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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 8-K
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Current Report
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
(Date of earliest event reported): December 16, 1999
DALEEN TECHNOLOGIES, INC.
(Exact name of Company specified in its charter)
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DELAWARE 0-27491 65-0944514
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.)
incorporation or organization)
902 CLINT MOORE ROAD
BOCA RATON, FLORIDA 33487
(Address of principal executive offices) (Zip Code)
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(561) 999-8000
(Company's telephone number, including area code)
PAGE 1 OF 7
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ITEM 2 - ACQUISITION OF ASSETS.
Effective December 16, 1999, Daleen Technologies, Inc. (the "Company")
acquired all of the issued and outstanding capital shares of Inlogic Software
Inc., a Nova Scotia corporation ("Inlogic"). The Company acquired the capital
shares of Inlogic in exchange for an aggregate of 2,160,239 exchangeable shares
(the "Exchangeable Shares") and 57,435 shares of the Company's Common Stock.
The Exchangeable Shares were issued by Daleen Canada Corporation, a
wholly-owned subsidiary of the Company, but are exchangeable at any time into
shares of the Company's Common Stock on a one-for-one basis. The Company also
has issued, or will issue, options to acquire an aggregate of 167,326 shares of
the Company's Common Stock in exchange for all of the outstanding options to
acquire capital shares of Inlogic. The terms of the transaction are set forth
in a Share Purchase Agreement as well as certain other transaction documents
which are filed as Exhibits to this Report. The terms of the transaction were
determined through arms-length negotiations between the parties. The
transaction will be accounted for as a purchase transaction. Additionally, the
Company has agreed to cause Mohammad Aamir, the President and Chief Executive
Officer of Inlogic, to be elected as a director of the Company.
Prior to the closing of the transaction, the board of directors of Inlogic
declared a cash dividend (the "Inlogic Dividend") payable on or about January
4, 2000 to the shareholders of Inlogic of record prior to the closing (the
"Inlogic Shareholders"). The Inlogic Dividend amount is to be equal to (i)
Inlogic's cash and accounts receivable as of the December 16, 1999, less (ii)
all debts, accounts payable, severance to certain employees of Inlogic, accrued
payroll for periods on or prior to the December 16, 1999, travel expenses
payable by Inlogic for periods prior to December 16, 1999, taxes accrued
through December 16, 1999, all bonuses and commissions payable by Inlogic to
its employees and independent contractors for calendar year 1999, amounts
payable or anticipated to be payable (including attorney fees) in connection
with the resolution of certain Inlogic litigation matters, and the amount of
cash contributed to the Atevent.com Inc. (described below). It currently is
estimated that the Inlogic Dividend will be in the range of approximately $4.0
million to $4.5 million. The Inlogic Dividend will be paid out of Inlogic's
remaining working capital.
Pursuant to the Share Purchase Agreement, an aggregate of 348,485 of
the Exchangeable Shares and 9,265 of the shares of Common Stock issued in the
transaction were, and 15% of the Inlogic Dividend will be, placed in an
Indemnity Escrow account for the purpose of providing a source of payment in
the event of a breach of certain terms of the Share Purchase Agreement by the
Inlogic Shareholders for which the Company is entitled to indemnification.
Subject to claims the Company may in the future make against the Indemnity
Escrow account, the balance of the Exchangeable Shares, Common Stock and cash
held in the Indemnity Escrow account will be released from escrow and
distributed to the Inlogic Shareholders on June 16, 2001 (18 months after the
closing).
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Pursuant to the Share Purchase Agreement, an aggregate of 661,242
Exchangeable Shares and 33,812 shares of Common Stock issued in the transaction
were placed in an Employee/Shareholder Escrow account. The Exchangeable Shares
and the Company Common Stock placed in the Employee/Shareholder Escrow account
consist of a portion of the shares issued in the transaction to the Inlogic
Shareholders who also are employees of Inlogic (the "Employee Shareholders").
The shares held in the Employee/Shareholder Escrow account will be released to
the respective Employee Shareholders as follows: (i) 41.67% of the escrowed
shares will be released on June 16, 2000; (ii) 41.67% of the escrowed shares
will be released on December 16, 2000; and (iii) the balance of the escrowed
shares will be released on June 16, 2001. In the event an Employee Shareholder
is terminated by Inlogic "for cause" (as defined under the terms of his or her
employment agreement) or resigns from his or her employment with Inlogic, that
Employee Shareholder shall forfeit his or her escrowed shares (to the extent
not previously released from escrow) and those shares will be reallocated among
the remaining Employee Shareholders on a pro rata basis. In the event that
Inlogic materially breaches and fails to cure the terms of the employment
agreement of an Employee Shareholder, all of such Employee Shareholder's
escrowed shares will be released from the Employee/Shareholder Escrow account
and delivered to the appropriate Employee Shareholder. Separately, in the event
Inlogic terminates Mohammad Aamir "for cause" under his employment agreement or
he resigns his employment with Inlogic, (i) 50% of his escrowed shares then
held in the Employee/Shareholder Escrow account will be forfeited and returned
to the Company and (ii) the remaining 50% of Mr. Aamir's escrowed shares will
be transferred to a charitable organization designated jointly by Mr. Aamir and
the Company.
In addition to its primary eBusiness suite of products, Inlogic
developed an early stage special events planning and invitation service known
as "Atevent.com." Pursuant to the Share Purchase Agreement and due, in part, to
the fact that the Atevent.com business is not part of the Company's or
Inlogic's core business or strategic plan, Inlogic contributed all the assets
of Inlogic used by Inlogic solely in connection with the Atevent.com business
to Atevent.com Inc. in exchange for all of the capital shares of Atevent.com
Inc. Immediately thereafter, Inlogic distributed 80.1% of the capital shares of
Atevent.com Inc. to the Inlogic Shareholders. Inlogic continues to own 19.9% of
the outstanding capital shares of Atevent.com Inc., has the right to elect at
least one director and also has certain preemptive rights to acquire additional
capital shares of Atevent.com Inc. Prior to the closing, Inlogic also agreed to
loan $200,000 Cdn. to Atevent.com Inc. to provide working capital. The Inlogic
Dividend has been reduced by the amount of this loan.
Pursuant to the Purchase Agreement, Daleen and the Inlogic
Shareholders entered into a Registration Rights Agreement that grants the
Inlogic Shareholders the right to register their shares of the Company's Common
Stock in the event the Company files with the SEC a registration statement
under the Securities Act of 1933, as amended. These "piggyback" registration
rights are subject to certain customary restrictions and limitations.
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Inlogic provides eBusiness software solutions for customer and partner
relationship management, including Web-enabled customer self-care and electronic
bill presentment and payment (EBPP), as well as business-to-business gateway
solutions that support streamlined workflows and automated processes between
trading partners.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired.
Pursuant to Item 7(a)(4) of Form 8-K, the financial statements of
Inlogic Software Inc. required by this Item will be filed by amendment
on or before February 29, 2000.
(b) Pro Forma Financial Information.
Pursuant to Item 7(b)(2) of Form 8-K, the pro forma financial
information required by this Item will be filed by amendment on or
before February 29, 2000.
(c) Exhibits
The following Exhibits are filed herewith:
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2.1 Share Purchase Agreement dated December 16, 1999, between the
Registrant, Daleen Canada Corporation, Inlogic Software Inc., the
shareholders of Inlogic Software Inc., and Atevent.com Inc.
10.1 Indemnity Escrow Agreement dated December 16, 1999, between the
Registrant, Daleen Canada Corporation, Inlogic Software Inc., the
shareholders of Inlogic Software Inc., and Montreal Trust Company of
Canada, as escrow agent.
10.2 Employee/Shareholder Escrow Agreement dated December 16, 1999, between
the Registrant, Daleen Canada Corporation, Inlogic Software Inc., the
employee shareholders of Inlogic Software Inc., and Montreal Trust
Company of Canada, as escrow agent.
10.3 Support Agreement dated December 16, 1999, between the Registrant,
Daleen Canada Corporation, Daleen Callco Corporation, and the
shareholders of Inlogic Software Inc.
10.4 Exchange Trust Agreement dated December 16, 1999, between the
Registrant, Daleen Canada Corporation, Daleen Callco Corporation, the
shareholders of Inlogic Software Inc., and Montreal Trust Company of
Canada, as trustee.
10.5 Registration Rights Agreement dated December 16, 1999, between the
Registrant and the shareholders of Inlogic Software Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DALEEN TECHNOLOGIES, INC.
By: /s/ Stephen M. Wagman
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Stephen M. Wagman,
Executive Vice-President,
Corporate Development and Secretary
Dated: December 30, 1999
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EXHIBIT INDEX
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The following Exhibits are filed herewith:
2.1 Share Purchase Agreement dated December 16, 1999, between the
Registrant, Daleen Canada Corporation, Inlogic Software Inc., the
shareholders of Inlogic Software Inc., and Atevent.com Inc.
10.1 Indemnity Escrow Agreement dated December 16, 1999, between the
Registrant, Daleen Canada Corporation, Inlogic Software Inc., the
shareholders of Inlogic Software Inc., and Montreal Trust Company of
Canada, as escrow agent.
10.2 Employee/Shareholder Escrow Agreement dated December 16, 1999, between
the Registrant, Daleen Canada Corporation, Inlogic Software Inc., the
employee shareholders of Inlogic Software Inc., and Montreal Trust
Company of Canada, as escrow agent.
10.3 Support Agreement dated December 16, 1999, between the Registrant,
Daleen Canada Corporation, Daleen Callco Corporation, and the
shareholders of Inlogic Software Inc.
10.4 Exchange Trust Agreement dated December 16, 1999, between the
Registrant, Daleen Canada Corporation, Daleen Callco Corporation, the
shareholders of Inlogic Software Inc., and Montreal Trust Company of
Canada, as trustee.
10.5 Registration Rights Agreement dated December 16, 1999, between the
Registrant and the shareholders of Inlogic Software Inc.
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Exhibit 2.1
DALEEN TECHNOLOGIES, INC.
as DALEEN
and
DALEEN CANADA CORPORATION
as CANADIAN BUYER
and
INLOGIC SOFTWARE INC.
as INLOGIC
and
THE HOLDERS OF ALL OF THE SHARES
OF INLOGIC SOFTWARE INC.
as the INLOGIC SHAREHOLDERS
and
ATEVENT.COM INC.
as ATEVENT.COM
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SHARE PURCHASE AGREEMENT
December 16, 1999
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TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS
Section 1.1 Defined Terms.............................................................................. 1
Section 1.2 Other Defined Terms........................................................................ 7
ARTICLE 2
PURCHASE AND SALE OF PURCHASED SHARES
Section 2.1 Pre-Closing Steps......................................................................... 10
Section 2.2 Purchase of Purchased Securities.......................................................... 11
Section 2.3 Purchase Price of Purchased Securities.................................................... 11
Section 2.4 Satisfaction of Purchase Price............................................................ 12
ARTICLE 3
CLOSING
Section 3.1 Closing................................................................................... 13
Section 3.2 Closing Procedures........................................................................ 13
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE INLOGIC SHAREHOLDERS
Section 4.1 Organization and Qualification of Inlogic Software Inc.................................... 14
Section 4.2 Organization and Qualification of Inlogic Delaware........................................ 14
Section 4.3 Reserved.................................................................................. 14
Section 4.4 Capitalization; Beneficial Ownership of Inlogic........................................... 14
Section 4.5 Subsidiaries of Inlogic................................................................... 15
Section 4.6 Authority................................................................................. 15
Section 4.7 Assets.................................................................................... 17
Section 4.8 Real Property............................................................................. 17
Section 4.9 Minute Books; Corporate Documents......................................................... 18
Section 4.10 Financial Statements...................................................................... 19
Section 4.11 Absence of Certain Changes or Events...................................................... 20
Section 4.12 Contracts and Commitments................................................................. 22
Section 4.13 Permits:.................................................................................. 25
Section 4.14 Litigation................................................................................ 25
Section 4.15 Compliance with Law....................................................................... 26
Section 4.16 Ordinary Course........................................................................... 26
Section 4.17 Officers and Compensation................................................................. 26
Section 4.18 Employees; Labour Matters................................................................. 26
Section 4.19 Banking Relations......................................................................... 27
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Section 4.20 No Brokers.............................................................................. 27
Section 4.21 No Other Agreements to Sell the Purchased Securities.................................... 27
Section 4.22 Customers............................................................................... 28
Section 4.23 Backlog................................................................................. 28
Section 4.24 Intellectual Property Rights of Inlogic................................................. 28
Section 4.25 Taxes................................................................................... 38
Section 4.26 Reserved................................................................................ 39
Section 4.27 Employee Benefit Programs............................................................... 39
Section 4.28 Insurance............................................................................... 41
Section 4.29 Accounts Receivable..................................................................... 42
Section 4.30 Environmental Matters................................................................... 42
Section 4.31 Warranty or Other Claims................................................................ 44
Section 4.32 Reserved................................................................................ 44
Section 4.33 Powers of Attorney...................................................................... 44
Section 4.34 Inlogic Disclosure...................................................................... 44
Section 4.35 Shareholders' Agent..................................................................... 44
Section 4.36 Offshore Investment Representations..................................................... 45
Section 4.37 Hart-Scott-Rodino....................................................................... 50
Section 4.38 Exchange Ratio.......................................................................... 50
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF DALEEN AND CANADIAN BUYER
Section 5.1 Organization............................................................................ 51
Section 5.2 Authority............................................................................... 52
Section 5.3 SEC Documents; Financial Statements..................................................... 53
Section 5.4 Securities and Blue Sky Laws............................................................ 54
Section 5.5 Listing of Additional Shares............................................................ 54
Section 5.6 Issuance of Daleen Common Stock......................................................... 54
Section 5.7 Exchangeable Shares..................................................................... 54
Section 5.8 Millennium Compliance................................................................... 55
ARTICLE 6
COVENANTS
Section 6.1 Further Assurances...................................................................... 56
Section 6.2 Exchangeable Documentation.............................................................. 57
Section 6.3 Conduct of Business..................................................................... 58
Section 6.4 Notification of Certain Matters......................................................... 59
Section 6.5 Options................................................................................. 60
Section 6.6 Preservation of Confidentiality......................................................... 61
Section 6.7 Activities of Canadian Buyer............................................................ 61
Section 6.8 Investment Canada Act................................................................... 61
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Section 6.9 Board Seat................................................................................ 61
ARTICLE 7
CONDITIONS TO INLOGIC SHAREHOLDERS' OBLIGATIONS
Section 7.1 Representations, Warranties and Covenants of Daleen and Canadian Buyer.................... 62
Section 7.2 No Actions or Court Orders................................................................ 62
Section 7.3 Consents.................................................................................. 62
Section 7.4 Material Changes.......................................................................... 62
Section 7.5 Opinions of Counsel....................................................................... 62
Section 7.6 Escrow Agreements......................................................................... 63
Section 7.7 Employment and Non-Competition Agreements................................................. 63
Section 7.8 Corporate Documents....................................................................... 63
Section 7.9 Exchangeable Documentation................................................................ 63
Section 7.10 Reserved.................................................................................. 63
Section 7.11 Registration Rights....................................................................... 63
ARTICLE 8
CONDITIONS TO CANADIAN BUYER'S AND DALEEN 'S OBLIGATIONS
Section 8.1 Representations, Warranties and Covenants................................................. 63
Section 8.2 Consents; Regulatory Compliance and Approval.............................................. 64
Section 8.3 No Actions or Court Orders................................................................ 64
Section 8.4 Atevent Spinoff........................................................................... 64
Section 8.5 Resignation and Release of Inlogic Directors.............................................. 65
Section 8.6 Conversion of Class D Shares and Debenture................................................ 65
Section 8.7 Fairness Opinion.......................................................................... 65
Section 8.8 Opinions.................................................................................. 65
Section 8.9 Material Changes.......................................................................... 65
Section 8.10 Corporate Documents....................................................................... 65
Section 8.11 Permits................................................................................... 65
Section 8.12 Escrow Agreements......................................................................... 65
Section 8.13 Employment Agreements..................................................................... 66
Section 8.14 Reserved.................................................................................. 66
Section 8.15 Pre-Closing Steps......................................................................... 66
Section 8.16 Exchangeable Documentation................................................................ 66
Section 8.17 Section 116 of the Income Tax Act Certificate............................................ 66
Section 8.18 Delivery of Inlogic Share Certificates.................................................... 66
Section 8.19 Receipt of Full Funding for Equity Financing.............................................. 66
Section 8.20 Employment and Tax Law Issues............................................................. 67
Section 8.21 Invention Assignment Provisions........................................................... 67
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ARTICLE 9
INDEMNIFICATION
Section 9.1 Indemnification by the Selling Parties.................................................... 67
Section 9.2 Limitations on Indemnification by the Inlogic Shareholders................................ 68
Section 9.3 Indemnification by Daleen and Canadian Buyer............................................. 69
Section 9.4 Limitation on Indemnification by Daleen and Canadian Buyer............................... 70
Section 9.5 Procedure for Indemnification--Third Party Claims......................................... 70
Section 9.6 Satisfaction of Inlogic Shareholders Indemnification Obligations.......................... 72
Section 9.7 Use of Daleen Common Stock............................................................... 72
Section 9.8 Exclusive Remedy.......................................................................... 72
ARTICLE 10
TERMINATION OF AGREEMENT; RIGHTS TO PROCEED
Section 10.1 Termination............................................................................... 73
Section 10.2 Effect of Termination..................................................................... 73
ARTICLE 11
MISCELLANEOUS
Section 11.1 Fees and Expenses......................................................................... 73
Section 11.2 Governing Law............................................................................. 74
Section 11.3 Notices................................................................................... 74
Section 11.4 Entire Agreement.......................................................................... 76
Section 11.5 Assignability; Binding Effect............................................................. 76
Section 11.6 Captions and Gender....................................................................... 76
Section 11.7 Execution in Counterparts................................................................. 77
Section 11.8 Amendments................................................................................ 77
Section 11.9 Publicity and Disclosures................................................................. 77
Section 11.10 Specific Performance...................................................................... 77
Section 11.11 U.S. Currency............................................................................. 78
Section 11.12 Atevent Spinoff........................................................................... 78
Section 11.13 Release of Inlogic Shareholders........................................................... 79
Section 11.14 Lock-Up Agreement......................................................................... 80
Section 11.15 U.S. Tax Considerations................................................................... 81
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(iv)
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SHARE PURCHASE AGREEMENT
Share Purchase Agreement dated December 16, 1999, among Daleen
Technologies, Inc., a Delaware corporation ("DALEEN"), DALEEN CANADA
CORPORATION, a newly formed Nova Scotia unlimited liability company ("CANADIAN
BUYER"), INLOGIC SOFTWARE INC., a Nova Scotia limited liability company and the
holders, directly or indirectly, of all of the issued and outstanding shares of
INLOGIC SOFTWARE INC. as such (collectively, the "INLOGIC SHAREHOLDERS") and
ATEVENT.COM INC., an Ontario corporation. (Atevent.com")
RECITALS:
(a) The Inlogic Shareholders own of record and beneficially
directly or indirectly all of the issued and outstanding
shares in the capital of Inlogic Software Inc. and desire to
sell all of such shares to the Canadian Buyer free and clear
of all Encumbrances upon the terms and subject to the
conditions of this Agreement; and
(b) The Canadian Buyer is an indirect wholly-owned subsidiary of
Daleen.
In consideration of the foregoing and the mutual agreements contained
herein (the receipt and adequacy of which are acknowledged), the parties agree
as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 DEFINED TERMS.
As used herein, the terms below shall have the following meanings. Any
of such terms, unless the context otherwise requires, may be used in the
singular or plural, depending upon the reference:
"ACTION" shall mean any action, claim, suit, litigation, proceeding,
arbitral action, governmental audit, criminal prosecution, governmental
investigation or unfair labour practice charge or complaint.
"AFFILIATE" shall have the meaning set forth in the Business
Corporations Act (Ontario), as amended, and the rules and regulations
thereunder.
"ASSETS" shall mean all of Inlogic's right, title and interest in and
to the business, properties, assets and rights of any kind, whether
tangible or intangible, real or personal and wherever located and
constituting, or used or useful in connection with, or related to, the
Business or in which Inlogic has any interest, including without
limitation all of Inlogic's right, title and interest in the following:
all accounts and notes receivable (whether current or
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non-current), refunds, deposits, prepayments or prepaid expenses
(including without limitation any prepaid insurance premiums) of
Inlogic; all cash and cash equivalents held by Inlogic; all equity
interests in other entities held by Inlogic; all Contract Rights; all
Leases; all Leasehold Estates; all Leasehold Improvements; all Fixtures
and Equipment; all Inventory; all Books and Records; all Proprietary
Rights relating to the Business; all Permits, all Insurance Policies;
all available supplies, sales literature, promotional literature,
customer, supplier and distributor lists, art work, display units,
telephone and fax numbers and purchasing records related to the
Business; all rights under or pursuant to all warranties,
representations and guarantees made by in connection with the Assets or
services furnished to Inlogic pertaining to the Business or affecting
the Assets; all claims, causes of action, causes in action, rights of
recovery and rights of set-off of any kind, against any person or
entity, including without limitation any liens, security interests,
pledges or other rights to payment or to enforce payment in connection
with service performed or products delivered by Inlogic on or prior to
the Closing Date; and the goodwill of Inlogic and the Business.
"BOOKS AND RECORDS" shall mean, (a) all records and lists of Inlogic
pertaining to Inlogic, the Business and the Assets, (b) all records and
lists of Inlogic pertaining to the Business, or personnel of Inlogic,
(c) all product, business and marketing plans of Inlogic and (d) all
books, ledgers, files, reports, plans, tax returns, source codes,
drawings and operating records of every kind maintained by Inlogic or
on behalf of Inlogic by its agents, accountants, investment bankers,
marketing firms, headhunting or placement firms, attorneys and other
representatives, including the originals of Inlogic's minute books.
"BUSINESS" shall mean all of Inlogic's current operations and business,
wherever carried on.
"BUSINESS DAY" shall mean any day of the year, other than a Saturday,
Sunday or any day on which banks are authorized or required to close in
Toronto, Ontario.
"CLOSING DATE" shall mean December 16, 1999, or such other date as
Canadian Buyer and Inlogic Shareholders shall mutually agree upon in
writing.
"CONTRACT" shall mean any agreement, contract, note, loan, evidence of
indebtedness, purchase order, letter of credit, indenture, security or
pledge agreement, franchise agreement, undertaking, covenant not to
compete, employment agreement, license agreement, instrument,
obligation or commitment to which Inlogic is a party or is bound,
whether oral or written, but excluding all Leases.
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"CONTRACT RIGHTS" shall mean all of Inlogic's rights and obligations
under the Contracts including, without limitation, those Contracts
listed on Schedules 4.8 and Section 4.12
"COPYRIGHTS" shall mean registered copyrights, copyright applications
and unregistered copyrights.
"COURT ORDER" shall mean any judgement, decision, consent decree,
injunction, ruling or order of any federal, provincial or local court
or governmental agency, department or authority that is binding on a
specified person, persons, entity or entities or its or their property
under applicable law.
"DALEEN COMMON STOCK" shall mean the Common Stock, $.01 par value per
share, of Daleen.
"DALEEN DISCLOSURE SCHEDULE" shall mean a schedule and letters executed
and delivered by Daleen and Buyer to the Selling Parties as of the date
hereof which sets forth the exceptions to the representations and
warranties contained in Article 5 hereof and certain other information
called for by this Agreement. Unless otherwise specified or the context
otherwise requires, each reference in this Agreement to any numbered
schedule is a reference to that numbered schedule which is included in
the Daleen Disclosure Schedule.
"DAMAGES" shall mean damages, Liabilities, losses, Taxes, fines,
penalties, costs, and expenses (including, without limitation,
reasonable fees of counsel) of any kind or nature whatsoever (whether
or not arising out of third-party claims and including all amounts paid
in investigation, defense or settlement of the foregoing).
"DEFAULT" shall mean (1) a breach of or default under any Contract or
Lease, (2) the occurrence of an event that with the passage of time or
the giving of notice or both would constitute a breach of or default
under any Contract or Lease, or (3) the occurrence of an event that
with or without the passage of time or the giving of notice or both
would give rise to a right of termination, re-negotiation or
acceleration under any Contract or Lease.
"ENCUMBRANCE" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, conditional sales
agreement or other similar right of third parties, whether voluntarily
incurred or arising by operation of law, and includes, without
limitation, any agreement to give any of the foregoing in the future,
and any contingent sale or other title retention agreement or lease in
the nature thereof.
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"EXCHANGEABLE SHARES" shall mean the exchangeable preference shares in
the capital of the Canadian Buyer having attached thereto the rights,
privileges, restrictions and conditions set forth in Exhibit 1.1(A).
"FACILITY LEASES" shall mean all of the leases described on Inlogic
Schedule 4.8.
"FIXTURES AND EQUIPMENT" shall mean all of the furniture, fixtures,
furnishings, machinery, spare parts, supplies, equipment and other
tangible personal property owned by Inlogic and used in connection with
the Business, wherever located and including any such Fixtures and
Equipment in the possession of any of Inlogic's, including all warranty
rights with respect thereto.
"FORMER FACILITY" shall mean each plant, office, manufacturing
facility, store, warehouse, improvement, administrative building and
all real property and related facilities that was owned, leased or
operated by Inlogic at any time prior to the date hereof.
"INLOGIC" except where otherwise specifically mentioned, Inlogic shall
mean collectively Inlogic Software Inc., and its Subsidiaries
including, without limitation, Inlogic Software Inc., a Delaware
corporation ("INLOGIC DELAWARE"). "INLOGIC DELAWARE" shall mean the
Delaware corporation that is a wholly-owned subsidiary of Inlogic
Software Inc.
"INLOGIC DISCLOSURE SCHEDULE" shall mean an Inlogic Schedule executed
and delivered by the Inlogic Shareholders to Canadian Buyer as of the
date hereof which sets forth the exceptions to the representations and
warranties contained in Article IV hereof and certain other information
called for by this Agreement. Unless otherwise specified or the context
otherwise requires, each reference in this Agreement to any numbered
Inlogic Schedule is a reference to that numbered Inlogic Schedule which
is included in the Inlogic Disclosure Schedule.
"INLOGIC OPTIONS" shall mean the outstanding options of Inlogic
granted to the holders and upon the terms set out on Exhibit 1.1(B).
"INLOGIC SHAREHOLDERS" shall mean those individuals and entities
identified as such on Exhibit 1.1(C) hereto.
"INSURANCE POLICIES" shall mean the insurance policies related to
Inlogic, the Assets and the Business listed on Inlogic Schedule 4.27.
"INVENTORY" shall mean all of Inlogic's inventory held for resale and
all of Inlogic's raw materials, work in process, finished products,
wrapping, supply
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and packaging items and similar items with respect to the Business, in
each case wherever the same may be located.
"KNOWLEDGE OF DALEEN", shall mean the actual knowledge of any member of
the Board of Directors, the Chief Executive Officer, or the Chief
Financial Officer of Daleen or that which could be learned by any such
individual upon reasonable investigation.
"KNOWLEDGE OF INLOGIC SHAREHOLDERS" or "KNOWLEDGE OF INLOGIC" shall
mean the actual knowledge of Mohammad Aamir, and each of the other
Inlogic Shareholders (in the case of 1303949 Ontario Inc. include the
knowledge of its shareholders) or that which could be learned by any
such individual upon reasonable investigation.
"LEASED REAL PROPERTY" shall mean all leased plants, offices,
manufacturing facilities, stores, warehouses, improvements,
administration buildings, and all real property and related facilities
which are identified or listed on Inlogic Schedule 4.9 attached hereto.
"LEASEHOLD ESTATES" shall mean all of Inlogic's rights and obligations
as lessee under the Leases.
"LEASEHOLD IMPROVEMENTS" shall mean all leasehold improvements situated
in or on the Leased Real Property and owned by Inlogic.
"LEASES" shall mean all of the existing leases with respect to the
personal or real property of Inlogic, including, without limitation,
those leases listed on Inlogic Schedule 4.9 and/or Inlogic Schedule
4.12.
"LIABILITIES" shall mean any direct or indirect liability,
indebtedness, obligation, commitment, expense, claim, guaranty or
endorsement of or by any person of any type, whether accrued, absolute,
contingent, matured, unmatured or other.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" shall mean with
respect to Inlogic, the Business or the Assets, any material adverse
effect or change in the condition (financial or other), business,
results of operations, prospects, assets, Liabilities or operations of
Inlogic, the Business and/or the Assets taken as a whole or on the
ability of the Inlogic Shareholders to consummate the transactions
contemplated hereby, or any event or condition which would, with the
passage of time, constitute a "MATERIAL ADVERSE EFFECT" or "MATERIAL
ADVERSE CHANGE." "MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE"
shall mean with respect to Daleen any material adverse effect or change
in the condition (financial or other), business, results of operations,
prospects, assets, liabilities or operations of Daleen and its
<PAGE> 11
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Subsidiaries taken as a whole or on the ability of Daleen to consummate
the transactions contemplated hereby, or any event or condition which
would, with the passage of time, constitute a "MATERIAL ADVERSE EFFECT"
or "MATERIAL ADVERSE CHANGE."
"ORDINARY COURSE OF BUSINESS" or "ORDINARY COURSE" or any similar
phrase shall mean the ordinary course of the Business consistent with
Inlogic's past practice.
"PERMITS" shall mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any
governmental authority, whether foreign, federal, provincial or local,
or any other person, necessary for the present or currently anticipated
conduct of, or relating to the operation of the Business.
"PERMITTED LIEN" shall mean: (i) materialmen's, mechanics', carriers',
workmen's, repairmen's or other like liens arising in the ordinary
course of business for amounts not yet due or which are being contested
in good faith by appropriate proceedings, (ii) liens for current taxes
not yet due or any taxes being contested in good faith by appropriate
proceedings, (iii) liens to secure performance of statutory
obligations, (iv) any lien securing any purchase money indebtedness
incurred in the ordinary course of business and reflected in Inlogic's
financial statements and (v) liens of lessors under Leases.
The term "PERSON" means any individual, corporation (including any
non-profit corporation), general or limited partnership, limited
liability company, joint venture, estate, trust, association,
organization, or other entity or governmental body.
"PROPRIETARY RIGHTS" shall mean all of Inlogic's Copyrights,
Trademarks, patents, technology rights and licenses, computer software
(including without limitation any source or object codes therefor and
all documentation relating thereto), trade secrets, franchises,
know-how, inventions, designs, specifications, plans, drawings and
intellectual property rights. "PROPRIETARY RIGHTS" includes, without
limitation, all rights in and to the products known as "E-CARE",
"E-SERVICE", "E-PARTNER", "VOYAGER" LNP Suite, "PICWARE" Suite,
"SWITCHFLOW", "REQUESTFLOW" and "ATEVENT.COM."
"REGULATIONS" shall mean any laws, statutes, ordinances, regulations,
rules, court decisions, agency guidelines, principles of law and orders
of any foreign, federal, provincial or local government and any other
governmental department or agency, including without limitation all Tax
Acts (as defined herein), Environmental Laws, energy, motor vehicle
safety, public utility, zoning, building and health codes, and
occupational safety and health and
<PAGE> 12
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laws respecting employment practices, employee documentation, terms and
conditions of employment and wages and hours.
"REPRESENTATIVE" shall mean any officer, director, principal, attorney,
agent, employee or other representative.
"SUBSIDIARY" shall mean a subsidiary within the meaning of the Business
Corporations Act (Ontario).
"TAX" shall mean all governmental taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross
income, gross receipts, sales, use, VAT, goods and services, ad
valorem, transfer, franchise, profits, withholding, social security,
payroll, employment, excise, estimated, severance, stamp, recording,
occupation, real and personal property, gift, windfall profits or other
taxes, customs duties, fees, assessments or charges of any kind
whatsoever, whether computed on a separate, consolidated, unitary,
combined or other basis, together with any interest, fines, penalties,
additions to tax or other additional amounts imposed thereon or with
respect thereto by any taxing authority (domestic or foreign) and shall
include any such or other amounts payable by a person pursuant to any
Regulation for failing to withhold, deduct and remit to the proper
authorities any amounts. Without limiting the generality of the
foregoing, "TAXES" shall include all taxes payable pursuant to the Tax
Acts, all Canada Pension Plan, Quebec Pension Plan and Employment
Insurance Premiums.
"TAX ACTS" shall mean the Income Tax Act (Canada), the Income Tax Act
(Ontario) and the Corporations Tax Act (Ontario) all as amended from
time to time.
"TRADEMARKS" shall mean registered trademarks, registered service
marks, trademark and service mark applications and unregistered
trademarks and service marks.
"UNAUDITED BALANCE SHEET"
"U.S. GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect as of the date hereof.
SECTION 1.2 OTHER DEFINED TERMS.
The following terms shall have the meanings defined for such terms in
the Sections set forth below:
<PAGE> 13
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<TABLE>
<CAPTION>
TERM SECTION
---- -------
<S> <C>
Amalgamation 2.1(1)(d)
Amalgamation Order 2.1(1)(c)
Audited Financial Statements 6.8
Base Balance Sheet 4.7(1)
Base Balance Sheet Date 4.7(1)
Buyer Indemnified Party 9.1
Buyer Indemnified Parties 9.1
Buyer Option Plan 6.6
Canadian Buyer Recitals
Clients 4.18
Closing 3.1
Company Hardware 4.24(4)(b)
Confidential Information 6.10
Customer Contracts 4.24(3)(p)
Customer Software 4.24(2)(c)(ii)
Customers 4.22
Daleen Recitals
Daleen Additional Options 6.5(2)
Daleen Balance Sheet 5.7(1)
Daleen Common Stock 4.35
Daleen Exchanged Options 2.1(6)
Daleen Financial Statements 5.7(1)
Daleen Option Plan 6.5(2)
Daleen SEC Documents 5.3
Distributor 4.24(1)(c)
Employee Program 4.23(11)(a)
Employment Agreement 8.10
Environmental Law 4.27(5)
Escrow Agreement 2.4(b)
Escrow Amount 2.4(b)
Exchange Trust Agreement 6.2
Facility Lease 4.6(2)
Financial Statements 4.7(1)
Fraud Claims 9.1(a)
General Claims 9.1(e)
Hazardous Material 4.27(5)
Hazardous Waste 4.27(5)
Indemnified Party 9.5(1)
Indemnifying Party 9.5(1)
Individual Claims 9.1(f)
Individual Fraud Claims 9.1
Individual General Claims 9.1(f)
</TABLE>
<PAGE> 14
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<TABLE>
<S> <C>
Inlogic 4.27(5)
Inlogic Delaware
Inlogic Shareholders Indemnified Party 9.3
Inlogic Shareholders Recitals
Inlogic Shareholders Indemnified Parties 9.3
Inlogic Software 4.24(2)(c)(ii)
Intangibles 4.24(1)(b)
ITA 6.1
Interim Financial Statements 6.8
Leased Real Property 4.6(2)
License Agreement 4.24(2)(b)
Material Contracts 4.10(1)
Millennium Compliant 4.24(4)(a)
NS Act 2.1(1)(a)
Other Software 4.24(2)(c)(iii)
Owned Software 4.24(2)(c)(i)
Ownership Claims 9.1(b)
Pre-Closing Steps 2.1
Principals 7.9
Pro Forma Financial Statements 5.7(3)
Proceeding 9.5(2)
Processes 4.24(4)(a)(i)
Purchased Securities 2.2
Registration Rights Agreement 7.11
Registrations 4.24(2)(a)
Restricted Period 4.35
SEC 4.10
Securities 4.35(d)
Securities Act 4.36(a)
Share Exchange Agreement 7.16
Shareholders' Agent 4.35(1)
Software 4.24(1)(a)
Source Code Agreement 4.24(2)(b)
Support Agreement 6.2
Tax Claims 9.1(c)
Tax Returns 4.22(a)
Technology 4.26(1)
Third Party License Agreement 4.24(2)(b)
Unaudited Balance Sheet 4.10
U.S. Person 4.36(a)
Year 2000 Complaint 4.26(1)
</TABLE>
<PAGE> 15
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ARTICLE 2
PURCHASE AND SALE OF PURCHASED SHARES
SECTION 2.1 PRE-CLOSING STEPS.
(1) As soon as practicable after the date hereof, but in any event prior to
the Closing Date, the parties hereto shall have caused the following
actions to have occurred (the "Pre-Closing Steps"):
(a) Inlogic shall be continued under the Companies Act (Nova
Scotia) ("NS ACT") as a limited liability company;
(b) Inlogic shall have effected the Atevent Transaction as
described in Section 11.12 hereof.
(c) Prior to the Closing Date, the board of directors of Inlogic
shall declare the "Inlogic Dividend," which shall be payable
on January 4, 2000 (the "Inlogic Dividend Payment Date") to
shareholders of Inlogic of record at the close of business on
December 16, 1999 (the "Dividend Record Date"). The Inlogic
Dividend shall be an amount of cash (in Canadian dollars)
equal to (i) all of Inlogic's cash and accounts receivable as
of the Closing Date, less (ii) all debts, accounts payable,
severance payments due to the employees of Inlogic identified
on Inlogic Schedule 4.18 whose employment shall be terminated
prior to the Closing, payroll expense and consulting fees
payable (and related accruals) for periods on or prior to the
Closing Date, travel and living expenses payable by Inlogic
for periods on or prior to the Closing Date, taxes accrued
through the Closing Date (including any taxes due in
connection with the purchase, lease or other acquisition of
computer systems and equipment on or around September 1999),
all bonuses payable by Inlogic to its employees, consultants
and independent contractors for calendar year 1999, all
commissions payable by Inlogic to its employees, consultants
and independent contractors for sales or services in calendar
1999, amounts payable or anticipated to be payable (including
attorney fees) in connection with the settlement or resolution
of the matters disclosed on Inlogic Schedule 4.14, and the
amount of cash contributed to the Atevent Corporation in
connection with the Atevent Transaction. No later than
December 31, 1999, Inlogic shall prepare a balance sheet dated
as of the Closing Date (the "Closing Balance Sheet"), which
balance sheet shall be used for purposes of calculating the
amount of the Inlogic Dividend. Inlogic shall afford Daleen
and the Inlogic Shareholders and their representatives the
opportunity to review the work papers and other documentation
used by Inlogic in preparing the Closing Balance Sheet. The
Inlogic Dividend shall be allocated among the Inlogic
<PAGE> 16
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Shareholders as set forth on Inlogic Schedule 2.1(c).
Notwithstanding the foregoing, 15% of the aggregate Inlogic
Dividend shall be paid into escrow and included in the
Indemnity Escrow Amount.
(2) The parties acknowledge and agree that the Representations and
Warranties of the Inlogic Shareholders will be based upon the
assumption that following the continuance of Inlogic under the NS Act
all of the property rights, assets and liabilities of Inlogic continue
to be the property rights, assets and liabilities of the continued
company.
(3) Except where the context otherwise requires, any reference herein to
"INLOGIC" shall be deemed to refer collectively to Inlogic Software
Inc. prior to and after its continuance under the NS Act and Inlogic
Software Inc., a Delaware corporation.
(4) The Exchangeable Shares, by virtue of their terms, the Support
Agreement and the Exchange Trust Agreement, entitle the holders thereof
to acquire Daleen Common Stock on certain terms and conditions.
(5) All Inlogic Options will be exchanged as soon as practicable following
the Closing Date for options to purchase Daleen Common Stock (the
"DALEEN EXCHANGED OPTIONS") upon the terms set out on Exhibit 2.1(5)
herein.
SECTION 2.2 PURCHASE OF PURCHASED SECURITIES.
Upon the terms and subject to the conditions contained herein, at the
Closing, the Inlogic Shareholders will sell and the Canadian Buyer will purchase
all of the issued and outstanding shares of Inlogic Software Inc. consisting of
8,555,000 common shares, 685,000 Class A shares, 710,000 Class C shares and
3,564,163 Class D shares and 1,020,000 Inlogic Options (collectively, the
"PURCHASED SECURITIES") free and clear of all Encumbrances.
SECTION 2.3 PURCHASE PRICE OF PURCHASED SECURITIES.
In consideration of the sale, and delivery of the Purchased Securities
to Canadian Buyer free and clear of all Encumbrances and in reliance upon the
representations and warranties of the Inlogic Shareholders herein contained and
made at the Closing and upon the terms and subject to the satisfaction or waiver
of the party entitled thereto of all of the conditions set forth herein,
Canadian Buyer agrees at the Closing to pay to Inlogic Shareholders for the
Purchased Securities an aggregate of 2,160,239 Exchangeable Shares and 57,435
shares of Daleen Common Stock and Daleen Exchange Options to purchase an
aggregate of 167,326 shares of Daleen Common Stock, which Daleen Exchanged
Options will have the terms set forth in Exhibit 2.1(5).
<PAGE> 17
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SECTION 2.4 SATISFACTION OF PURCHASE PRICE.
The Canadian Buyer shall satisfy the purchase consideration for the
Purchased Securities as follows:
In reliance upon the representations and warranties of Inlogic
Shareholders herein contained and made at the Closing and upon
the terms and subject to the satisfaction or waiver of all of
the conditions set forth herein, Canadian Buyer agrees that at
the Closing (except that the Inlogic Dividend shall be
delivered on December 31, 1999), it will (i) deliver to the
Escrow Agent (A) 348,485 Exchangeable Shares, (B) 9,265 shares
of Daleen Common Stock, and (C) 15% of the aggregate Inlogic
Dividend (such Exchangeable Shares, Daleen Common Stock and
cash from the Inlogic Dividend are collectively referred to as
the "INDEMNITY ESCROW AMOUNT") in the Inlogic Shareholders'
names as set out in Exhibit 2.4(A) and to be held in the
manner described in the Indemnity Escrow Agreement to be
executed in substantially the form attached hereto as Exhibit
2.4(B); and (ii) deliver to the Escrow Agent 661,242
Exchangeable Shares and 33,812 shares of Daleen Common Stock
(such Exchangeable Shares and Daleen Common Stock are referred
to collectively as the "EMPLOYEE/SHAREHOLDER ESCROW AMOUNT")
in the Inlogic Shareholders' names as set out in Exhibit
2.4(C) and to be held in the manner described in the
Employee/Shareholder Escrow Agreement to be executed in
substantially the form attached hereto as Exhibit 2.4(D) (the
"EMPLOYEE/SHAREHOLDER ESCROW AGREEMENT"), provided however
that 18,953 Daleen Common Stock issuable hereunder to George
Timmes shall be initially withheld by Canadian Buyer until
receipt of a section 116 certificate under the Income Tax Act
(Canada) from Mr. George Timmes at which point the 18,953
shares of Daleen Common Stock withheld shall be delivered to
the Escrow Agent to be governed by the Employee/Shareholder
Escrow Agreement and (iii) deliver the balance of the
Exchangeable Shares (1,150,512 shares) and Daleen Common Stock
(14,358 shares) to, and in the name of, the Inlogic
Shareholders as set forth on Exhibit 2.4(E) hereto. Daleen
shall deliver the Daleen Exchanged Options to the holders of
Inlogic Options identified on Exhibit 1.1(B) hereto (which
Exhibit
<PAGE> 18
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includes the name of each holder of Inlogic Options, the
number and class or series of Inlogic capital stock underlying
such Inlogic Options and the number of shares of Daleen Common
Stock underlying the Daleen Exchanged Options to be granted to
such Inlogic Option holder) as soon as practicable following
the Closing Date upon the execution by such holders of
agreements substantially in the form of Exhibit 6.5(1) hereto.
ARTICLE 3
CLOSING
SECTION 3.1 CLOSING.
The Closing of the transactions contemplated herein (the "CLOSING")
shall be held at Stikeman, Elliott in Toronto on December 16, 1999 or at such
other date and location as may be mutually agreed upon by the parties but in any
event no later than December 31, 1999.
SECTION 3.2 CLOSING PROCEDURES.
Subject to the satisfaction or waiver by the relevant party of the
conditions of closing in its favour, at the Closing, the Inlogic Shareholders
shall deliver actual possession of the certificates evidencing the Purchased
Securities to the Canadian Buyer and record the Canadian Buyer or its nominee as
the registered owner and thereupon the Canadian Buyer shall pay or satisfy the
Purchase Price in accordance with Section 2.3.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE INLOGIC
SHAREHOLDERS
As a material inducement to Daleen and Canadian Buyer to enter into
this Agreement and consummate the transactions contemplated hereby, the Inlogic
Shareholders hereby severally represent and warrant to Daleen and Canadian Buyer
that (provided that the each Inlogic Shareholder shall not be deemed to have
made the representations and warranties set forth in the second and third
sentences of Section 4.4, Section 4.6(1) and (2), Section 4.6(3)(b) and (c) (but
only to the extent such representation relates to the individual Inlogic
Shareholder, ,Section 4.14(a)(iii), Section 4.21, Section 4.25(i), Section
4.33(b), or Section 4.36 to the extent, but only to the extent, such
representations relate to another Inlogic Shareholder except that
representations made herein by Mohammed Aamir, and 1303949 Ontario Inc. (the
"AFFILIATED SHAREHOLDERS") shall be deemed to include representations as to each
Affiliated Shareholder) (such representations and warranties described above are
referred to as the "INDIVIDUAL REPRESENTATIONS").
<PAGE> 19
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SECTION 4.1 ORGANIZATION AND QUALIFICATION OF INLOGIC SOFTWARE INC.
Immediately prior to its continuance into Nova Scotia, Inlogic Software
Inc. was a corporation duly organized and validly existing under the laws of the
Province of Ontario with corporate power and authority to own or lease its
properties and to conduct its business in the manner and in the places where
such properties are owned or leased or such business is currently conducted or
proposed to be conducted. Attached hereto as Inlogic Schedule 4.1 are (i)
accurate and complete copies of the Certificate and Articles of Incorporation
and Bylaws of Inlogic Software Inc., together with all amendments thereto, in
each case, as in effect as of the date of continuance and (ii) an accurate and
complete list of the members of the board of directors as of the date hereof and
of Inlogic Software Inc. as of the date of continuance. Inlogic Software Inc.
was not in violation of any terms of its Certificate and Articles of
Incorporation or Bylaws as of the date of, or in connection with, the
continuance. Inlogic Software Inc. was not required to be licensed or qualified
to conduct its business in any other jurisdiction where it is not so licensed or
qualified in which failure to be so licensed or qualified would have a material
adverse effect on Inlogic, the Assets or the Business;
SECTION 4.2 ORGANIZATION AND QUALIFICATION OF INLOGIC DELAWARE.
Inlogic Delaware is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware with corporate power
and authority to own or lease its properties and to conduct its business in the
manner and in the places where such properties are owned or leased or such
business is currently conducted or proposed to be conducted. Attached hereto as
Inlogic Schedule 4.2 are (i) accurate and complete copies of the Certificate of
Incorporation and Bylaws of Inlogic Delaware, together with all amendments
thereto, in each case, as in effect as of the date hereof and (ii) an accurate
and complete list of the members of the board of directors of Inlogic Delaware
as of the date hereof, and (iii) an accurate and complete list of the
shareholders of Inlogic Delaware. Inlogic Delaware is not in violation of any
terms of its Certificate and Articles of Incorporation or Bylaws. Inlogic
Delaware is not required to be licensed or qualified to conduct its business in
any other jurisdiction where it is not so licensed or qualified in which failure
to be licensed or qualified would have a material adverse effect on Inlogic, the
Assets or the Business.
SECTION 4.3 RESERVED.
SECTION 4.4 CAPITALIZATION; BENEFICIAL OWNERSHIP OF INLOGIC.
The authorized capital of Inlogic Software Inc. consists of an
unlimited number of common shares, an unlimited number of Class A shares, an
unlimited number of Class B shares, an unlimited number of Class C shares and an
unlimited number of Class D shares of which 8,555,000 common shares, 685,000
Class A shares, no Class B shares, 710,000 Class C shares and 3,564,163 Class D
shares are duly and validly issued, and outstanding, and are fully paid and
non-assessable.
<PAGE> 20
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Inlogic Schedule 4.4 sets forth a complete and accurate list of all of the
holders of capital shares of Inlogic Software Inc. (previously defined as the
"INLOGIC SHAREHOLDERS"), including the name of each Inlogic Shareholder and the
number and class or series of shares of Inlogic capital stock held by each such
Inlogic Shareholder. All of such shares are owned by the Inlogic Shareholders
free and clear of any Encumbrances. Each Inlogic Shareholder is the owner of
record and beneficially of the number of common shares, Class A shares, Class C
shares and Class D shares set forth opposite such Inlogic Shareholder's name on
Inlogic Schedule 4.4. Inlogic Schedule 4.4 includes a true and complete copy of
each stock option plan governing the terms of the outstanding Inlogic Options
(it being understood that each amendment to a stock option plan shall be deemed
to be a separate stock option plan for purposes of this Section). Inlogic has
previously provided to Daleen and Daleen Canada true and correct copies of each
option agreement governing the outstanding stock options. Other than as set out
on Exhibit 1.1(B), there are no outstanding options, warrants, rights,
commitments, pre-emptive rights or agreements of any kind for the issuance or
sale of, or outstanding securities convertible into, any additional equity of
any class of Inlogic Software Inc. Exhibit 1.1(B) includes an accurate
description of the outstanding options, including the number and class of shares
underlying each such option or other right, the date of grant or proposed grant,
the exercise price per share, vesting schedule, the term date, the name of each
holder thereof and the identity of the stock option plan pursuant to which the
option was granted. None of the shares in the capital of Inlogic has been issued
in violation of any Regulation. There are no voting trusts, voting agreements,
proxies or other agreements, instruments or undertakings with respect to the
voting of the shares of Inlogic except for the existing shareholders agreement
between the Inlogic Shareholders as set out in Inlogic Schedule 4.4;
SECTION 4.5 SUBSIDIARIES OF INLOGIC.
Except for Inlogic Delaware which is a wholly-owned Subsidiary of
Inlogic Software Inc. and Atevent.com Inc., Inlogic Software Inc. has no
Subsidiaries, or investments in any other corporations or business organization
or businesses. There are no outstanding options, warrants, rights, commitments,
pre-emptive rights or agreements of any kind for the issuance or sale of, or
outstanding securities convertible into, any additional equity of any class of
any Subsidiary of Inlogic Software Inc. The business of Atevent.com has been
carried out as a division of Inlogic Software Inc.;
SECTION 4.6 AUTHORITY.
(1) Inlogic and each of the Inlogic Shareholders has full, right, authority
and power to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by Inlogic or the Inlogic
Shareholders, as the case may be, pursuant to this Agreement and to
carry out the transactions contemplated hereby or thereby. The
execution, delivery
<PAGE> 21
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and performance by Inlogic and each Inlogic Shareholder of this
Agreement and each such other agreement, document and instrument have
been duly authorized by all necessary action of Inlogic and each
Inlogic Shareholder and no other action on the part of any of Inlogic
or any Inlogic Shareholder is required in connection therewith.
(2) This Agreement and each agreement, document and instrument executed and
delivered by Inlogic and/or any of the Inlogic Shareholders pursuant to
this Agreement constitutes, or when executed and delivered will
constitute, valid and binding obligations of each of them that is a
party thereto enforceable in accordance with their terms (assuming the
due authorization, execution and delivery by Daleen and Canadian
Buyer), subject to the effect of any applicable bankruptcy,
re-organization, insolvency, moratorium or similar laws affecting
creditors' rights generally and subject to the effect of general
principles of equity, including, without limitation, the possible
unavailability of specific performance or injunctive relief, regardless
of whether considered in a proceeding in equity or at law.
(3) The execution, delivery and performance by Inlogic and the Inlogic
Shareholders of this Agreement and each such other agreement, document
and instrument:
(a) With respect to Inlogic, does not and will not violate any
provision of the Certificate or Articles of Incorporation (as
amended) or the Bylaws of Inlogic;
(b) Does not and will not violate any applicable laws or require
any Inlogic or any Inlogic Shareholder to obtain any approval,
consent or waiver of, or make any filing with, any person or
entity (governmental or otherwise) that has not been obtained
or made on or prior to the date hereof; and
(c) Except such consents as disclosed on Inlogic Schedule
4.6(3)(c), does not and will not result in (a) a breach of,
constitute a default under, accelerate any obligation under,
or give rise to a right of termination of any indenture or
loan or credit agreement or any other agreement, contract,
instrument, mortgage, lien, lease, permit, authorization,
order, writ, judgement, injunction, decree, determination or
arbitration award to which any of the Inlogic Shareholders or
Inlogic is a party or by which the property of any Inlogic
Shareholders or Inlogic is bound or affected and which is
material to any Inlogic Shareholder or Inlogic (as
applicable), or the Assets or the Business, taken as a whole,
or (b) result in the creation or imposition of any mortgage,
pledge, lien, security interest or other charge or encumbrance
on any equity interest in any Inlogic Shareholder or Inlogic.
<PAGE> 22
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SECTION 4.7 ASSETS.
Excluding the Leased Real Property and any leases of personal property
and except as set forth on Inlogic Schedule 4.7(A), Inlogic has title to the
tangible Assets free and clear of any Encumbrances other than the Permitted
Liens. The Assets of Inlogic excluding the Atevent Assets (as hereinafter
defined) are referred to as the "Retained Assets". The Retained Assets include
all assets necessary for the conduct of the Business as currently conducted and
currently proposed to be conducted. Inlogic Schedule 4.7(A) contains an accurate
list as of the date hereof and as of the Closing Date by general category of all
tangible Retained Assets where the book value or fair market value of an
individual item exceeds $1,000 or where an aggregate of similar items exceeds
$5,000 except for tangible Retained Assets that have been fully depreciated for
tax purposes. All tangible assets and properties which are part of the Retained
Assets and are material to the operation of the Business are in good operating
condition and repair (normal wear and tear excepted) and are usable in the
ordinary course of business. The Retained Assets include a minimum of $7,000,000
Cdn of cash a portion of which will be distributed as the Inlogic Dividend to
the Inlogic Shareholders. The Atevent Assets have been used solely for the
Atevent Business.
SECTION 4.8 REAL PROPERTY.
(1) OWNED REAL PROPERTY. Inlogic does not own any real property.
(2) LEASES. All of the real property leased or sub-leased by Inlogic is
identified on Inlogic Schedule 4.8 (herein referred to as the "LEASED
REAL PROPERTY" and such leases are herein referred to as the "FACILITY
LEASES"). Inlogic Schedule 4.8 includes with respect to each Facility
Lease, the names of the lessor and any sub-lessor, the expiration date
of the lease together with any renewal provisions, the address of the
Leased Real Property (including the floor), the square footage of the
Leased Real Property and the price of the lease.
(3) True and complete copies of the Facility Leases have been delivered to
the Canadian Buyer. The Facility Leases have been duly authorized and
executed by Inlogic and, to the knowledge of the Inlogic Shareholders,
the other parties thereto and are in full force and effect and binding
and enforceable against the parties thereto (assuming due
authorization, execution and delivery by the other parties thereto),
subject to the effect of any applicable bankruptcy, re-organization,
insolvency, moratorium or similar laws affecting creditors' rights
generally and subject to the effect of general principles of equity,
including, without limitation, the possible unavailability of specific
performance or injunctive relief, regardless of whether considered in a
proceeding in equity or at law. Inlogic is not in material default
under any Facility Lease, nor has any event occurred which, with notice
or the passage of time, or both, would give rise to such a default. To
the knowledge of the Inlogic Shareholders, none of the other parties to
any
<PAGE> 23
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Facility Lease is in default under such Facility Lease and there is no
event which, with notice or the passage of time, or both, would give
rise to such a default.
(4) LEASES OR OTHER AGREEMENTS. Except for the Facility Leases listed on
Inlogic Schedule 4.8, neither Inlogic nor any of its Subsidiaries
holds, or is obligated under or a party to, any leases, subleases,
licenses, occupancy agreements, options, rights, concessions or other
agreements or arrangements, written or oral, granting to any person the
right to purchase, use or occupy any real property in connection with
the Business or any portion thereof or interest in any such real
property.
(5) FACILITY LEASES AND LEASED REAL PROPERTY. With respect to the Facility
Leases to which Inlogic is a party, as lessee or sublessee, Inlogic has
an unencumbered leasehold interest as a lessee or a sub-lessee in the
Leasehold Estate subject to the Permitted Liens. The actions
contemplated by this Agreement do not violate the terms or result in
the termination of, or create a right to terminate, such Facility
Lease. Inlogic enjoys peaceful and undisturbed possession of all the
Leased Real Property, as applicable.
(6) CONDITION OF LEASED REAL PROPERTY. There are no material defects in the
physical condition of any portion of the Leased Real Property and all
such Leased Real Property is in good operating condition and repair
(reasonable wear and tear excepted) and are adequate to the uses to
which they are being put and for which they are planned to be put.
(7) COMPLIANCE WITH THE LAW. Inlogic has not received any written notice
from any governmental authority of any violation of any law, ordinance,
regulation, license, permit or authorization issued with respect to the
Leased Real Property that has not been heretofore corrected. None of
the Inlogic Shareholders nor Inlogic has received any written notice of
any real estate tax deficiency or assessment and is not aware of any
proposed deficiency, claim or assessment with respect to any of the
Leased Real Property, or any pending or threatened condemnation
thereof.
SECTION 4.9 MINUTE BOOKS; CORPORATE DOCUMENTS.
The minute books of Inlogic Software Inc. and its Subsidiaries made
available to Daleen and Canadian Buyer contain a complete and accurate summary
of all meetings of directors and stockholders or actions by written resolutions
since the time of incorporation of Inlogic and the respective subsidiaries
through the date of this Agreement, and reflect all transactions referred to in
such minutes or resolutions accurately. The actions recorded in the corporate
records of Inlogic are complete and accurate and all corporate proceedings and
actions reflected in such records have been conducted or taken in compliance
with all applicable Regulations and the
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articles and by-laws of Inlogic. The Inlogic Shareholders have made available
for inspection and copying by the Canadian Buyer and its counsel true and
correct copies of all documents referred to in this Section or in the Schedules
delivered to the Canadian Buyer pursuant to this Agreement. The Board of
Directors of Inlogic has adopted resolutions as to its interpretation of
Inlogic's Employee Stock Option Plan with respect to the effect of the
transactions contemplated hereby on the vesting provisions of the Employee Stock
Option Plan as previously discussed with, and agreed to by, Daleen, and such
interpretation is within the powers of the Board of Directors under such plan.
SECTION 4.10 FINANCIAL STATEMENTS.
(1) The Inlogic Shareholders have delivered to Daleen and the Canadian
Buyer the following financial statements of Inlogic, copies of which
are attached hereto as Inlogic Schedule 4.10: audited balance sheets
and statements of earnings, retained earnings and changes in financial
position for its fiscal years ended December 31, 1997, and 1998 and
unaudited balance sheet as at September 30, 1999 and the statements of
earnings, retained earnings and changes in financial position for the
nine months ended September 30, 1999 (such financial statements are
referred to collectively as the "FINANCIAL STATEMENTS"). The unaudited
balance sheet as of September 30, 1999 is referred to as the "Unaudited
Balance Sheet." The December 31, 1998 balance sheet is hereinafter
referred to as the "Base Balance Sheet" and December 31, 1998 is
hereafter referred to as the "Base Balance Sheet Date." The Financial
Statements, present fairly and accurately and, in all material
respects, completely the financial condition of Inlogic at the dates of
said statements and the results of its operations for the periods
covered thereby. In connection with the preparation of the Financial
Statements, Inlogic has made available to KPMG Peat Marwick LLP all
accounting and financial records and related data, and all minute books
including all board and shareholder actions taken by Inlogic, all of
which are true, correct and accurate, and all in accordance with the
representations contained in the Inlogic letter to KPMG Peat Marwick
LLP delivered in connection with the review and audit of the Financial
Statements. Prior to the Closing, Inlogic Shareholders will prepare and
deliver to Daleen and the Canadian Buyer an unaudited balance sheet of
Inlogic as at the Closing Date and such balance sheet shall present
fairly and completely the information purported to be shown thereon.
(2) Inlogic's fiscal year 1999 and fiscal year 2000 operating budgets are
attached hereto as Inlogic Schedule 4.10(1), have previously been
supplied by the Inlogic Shareholders to the Canadian Buyer and Daleen
and have been prepared in good faith on the basis of assumptions by
Inlogic which Inlogic and the Inlogic Shareholders reasonably believed
were reasonable at the time of the preparation of such budget and as of
the date hereof.
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(3) Except as set forth on Inlogic Schedule 4.10 as of the date hereof
Inlogic does not have any Liabilities of any nature, whether accrued,
absolute or contingent (including without limitation Liabilities as
guarantor or otherwise with respect to obligations of others, or
Liabilities for any Tax due or then accrued or to become due or
contingent or potential Liabilities relating to activities of Inlogic
or the conduct of the Business prior to the date hereof or the Closing,
as the case may be, regardless of whether claims in respect thereof had
been asserted as of such date), except Liabilities (i) stated or
adequately reserved against on the Unaudited Balance Sheet or the notes
thereto, (ii) incurred or arising in the ordinary course of business
under Contracts, Leases, Permits and other business arrangements
described in the Disclosure Schedule (and under those Contracts, Leases
and Permits which are not required to be disclosed on the Inlogic
Disclosure Schedule) none of which relates to any Default under any
Contract or Lease, breach of warranty, tort, infringement or violation
of any Regulation or Court Order or that arose out of any Action and
none of which, individually or in the aggregate, has or would have a
material adverse effect, (iii)incurred or arising in the ordinary
course of the Business subsequent to the September 30, 1999 consistent
with the terms of this Agreement (none of which relates to any Default
under any Contract or Lease, breach of warranty, tort, infringement or
violation of any Regulation or Court Order or arose out of any Action)
and none of which, individually or in the aggregate, has or would have
a material adverse effect, (iv) disclosed in or pursuant to this
Article IV or on the Inlogic Disclosure Schedule or (v) future
performance under Contracts or Leases, none of which relates to any
default, breach of warranty, tort, infringement or violation of any
Regulation or Court Order or arose out of any action and none of which
individually or in the aggregate has or would have a material adverse
effect.
SECTION 4.11 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as disclosed in Inlogic Schedule 4.11 and other than the
transactions expressly contemplated by Section 2.1(1) hereof, since the Base
Balance Sheet Date, there has not been any:
(a) Except as specifically disclosed in the Inlogic Schedules,
actual or threatened material adverse change;
(b) Change in accounting methods, principles or practices of
Inlogic affecting the Assets, its Liabilities or the Business;
(c) Revaluation by Inlogic of any of the Assets, including without
limitation writing down the value of inventory or writing off
notes or accounts receivable;
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(d) Damage, destruction or loss (whether or not covered by
insurance) which has had or will have a material adverse
effect;
(e) Cancellation of any indebtedness owing to Inlogic or waiver or
release of any right or claim of Inlogic relating to its
activities or properties which had or will have a material
adverse effect;
(f) Change in Inlogic's authorized or issued capital stock; grant
of any stock option or right to purchase shares of capital
stock of Inlogic; issuance of any security convertible into
such capital stock; grant of any registration rights;
declaration, setting aside, or payment of dividends or
distributions by Inlogic or any redemption, purchase or other
acquisition of any of the securities of Inlogic;
(g) Reserved;
(h) Adverse change in employee relations which has or is
reasonably likely to have a material adverse effect on the
productivity, the financial condition, results of operations
or Business of Inlogic or the relationships between the
employees of Inlogic and the management of Inlogic;
(i) With the exception of notice of termination of the Facility
Lease in September 1999, (x) amendment, cancellation or
termination of any Contract, commitment, agreement, Lease,
transaction or Permit relating to the Assets or the Business,
or (y) with the exception of this Agreement and the other
agreements entered into in connection herewith, and an offer
to lease on new premises, entry into any Contract, Lease,
transaction or Permit which is not in the ordinary course of
business, including without limitation any employment or
consulting agreements;
(j) Mortgage, pledge or other encumbrance of any Assets, except
Permitted Liens;
(k) Sale, assignment or transfer of any of the Assets, except to
the extent Assets are sold or disposed of in the ordinary
course of business;
(l) Incurrence of indebtedness by Inlogic for borrowed money or
commitment to borrow money entered into by Inlogic, or loans
made or agreed to be made by Inlogic which is outstanding as
of the date hereof, or indebtedness guaranteed by Inlogic,
except for endorsements for collection or deposit in the
ordinary course of business;
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(m) Except as provided in this Agreement or the other agreements
contemplated hereby or as described in the Inlogic Disclosure
Schedule, incurrence by Inlogic of Liabilities, except
Liabilities relating to normal trade payables incurred in the
ordinary course of business, or increase or change in any
assumptions underlying or methods of calculating, any doubtful
account contingency or other reserves of Inlogic;
(n) Payment, discharge or satisfaction of any Liabilities of
Inlogic other than the payment, discharge or satisfaction in
the ordinary course of business of Liabilities set forth or
reserved for on the Base Balance Sheet or incurred in the
ordinary course of business;
(o) Capital expenditure by Inlogic in excess of Cdn.$5,000
individually or Cdn.$20,000 in the aggregate, or the incurring
of any obligation by Inlogic to make any capital expenditures
or execute any Lease;
(p) Failure to pay or satisfy when due any Liability of Inlogic;
(q) Disposition or lapsing of any Intangibles or any disposition
or disclosure to any person of any Intangibles not theretofore
a matter of public knowledge; or
(r) Agreement whether written or oral, by Inlogic or any Inlogic
Shareholder to do any of the things described in the preceding
clauses (a) through (s) other than as expressly provided for
herein.
SECTION 4.12 CONTRACTS AND COMMITMENTS.
(1) CONTRACTS. Inlogic Schedules 4.8 and 4.12 set forth the following
Contracts (or descriptions thereof, in the case of oral Contracts) to
which Inlogic is a party or by which it is bound (collectively, the
"MATERIAL CONTRACTS"):
(a) Other than in connection with Atevent Transaction, contracts
not made in the ordinary course of business;
(b) Other than obligations relating solely to notice of
termination or severance payments required by applicable law,
(A) Employment contracts and severance agreements, to employ
or terminate present or former executive officers or other
personnel (including without limitation present and former
employees, independent contractors and consultants) and other
contracts with present or former officers, directors,
employees, consultants, independent contractors, or
shareholders of Inlogic, (B) employment contracts and
severance agreements that will result in the payment by, or
the creation of any Liability to pay on behalf of Inlogic or
Canadian Buyer, any severance,
<PAGE> 28
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termination, "GOLDEN PARACHUTE", or other similar payments to
any present or former personnel following termination of
employment or otherwise as a result of the consummation of the
transactions contemplated by this Agreement, (C) any
agreements or commitments, or pending agreements or
commitments, to hire any person or entity as an employee,
independent contractor or consultant, or (D) any contracts,
commitments or other obligations with respect to the payment
of any referral or other fees in connection with the hiring or
proposed hiring of any employee, independent contractor or
consultant;
(c) Labour or union contracts;
(d) Distribution, franchise, license, technical assistance, sales,
service, OEM (either pursuant to which Inlogic licenses its
Proprietary Rights to third parties or pursuant to which
Inlogic licenses Proprietary Rights from third parties),
reseller, value added reseller (VAR), commission, agency or
advertising Contracts, or consultant Contracts (where a third
party is providing services to Inlogic), excluding (A) "SHRINK
WRAP" software licenses from third parties that are not
material to the Business and (B) consultant Contracts
involving aggregate fees of less than $25,000 per annum and
that are terminable by Inlogic on no more than 30 days notice;
(e) Contracts or agreements with a customer of Inlogic providing
for an aggregate payment by such customer in excess of $25,000
or pursuant to which Inlogic has, or reasonably anticipates
that it will, derive revenues in excess of $25,000;
(f) Options with respect to any property, real or personal,
whether Inlogic is the grantor thereunder;
(g) Contracts (excluding real property leases) involving actual
future expenditures or other Liabilities (including without
limitation, potential or contingent Liabilities), in excess of
$25,000 in the aggregate (excluding Liabilities for indirect
expenditures such as salaries and overhead expenses and any
contingent or potential Liability) to the Business or the
Assets;
(h) Contracts or commitments relating to commission arrangements
with others;
(i) Promissory notes, loans, agreements, indentures, evidences of
indebtedness, letters of credit, guarantees, or other
instruments relating to an obligation in respect of borrowed
money whether Inlogic
<PAGE> 29
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shall be the borrower, lender or guarantor thereunder or
whereby any Assets are pledged;
(j) Contracts containing covenants limiting the freedom of Inlogic
or any of its respective officers, directors, shareholders or
affiliates, to engage in any line of business or compete with
any person other than Inlogic;
(k) Any Contract to supply services to the Canadian federal,
provincial, or local government or any other foreign
government or any agency or department thereof;
(l) Leases of real property; or
(m) Leases of personal property not cancellable (without
Liability) within 30 calendar days, excluding leases of
personal property involving the expenditure of less than
$5,000 in the aggregate annually.
(2) MATERIAL CONTRACTS. The Inlogic Shareholders have delivered to Canadian
Buyer true, correct and complete copies (or descriptions thereof with
respect to oral Material Contracts) of all of the Material Contracts,
including all amendments and supplements thereto. Other than the
Material Contracts, the Inlogic Shareholders have no other Contracts of
the type described in clauses (a) through (m) above.
(3) ABSENCE OF DEFAULTS. Inlogic has fulfilled, or taken all action
necessary to enable it to fulfill when due, all of its respective
material obligations under each such Material Contract. To the
knowledge of the Inlogic Shareholders, all other parties to such
Material Contracts are currently in compliance in all material respects
with the provisions thereof, no party is in Default in any respect
thereunder or has threatened Default or termination thereof and no
notice of any such claim of Default relating thereto has been given to
Inlogic or the Inlogic Shareholders. To the knowledge of the Inlogic
Shareholders, there is no reason to believe that the services called
for by any Material Contract between Inlogic and a client of Inlogic
cannot be supplied substantially in accordance with the terms of such
Material Contract, including time specifications, and Inlogic has no
reason to believe that any Material Contract will upon performance by
Inlogic result in a net loss to Inlogic or that any customer will
refuse to pay for services rendered or products sold or licensed
thereunder. Without limiting the generality of the foregoing, Inlogic
is in full and complete compliance with, and is not in default or
breach under, the terms and conditions of the Alliance Software License
Agreement dated August 12, 1999, by and between MetaSolv Software, Inc.
and Inlogic Software Inc., including without limitation Section 3(c) of
such agreement, and accordingly has had its employees and
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consultants execute an explicit non-disclosure agreements containing
the provisions required by such Section 3(c).
(4) MISCELLANEOUS CONTRACT MATTERS. Except as disclosed on Inlogic Schedule
4.12(4), Inlogic has not granted ownership or other intellectual
property rights to any derivative works created by third parties
related to the Proprietary Rights. In the case of AT&T Canada, AT&T
Canada has not created any such derivative works. Inlogic has prepared
and delivered to Metronet Communications Group, Inc. a letter
consistent in all material respects with the letter prepared and
delivered to Inlogic by Daleen on October 5, 1999, and Metronet
Communications Group, Inc. has agreed to comply with the statements
contained therein. A copy of such letter, as delivered to Metronet
Communications Group, Inc., is attached to Inlogic Schedule 4.12(4). In
addition, Metronet Communications Group, Inc. has not challenged any of
the provisions of such letter.
SECTION 4.13 PERMITS:
(1) Inlogic has, and at all times has had, all Permits required under any
Regulation (including Environmental Laws) in the operation of the
Business or in the ownership of the Assets, except for those Permits
the absence of which would not individually or in the aggregate have a
material adverse effect. Inlogic is not in Default, nor has it received
any notice of any claim of Default, with respect to any such Permit. No
present or former shareholder, director, officer or employee of Inlogic
or any affiliate thereof, or any other person, firm, corporation or
other entity, owns or has any proprietary, financial or other interest
(direct or indirect) in any such Permit.
(2) Except as disclosed on Inlogic Schedule 4.13 hereto, no notice to,
declaration, filing or registration with, or Permit from, any domestic
or foreign governmental or regulatory body or authority, or any other
person or entity, is required to be made or obtained by Inlogic in
connection with the execution, delivery or performance of this
Agreement and the consummation of the transactions contemplated hereby.
SECTION 4.14 LITIGATION.
Except as set forth on Inlogic Schedule 4.14, there are no Actions
outstanding or, to the knowledge of the Inlogic Shareholders, pending or
threatened (a) against, (i) Inlogic, the Business or the Assets (including with
respect to Environmental Laws), (ii) to the knowledge of the Inlogic
Shareholders, any officers or directors of Inlogic, as such, or (iii) to the
knowledge of the Inlogic Shareholders, any Inlogic Shareholder in such Inlogic
Shareholder's capacity as a shareholder of Inlogic or as an employee of Inlogic,
(b) against Inlogic seeking to delay, limit or enjoin the transactions
contemplated by this Agreement (c) against Inlogic, or any of its officers or
directors or Inlogic Shareholders, in their capacity as such that involves the
risk of
<PAGE> 31
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criminal liability to any such entity or person or (d) in which Inlogic is a
plaintiff, including any derivative suits brought by or on behalf of Inlogic
nor, to the knowledge of the Inlogic Shareholders, is there any reasonable basis
for any such Action. Inlogic is not in Default with respect to or subject to any
Court Order, and there are no unsatisfied judgements against Inlogic, the
Business or the Assets. There is not a reasonable likelihood of an adverse
determination of any pending Actions that would have a material adverse effect.
There are no Court Orders or agreements with, or liens by, any governmental
authority or quasi-governmental entity relating to any Environmental Law which
regulate, obligate, bind or in any way affect the Inlogic Shareholders, the
Assets or the Business, other than the Permitted Liens.
SECTION 4.15 COMPLIANCE WITH LAW.
Except as set forth on Inlogic Schedule 4.15, Inlogic and the conduct
of the Business have been and are in compliance with all Regulations and Court
Orders relating to the Assets or the Business or operations of Inlogic except in
each case for such non-compliance as would not, individually or in the
aggregate, have a material adverse effect. Within the last five years, Inlogic
has not received any notice to the effect that it is not in such compliance with
any such Regulations or Court Orders.
SECTION 4.16 ORDINARY COURSE.
Except for the transactions contemplated by this Agreement, including
the transactions expressly contemplated by Section 2.1(1) hereof and as set
forth on Inlogic Schedule 4.16, since December 31, 1998, Inlogic has conducted
its business only in the ordinary course and consistently with its prior
practices.
SECTION 4.17 OFFICERS AND COMPENSATION.
Inlogic Schedule 4.17 hereto contains a true and complete list of all
current officers and directors of Inlogic. In addition, Inlogic Schedule 4.17
hereto contains a list of all managers, employees, independent contractors and
consultants of Inlogic. In each case Inlogic Schedule 4.17 includes the current
job title and aggregate annual compensation (including base salary and bonus
reflected separately) of each such individual.
SECTION 4.18 EMPLOYEES; LABOUR MATTERS.
As of the date of this Agreement, Inlogic employs a total of 108
full-time employees, no part-time employees and 28 independent contractors.
Except as set forth in Inlogic Schedule 4.18, Inlogic has not received any
notice, written or otherwise, that any employee or independent contractor
intends to terminate his or her employment or business relationship with Inlogic
following the Closing whether as a result of this Agreement or otherwise.
Inlogic is not delinquent in payments to any of its employees or independent
contractors for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed for it
<PAGE> 32
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to the date hereof or amounts required to be reimbursed to such employees or
independent contractors. Except as set forth in Inlogic Schedule 4.18, Inlogic
does not have a policy, practice, plan or program of paying severance pay or any
form of severance compensation in connection with the termination of employment,
other than employees and independent contractors may be terminated with notice
or pay in lieu thereof as required by applicable law in the absence of a written
or oral agreement. Inlogic is in compliance in all material respects with all
applicable laws and regulations respecting labour, employment, fair employment
practices, work place safety and health, terms and conditions of employment, and
wages and hours. There are no charges of employment discrimination or unfair
labour practices pending or, to the knowledge of Inlogic Shareholders,
threatened and there exists no basis for any such claim, nor are there any
strikes, slowdowns, stoppages of work, or any other concerted interference with
normal operations which are existing, pending or threatened against or involving
Inlogic. There are no pending grievances, complaints or charges that have been
filed against Inlogic under any dispute resolution procedure (including, but not
limited to, any arbitration or similar proceedings) and no such claim of which
Inlogic or any Inlogic Shareholder has received written notice. No collective
bargaining agreement is in effect or is currently being or is about to be
negotiated by Inlogic. There are no current or, to the knowledge of the Inlogic
Shareholders, threatened attempt to organize or establish any trade union or
employee association with respect to Inlogic. Inlogic has not received any
written notice indicating that any of its employment policies or practices is
currently being audited or investigated by any federal, provincial or local
government agency. Since November 11, 1999, Inlogic has complied with the
requirements of Section G of the Term Sheet dated November 11, 1999, between
Daleen and Inlogic.
SECTION 4.19 BANKING RELATIONS.
Inlogic Schedule 4.19 contains a complete and correct list of the names
and locations in which Inlogic has accounts or safe deposit boxes and the names
of all persons authorized to draw thereon or have access thereto.
SECTION 4.20 NO BROKERS.
Neither Inlogic nor any of the Inlogic Shareholders nor any of their
respective officers, directors, employees, or affiliates has employed or made
any agreement with any broker, finder, investment banker or similar agent or any
person or firm which will result in the obligation of Daleen, Canadian Buyer,
Inlogic, or any of their affiliates to pay any finder's fee, brokerage fees or
commission or similar payment in connection with the transactions contemplated
hereby.
SECTION 4.21 NO OTHER AGREEMENTS TO SELL THE PURCHASED SECURITIES.
Other than the transactions expressly contemplated by Section 2.1(1)
hereof and as described on Inlogic Schedule 4.21 neither the Inlogic
Shareholders nor any
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of Inlogic's officers, directors, employees or affiliates have any commitment or
legal obligation, absolute or contingent, to any other person or firm other than
Canadian Buyer and Daleen under this Agreement or the Term Sheet signed November
11, 1999 as revised on November 26, 1999 to sell, assign, transfer or effect a
sale of any of the Assets or Business (other than inventory or services in the
ordinary course of business), to sell or effect a sale of the equity of Inlogic,
to effect any merger, consolidation, liquidation, dissolution or other
reorganization of Inlogic or to enter into any agreement or cause the entering
into of an agreement with respect to any of the foregoing.
SECTION 4.22 CUSTOMERS.
Inlogic Schedule 4.22 sets forth all customers which (i) accounted for
more than $25,000 in revenue for Inlogic for the nine months ended September 30,
1999 and or (ii) accounted for more than $25,000 in revenue for Inlogic in the
twelve months ended December 31, 1998 (collectively, the "CUSTOMERS"). The
relationships of Inlogic with its Customers are good commercial working
relationships and no Customer has given notice, written or oral, of its intent
to terminate its business relationship with Inlogic.
SECTION 4.23 BACKLOG.
As of the date hereof, Inlogic has a backlog of orders for the sale or
lease of services, or for the licensing or manufacture of software, for which
potential revenues have not been recognized by Inlogic, as set forth in Inlogic
Schedule 4.23.
SECTION 4.24 INTELLECTUAL PROPERTY RIGHTS OF INLOGIC.
(1) CERTAIN DEFINED TERMS. For the purposes of this Agreement:
(a) "SOFTWARE" means any computer program, operating system,
applications system, microcode, firmware or software of any
nature, whether operational, under development or inactive,
including all object code, source code, technical manuals,
compilation procedures, execution procedures, flow charts,
programmers notes, user manuals and other documentation
thereof, whether in machine-readable form, programming
language or any other language or symbols and whether stored,
encoded, recorded or written on disk, tape, film, memory
device, paper or other media of any nature;
(b) "INTANGIBLES" means:
(i) Patents, patent applications, patent disclosures, all
re-issues, divisions, continuations, renewals,
extensions and continuation-in-parts thereof and
improvements thereto;
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(ii) Trademarks, service marks, trade dress, logos, trade
names, and corporate names and registrations and
applications for registration thereof and all
goodwill associated therewith;
(iii) Copyrights and registrations and applications for
registration thereof;
(iv) Maskworks and registrations and applications for
registration thereof;
(v) All right, title and interest in all computer
software, data and documentation (including, without
limitation, modifications, enhancements, revisions or
versions of or to any of the foregoing and prior
releases of any of the foregoing applicable to any
operating environment);
(vi) Trade secrets and confidential business information
(including ideas, formulas, compositions, inventions,
whether patentable or unpatentable and whether or not
reduced to practice, know-how, manufacturing and
production processes and techniques, research and
development information, drawings, flow charts,
processes ideas, specifications, designs, plans,
proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and
cost information, business and marketing plans, and
customer and supplier lists and information);
(vii) Other proprietary rights, including, without
limitation moral rights;
(viii) All rights necessary to prevent claims of invasion of
privacy, right of publicity, defamation, infringement
of moral rights, or any other causes of action
arising out of the use, adaptation, modification,
reproduction, distribution, sale, or exhibition of
the Software;
(ix) All income, royalties, damages and payments due at
Closing or thereafter with respect to the Owned
Software or the Intangibles therein and all other
rights thereunder including, without limitation,
damages and payments for past, present or future
infringements or misappropriations thereof, the right
to sue and recover for past, present or future
infringements or misappropriations thereof;
(x) All rights to use all of the foregoing; and
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(xi) All other rights in, to, and under the foregoing in
all countries; and
(c) "DISTRIBUTOR" means Inlogic and any other person or entity
that has been authorized by Inlogic to sell, license or offer
to sell or license any Inlogic Software, other than an
employee of Inlogic. Distributors may include, without
limitation, value added resellers, original equipment
manufacturers, dealers, sales agents, and distributors.
(2) LISTS OF INTELLECTUAL PROPERTY RIGHTS AND CONTRACTS:
(a) Inlogic Schedule 4.24(2)(a) contains a complete list of each
governmental filing, whether federal, state, local, foreign or
otherwise, related to patents, copyrights, trademarks, service
marks, trade names, maskworks, other Intangibles and Software
(collectively "REGISTRATIONS") of Inlogic; (ii) identifies
each pending Registration of Inlogic with respect to the
Intangibles and Software; (iii) identifies all of Inlogic's
applications for or Registrations regarding the Intangibles
and Software which have been withdrawn, abandoned, or have
lapsed or been denied; and (iv) specifies any advice to
Inlogic with respect to such Registration or protectability of
the Intangibles and Software, summarizing such advice;
(b) Inlogic Schedule 4.24(2)(b) also identifies (i) each license
agreement or other written or oral agreement or permission
("LICENSE AGREEMENT") in which Inlogic has granted to any
third party any right with respect to any of the Intangibles
or Software; (ii) each item of the Intangibles and Software
used or possessed by Inlogic that any third party owns and the
license, sublicense, agreement or other permission in
connection therewith (the "THIRD PARTY LICENSE AGREEMENT"),
together with the term thereof, and all royalties or other
amounts due thereon and (iii) each agreement entered into by
Inlogic that provides for the sale, license or access to any
source code of the Software, including, without limitation,
any source code escrow agreement ("SOURCE CODE AGREEMENT");
(c) Inlogic Schedule 4.24(2)(c) is an accurate and complete list
and description (including a name, product description, the
language in which it is written and the type of hardware
platform(s) on which it runs) of all of the following:
(i) All Software owned by Inlogic, whether purchased from
a third party, developed by or on behalf of Inlogic,
currently under development or otherwise ("OWNED
SOFTWARE") other than Software generally available
for license at retail;
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(ii) All Software, other than the Owned Software, that is
either (x) offered or provided by Inlogic, directly
or through Distributors, to customers of Inlogic or
(y) used by Inlogic to provide information or
services to customers of Inlogic for a fee
(collectively, "CUSTOMER SOFTWARE"; the Owned
Software and the Customer Software are collectively
referred to as the "INLOGIC SOFTWARE"); and
(iii) All Software, other than Inlogic Software, that is
licensed or marketed to or from third parties or
otherwise used by Inlogic for any purpose whatsoever
(collectively, "OTHER SOFTWARE") other than software
generally available for license at retail;
(d) To the extent not set forth in Inlogic Schedule 4.24(2)(a),
Inlogic Schedule 4.24(d) separately sets forth an accurate and
complete list and description of each copyright, trademark,
trademark application or registration, service mark, service
mark application or registration, patent application or
registration, and name and logo included in the Intangibles
(as defined below in this Section) owned, marketed or licensed
by Inlogic or from third parties, used or under development by
Inlogic. Inlogic Schedule 4.24(d) indicates Inlogic's
ownership of such items or the source of Inlogic's right to
use such items; and
(e) Inlogic Schedule 4.24(2)(e) identifies all individuals who
have materially contributed to the development of the Owned
Software.
(3) WARRANTIES:
(a) Inlogic has supplied Daleen and the Canadian Buyer with
correct and complete copies of all License Agreements, Third
Party License Agreements and Source Code Agreements, and
except as specified in Inlogic Schedule 4.24(3)(a) all License
Agreements, Third Party License Agreements and Source Code
Agreements do not and will not require the consent or approval
of any other persons as a result of the transactions
contemplated hereby or any subsequent amalgamation or other
merger or combination of Inlogic and Canadian Buyer or other
Affiliate of Daleen, in each case, free of cost or expense.
(b) Inlogic has complied with all License Agreements, Third Party
License Agreements and Source Code Agreements, and to the best
of Inlogic's knowledge, all other parties to such agreements
have complied with all provisions thereof; and no default or
event of default exists under any of the License Agreements,
Third Party License Agreements and Source Code Agreements,
except as set forth in Inlogic Schedule 4.24(3)(b).
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(c) No Software other than the Owned Software, Customer Software
and Other Software is required to operate Inlogic's business
as currently conducted and as contemplated by existing Inlogic
product and service plans.
(d) Except as explained on Inlogic Schedule 4.24(3)(d), Inlogic
owns and has good and marketable title to the Owned Software
and Intangibles attributable to the Owned Software, and has
the full right to use all of the Customer Software and Other
Software, and Intangibles attributable thereto, as used or
required to operate Inlogic's business as currently conducted
and as contemplated in the future in accordance with Inlogic's
written business plans, free and clear of any liens, claims,
charges or encumbrances which would affect the use of such
Software in connection with the operation of Inlogic's
business as currently conducted and as contemplated in the
future in accordance with Inlogic's written business plans.
(e) No rights of any third party not previously obtained are
necessary to market, license, sell, modify, update, and/or
create derivative works for any Software as to which Inlogic
takes any such action in its business as currently conducted.
(f) With respect to Software which is licensed by Inlogic to third
parties or used in connection with the providing of services
to third parties:
(i) Inlogic maintains machine-readable
master-reproducible copies, reasonably complete
technical documentation and/or user manuals for the
most current releases or versions thereof and for all
earlier releases or versions thereof currently being
supported by Inlogic;
(ii) In each case, the machine-readable copy substantially
conforms to the corresponding source code listing;
(iii) Such Software is written in the language set forth on
Inlogic Schedule 4.24(2)(c), for use on the hardware
set forth on Inlogic Schedule 4.24(2)(c) with
standard operating systems;
(iv) Such Software can be maintained and modified by
reasonable competent programmers familiar with such
language, hardware and operating systems; and
(v) In each case the Software operates in accordance with
the user manual thereof without operating defects of
any material nature;
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(g) None of the Software or Intangibles listed on Inlogic
Schedules 4.24(3)(a), 4.24(3)(b) or 4.24(2)(d), or their
respective past or current uses by or through Inlogic has
violated or infringed upon, or is violating or infringing
upon, any patent, copyright, trade secret or other Intangible
of any person. Inlogic has adequately maintained all trade
secrets and copyrights with respect to the Inlogic Software
and Other Software. Inlogic has performed all obligations
imposed upon it with regard to the Customer Software and Other
Software which are required to be performed by it on or prior
to the date hereof, and neither Inlogic nor, to the knowledge
of Inlogic, any other party, is in breach of or default
thereunder in any respect, nor to Inlogic's knowledge, is
there any event which with notice or lapse of time or both
would constitute a default thereunder;
(h) To the knowledge of the Inlogic Shareholders, no person is
violating or infringing upon, or has violated or infringed
upon at any time, any of Inlogic's proprietary rights to any
of the Software or Intangibles listed on Inlogic Schedules
4.24(3)(a), 4.24(3)(b) or 4.24(3)(d);
(i) None of the Software or Intangibles listed on Inlogic
Schedules 4.24(3)(a), 4.24(3)(c) or 4.24(3)(d) are owned by or
registered in the name of any of Inlogic's shareholders, any
current or former owner or shareholder, partner, director,
executive, officer, employee, salesperson, agent, customer,
contractor of Inlogic or its representative nor does any such
person have any interest therein or right thereto, including,
but not limited to, the right to royalty payments. Except as
listed on Inlogic Schedule 4.24(3)(i), Inlogic has granted no
third party any exclusive rights related to any Owned
Software;
(j) No litigation is pending and no claim has been made against
Inlogic or, to the knowledge of the Inlogic Shareholders, is
threatened, which contests the right of Inlogic to sell or
license to any person or entity or use any of the Owned
Software, Customer Software or Other Software. Except as
described in Inlogic Schedule 4.24(3)(j), no former employer
of any employee or consultant of Inlogic has made a claim
against Inlogic or, to the knowledge of Inlogic, against any
other person, that Inlogic or such employee or consultant is
misappropriating or violating the Intangibles of such former
employer;
(k) Inlogic is not a party to or bound by and, upon the
consummation of the transactions contemplated by this
Agreement, neither Inlogic nor the Canadian Buyer (in the case
of the Canadian Buyer, as a result of any action or inaction
of Inlogic or any Inlogic Shareholder), will be a party to or
bound by any license or other agreement requiring the
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payment by Inlogic, the Canadian Buyer or its assigns of any
royalty or license payment, excluding such agreements relating
to the Customer Software to the extent such royalty or license
payment is expressly set forth on Inlogic Schedule 4.24(3)(k);
(l) Except as set forth in Inlogic Schedule 4.24(3)(1), the Owned
Software, Customer Software, and Other Software and the
information used by Inlogic, and the Intangibles thereunder,
are fully transferable to the Canadian Buyer following the
Closing Date (in, object code, and if applicable, source code
forms, including all related documentation, to the extent that
such documentation has been created);
(m) Without limiting any of the foregoing, to the best knowledge
of Inlogic, none of Inlogic's current or former officers,
executives, directors, partners, shareholders, employees,
salespersons, customers, or independent contractors have
disclosed to (without proper obligation of confidentiality) or
otherwise used or utilized on behalf of any person other than
Inlogic, any trade secrets or proprietary information,
including, without limitation, the source codes for Inlogic
Software;
(n) All License Agreements, Third Party License Agreements, Source
Code Agreements, software development agreements, and any
other written agreement between Inlogic and any third party in
which trade secrets or confidential information of Inlogic,
Inlogic's customers, agents, or suppliers, are disclosed binds
the recipient thereof to take reasonable steps to protect the
proprietary rights of Inlogic and its customers, agents, and
suppliers in such trade secrets and confidential information;
(o) Except as set forth on Inlogic Schedule 4.24(3)(o), none of
Inlogic's shareholders have an ownership right or other
interest in any Inlogic Software, Other Software or
Intangibles, and no claims have been made or, to the knowledge
of the Inlogic, is threatened, that the Inlogic Software
substantially fails to perform as set forth in Section
4.24(5);
(p) All Inlogic's contracts with customers (collectively "CUSTOMER
CONTRACTS"), whether completed or outstanding, were or are
evidenced by written agreements containing provisions
reasonably equivalent to those contained in Inlogic Schedule
4.24(3)(p) hereto, with only such changes as would not affect
the rights of Inlogic or the Canadian Buyer as assignee
thereof and would not impose on Inlogic or the Canadian Buyer,
as assignee thereof, any additional obligations; and
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(q) No Customer Contract provides for the transfer to the customer
therein of any Intangibles relating to Inlogic Software as to
which Inlogic thereafter shall have no further rights. No
current Customer Contract provides that the customer therein
shall be entitled to sublicense or otherwise transfer to a
third party any of the Intangibles relating to Inlogic
Software unless such third party agrees to be bound by the
confidentiality provisions thereof and agrees to pay Inlogic
royalties and other amounts comparable to those under such
Customer Contract:
(i) Except as set forth on Inlogic Schedule 4.24(3)(q),
each past or present customer of Inlogic and each
past or present customer of Inlogic to whom Inlogic
disclosed any of the Intangibles relating to Inlogic
Software is bound by a confidentiality provision
which requires such past or present customer to take
reasonable steps to protect the rights of Inlogic in
the Intangibles relating to Inlogic Software; and
(ii) None of the Intangibles owned by Inlogic were in
existence prior to August 11, 1993.
(4) MILLENNIUM COMPLIANCE:
(a) Except as noted in Inlogic Schedule 4.24(4)(a), the Owned
Software and to the knowledge of the Inlogic Shareholders, the
Customer Software and Other Software, are "MILLENNIUM
COMPLIANT." For the purposes of this Agreement "MILLENNIUM
COMPLIANT" means:
(i) The functions, calculations, and other computing
processes of the Owned Software, Other Software and
Customer Software (collectively, "PROCESSES") perform
in an accurate manner regardless of the date in time
on which the Processes are actually performed and
regardless of the date input to the Owned Software,
Other Software, and Customer Software, whether
before, on, or after January 1, 2000, and whether or
not the dates are affected by leap years;
(ii) The Owned Software, Other Software, and Customer
Software accept, store, sort, extract, sequence, and
otherwise manipulate date inputs and date values, and
return and display date values, in an accurate manner
regardless of the dates used, whether before, on, or
after January 1, 2000;
(iii) The Owned Software, Other Software, and Customer
Software will function without interruptions caused
by the date in time
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on which the Processes are actually performed or by
the date input to the Owned Software, Other Software,
and Customer Software, whether before, on, or after
January 1, 2000;
(iv) The Owned Software, Other Software, and Customer
Software accept and respond to two (2) digit year and
four (4) digit year date input in a manner that
resolves any ambiguities as to the century in a
defined, predetermined, and accurate manner;
(v) The Owned Software, Other Software, and Customer
Software display, print, and provide electronic
output of date information in ways that are
unambiguous as to the determination of the century;
and
(vi) The Owned Software, Customer Software, and Other
Software have been tested by Inlogic to determine
whether the Owned Software, Customer Software, and
Other Software are Millennium Compliant. Inlogic
shall deliver the test plans and results of such
tests upon written request from Daleen or the
Canadian Buyer. Inlogic shall notify Daleen and the
Canadian Buyer immediately of the results of any
tests or any claim or other information that
indicates the Owned Software, Customer Software, and
Other Software are not Millennium Complaint;
(b) Except as set forth in Inlogic Schedule 4.24(4)(b) and except
as described in the next following sentence, the Company has
inquired as to the Millennium Compliance of the Customer
Software and any computer hardware and devices owned or leased
by the Company that operates any of the Company Software
("COMPANY HARDWARE") with the vendor thereof, has obtained
assurances that such Customer Software and Company Hardware is
Millennium Compliant, and has tested such Customer Software
and Company Hardware in conjunction with the Owned Software to
determine whether the operation of the Owned Software would
result in dated-related failures or errors in such Customer
Software or Company Hardware. In the event that the Company
obtains information that such Customer Software or Company
Hardware is not Millennium Compliant or such Customer Software
or Company Hardware fails the testing as described above, the
Company has established and has timely implemented written
plans to migrate the Company and all Company customers off of
such Customer Software or Company Hardware before the Company
anticipates that errors or failures in such Customer Software
or Company Hardware will occur;
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(c) Except as set forth in Inlogic Schedule 4.24(4)(c) and except
as described in the next following sentence, the Company has
inquired as to the Millennium Compliance of the Other Software
with the vendor thereof and has obtained assurances that such
Other Software is Millennium Compliant. In the event that the
Company obtains information that such Other Software is not
Millennium Compliant, the Company has established and has
timely implemented written plans to migrate the Company off of
such Other Software before the Company anticipates that errors
or failures in such Other Software will occur;
(d) Each customer of Company identified on Inlogic Schedule
4.24(4)(d) has received a copy of the correspondence attached
to such Inlogic Schedule
(e) Except as set forth on Schedule 4.24(4)(e), no Intangibles are
used by Inlogic which are owned by Atevent or to which Atevent
has rights;
(f) Except as set forth on Schedule 4.24(4)(f), all Software
included in the Atevent Assets, including Third Party
Software, shall be properly licensed to and paid for by
Atevent;
(g) Immediately prior to the Atevent Transaction, the Atevent
Corporation had no assets or liabilities.
(5) MILLENNIUM COMMUNICATION. Inlogic has provided to Daleen :
(a) Copies of all material forms of correspondence and statements
relating to the Millennium Compliance of the Business which
have been made by or on behalf of Inlogic to suppliers,
auditors, investors, customers or other third parties;
(b) Copies of all material reports and test plans provided to the
board or senior management that were prepared for, by or on
behalf of the Corporation relating to the Millennium
Compliance of the Business, and any deficiencies or require
remediation relating thereto;
(c) All material copies of plans for Year 2000 remediation
provided to the board of directors or senior management that
were prepared by the Corporation or third parties; and
(d) Copies of or reports summarizing the material information from
all material correspondence, statements and reports sent or
received by Inlogic with respect to the Year 2000 Compliance
of the Business' suppliers.
<PAGE> 43
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(6) PERFORMANCE. The Inlogic Software:
(a) Performs in accordance with all published specifications for
such Software;
(b) Complies with all other published documentation, descriptions
and literature with respect to such Software; and
(c) Complies with all representations, warranties and other
requirements specified in all of Inlogic's License Agreements.
SECTION 4.25 TAXES.
Except as otherwise set forth on Inlogic Schedule 4.25:
(a) All returns, declarations, reports, estimates, statements,
schedules or other information or documents with respect to
Taxes (collectively, "TAX RETURNS") required to be filed by or
with respect to Inlogic have been timely filed (giving effect
to extensions granted with respect thereto), with the
appropriate tax authorities and all such Tax Returns are true,
correct, and complete in all material respects;
(b) Inlogic has paid all Taxes when due to any federal,
provincial, local, foreign or other taxing authority;
(c) There are no liens for Taxes upon any of the assets of, or
interests in Inlogic, except liens for Taxes not yet due and
payable;
(d) Other than a review of claims for research and development tax
credits by Revenue Canada, no Tax Return of Inlogic has been
audited by the relevant taxing authority. No deficiency for
any Taxes has been proposed, asserted or assessed against
Inlogic that has not been resolved and paid in full. Other
than a review of claims for research and development tax
credits by Revenue Canada, there are no outstanding waivers,
objections, extensions, or comparable consents regarding the
application of the statute of limitations or period of
reassessment with respect to any Taxes or Tax Returns that
have been given or made by Inlogic (including the time for
filing of Tax Returns or paying Taxes) and Inlogic has no
pending requests for any such waivers, extensions, or
comparable consents;
(e) Other than a review of claims for research and development tax
credits by Revenue Canada, no audit or other proceeding by any
federal, provincial, local or foreign court, governmental,
regulatory, administrative or similar authority is presently
pending with respect to
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any Taxes or Tax Return of Inlogic and Inlogic has not
received written notice of any pending audits or proceedings;
(f) Except as set forth on Inlogic Schedule 4.25(f), Inlogic has
not received a ruling from any taxing authority or signed an
agreement with any taxing authority that could reasonably be
expected to have a material adverse effect on Inlogic or the
Assets or the Business;
(g) Inlogic has complied in all material respects with all
applicable Regulations relating to the payment and withholding
of Taxes and has, within the time and the manner prescribed by
law, paid over to the proper governmental authorities all
amounts so withheld;
(h) There is no reason to suspect that any taxing authority may
claim or assess any material amount of Taxes payable by
Inlogic for any period ending on or prior to the Closing Date
and there are no facts of which Inlogic or the Inlogic
Shareholders are aware which would constitute grounds for the
assessment of any material amount of Taxes payable by Inlogic
for any period ending on or prior to the Closing Date;
(i) Except for George Timmes each of the Inlogic Shareholders is a
resident of Canada for purposes of the Tax Acts; and
(j) No issue has been raised in writing by a federal, provincial,
local or foreign taxing authority in any examination relating
to Inlogic which could reasonably be expected to result in a
proposed deficiency for any subsequent taxable period.
SECTION 4.26 RESERVED.
SECTION 4.27 EMPLOYEE BENEFIT PROGRAMS.
(1) Inlogic Schedule 4.27 lists every Employee Program (as defined below)
that has been maintained (as defined below) by Inlogic at any time
during the three-year period ending on the date of the Closing.
(2) To the knowledge of the Inlogic Shareholders, there has been no failure
of any party to comply in any material respects with any laws
applicable to the Employee Programs that have been maintained by
Inlogic. With respect to any Employee Program ever maintained by
Inlogic, there has occurred no material violation of, or breach of any
duty under applicable law or any Tax law requirements, or conditions to
favourable Tax treatment, applicable to such plan), which could result,
directly or indirectly, in any Taxes, penalties or other liability to
Inlogic. No litigation, arbitration, or governmental administrative
proceeding (or investigation) or other proceeding (other than those
relating to routine claims for benefits) is pending or, to the
knowledge
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of the Inlogic Shareholders, threatened with respect to any Employee
Program.
(3) With respect to each Employee Program maintained by Inlogic within the
three years preceding the Closing, complete and correct copies of the
following documents (if applicable to such Employee Program) have
previously been delivered to Canadian Buyer: (i) all documents
embodying or governing such Employee Program, and any funding medium
for the Employee Program (including, without limitation, trust
agreements) as they may have been amended; (ii) the summary plan
description for such Employee Program (or other descriptions of such
Employee Program provided to employees) and all modifications thereto;
(iii) any insurance policy (including any fiduciary liability insurance
policy) related to such Employee Program; (iv) any documents evidencing
any loan to an Employee Program that is an employee stock ownership
plan; and (v) all other materials reasonably necessary for Canadian
Buyer to perform any of its responsibilities with respect to any
Employee Program subsequent to the Closing (including, without
limitation, health care continuation requirements).
(4) Other than as set forth on Inlogic Schedule 4.27(4), Inlogic has not
announced any plan or legally binding commitment to create any
additional Employee Program which is intended to cover employees or
former employees of Inlogic or to amend or modify any existing Employee
Program which covers or has covered employees or former employees of
Inlogic.
(5) Reserved.
(6) No event has occurred in connection with which Inlogic or any Employee
Program, directly or indirectly, could be subject to any material
liability (A) under any Regulation or governmental order relating to
any Employee Programs or (B) pursuant to any obligation of Inlogic to
indemnify any person against liability incurred under any such
Regulation or order as they relate to the Employee Programs.
(7) Except as described on Inlogic Schedule 4.27(7), neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will result in the acceleration or creation of any
rights of any person to benefits under any Employee Program (including,
without limitation, the acceleration of the vesting or exercisability
of any stock options, the acceleration of the vesting of any restricted
stock, or the acceleration or creation of any rights under any
severance, parachute or change in control agreement).
<PAGE> 46
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(8) Each Employee Program and related trust agreement or other funding
instrument, as applicable, which covers or has covered employees or
former employees of Inlogic (with respect to their relationship with
such entities) is legally valid and binding and in full force and
effect.
(9) There is no contract, agreement, plan or arrangement covering any
employee or former employee of Inlogic, other than stock option plans,
that, individually or collectively, provides for the payment by Inlogic
of any amount that is not deductible under the Income Tax Act (Canada).
(10) All contributions required to be made by Inlogic with respect to any
Employee Program due as of any date through and including the Closing
Date have been made when due.
(11) For purposes of this section:
(a) "EMPLOYEE PROGRAM" means (A) any employee benefit plan,
including, but not limited to, health, dental, insurance, and
similar plans and programs for the benefit of employees and
(B) any employment, consulting, severance or other similar
contract, arrangement or policy, any stock option plan,
phantom stock plan, bonus or incentive award plan, deferred
compensation agreement, supplemental income arrangement, and
vacation plan, and any other employee benefit plan, agreement,
or arrangement not described in (A) above. In the case of an
Employee Program funded through a trust, each reference to
such Employee Program shall include a reference to such trust;
and
(b) An entity "MAINTAINS" an Employee Program if such entity
sponsors, contributes to, or provides (or has promised to
provide) benefits under such Employee Program, or has any
obligation (by agreement or under applicable law) to
contribute to or provide benefits under such Employee Program,
or if such Employee Program provides benefits to or otherwise
covers employees of such entity, or their spouses, dependants,
or beneficiaries.
(12) There are no pension plans existing in respect of the employees of
Inlogic.
SECTION 4.28 INSURANCE.
Inlogic Schedule 4.28 contains a complete and accurate list of all
policies or binders of fire, liability, title, worker's compensation, directors
and officers liability, errors and omissions, product liability and other forms
of insurance maintained by Inlogic. All such insurance coverage applicable to
Inlogic, the Business and the Assets is in full force and effect and provides
coverage as may be required by applicable Regulation and by any and all
Contracts to which Inlogic is a party. There is no Default under any such
coverage nor is there presently any failure to
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give notice or present any claim under any such coverage in a due and timely
fashion. There are no outstanding unpaid premiums except in the ordinary course
of business and no notice of cancellation or non-renewal of any such coverage
has been received. There are no provisions in such insurance policies for
retroactive or retrospective premium adjustments. All products liability,
general liability and workers' compensation insurance policies maintained by
Inlogic are presently occurrence policies and not claims made policies except
for Inlogic's professional liability (error and admissions), fiduciary liability
and employment practices policies. There are no outstanding performance bonds
covering or issued for the benefit of Inlogic. To the knowledge of the Inlogic
Shareholders, no insurer has advised Inlogic that it intends to reduce coverage,
increase premiums or fail to renew existing policy or binder.
SECTION 4.29 ACCOUNTS RECEIVABLE.
Inlogic Schedule 4.29 includes an accurate and complete list of
accounts receivable, including the days outstanding of such accounts receivable,
as of the date hereof and as of the Closing Date. Inlogic Schedule 4.29
indicates the number of days such accounts receivable have been outstanding as
of the respective date of the information. The accounts receivable set forth on
Inlogic Schedule 4.29 and the accounts receivable set forth on the Base Balance
Sheet, represent, and the accounts receivable to be set forth in the Closing
Balance Sheet will represent, bona fide claims of Inlogic against debtors for
sales, services performed or other charges arising on or before such date, and
all the goods delivered and services performed which gave rise to said accounts
where delivered or performed in all material respects in accordance with the
applicable orders, Contracts or customer requirements. Said accounts receivable
are subject to no defenses, counterclaims or rights of setoff and are fully
collectible in the ordinary course of business without cost in collection
efforts therefor, except to the extent of the appropriate reserves for bad debts
on accounts receivable as set forth on the Base Balance Sheet and, in the case
of accounts receivable arising since the Base Balance Sheet Date, to the extent
of a reasonable reserve rate for bad debts on accounts receivable which is not
greater than the rate reflected by the reserve for bad debts on the Base Balance
Sheet.
SECTION 4.30 ENVIRONMENTAL MATTERS.
(1) Except for Hazardous Materials contained in cleaning and other office
products used in the ordinary course of Inlogic's business (i) Inlogic
has not ever generated, transported, used, stored, treated, disposed
of, or managed any Hazardous Waste (as defined below); (ii) to the
knowledge of the Inlogic Shareholders, no Hazardous Material (as
defined below) has ever been or is threatened to be spilled, released,
or disposed of at any site presently or formerly owned, operated,
leased, or used by Inlogic or has ever been located in the soil or
groundwater at any such site; (iii) to the knowledge of the Inlogic
Shareholders, no Hazardous Material has ever been transported from
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any site presently or formerly owned, operated, leased, or used by
Inlogic for treatment, storage, or disposal at any other place; (iv) to
the knowledge of the Inlogic Shareholders, Inlogic does not presently
own, operate, lease, or use, nor has it previously owned, operated,
leased, or used any site on which underground storage tanks are or were
located; and (v) to the knowledge of the Inlogic Shareholders no lien
has ever been imposed by any governmental agency on any property,
facility, machinery, or equipment owned, operated, leased, or used by
Inlogic in connection with the presence of any Hazardous Material.
(2) (i) Inlogic does not have liability under, of has ever violated in any
material respect, any Environmental Law (as defined below); (ii) to the
knowledge of the Inlogic Shareholders, Inlogic does not have any
property owned, operated, leased, or used by it, and any facilities and
operations of Inlogic thereon, are presently in compliance in all
material respects with all applicable Environmental Laws; (iii) Inlogic
has not ever entered into or been subject to any judgement, consent
decree, compliance order, or administrative order with respect to any
environmental or health and safety matter or received any request from
any governmental authority or agency for information, notice, demand
letter, administrative inquiry, or formal or informal complaint or
claim with respect to any environmental or health and safety matter or
the enforcement of any Environmental Law; and (iv) the Inlogic
Shareholders have no reason to believe that any of the items enumerated
in clause of this subsection will be forthcoming.
(3) The Inlogic Shareholders have made available to the Canadian Buyer
copies of all documents and records, and information in the possession
of Inlogic Shareholders and Inlogic concerning any environmental or
health and safety matter relevant to Inlogic, whether generated by
Inlogic or others, including, without limitation, environmental audits,
environmental risk assessments, site assessments, documentation
regarding off-site disposal of Hazardous Materials, spill control
plans, and reports, correspondence, Permits, licenses, approvals,
consents, and other authorizations related to environmental or health
and safety matters issued by any governmental agency.
(4) For purposes of this Section 4.30, (i) "HAZARDOUS MATERIAL" shall mean
and include any hazardous waste, hazardous material, hazardous
substance, petroleum product, oil, toxic substance, pollutant,
contaminant, or other substance which may pose a threat to the
environment or to human health or safety, as defined or regulated under
any Environmental Law except for any Hazardous Material contained in
cleaning and other office products used in the ordinary course of
Inlogic's Business; (ii) "HAZARDOUS WASTE" shall mean and include any
contaminant or hazardous waste as defined or regulated under any
Environmental Law; (iii) "ENVIRONMENTAL LAW" shall mean any
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environmental or health and safety-related Regulation, including,
without limitation, the Environmental Protection Act (Ontario) and the
Occupational Health and Safety Act (Ontario), whether existing as of
the date hereof, previously enforced, or subsequently enacted; (iv)
"INLOGIC" shall mean and include Inlogic and all other entities for
whose conduct Inlogic is or may be held responsible under any
Environmental Law.
SECTION 4.31 WARRANTY OR OTHER CLAIMS.
There are no existing or, to the knowledge of the Inlogic Shareholders
(which knowledge shall be unrebuttably presumed with respect to any customer
that has not paid all amounts owed to Inlogic when due) threatened service
liability, warranty or other similar claims, or any reasonable basis upon which
a material claim of such nature could be based, against Inlogic for services
which are negligent, defective or fail to meet any service warranties. Since the
Balance Sheet Date, no claim has been asserted against Inlogic for
re-negotiation or price re-determination of any business transaction, and, to
the knowledge of the Inlogic Shareholders, there are no facts known to the
Inlogic Shareholders upon which any such claim could be based.
SECTION 4.32 RESERVED.
SECTION 4.33 POWERS OF ATTORNEY.
(1) Inlogic does not have any outstanding power of attorney with respect to
or affecting any transaction contemplated by this Agreement.
(2) The Inlogic Shareholders do not have any outstanding power of attorney
with respect to or affecting any transaction contemplated by this
Agreement
SECTION 4.34 INLOGIC DISCLOSURE.
The representations, warranties and statements contained in this
Agreement and in the Exhibits and Schedules hereto do not contain any untrue
statement of a material fact, and, when taken together, do not omit to state a
material fact required to be stated therein or necessary in order to make such
representations, warranties or statements not misleading in light of the
circumstances under which they were made.
SECTION 4.35 SHAREHOLDERS' AGENT.
(1) Mohammed Aamir shall be constituted and appointed as agent
("SHAREHOLDERS' AGENT") for and on behalf of the Inlogic Shareholders
to give and receive notices and communications under this Agreement, to
authorize delivery to Daleen of the Indemnity Escrow Shares or other
property from the Escrow Fund in satisfaction of claims by Daleen, to
object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with
orders of courts and awards of
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arbitrators with respect to such claims, and to take all actions
necessary or appropriate in the judgement of the Shareholders' Agent
for the accomplishment of the foregoing. Such agency may be changed by
the holders of a majority in interest of the Indemnity Escrow Fund from
time to time upon not less than 10 days' prior written notice to
Daleen. No bond shall be required of the Shareholders' Agent, and the
Shareholders' Agent shall receive no compensation for his services.
Notices or communications to or from the Shareholders' Agent shall
constitute notice to or from each of the Inlogic Shareholders for this
Agreement and for the other agreements contemplated hereby.
(2) The Shareholders' Agent shall not be liable for any act done or omitted
hereunder as Shareholders' Agent while acting in good faith and in the
exercise of reasonable judgement, and any act done or omitted pursuant
to the advice of counsel shall be conclusive evidence of such good
faith. The Inlogic Shareholders shall severally indemnify the
Shareholders' Agent and hold him harmless against any loss, liability
or expense incurred without gross negligence or bad faith on the part
of the Shareholders' Agent and arising out of or in connection with the
acceptance or administration of his duties hereunder.
(3) The Shareholders' Agent shall have reasonable access to information
about Inlogic and the reasonable assistance of Inlogic's officers and
employees for purposes of performing its duties and exercising its
rights hereunder, provided that the Shareholders' Agent shall treat
confidentially and not disclose any nonpublic information from or about
Inlogic to anyone (except on a need to know basis to individuals who
agree to treat such information confidentially).
SECTION 4.36 OFFSHORE INVESTMENT REPRESENTATIONS.
Each Inlogic Shareholder hereby represents, warrants and covenants as
set forth below, and all such representations and warranties shall be true and
correct as of the Closing Date as if then made and shall survive the Closing:
(a) Such Inlogic Shareholder (other than George Timmes) is not a
U.S. Person (as defined in Regulation S under the Securities
Act of 1933 Act, as amended (the "SECURITIES ACT")), is not an
affiliate (as defined in Rule 501(b) under the Securities Act,
of Daleen and is not a corporation that has been formed
principally for the purpose of investing in securities not
registered under the Securities Act. Except for George Timmes,
none of the shareholders or other equity owners of each
Inlogic Shareholder that is a corporation are U.S. Persons.
Pursuant to Regulation S, Rule 903(k)(1), a "U.S. PERSON"
means:
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(i) Any natural person resident in the United States;
(ii) Any partnership or corporation organized or
incorporated under the laws of the States;
(iii) Any estate of which any executor or administrator is
a U.S. person;
(iv) Any trust of which any trustee is a U.S. person;
(v) Any agency or branch of a foreign entity located in
the United States;
(vi) Any non-discretionary account or similar account
(other than an estate or trust held by a dealer or
other fiduciary for the benefit or account of a U.S.
person;
(vii) Any discretionary account or similar account (other
than an estate or trust) held by a dealer or other
fiduciary organized, incorporated, or (if an
individual) resident in the United States; and
(viii) Any partnership or corporation if:
(A) Organized or incorporated under the laws of
any foreign jurisdiction; and
(B) Formed by a U.S. person principally for the
purpose of investing in securities not
registered under the Securities Act, unless
it is organized or incorporated, and owned,
by accredited investors (as defined in Rule
501(a)) who are not natural persons, estates
or trusts;
(b) Such Inlogic Shareholder is purchasing the Exchangeable Shares
or, in the case of George Timmes, the Daleen Common Stock and
will exchange such Exchangeable Shares for Daleen Common Stock
for its own account for the purpose of investment and not (A)
with a view to, or for sale in connection with, any
distribution thereof or (B) for the account of, as a nominee
or agent for, or on behalf of any U.S. Person, and has no
current intent to exchange the Exchangeable Shares for Daleen
Common Stock;
(c) Except for George Timmes, at the time of the origination of
contact concerning this Agreement and the date of the
execution and delivery of this Agreement such Inlogic
Shareholder was outside the United States;
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(d) Such Inlogic Shareholder:
(i) Understands that the Exchangeable Shares shall be
exchangeable upon request by such Inlogic Shareholder
into Daleen Common Stock (the "SECURITIES"). Such
Exchangeable Shares shall be non-voting and
non-transferable until exchanged into the Securities;
(ii) Understands that the Securities are distributed under
Regulation S under the Securities Act, or under
another exemption from the registration requirements
of the Securities Act and the Inlogic Shareholders
will not, during the period commencing on the date of
the exchange of the Exchangeable Shares into the
Securities and ending on the first anniversary of
such date, or such shorter period as may be permitted
by Regulation S or other applicable securities law,
(the "RESTRICTED PERIOD"), offer, sell, pledge or
otherwise transfer the Securities in the United
States, or to a U.S. Person for the account or
benefit of a U.S. Person;
(iii) Understands that the Securities are being offered in
a transaction not involving any public offering
within the meaning of the Securities Act and that
neither the Exchangeable Shares nor the Securities
have been registered under the Securities Act, and
will, during the Restricted Period, offer, sell,
pledge or otherwise transfer the Securities only in
accordance with Rule 904 of Regulation S under the
Securities Act, pursuant to registration under the
Securities Act or pursuant to an available exemption
from the registration requirements of the Securities
Act (and based upon an opinion of counsel if the
Company so requests), and in accordance with all
applicable state and foreign securities laws;
(iv) Will, after expiration of the Restricted Period,
offer, sell, pledge or otherwise transfer the
Securities only pursuant to registration under the
Securities Act or an available exemption therefrom
(and based upon an opinion of counsel, if the Company
so requests) and, in any case, in accordance with all
applicable state and foreign securities laws; and
(v) Has not in the United States, engaged in, and prior
to the expiration of the Restricted Period will not
engage in, any short selling of any equity security
issued by Daleen (including, without limitation, the
Daleen Common Stock) or any hedging transaction with
respect to any such equity security, including
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without limitation, put, call or other option
transaction, option writing and equity swaps;
(e) None of the Inlogic Shareholders, its affiliates or any person
acting on behalf of any Inlogic Shareholder or any such
affiliates has engaged, or will engage, in any directed
selling efforts (within the meaning of Rule 901(b) of
Regulation S under the Securities Act) with respect to the
Securities and they, their affiliates and all persons acting
on their behalf have complied and will comply with the
"OFFERING RESTRICTIONS" requirements of Regulation S under the
Securities Act;
(f) The transactions contemplated by this Agreement have not been
pre-arranged with a buyer (other than Daleen) located in the
United States or with a U.S. Person, and are not part of a
plan or scheme to evade the registration requirements of the
Securities Act;
(g) Neither such Inlogic Shareholder, any affiliate of such
Inlogic Shareholder, nor any person acting on their behalf has
undertaken or carried out any activity for the purpose of, or
that could reasonably be expected to have the effect of,
conditioning the market in the United States, its territories
or possessions, for any of the Securities. The Inlogic
Shareholder agrees not to cause any advertisement of the
Securities to be published in any newspaper or periodical or
posted in any public place and not to issue any circular
relating to the Securities;
(h) Such Inlogic Shareholder understands that the Securities have
not been registered under the Securities Act by reason of a
specific exemption therefrom, and may not be transferred or
resold except pursuant to an effective registration statement
or exemption from registration (and based upon an opinion of
counsel, if Daleen so requests) and each certificate
representing the Securities will be endorsed with the
following legends (provided the certificates issued to George
Timmes shall not include the reference to Regulation S):
(i) THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE
PROVISIONS OF ANY APPLICABLE STATE SECURITIES LAWS,
BUT HAVE BEEN ACQUIRED BY THE REGISTERED HOLDER
HEREOF FOR PURPOSES OF INVESTMENT AND IN RELIANCE ON
EXEMPTIONS UNDER THE SECURITIES ACT INCLUDING
REGULATION S, AND STATUTORY EXEMPTIONS UNDER
APPLICABLE STATE AND FOREIGN SECURITIES LAWS. THESE
SECURITIES MAY NOT BE SOLD, PLEDGED, TRANSFERRED
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OR ASSIGNED, EXCEPT IN A TRANSACTION IN ACCORDANCE
WITH REGULATION S OR WHICH IS OTHERWISE EXEMPT FROM
REGISTRATION UNDER PROVISIONS OF THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT THEREUNDER;
AND IN THE CASE OF AN EXEMPTION, ONLY IF THE
CORPORATION HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH TRANSACTION
DOES NOT REQUIRE REGISTRATION OF ANY SUCH SECURITIES.
THESE SECURITIES MAY NOT BE A PART OF ANY HEDGING
TRANSACTIONS THAT DO NOT COMPLY WITH THE SECURITIES
ACT; and
(ii) Any legend required to be placed thereon by
applicable federal or state securities laws;
(i) Such Inlogic Shareholder has substantial experience in
business and finance and in evaluating and investing in
securities in companies similar to Daleen so that he is
capable of evaluating the merits and risks of acquiring the
Securities to be issued to such Inlogic Shareholder and has
the capacity to protect his own interests. Such Inlogic
Shareholder must bear the economic risk of holding the
Securities indefinitely unless such securities are registered
pursuant to the Securities Act, or an exemption from
registration is available for the disposition thereof. Such
Inlogic Shareholder understands that there is no assurance
that any exemption from registration under the Securities Act
will be available;
(j) Such Inlogic Shareholder understands that the availability of
the exemptions from registration under the Securities Act
depends upon, among other things, the bona fide nature of the
investment intent and the accuracy of such Inlogic
Shareholder's representations as expressed herein;
(k) Such Inlogic Shareholder understands that a public market has
recently been created for the Securities but that there is no
assurance that a public market will be maintained for the
Securities;
(l) Such Inlogic Shareholder has received and read the Daleen SEC
reports and financial statements and has had an opportunity to
discuss Daleen's business, management and financial affairs
with its management. Such Inlogic Shareholder has also had an
opportunity to ask questions of and receive answers from
officers of Daleen regarding
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the terms and conditions of acquiring the Securities pursuant
to this Agreement, which questions were answered to such
Inlogic Shareholder's satisfaction; however, such discussions
with officers of Daleen shall not affect the Inlogic
Shareholders' right to rely on the representations and
warranties of Daleen and Canadian Buyer set forth in Article 5
hereof;
(m) George Timmes represents and warrants that he is a resident of
the State of Georgia and that he has:
(i) An individual net worth or joint net worth with his
spouse in exceeding $1,000,000.00 at the Closing
Date; or,
(ii) Individual income in excess of $200,000.00 in each of
fiscal 1997 and 1998 or joint income with his spouse
in excess of $300,000 in each of fiscal 1997 and 1998
and who has a reasonable expectation of reaching the
same income level in the current year; or
In determining "INCOME," any amounts attributable to
tax-exempt income received, losses claimed as a limited
partner in any limited partnership, deductions claimed for
depletion, contributions to IRA or Keogh retirement plans,
alimony payments and any amount by which income from long-term
capital gains has been reduced in arriving at adjusted gross
income should be added to the gross income .
SECTION 4.37 HART-SCOTT-RODINO.
In the previous fiscal year and the current fiscal year of Inlogic (i)
Inlogic has not and does not hold assets located in the United States having an
aggregate book value of U.S. $15 million or more, and (ii) Inlogic has not made
aggregate sales in or into the United States equalling U.S. $25 million or more
in revenues.
SECTION 4.38 EXCHANGE RATIO.
The Inlogic Shareholders acknowledge and agree that the Purchase Price
to be paid per share of the Purchased Securities set forth in Article II hereof
is properly allocated among the outstanding shares of Inlogic common shares,
Class A shares, Class C shares and Class D shares.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF DALEEN AND CANADIAN
BUYER
As a material inducement to the Inlogic Shareholders to enter into this
Agreement and consummate the transactions contemplated hereby, Daleen and
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Canadian Buyer jointly and severally hereby make the representations and
warranties to the Inlogic Shareholders as follows, which representations and
warranties are, as of the date hereof, and will be, as of the Closing Date, true
and correct:
SECTION 5.1 ORGANIZATION.
(1) DALEEN. Daleen is a corporation organized, validly existing and in good
standing under the laws of the State of Delaware with full corporate
power to own or lease its properties and to conduct its business in the
manner and in the places where such properties are owned or leased or
such business is conducted by it. Each of Daleen's Subsidiaries is duly
organized or incorporated (as applicable) and in good standing under
the laws of the state of its organization or incorporation with full
corporate power (as applicable) to own or lease its properties and to
conduct its business in the manner and in the places where such
properties are owned or leased or such business is conducted by it.
(2) CANADIAN BUYER. Canadian Buyer is an unlimited liability company
incorporated, organized and in good standing under the NS Act with full
corporate power and authority to own or lease its properties and to
conduct its business in the manner and in the places where such
properties are owned or leased or such business is or is proposed to be
conducted. Canadian Buyer is an indirect wholly-owned subsidiary of
Daleen.
(3) CAPITAL STRUCTURE OF DALEEN. (a) The authorized capital stock of Daleen
consists of (i) 70,000,000 shares of Common Stock, $.01 par value per
share, of which 19,036,072 shares are issued and outstanding (not
including shares reserved for issuance upon the exercise of outstanding
warrants and options) and no shares were held as treasury shares, in
each case as of December 1, 1999 and (ii) 10,000,000 shares of serial
preferred stock none of which are issued and outstanding. Daleen has
reserved 4,444,390 shares of Daleen Common Stock for issuance upon the
exercise of outstanding options or warrants to purchase Daleen Common
Stock.
(4) CAPITAL STRUCTURE OF CANADIAN BUYER. The authorized capital of Canadian
Buyer consists of 10,000,000 Common Shares without par value and
100,000,000 Exchangeable Shares. Immediately after Closing the issued
capital of Canadian Buyer will consist of 1 common share and 2,160,239
Exchangeable Shares.
(5) EXCHANGEABLE SHARES. On the Closing Date, all necessary corporate
action will have been taken by the Canadian Buyer to duly authorize the
issuance and delivery of the Exchangeable Shares to the Inlogic
Shareholders pursuant to Section 2.3 and upon the satisfaction of the
terms and conditions hereof
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and the consummation of the transactions contemplated hereby and the
issue of such Exchangeable Shares, such Exchangeable Shares will be
issued as fully paid and non-assessable free and clear of any and all
Encumbrances, and Daleen and Canadian Buyer have no knowledge of any
reason why Inlogic Shareholders should not be entitled to acquire
Daleen Common Stock.
SECTION 5.2 AUTHORITY.
(1) Daleen and Canadian Buyer have full right, authority and power to enter
into this Agreement and each agreement, document and instrument to be
executed and delivered by Daleen and Canadian Buyer pursuant to this
Agreement and to carry out the transactions contemplated hereby. The
execution, delivery and performance by Daleen and Canadian Buyer of
this Agreement and each such other agreement, document and instrument
have been duly authorized by all necessary organizational action of
Daleen and Canadian Buyer and no other action on the part of Daleen and
Canadian Buyer is required in connection therewith.
(2) This Agreement and each other agreement, document and instrument
executed and delivered by Daleen and Canadian Buyer pursuant to this
Agreement constitutes, or when executed and delivered will constitute,
valid and binding obligations of Daleen and Canadian Buyer enforceable
in accordance with their terms, subject to the effect of any applicable
bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject to the effect of
general principles of equity, including, without limitation, the
possible unavailability of specific performance or injunctive relief,
regardless of whether considered in a proceeding in equity or at law.
The execution, delivery and performance by Daleen and Canadian Buyer of
this Agreement and each such agreement, document and instrument:
(a) Does not and will not violate any provision of the Memorandum
and Articles of Association of Canadian Buyer;
(b) Does not and will not violate any provision of the Certificate
of Incorporation of Daleen and the Bylaws;
(c) Except as set forth on Daleen Schedule 5.2(2)(c), does not and
will not violate any laws of Canada or of any province or the
laws of the United States or of any state or any other
jurisdiction applicable to Daleen and Canadian Buyer or
require Daleen and Canadian Buyer to obtain any approval,
consent or waiver of, or make any filing with, any person or
entity (governmental or otherwise) which has not been obtained
or made or opinion to Closing other than any such approval,
consent or waiver of or filing with respect to which the
failure to so
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obtain will not have a material adverse effect on the business
and operation of Canadian Buyer, individually, or Daleen and
its Subsidiaries, taken as a whole, following the Closing; and
(d) Does not and will not result in a breach of, constitute a
Default under, accelerate any obligation under, or give rise
to a right of termination of any indenture, loan or credit
agreement, or other agreement mortgage, lease, permit, order,
judgement or decree to which Daleen, its Subsidiaries or the
Canadian Buyer is bound or affected, or result in the creation
or imposition of any mortgage, pledge, lien, security interest
or other charge or similar encumbrance on any of the assets or
capital stock of Daleen or Canadian Buyer and which is
material to the business and financial condition of Daleen or
Canadian Buyer on a consolidated basis, except in the case of
clause (b), for such breaches, defaults, accelerations or
terminations as would not, individually or in the aggregate,
have a material adverse effect.
SECTION 5.3 SEC DOCUMENTS; FINANCIAL STATEMENTS.
(1) Daleen has made available to Inlogic a true and complete copy of each
statement, report, registration statement (with the prospectus in the
form filed pursuant to Rule 424(b) of the Securities Act), and other
filing filed with the SEC by Daleen since July 6, 1999, and, prior to
the Closing Date, Daleen will have furnished Inlogic with true and
complete copies of any additional reports, including the exhibits
thereto, filed with the SEC by Daleen prior to the Closing Date
(collectively, the "DALEEN SEC DOCUMENTS"). All documents required to
be filed as exhibits to the Daleen SEC Documents have been so filed,
and all material contracts so filed as exhibits are in full force and
effect, except as disclosed in the Daleen SEC Documents and those which
have expired in accordance with their terms, and neither Daleen nor any
of its subsidiaries is in default thereunder. As of their respective
filing dates, the Daleen SEC Documents complied in all material
respects with the requirements of the Exchange Act and the Securities
Act, and none of the Daleen SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not
misleading, except to the extent corrected by a subsequently filed
Daleen SEC Document. The financial statements of Daleen, including the
notes thereto, included in the Daleen SEC Documents (the "DALEEN
FINANCIAL STATEMENTS") were complete and correct in all material
respects as of their respective dates, complied as to form in all
material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto as of
their respective dates, and have been prepared in accordance with U.S.
GAAP applied on a basis consistent throughout the periods indicated and
consistent with each other
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(except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements included in the Daleen SEC
Documents, as permitted by Form 10-Q of the SEC). The Daleen Financial
Statements fairly present in all material respects the consolidated
financial condition and operating results of Daleen and its
subsidiaries at the dates and during the periods indicated therein
(subject, in the case of unaudited statements, to normal, recurring
year-end adjustments). There has been no change in Daleen accounting
policies except as described in the notes to the Daleen Financial
Statements.
(2) Except as set forth in Daleen SEC Documents from September 30, 1999
through the date hereof there has not been any material adverse change
in the business, operations, properties, assets, liabilities, condition
(financial or other), results of operations or prospects of Daleen and
its Subsidiaries, taken as a whole.
SECTION 5.4 SECURITIES AND BLUE SKY LAWS.
Daleen shall take such steps as may be necessary to comply with the
securities and blue sky laws of all jurisdictions which are applicable to the
issuance of the Daleen Common Stock in connection with the transactions
contemplated hereby. Inlogic shall use its best efforts to assist Daleen as may
be necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable in connection with the issuance of Daleen
Common Stock in connection with the Reorganization.
SECTION 5.5 LISTING OF ADDITIONAL SHARES.
Daleen shall file with the Nasdaq National Market a listing application
for and use reasonable efforts to obtain a listing of additional shares with
respect to Daleen Common Stock underlying the Exchangeable Shares.
SECTION 5.6 ISSUANCE OF DALEEN COMMON STOCK.
On or prior to the Closing Date, Daleen shall execute and deliver the
Exchange Trust Agreement and the Support Agreement with respect to that number
of Shares of Daleen Common Stock issuable upon the exchange of the Exchangeable
Shares outstanding at the Closing Date.
SECTION 5.7 EXCHANGEABLE SHARES.
Daleen and Canadian Buyer shall refuse to recognize on its books any
sale, pledge or other transfer of the Exchangeable Shares that is not conducted
(i) in accordance with Regulation S of the Securities Act, (ii) pursuant to
registration pursuant to the Securities Act or (iii) in accordance with another
available exemption other than Regulation S.
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SECTION 5.8 MILLENNIUM COMPLIANCE.
(a) Except as noted in Daleen Schedule 5.8, all Software (as
defined in this Section 5.8) owned and released by Daleen,
whether developed by or on behalf of Daleen, currently under
development or otherwise ("Daleen Owned Software") other than
Software generally available for license at retail, is
"Millennium Compliant" except where the failure to be
Millennium Compliant will not result in a Material Adverse
Effect on Daleen. For purposes of this Section, "Software"
means any computer program, operating system, applications
system, microcode, firmware or software of any nature, whether
operational, under development or inactive, including all
object code, source code, technical manuals, compilation
procedures, execution procedures, flow charts, programmers
notes, user manuals and other documentation thereof, whether
in machine-readable form, programming language or any other
language or symbols and whether stored, encoded, recorded or
written on disk, tape, film, memory device, paper or other
media of any nature.
For the purposes of this Section "Millennium Compliant" means:
(i) The functions, calculations, and other computing
processes of the Daleen Owned Software,
(collectively, "PROCESSES") perform in an accurate
manner regardless of the date in time on which the
Processes are actually performed and regardless of
the date input to the Daleen Owned Software, whether
before, on, or after January 1, 2000, and whether or
not the dates are affected by leap years;
(ii) The Daleen Owned Software accept, store, sort,
extract, sequence, and otherwise manipulate date
inputs and date values, and return and display date
values, in an accurate manner regardless of the dates
used, whether before, on, or after January 1, 2000;
(iii) The Daleen Owned Software will function without
interruptions caused by the date in time on which the
Processes are actually performed or by the date input
to the Daleen Owned Software whether before, on, or
after January 1, 2000;
(iv) The Daleen Owned Software accept and respond to two
(2) digit year and four (4) digit year date input in
a manner that resolves any ambiguities as to the
century in a defined, predetermined, and accurate
manner;
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(v) The Daleen Owned Software display, print, and provide
electronic output of date information in ways that
are unambiguous as to the determination of the
century; and
(vi) The Daleen Owned Software has been tested by Daleen
to determine whether the Daleen Owned Software is
Millennium Compliant. Daleen shall notify the Inlogic
Shareholders immediately of the results of any tests
or other information that indicates the Daleen Owned
Software is not Millennium Complaint.
ARTICLE 6
COVENANTS
SECTION 6.1 FURTHER ASSURANCES.
(1) Upon the terms and subject to the conditions contained herein, Daleen
and Canadian Buyer on the one hand, and the Inlogic Shareholders on the
other hand, agree, both before and after the Closing, (a) to use all
reasonable efforts to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by this
Agreement, (b) to execute any documents, instruments or conveyances of
any kind which may be reasonably necessary or advisable to carry out
any of the transactions contemplated hereunder, and (c) to co-operate
with each other in connection with the foregoing. Without limiting the
foregoing, the Inlogic Shareholders, on the one hand, and Canadian
Buyer on the other hand, agree to use their respective commercially
reasonable efforts (i) to obtain the consents of each relevant party
with respect to license agreements between any third party, and Inlogic
(as listed in Schedule 6.1); provided, however, that to the extent
Canadian Buyer fails to co-operate (i) by providing on a timely basis
any financial or similar information reasonably requested by the party
whose consent is sought, including, without limitation, any pro forma
financial statements with respect to Buyer reflecting the consummation
of the transactions contemplated hereby, or (ii) executing and
delivering any assumption agreement or similar instrument requested by
any lessor or sub-lessor and which is reasonably acceptable to Buyer in
connection with the obtaining of any consent with respect to a Contract
or Facility Lease listed on Schedules 4.8 and/or 4.12, Inlogic
Shareholders shall not be required to obtain said consent hereunder and
the obtaining of said consent shall no longer be deemed a condition to
Closing under Article IX hereof; provided, further that no party shall
be required to make any payments, commence litigation or agree to
modifications of the terms thereof in order to obtain any such waivers,
consents or approvals, (ii) to obtain all necessary Permits as are
required to be
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obtained under any Regulations, (iii) to give all notices to, and make
all registrations and filings with third parties, including without
limitation submissions of information requested by governmental
authorities, and (iv) to fulfill all conditions to this Agreement.
(2) Daleen agrees to (i) cause Canadian Buyer to fulfill its obligations
under this Agreement and (ii) take such actions as may be reasonably
necessary to cause Canadian Buyer to take such actions as it is
required to take hereunder.
(3) The Canadian Buyer and each of the Inlogic Shareholders agree to elect
jointly under Section 85 of the Income Tax Act (Canada) (the "ITA") and
under comparable provisions of any applicable provincial tax
legislation, in the prescribed form in connection with the purchase and
sale hereunder.
(4) In order to make this election, an Inlogic Shareholder must provide to
the Canadian Buyer at Suite 230, 902 Clint Moore Road, Boca Raton,
Florida 33487 two signed copies of the necessary election forms on or
before 120 days after the Closing Date, duly completed with the details
of the number of Purchase Shares transferred and the applicable agreed
amount for purposes of the election (which agreed amount shall be
determined in the sole discretion of the relevant Inlogic Shareholder
subject only to the limits imposed by applicable law). Subject to the
election forms complying with the provisions of the applicable law, the
forms will be returned within 30 days of receipt to the Inlogic
Shareholder signed by the Canadian Buyer for filing by the Inlogic
Shareholder with the appropriate taxing authorities. With the exception
of the execution of the election by the Canadian Buyer, compliance with
requirements for a valid election will be the sole responsibility of
the Inlogic Shareholder making the election. Except for the obligation
set forth herein the Canadian Buyer is not responsible or liable for
taxes, interests, penalties, damages or expenses resulting from the
failure by anyone to properly complete any election or to properly file
it within the time prescribed and in the form prescribed under the
relevant Tax Acts.
SECTION 6.2 EXCHANGEABLE DOCUMENTATION.
Daleen, Canadian Buyer and Inlogic Shareholders agree to execute and
deliver or cause to be executed and delivered on Closing (i) a support agreement
between Daleen and the Canadian Buyer and the Inlogic Shareholders in the form
or substantially in the form of Exhibit 6.2(A) (the "SUPPORT AGREEMENT") and
(ii) an exchange trust agreement among Daleen, Canadian Buyer and Inlogic
Shareholders and a trustee in the form or substantially in the form of Exhibit
6.2(B) (the "EXCHANGE TRUST AGREEMENT")
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SECTION 6.3 CONDUCT OF BUSINESS.
Except as set forth on Inlogic Schedule 6.3, between the date of this
Agreement and the date of the Closing, Inlogic will, and the Inlogic
Shareholders will cause Inlogic to:
(a) Conduct its business only in the ordinary course consistent
with past operations and refrain from changing or introducing
any method of management or operations except in the ordinary
course of business;
(b) With the exception of the termination of the Facility Lease
and an offer to lease of Inlogic, not enter into, extend,
modify, amend, terminate or renew any Contract or Lease,
except in the ordinary course of business;
(c) Not sell, assign, transfer, convey, lease, mortgage, pledge or
otherwise dispose of or encumber any of the Assets, or any
interests therein;
(d) Not incur any Liability for indebtedness, guarantee the
obligations of others, indemnify others or, except
endorsements for collection of deposits in the ordinary course
of business, incur any other Liability;
(e) Refrain from making any change or incurring any obligation to
make a change in its charter document other than are required
to effect the steps referred to in Section 2.1 hereof;
(f) Refrain from issuing any capital stock or securities, options
or other instruments convertible into or exchangeable for
capital stock, declaring, setting aside or paying any
dividend, making any other distribution in respect of its
capital stock or making any direct or indirect redemption,
purchase or other acquisition of its capital stock;
(g) Refrain from making any material change in the method of
determining compensation (whether salary or bonus) payable or
to become payable to any of its employees and use all
reasonable efforts in the ordinary course of business to
maintain Inlogic's workforce at its current level and make no
material adjustment in wages or hours of work, nor enter into
any employment agreement, or adopt any new Employee Programs
or other benefit or severance plan or amend or otherwise
modify in any material respect any existing employment
agreement, Employee Programs or other benefit or severance
plan;
(h) Refrain from entering into any arrangement or amending any
existing arrangement between Inlogic and any officer,
director, or any of the Inlogic Shareholders (or any entity
affiliated with such persons), except for arrangements
contemplated by this Agreement or the Disclosure Schedule;
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(i) Refrain from prepaying any loans (if any) from its
shareholders, officers or directors, borrowing any funds
(other than borrowings in the ordinary course of business
under Inlogic's revolving credit facility) or making any other
change in its borrowing arrangements;
(j) Prevent any change with respect to its management and
supervisory personnel and banking arrangements;
(k) Keep intact its business organization, to keep available its
present officers and employees and to preserve the goodwill of
all independent contractors and others having business
relations with it;
(l) Have in effect and maintain at all times all insurance of the
kind, in the amount and with the insurers set forth in the
Schedule 4.28 hereto or equivalent insurance with any
substitute insurers approved in writing by the Canadian Buyer;
(m) Maintain the working capital of Inlogic in the ordinary course
of business at levels consistent with past operations;
(n) Permit Daleen, Canadian Buyer and its authorized
representatives during normal business hours to have full
access to all its properties, assets, records, tax returns,
contracts and documents and furnish to the Daleen and Canadian
Buyer or its authorized representatives such financial and
other information with respect to its business or properties
as Daleen or Canadian Buyer may from time to time reasonably
request;
(o) Refrain from incurring any capital expenditures which,
individually or in the aggregate, exceed $10,000.
SECTION 6.4 NOTIFICATION OF CERTAIN MATTERS.
(1) From the date hereof through the Closing, the Inlogic Shareholders on
the one hand, and Daleen and Canadian Buyer on the other hand, shall
give prompt notice to the other of (i) the occurrence, or failure to
occur, of any event which occurrence or failure would be likely to
cause any representation or warranty contained in this Agreement or in
any exhibit or Schedule hereto to be untrue or inaccurate in any
respect and (ii) any failure of such party, or any of its respective
affiliates or Representatives, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under
this Agreement or any exhibit or Schedule hereto; provided, however,
that such disclosure shall not be deemed to cure any breach of a
representation, warranty, covenant or agreement or to satisfy any
condition except as otherwise provided in Section 6.4(2) hereof. The
Inlogic Shareholders shall promptly notify Daleen and the Canadian
Buyer of any Default, the threat or
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commencement of any Action, or any development that occurs before the
Closing that could in any way materially affect Inlogic, the Assets or
the Business or the consummation of the transactions contemplated
hereby. The Canadian Buyer and Daleen shall promptly notify the Inlogic
Shareholders of any default, the threat or commencement of any action,
or any development that occurs before the Closing that could in any way
materially affect the consummation of the transactions contemplated
hereby.
(2) Anything in Section 6.5(1) to the contrary notwithstanding, if any
event not expressly contemplated by this Agreement occurs at any time
between the date hereof and the Closing Date that would result in any
representation or warranty made by the Inlogic Shareholders, on the one
hand, and Canadian Buyer and Daleen, on the other hand, not being true
in any material respect on the Closing Date, such parties shall
promptly give written notice of such event to such other parties.
Following receipt of such notice, the parties receiving notice shall
have no obligation to consummate the transactions contemplated hereby
and the Inlogic Shareholders, on the one hand, or Canadian Buyer and
Daleen, on the other hand, may terminate this Agreement pursuant to
Article XIII hereof; provided, however, that if such parties consummate
the transactions contemplated hereby, such parties shall continue to
have any indemnification rights hereunder relating to or arising out
of, the subject matter of the event described in any written notice
given pursuant to this Section 6.4(2) to the same extent as if such
notice had not been given and; provided, further, that the giving of
any notice by a party pursuant to this Section 6.4(2) shall not relieve
such party of any liability for breach of any covenant hereunder or the
failure of any representation or warranty of such party hereunder to be
true and correct as of the date hereof.
SECTION 6.5 OPTIONS.
(1) As soon as practicable following the Closing Date, the Inlogic Options
shall be exchanged for options to purchase Daleen Common Stock pursuant
to the exchange ratio used to calculate the number of Exchangeable
Shares issued in consideration for each outstanding share of Inlogic
Software Inc. (the "DALEEN EXCHANGED OPTIONS"). The Daleen Exchanged
Options shall be granted upon the terms set on Schedule 6.5(1)
notwithstanding the foregoing, Daleen shall not be required to grant
the Daleen Exchanged Options to any holder of Inlogic Options who does
not execute an agreement substantially in the form of Exhibit 6.5(1)
hereto.
(2) As soon as possible the Closing Date, in addition to the Daleen
Exchanged Options, Daleen agrees to grant to certain of the employees
who execute agreements substantially in the form of Exhibit 6.5(1)
hereto of Inlogic options under the Daleen stock option plan (the
"DALEEN OPTION PLAN") a true and correct copy of which is attached
hereto as Exhibit 6.5(2) of options to
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purchase in the aggregate 370,000 shares of Daleen Common Stock the
("DALEEN ADDITIONAL OPTIONS") to be distributed as set forth in a
letter of even date herewith from Daleen to the Inlogic Shareholders
which letter makes specific reference to this Section 6.5. Such options
shall have an exercise price per share equal to the fair market value
of the Daleen Common Stock on the date of grant and shall vest at the
rate of twenty-five percent (25%) per year over four (4) years with
vesting commencing on the first anniversary of the date of grant.
SECTION 6.6 PRESERVATION OF CONFIDENTIALITY.
The terms and provisions of Sections l and 3 of the Non-Disclosure
Agreement dated August 16, 1999 between Daleen and Inlogic shall remain in full
force and effect after the date hereof.
SECTION 6.7 ACTIVITIES OF CANADIAN BUYER.
Daleen and Canadian Buyer agree that for so long as the Inlogic
Shareholders are holders of Exchangeable Shares the Canadian Buyer will not
engage in any activities other than holding shares or other securities of
Inlogic and capital or loan transactions with Daleen or its Subsidiaries.
SECTION 6.8 INVESTMENT CANADA ACT.
Daleen and the Canadian Buyer, as promptly as practicable after the
Closing Date will make, or cause to be made, all such filings and submissions
applicable to it, as may be required for it to consummate the purchase of
Inlogic, including the filing of notice pursuant to the Investment Canada Act.
Each of the Inlogic Shareholders and Daleen and Canadian Buyer will co-ordinate
and co-operate with one another in exchanging such information and supplying
such assistance as may be reasonably requested in connection with the foregoing.
Daleen and Canadian Buyer agree to provide evidence of the Investment Canada Act
notification to the Inlogic Shareholders.
SECTION 6.9 BOARD SEAT.
As soon as practicable after the Closing Date, Daleen shall nominate
Mohammad Aamir to the Board of Directors of Daleen and use its reasonable
efforts to elect him to the Board of Directors.
ARTICLE 7
CONDITIONS TO INLOGIC SHAREHOLDERS' OBLIGATIONS
The obligations of Inlogic Shareholders to consummate the transactions
provided for hereby are subject, in the discretion of the Inlogic Shareholders,
to the satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by the Inlogic Shareholders.
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SECTION 7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF DALEEN AND CANADIAN
BUYER.
All representations and warranties of Daleen and Canadian Buyer
contained in this Agreement shall be true and correct at and as of the date of
this Agreement and at and as of the Closing Date as if made as of the Closing
Date, except as and to the extent that the facts and conditions upon which such
representations and warranties are based are expressly required or permitted to
be changed by the terms hereof, and Daleen and Canadian Buyer shall have
performed and satisfied all agreements and covenants required hereby to be
performed by it prior to or on the Closing Date. The Inlogic Shareholders shall
have received a certificate to the foregoing effect from the President or any
Vice President of Daleen.
SECTION 7.2 NO ACTIONS OR COURT ORDERS.
No Action by any governmental authority or other person shall have been
instituted or threatened which questions the validity or legality of the
transactions contemplated hereby and which could reasonably be expected to (a)
materially affect the right or ability of Daleen or Canadian Buyer to purchase
and own the Purchased Securities or to permit Inlogic to operate, possess or
transfer the Assets after the Closing or (b) materially damage the business or
financial condition of Daleen or Canadian Buyer on a consolidated basis if the
transactions contemplated hereunder are consummated. There shall have been no
determination by the Inlogic Shareholders, acting in good faith, that the
consummation of the transactions contemplated by this Agreement has become
inadvisable or impracticable by reason of the institution or threat by any
person or any federal, provincial or other governmental authority of litigation.
There shall not be any Regulation or Court Order that makes the purchase and
sale of the Purchased Securities contemplated hereby illegal or otherwise
prohibited.
SECTION 7.3 CONSENTS.
All Permits, consents, approvals and waivers from governmental
authorities and other parties necessary to the consummation of the transactions
contemplated hereby shall have been obtained.
SECTION 7.4 MATERIAL CHANGES.
Since September 30, 1999, there shall not have been any material
adverse change with respect to the financial or business condition of Daleen or
its Subsidiaries except as disclosed in the Daleen SEC Documents.
SECTION 7.5 OPINIONS OF COUNSEL.
(1) Daleen and Canadian Buyer shall have delivered to the Inlogic
Shareholders an opinion of Stikeman, Elliott and Stewart McKelvey
Stirling Scales, counsel to Canadian Buyer, dated as of the Closing
Date, in the form attached hereto as Exhibit 7.5(A);
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(2) Daleen shall have delivered to the Inlogic Shareholders an opinion of
Morris, Manning & Martin counsel to Daleen, dated as of Closing Date,
in the form attached hereto as Exhibit 7.5(B).
SECTION 7.6 ESCROW AGREEMENTS.
The Canadian Buyer, Daleen, the Inlogic Shareholders and the Escrow
Agent shall have executed and delivered the Indemnity Escrow Agreement and the
Employee/Shareholder Escrow Agreement in substantially in the forms attached as
Exhibits 2.4(B) and 2.4(D).
SECTION 7.7 EMPLOYMENT AND NON-COMPETITION AGREEMENTS.
Canadian Buyer shall have executed and delivered to each of l and l
(the "PRINCIPALS") an Employment and Non-Competition Agreement as hereinafter
defined in substantially the forms attached as Exhibit 7.7(A) and 7.7(B).
SECTION 7.8 CORPORATE DOCUMENTS.
The Inlogic Shareholders shall have received from Canadian Buyer and
Daleen resolutions adopted by the boards of directors of Canadian Buyer and
Daleen, approving this Agreement and the agreements and the transactions
contemplated hereby and thereby, certified by an officer of Canadian Buyer and
Daleen, as applicable, respectively.
SECTION 7.9 EXCHANGEABLE DOCUMENTATION.
The parties thereto shall have executed and delivered the Support
Agreement and the Exchange Trust Agreement.
SECTION 7.10 RESERVED.
SECTION 7.11 REGISTRATION RIGHTS.
Daleen shall have granted to each Inlogic Shareholder registration
rights in the form of the registration rights agreement attached as Exhibit 7.11
(the "REGISTRATION RIGHTS AGREEMENT").
ARTICLE 8
CONDITIONS TO CANADIAN BUYER'S AND DALEEN'S OBLIGATIONS
The obligations of Daleen and Canadian Buyer to consummate the
transactions provided for hereby are subject, in the discretion of Daleen and
Canadian Buyer to the satisfaction, on or prior to the Closing Date, of each of
the following conditions, any of which may be waived by Daleen and Canadian
Buyer.
SECTION 8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS.
All representations and warranties of the Inlogic Shareholders or
Inlogic Shareholder contained in this Agreement shall be true and correct at and
as of the
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date of this Agreement and at and as of the Closing Date, except as and to the
extent that the facts and conditions upon which such representations and
warranties are based are expressly required or permitted to be changed by the
terms hereof, and each Inlogic Shareholder shall have performed and satisfied
all agreements and covenants required hereby to be performed by it prior to or
on the Closing Date. Daleen and the Canadian Purchaser shall have received a
certificate to the foregoing effect from both the President and Chief Executive
Officer and from the Chief Financial Officer of Inlogic.
SECTION 8.2 CONSENTS; REGULATORY COMPLIANCE AND APPROVAL.
All Permits, consents, approvals and waivers from governmental
authorities necessary to the consummation of the transactions contemplated
hereby and for the operation of the Business by Canadian Buyer shall have been
obtained. The parties agree that the consents to be obtained prior to Closing
shall be satisfied and that all approvals required under any Regulations to
carry out the transactions contemplated by this Agreement shall have been
obtained and that the parties shall have complied with all Regulations
applicable to this Agreement and the transactions contemplated hereby.
SECTION 8.3 NO ACTIONS OR COURT ORDERS.
No Action by any governmental authority or other person shall have been
instituted or threatened which questions the validity or legality of the
transactions contemplated hereby or which could reasonably be expected (a) to
materially damage Daleen or the Canadian Buyer or (b) to materially damage the
Assets or the Business or otherwise have a material adverse effect on Inlogic.
There shall have been no determination by Daleen or the Canadian Buyer, acting
in good faith, that the consummation of the transactions contemplated by this
Agreement has become inadvisable or impracticable by reason of the institution
or threat by any person or any federal, provincial or other governmental
authority of litigation. There shall not be any Regulation or Court Order that
makes the purchase and sale of the Purchased Securities contemplated hereby
illegal or otherwise prohibited. The exemption from registration provided by
Regulation S of the SEC shall be available with respect to the issuance of all
of the Exchangeable Securities and the Daleen Common Stock issuable in exchange
therefore.
SECTION 8.4 ATEVENT TRANSACTION
The Atevent Transaction shall have been effected in the manner set
forth in Section 11.12 hereof. Each of the Atevent Employees shall have executed
and delivered to Inlogic and Daleen the Atevent Employee Release. The Atevent
Corporation shall have executed and delivered to Inlogic and Daleen the Atevent
License Agreement.
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SECTION 8.5 RESIGNATION AND RELEASE OF INLOGIC DIRECTORS.
Each of the directors of Inlogic shall have executed and delivered to
Canadian Buyer a resignation and release in the form of Exhibit 8.5 hereto.
SECTION 8.6 CONVERSION OF CLASS D SHARES AND DEBENTURE.
All Inlogic Shareholders shall have waived all rights to any other
contractual agreements they may have with Inlogic or Inlogic's Shareholders
including without limitation any rights they may have under the registration
rights agreement and under the shareholder agreement entered into on September
27, 1999. The Vengrowth Investment Fund Inc. shall have converted the Debenture
dated September 27, 1999 into Class D Shares pursuant to the terms of such
Debenture.
SECTION 8.7 FAIRNESS OPINION.
Daleen shall have received from its investment banker a fairness
opinion dated within five (5) business days of the Closing Date with respect to
the terms of the transaction referred to herein and to the effect that the
transactions contemplated hereby are fair to Daleen and its shareholders from a
financial point of view.
SECTION 8.8 OPINIONS.
Inlogic Shareholders shall have delivered to the Canadian Buyer and
Daleen an opinion of Blake, Cassels & Graydon, counsel to Inlogic Shareholders,
dated as of the Closing Date, in the form attached hereto as Exhibit 8.8.
SECTION 8.9 MATERIAL CHANGES.
Since the Base Balance Sheet Date, there shall not have been any
material adverse change with respect to Inlogic, the Business or the Assets
except as disclosed on the Inlogic Disclosure Schedule.
SECTION 8.10 CORPORATE DOCUMENTS.
Canadian Buyer shall have received from the Inlogic shareholders
resolutions adopted by the board of directors of Inlogic and Inlogic Holdco
approving this Agreement and the agreements and the transactions contemplated
hereby and thereby, certified by an officer of Inlogic.
SECTION 8.11 PERMITS.
Inlogic shall continue to own or shall have obtained or been granted
the right to use all Permits necessary to its continued operation of the
Business.
SECTION 8.12 ESCROW AGREEMENTS.
The Inlogic Shareholders and the Escrow Agent shall have executed and
delivered the Indemnity Escrow Agreement and the Employee/Shareholder Escrow
Agreement.
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SECTION 8.13 EMPLOYMENT AGREEMENTS.
Each of the individuals listed on Schedule 8.13 shall have executed and
delivered to Canadian Buyer an employment and non-competition agreement in
substantially the form attached hereto as Exhibit 8.13 (individually and
including Exhibits 7.7(A) and 7.7(B), an "EMPLOYMENT AGREEMENT" and
collectively, the "EMPLOYMENT AGREEMENTS") and the Principals shall have
executed and delivered to Canadian Buyer his Employment Agreement substantially
in the form of Exhibit 7.7(A) or 7.7(B), as the case may be.
SECTION 8.14 RESERVED.
SECTION 8.15 PRE-CLOSING STEPS.
All the Pre-Closing Steps referred to in Section 2.1 hereof shall have
been completed to the satisfaction of Canadian Buyer and true copies of all
documents evidencing such steps, including the Amalgamation Order, shall have
been delivered to Canadian Buyer.
SECTION 8.16 EXCHANGEABLE DOCUMENTATION.
The parties thereto shall have executed and delivered the Support
Agreement and the Exchange Trust Agreement in the form, or substantially in the
form, attached hereto as Exhibits 6.2(A) and 6.2(B), respectively.
SECTION 8.17 SECTION 116 OF THE INCOME TAX ACT CERTIFICATE.
Each of the Inlogic Shareholders who is not a Canadian resident shall
(i) have executed and delivered a certificate under Section 116 of the Income
Tax Act (Canada) and such other documentation as Daleen shall reasonably request
in connection with compliance with applicable securities and other laws; or have
allowed Canadian Buyer to withhold one-third of the consideration each such
Inlogic shareholder receives hereunder until such certificate is delivered to
Daleen, at which point the withheld shares shall be given to the Escrow Agent
under the Employee/Shareholder Escrow agreement.
SECTION 8.18 DELIVERY OF INLOGIC SHARE CERTIFICATES.
Each of the Inlogic Shareholders shall have delivered actual possession
of the certificates evidencing the Purchased Securities to the Canadian Buyer
and record the Canadian Buyer or its nominee as the registered owner thereof.
SECTION 8.19 RECEIPT OF FULL FUNDING FOR EQUITY FINANCING.
Inlogic shall have received payment in full for all of its issued and
outstanding capital shares, in each case pursuant to the terms of the
subscription agreement relating to such capital shares, including without
limitation the equity investment transaction entered into by Inlogic in the
second quarter of 1999. The Inlogic Shareholders shall pay in full all amounts
owed by them to Inlogic, whether or not then due and payable.
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SECTION 8.20 EMPLOYMENT AND TAX LAW ISSUES.
Inlogic shall resolve to the satisfaction of Daleen and the Canadian
Buyer all matters relating to tax and employment law issues.
SECTION 8.21 INVENTION ASSIGNMENT PROVISIONS.
All employees, independent contractors and consultants of Inlogic shall
have executed and delivered to Inlogic invention assignment agreements conveying
ownership of all inventions, patents and other Proprietary Rights to Inlogic.
ARTICLE 9
INDEMNIFICATION
SECTION 9.1 INDEMNIFICATION BY THE SELLING PARTIES.
The Inlogic Shareholders severally agree subsequent to the Closing to
indemnify and hold Daleen, Canadian Buyer and its Subsidiaries, affiliates,
successors and assigns and persons serving as officers, directors, partners,
managers, shareholders, members, employees and agents thereof (other than the
Inlogic Shareholders, except to the extent of Liabilities incurred in their
capacities as an officer, director or employee of Canadian Buyer after the
Closing) (individually a "BUYER INDEMNIFIED PARTY" and collectively the "BUYER
INDEMNIFIED PARTIES") harmless from and against any Damages which may be
sustained or suffered by any of them attributable to, arising out of or based
upon any of the following matters:
(a) Any failure by that Inlogic Shareholder to convey to the
Canadian Buyer title to the Purchased Securities free and
clear of any Encumbrances (collectively, "OWNERSHIP CLAIMS");
(b) Any liability of Inlogic for Taxes arising from its respective
activities, assets and all events and transactions on or prior
to the Closing Date, including with respect to risks and other
matters disclosed in Section 4.25, (to the extent there is no
reserve contained in the Financial Statements) and any breach
of the representations and warranties set forth in Section
4.25 hereof and any covenant with respect to Taxes or tax
related matters set forth herein or in any related agreement
(collectively, "TAX CLAIMS"); and
(c) Other than Ownership Claims or Tax Claims, any other breach of
any representation, warranty or covenant of Inlogic or the
Inlogic Shareholders under this Agreement or in any
certificate, Schedule or Exhibit delivered pursuant hereto by
Inlogic Shareholders (collectively "GENERAL CLAIMS") provided
that with respect to breaches of Individual Representations,
only the Inlogic Shareholder who has
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breached such Individual Representation shall be liable under
this Section 9.1(c).
(d) Any claim from a holder of Inlogic Options to the effect that
any unvested Inlogic Option as of the date hereof, has vested
as a result of the transaction contemplated herein or of the
Amalgamation to be completed immediately following the
Closing.
(e) Any liability of Inlogic to the extent they are Atevent
Liabilities and any claim arising out of or relating to the
Atevent Business, the Atevent Liabilities, the Atevent Assets
the Atevent Corporation or the Atevent Employees including
without limitation any tax liability incurred by Inlogic as a
result of or in connection with, the Atevent Transaction.
(f) Any liabilities of Inlogic arising in connection with the
Inlogic Dividend.
SECTION 9.2 LIMITATIONS ON INDEMNIFICATION BY THE INLOGIC SHAREHOLDERS.
Anything contained in this Agreement to the contrary notwithstanding,
the liability of the Inlogic Shareholders to provide any indemnification to any
Buyer Indemnified Party and right of Buyer Indemnified Parties to
indemnification under Section 9.1 (or otherwise) shall be subject to the
following provisions:
(a) Subject to Section 9.2(b), (e) and (f) no claims for
indemnification shall be made under this Agreement against any
Inlogic Shareholder, and no indemnification shall be payable
to any Buyer Indemnified Party, with respect to General Claims
asserted after the date which is eighteen (18) months
following the Closing;
(b) No claims for indemnification shall be made under this
Agreement against any Inlogic Shareholder, and no
indemnification shall be payable to any Buyer Indemnified
Party, with respect to any Tax Claim asserted after expiration
of all applicable statutes of limitation or periods of
reassessment with respect to the Tax that is the subject of
the indemnification claim and the expiration of all applicable
statutes of limitation or periods of reassessment taking into
account any actual or effective extensions thereof with
respect to the assessment or collection of the Tax; provided
that the Inlogic Shareholders shall have no obligation for
indemnification with respect to Tax Claims to the extent such
claims, together with General Claims and Ownership Claims,
exceed a maximum aggregate amount of $64,842,187.
(c) With respect to General Claims, the amount payable by an
Inlogic Shareholder to all Buyer Indemnified Parties for
claims for
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indemnification hereunder shall in no event exceed such
Inlogic Shareholder's pro rata share of the total amount to be
paid to all Buyer Indemnified Parties for claims for
indemnification hereunder. The pro rata shares of the Inlogic
Shareholders for purposes of this paragraph shall be the same
percentages as the Inlogic Shareholders' respective ownership
interests listed on Schedule 4.2;
(d) The Inlogic Shareholders shall have no obligation for
indemnification with respect to General Claims hereunder until
aggregate claims for indemnification with respect to General
Claims hereunder exceed $50,000, in which case the Inlogic
Shareholders shall be obligated for indemnification of all
General Claims including the initial $50,000 of such claims
and then only up to a maximum aggregate amount of the
Indemnity Escrow Amount; provided that with respect to any
breach of a representation and warranty set forth in Section
4.7, Section 4.18, Section 4.24, and Section 4.25, the
aggregate maximum amount of such claims together with Tax
Claims and Ownership Claims shall be $64,842,187. However,
this Section 9.2(d) shall not apply to any breach of the
Inlogic Shareholders' representations and warranties which
constitutes fraud by any Inlogic Shareholder or any
intentional breach by the Inlogic Shareholders of any covenant
or obligation, and the Inlogic Shareholders will be liable for
all damages with respect to such breaches;
(e) Claims for indemnification with respect to claims based on
fraud or intentional misrepresentation, Ownership Claims under
this Agreement, and claims for any breach of Section 4.4
(Capitalization; Beneficial Ownership of Inlogic), Section 4.6
(Authority), or Section 4.21 (No Other Agreements to Sell the
Purchased Securities), by any Buyer Indemnified Party shall
not be subject to any of the limitations set forth in this
Section 9.2(a) but shall be subject to applicable statutory
limitations.
(f) Claims for indemnification with respect to claims referred to
in Section 9.1(d), Section 9.1(e) and Section 9.1(f) shall not
be subject to any of the limitations set forth in this Section
9.2.
SECTION 9.3 INDEMNIFICATION BY DALEEN AND CANADIAN BUYER.
Daleen and Canadian Buyer agree to indemnify and hold the Inlogic
Shareholders and their affiliates and persons serving as officers, directors,
partners, managers, shareholders, members, employees and agents thereof
(individually a "INLOGIC SHAREHOLDERS INDEMNIFIED PARTY" and collectively the
"INLOGIC SHAREHOLDERS INDEMNIFIED PARTIES") harmless from and against any
Damages which may be sustained or suffered by any of them attributable to
arising out of or
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based upon (i) any breach or inaccuracy of any representation, warranty or
covenant made by Daleen and/or Canadian Buyer in this Agreement or in any
certificate or Schedule delivered by Daleen and/or the Canadian Buyer hereunder
or (ii) by the continuance of Inlogic under the NS Act as contemplated in
Section 2.1(1)(a) hereof.
SECTION 9.4 LIMITATION ON INDEMNIFICATION BY DALEEN AND CANADIAN BUYER.
Notwithstanding the foregoing, (a) no indemnification shall be payable
to the Inlogic Shareholders Indemnified Parties with respect to claims asserted
pursuant to Section 9.3 above after the date which is eighteen (18) months after
the Closing, and (b) Daleen and Canadian Buyer shall have no obligation for
indemnification hereunder until aggregate claims for indemnification hereunder
exceed $50,000, in which case Daleen and Canadian Buyer shall be obligated for
indemnification of all claims, including the initial $50,000 of such claims, and
then only up to a maximum aggregate amount of $64,842,187. Claims for
indemnification with respect to fraud, intentional misrepresentation or the
cause or knowledge of a deliberate or wilful breach of any representations,
warranties or covenants of Canadian Buyer under this Agreement or in any
certificate, Schedule or exhibit delivered pursuant hereto or a breach of
Section 6.7 and Section 6.8 shall not be subject to any of the limitations set
forth in this Section 9.4.
SECTION 9.5 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS.
(1) Promptly after receipt by an indemnified party (an "INDEMNIFIED PARTY")
under Section 9.1 or Section 9.3 of a notice of the commencement of any
proceeding against it by a third party, the Indemnified Party will, if
a claim is to be made against an indemnifying party under such Section,
give notice to the Indemnifying Party (an "INDEMNIFYING PARTY") of the
commencement of such claim. The failure to notify the Indemnifying
Party will not relieve the Indemnifying Party of any liability that it
may have to any Indemnified Party, except to the extent that the
Indemnifying Party demonstrates that the defense of such action is
prejudiced by the Indemnified Party's failure to give such notice.
(2) If any proceeding referred to in Section 9.5(1) (a "PROCEEDING") is
brought against an Indemnified Party and it gives notice to the
Indemnifying Party of the commencement of the Proceeding, the
Indemnifying Party will be entitled to participate in the Proceeding.
Subject to the next following sentence, to the extent that the
Indemnifying Party wishes to assume the defense of the Proceeding with
counsel satisfactory to the Indemnified Party, it may do so provided it
reimburses the Indemnified Party for all of its out-of-pocket expenses
arising prior to or in connection with such assumption. The
Indemnifying Party may not assume defence of the Proceeding if (i) the
Indemnifying Party is also a party to the Proceeding and the
Indemnified Party determines in good faith that joint representation
would be inappropriate, or (ii) the Indemnifying Party fails to provide
reasonable
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assurance to the Indemnified Party of its financial capacity to defend
the Proceeding and provide indemnification with respect to the
Proceeding. After notice from the Indemnifying Party to the Indemnified
Party of its election to assume the defense of the Proceeding, the
Indemnifying Party will not, as long as it diligently conducts such
defense, be liable to the Indemnified Party under this Section 9.5 for
any fees of other counsel or any other expenses with respect to the
defense of the Proceeding, in each case subsequently incurred by the
Indemnified Party in connection with the defense of the Proceeding,
other than reasonable costs of investigation approved in advance by the
Indemnifying Party. If the Indemnifying Party assumes the defense of a
Proceeding (i) it will be conclusively established for purposes of this
Agreement that the claims made in that Proceeding are within the scope
of, and subject to, indemnification, (ii) no compromise or settlement
of such claims may be made by the Indemnifying Party without the
Indemnified Party's consent unless (y) there is no finding or admission
of any violation of Laws or any violation of the rights of any Person
and no effect on any other claims that may be made against the
Indemnified Party, and (z) the sole relief provided is monetary damages
that are paid in full by the Indemnifying Party, and (iii) the
Indemnified Party will have no liability with respect to any compromise
or settlement of such claims effected without its consent. If notice is
given to an Indemnifying Party of the commencement of any Proceeding
and the Indemnifying Party does not, within ten days after receipt of
such notice, give notice to the Indemnified Party of its election to
assume the defense of the Proceeding, the Indemnifying Party will be
bound by any determination made in the Proceeding or any compromise or
settlement effected by the Indemnified Party.
(3) Reserved.
(4) Where the defence of a Proceeding is being undertaken and controlled by
the Indemnifying Party, the Indemnified Party will use all reasonable
efforts to make available to the Indemnifying Party those employees
whose assistance, testimony or presence is necessary to assist the
Indemnifying Party in evaluating and defending any such claims.
However, the Indemnifying Party shall be responsible for the expense
associated with any employees made available by the Indemnified Party
to the Indemnifying Party pursuant to this Section 9.5(4), which
expense shall be equal to an amount to be mutually agreed upon per
person per hour or per day for each day or portion thereof that the
employees are assisting the Indemnifying Party and which expenses shall
not exceed the actual cost to the Indemnified Party associated with the
employees.
(5) With respect to any Proceeding, the Indemnified Party shall make
available to the Indemnifying Party or its representatives on a timely
basis all documents,
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records and other materials in the possession of the Indemnified Party,
at the expense of the Indemnifying Party, reasonably required by the
Indemnifying Party for its use in defending any such claim and shall
otherwise cooperate on a timely basis with the Indemnifying Party in
the defence of such claim.
(6) With respect to any re-assessment for Tax or other liability
enforceable by Lien against the property of the Indemnified Party, the
Indemnifying Party's right to so contest shall only apply after payment
of the re-assessment or the provision of such security as is necessary
to avoid a Lien being placed on the property of the Indemnified Party.
SECTION 9.6 SATISFACTION OF INLOGIC SHAREHOLDERS INDEMNIFICATION OBLIGATIONS.
Daleen shall bring and control all indemnification claims hereunder and
under the Escrow Agreements on behalf of the Buyer Indemnified Parties,
including without limitation Canadian Buyer. In order to satisfy the
indemnification obligations of the Inlogic Shareholders hereunder and under the
Escrow Agreements, Daleen shall proceed first directly against the Escrow Amount
as further set forth in the Escrow Agreements and then may proceed directly
against the Inlogic Shareholders subject to the limitations set forth herein. A
Buyer Indemnified Party may proceed against the Inlogic Shareholder(s) of its
choosing subject to the limitations set forth in the Agreement.
SECTION 9.7 USE OF DALEEN COMMON STOCK.
To the extent indemnification claims exceed the Escrow Deposit (as
defined in the Escrow Agreement), the Inlogic Shareholders may, at their option,
elect to satisfy any indemnification claims under this Agreement by delivering
to the indemnified party Exchangeable Shares issued pursuant to Section 2.3 or
any securities which such Exchangeable Shares may be converted into, or
exchanged for, including, without limitation Daleen Common Stock. To the extent
that Exchangeable Shares (or such other securities) are used to satisfy
indemnification obligations under this Agreement, such shares shall be valued in
accordance with the terms of the Escrow Agreement. No statement of value in this
Agreement shall affect such valuation under the Escrow Agreement.
SECTION 9.8 EXCLUSIVE REMEDY.
The parties hereto acknowledge and agree that the remedies set forth in
this Article 9 shall be the exclusive remedy for a breach of any representation
and warranty herein. This provision is not intended to preclude any proceeding
by any party against any other party based on a cause of action or right,
including any statutory right, other than a cause of action in contract for
breach of a representation or warranty.
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ARTICLE 10
TERMINATION OF AGREEMENT; RIGHTS TO PROCEED
SECTION 10.1 TERMINATION.
At any time prior to the Closing, this Agreement may be terminated as
follows:
(a) By mutual written consent of all of the parties to this
Agreement;
(b) By Daleen or Canadian Buyer, pursuant to written notice to the
Inlogic Shareholders, if any of the conditions set forth in
Article 8 of this Agreement have not been satisfied at or
prior to the Closing, or if it has become reasonably and
objectively certain that any of such conditions, other than a
condition within the control of Daleen or the Canadian Buyer,
will not be satisfied at or prior to the Closing, such written
notice to set forth such conditions which have not been or
will not be so satisfied;
(c) By the Inlogic Shareholders, pursuant to written notice to
Daleen and the Canadian Buyer, if any of the conditions set
forth in Article 7 of this Agreement have not been satisfied
at or prior to the Closing, or if it has become reasonably and
objectively certain that any of such conditions, other than a
condition within the control of the Inlogic Shareholders or
Inlogic, will not be satisfied at or prior to the Closing,
such written notice to set forth such conditions which have
not been or will not be so satisfied; and
(d) By Daleen and the Canadian Buyer if the Closing shall not have
occurred on or before December 31, 1999.
SECTION 10.2 EFFECT OF TERMINATION.
All obligations of the parties hereunder shall cease upon any
termination pursuant to Section 10.1, provided, however, that the provisions of
Article 9 and Article 10, Section 4.36, Section 6.6, Section 11.1, and Section
11.9 hereof shall survive any termination of this Agreement. No termination
shall relieve any party of any liability for breach of this Agreement prior to
termination except as otherwise provided for herein.
ARTICLE 11
MISCELLANEOUS
SECTION 11.1 FEES AND EXPENSES.
(1) Except as otherwise specified below, each party hereto shall pay its
own legal, accounting, out-of-pocket and other expenses incident to
this Agreement and
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to any action taken by such party in preparation for carrying this
Agreement into effect, provided, however, that except as set forth
below the Inlogic Shareholders, jointly and severally, shall pay the
expenses of Inlogic incurred in connection with the transactions
contemplated hereby including without limitation the costs and expenses
of any investment bankers, brokers and consultants engaged by Inlogic
or any Inlogic Shareholder at any time in connection with pursuing or
consummating the transactions contemplated hereby but excluding
ordinary salary expense and overhead expenses associated with Inlogic's
employees who have provided assistance in the transactions contemplated
hereby.
(2) The fees and expenses incurred by Inlogic for the transactions
contemplated herein shall on Closing be reimbursed or assumed by Daleen
as follows: (i) up to $60,000 Cdn. of costs for the special product
accounting analysis report by KPMG; (ii) up to $60,000 Cdn. of costs
and expenses for the audit opinion on Inlogic's financial statements
issued by KPMG; (iii) up to $60,000 Cdn. for Inlogic's legal counsel,
Blake, Cassels & Graydon's legal fees. Notwithstanding the foregoing,
in the event that the transaction does not close and Inlogic
Shareholders are not otherwise in breach of any of the Binding
Provisions of the Letter Agreement dated November 11, 1999, each of
Daleen and Inlogic Shareholders shall pay one half of Inlogic's actual
professional fees due to obtaining the special accounting analysis by
KPMG LLP.
SECTION 11.2 GOVERNING LAW.
This Agreement shall be construed under and governed by the internal
laws of Province of Ontario without regard to its conflict of laws provisions.
The parties irrevocably attorn to the exclusive jurisdiction of the courts of
the Province of Ontario for any legal action arising out of this Agreement.
SECTION 11.3 NOTICES.
Any notice, request, demand or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been given
if delivered or sent by facsimile transmission, upon receipt, or if sent by
registered or certified mail, upon the sooner of the date on which receipt is
acknowledged or the expiration of three days after deposit in their post office
facilities properly addressed with postage prepaid. All notices to a party will
be sent to the addresses set forth below or to such other address or person as
such party may designate by notice to each other party hereunder:
TO DALEEN: Daleen Technologies, Inc.
902 Clint Moore Road
Suite 230
Boca Raton, Florida 33487
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Attention: Stephen Wagman
Fax: (561) 995-1979
With a copy to: Morris, Manning & Martin
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: David M. Calhoun
Fax: (404) 365-9532
TO CANADIAN BUYER: c/o Inlogic Software Inc. L.L.C.
55 York Street, Suite 1600
Toronto, Ontario
M5J 1R7
Attention: Mohammad Aamir
Fax: (416) 642-1432
With a copy to: Morris, Manning & Martin
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: David M. Calhoun
Fax: (404) 365-9532
With an additional copy to: Stikeman, Elliott
Suite 5300
Commerce Court West
Toronto, Ontario, M9L 1B9
Attention: Roderick Barrett, Esq.
Fax: (416) 947-0866
TO THE INLOGIC SHAREHOLDERS: c/o Mohammad Aamir
819-123 Scadding Avenue
Toronto, Ontario
M5A 4J3
With a copy to: Blake Cassels & Graydon
Commerce Court West
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P.O. Box 25
Stn. Commerce Court
Toronto, Ontario
M5L 1A9
Attention: John Tuzyk, Esq.
Fax: (416) 863-2653
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
SECTION 11.4 ENTIRE AGREEMENT.
This Agreement, including the Escrow Agreement, Employment Agreements,
Support Agreement, Exchange Trust Agreement, Indemnity Escrow Agreement,
Employee/Shareholder Escrow Agreement, Registration Rights Agreement, the
Canadian Buyer Operating Agreement, Letter Agreement Non-Disclosure Agreement
and all other documents delivered herewith or contemplated hereby, constitute
the entire agreement of the parties with respect to its subject matter, and
supersedes all previous written or oral negotiations, commitments and writings
including without limitation the Term Sheet dated November 11, 1999, as revised
by Revised Term Sheet dated November 26, 1999, between Daleen and Inlogic. No
promises, representations, understandings, warranties and agreements have been
made by any of the parties hereto except as referred to herein or in such
Inlogic Schedules and exhibits; and all inducements to the making of this
Agreement relied upon by either party hereto have been expressed herein or in
such Inlogic Schedules or exhibits.
SECTION 11.5 ASSIGNABILITY; BINDING EFFECT.
This Agreement shall only be assignable by Canadian Buyer to an entity
controlling, controlled by or under common control with Canadian Buyer upon
written notice to the Inlogic Shareholders; provided, however, that Canadian
Buyer shall remain liable for all obligations hereunder to the extent such
obligations are not satisfied by the transferee. This Agreement may not be
assigned by the Inlogic Shareholders without the prior written consent of the
Canadian Buyer. This Agreement shall be binding upon and enforceable by, and
shall inure to the benefit of, the parties hereto and their respective legal
personal representation successors and permitted assigns. Assignment of this
Agreement by any party shall not relieve such party from its obligations
hereunder.
SECTION 11.6 CAPTIONS AND GENDER.
The captions in this Agreement are for convenience only and shall not
affect the construction or interpretation of any term or provision hereof. The
use in this
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Agreement of the masculine pronoun in reference to a party hereto shall be
deemed to include the feminine or neuter, as the context may require.
SECTION 11.7 EXECUTION IN COUNTERPARTS.
For the convenience of the parties and to facilitate execution, this
Agreement, and any documents in connection herewith, may be executed by
facsimile, with originals to follow, in two or more counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
document.
SECTION 11.8 AMENDMENTS.
This Agreement may not be amended or modified, nor may compliance with
any condition or covenant set forth herein be waived, except by a writing duly
and validly executed by each party hereto, or in the case of a waiver, the party
waiving compliance, provided that l may consent to any such amendment or
modification or waiver on behalf of the Inlogic Shareholders provided further
that the Shareholder Representative may not enter into any such amendment or
modification or waive any condition or covenant that materially and adversely
affects any Inlogic Shareholder differently than all other Inlogic Shareholders
affected thereby without the consent of such Inlogic Shareholder.
SECTION 11.9 PUBLICITY AND DISCLOSURES.
No press releases or public disclosure, either written or oral, of the
transactions contemplated by this Agreement, shall be made by Daleen or any
other a party to this Agreement without the prior knowledge and consent of
Canadian Buyer and Inlogic, except to the extent Daleen determines, upon advice
of counsel, that such disclosure is necessary or appropriate under applicable
law and regulations.
SECTION 11.10 SPECIFIC PERFORMANCE.
(1) The parties agree that it would be difficult to measure damages which
might result from a breach of this Agreement by the Inlogic
Shareholders and that money damages would be an inadequate remedy for
such a breach. Accordingly, if there is a breach or proposed breach of
any provision of this Agreement by any Inlogic Shareholder, and
Canadian Buyer do not elect to terminate under Article 10, Daleen and
Canadian Buyer shall be entitled, in addition to any other remedies
which it may have, to an injunction or other appropriate equitable
relief to restrain such breach without having to show or prove actual
damage to Daleen or Canadian Buyer.
(2) The parties agree that it would be difficult to measure damages which
might result from a breach of this Agreement by the Canadian Buyer or
Daleen and that money damages would be an inadequate remedy for such a
breach. Accordingly, if there is a breach or proposed breach of any
provision of this Agreement by Canadian Buyer or Daleen, and the
Inlogic Shareholders do
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not elect to terminate under Article 10, the Inlogic Shareholders shall
be entitled, in addition to any other remedies which it may have, to an
injunction or other appropriate equitable relief to restrain such
breach without having to show or prove actual damage to Daleen or
Canadian Buyer.
SECTION 11.11 U.S. CURRENCY.
Any reference herein to dollar amounts shall refer to lawful currency
of the United States of America except as indicated, otherwise herein.
SECTION 11.12 ATEVENT SPINOFF
Prior to the Closing, Inlogic shall transfer to Atevent.com Inc. (the
"ATEVENT CORPORATION") and transfer to the Atevent Corporation (i) the assets of
Inlogic set forth on Inlogic Schedule 11.12(A) hereto (the "ATEVENT ASSETS"),
which assets are those Assets of Inlogic used by Inlogic solely in connection
with the Atevent Business (as defined below), (ii) at least U.S.$200,000 in cash
and (iii) all liabilities of Inlogic to the extent they relate to the Atevent
Business, including without limitation the sublease identified on Inlogic
Schedule 11.12(A), all accounts payable, payroll expenses, payroll taxes,
indebtedness and other liabilities, contingent or otherwise relating to the
Atevent Business (collectively, the "ATEVENT LIABILITIES"). The "ATEVENT
BUSINESS" means the business of providing event planning and invitation services
over the web site "ATEVENT.COM". The capital shares of the Atevent Corporation
shall consist solely of common shares. Prior to the Closing, the employees of
Inlogic identified on Inlogic Schedule 11.12(B) (the "ATEVENT EMPLOYEES") shall
become employees of the Atevent Corporation and all liabilities of Inlogic with
respect to the Atevent Employees, including any employment agreements and/or
termination or severance obligations shall be included in the Atevent
Liabilities. Prior to the Closing, Inlogic shall distribute 75% of the common
shares of the Atevent Corporation to the Inlogic Shareholders based on the
allocation set forth on Inlogic Schedule 11.12(C) hereto. Prior to the Closing,
an aggregate of 5.1% of the common shares of the Atevent Corporation (or options
representing such shares) shall be issued to the Atevent Employees with the
allocation set forth on Inlogic Schedule 11.12(B) hereto; provided, however,
that it shall be a condition to the transactions contemplated by this Section
11.12 that the Atevent Employees execute a release in the form of Exhibit
11.2(A) hereto (the "ATEVENT EMPLOYEE Release"), pursuant to which each Atevent
Employee releases Inlogic, Daleen and their respective affiliates from any and
all claims and agrees to the cancellation of any options or other rights to
acquire capital shares of Inlogic. Inlogic shall continue to own the remaining
19.9% of the capital of the Atevent Corporation (calculated on a fully diluted
basis as if all options or other rights to acquire capital shares of the Atevent
Corporation had been exercised). The transactions described above in this
Section 11.12 are referred to herein as the "ATEVENT TRANSACTION". From and
after Atevent Transaction, Inlogic shall have the right (the "DIRECTOR ELECTION
RIGHT") to elect such number of directors of the
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Atevent Corporation as would represent at least the same percentage of all
directors as Inlogic's percentage ownership of the capital shares of the Atevent
Corporation. For example, so long as Inlogic owns 19.9% of the capital shares of
the Atevent Corporation, Inlogic shall have the right to elect a number of
directors equal to at least 19.9% of the total number of directors (i.e. on a
five member board of directors, Inlogic shall be entitled to elect one of the
five directors). Additionally, in the event that at any time after the Atevent
Transaction the Atevent Corporation issues or sells any additional capital
shares to any person or entity, Inlogic shall be entitled to acquire a number of
such additional capital shares as would be required to maintain its level of
ownership interest in the Atevent Corporation on the same terms as the proposed
issuance to the other person or entity (such right is referred to as "INLOGIC'S
PREEMPTIVE Right"). The articles and other charter documents of the Atevent
Corporation shall include the Director Election Right and Inlogic's Preemptive
Right.
The Inlogic Shareholders agree to take such actions, including without
limitation, voting their shares of the Atevent Corporation capital shares, as
may be necessary to preserve and protect Inlogic's rights with respect to the
Director Election Right and Inlogic's Preemptive Right and shall vote their
capital shares of the Atevent Corporation for the election of Inlogic's nominees
for director nominated pursuant to the Director Election Right. In addition to
the foregoing, Inlogic shall have registration rights with respect to capital
shares of the Atevent Corporation (now owned or hereafter acquired) that are the
same as the Inlogic Shareholders' registration rights with respect to their
shares of Daleen Common Stock set forth in the Registration Rights Agreement.
The Atevent Corporation shall be required to obtain the prior written consent of
Daleen in the event that it grants registration rights to any other person or
entity that dilute Inlogic's registration rights hereunder. Attached hereto as
Inlogic Schedule 11.12(D) is a true, correct and complete copy of the articles
and bylaws of the Atevent Corporation as in effect on the date hereof. The
Atevent Corporation shall execute and deliver to Inlogic and Daleen the License
Agreement in the form of Exhibit 11.12(B) (the "Atevent License Agreement").
SECTION 11.13 RELEASE OF INLOGIC SHAREHOLDERS.
Each Inlogic Shareholder, for itself, its successors and assigns, now
and forever, hereby waives, releases and discharges Daleen, Daleen Canada,
Inlogic and their officers, directors, stockholders, employees, agents, parent
corporations, subsidiaries, affiliates, successors, assigns and attorneys (the
"RELEASEES"), from any and all claims, legal or equitable actions, liability or
litigation, real or contemplated, known or unknown, that such Inlogic
Shareholder may now have or may later claim to have had against any of the
Releasees. Subject to but without limiting the foregoing, each Inlogic
Shareholder hereby releases those claims that could have been asserted by such
Inlogic Shareholder in connection with any agreement pursuant to which it has
rights against any Releasee, such Inlogic Shareholder
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acknowledges that it may have sustained or may yet sustain damages, costs or
expenses that are presently unknown and that relate to claims between such
Inlogic Shareholder and the parties released by this Section and it agrees that
it is waiving all such claims which arise against the Releasees. For the purpose
of implementing a full and complete release and discharge of the Releasees, each
Inlogic Shareholder expressly acknowledges the waiver and release set forth in
this Section is intended to include in its effect, without limitation, all
claims that such Inlogic Shareholder does not know or suspect to exist in its
favor at the time it signs this Agreement, and that the waiver and release set
forth in this Section contemplates the extinguishment of any such claim or
claims which are released hereunder. Each Inlogic Shareholder shall forever
refrain and forbear from commencing, instituting or prosecuting any lawsuit,
action, claim or proceeding before or in any court, regulatory, governmental,
arbitral or other authority against the parties released hereby or naming or
joining such Releasees as parties to collect or enforce any claims or causes of
action which are released and discharged hereby. Each Inlogic Shareholder hereby
acknowledges and agrees that it has knowingly relinquished, waived and forever
released any and all other remedies that might be available to it with respect
to claims released hereby, including without limitation, claims for contract
damages, punitive damages and attorneys' fees or expenses of litigation.
The foregoing release and covenant not to sue is not, however, intended
to release or apply to, and shall not release or apply to, any rights of any
Inlogic Shareholder (i) under this Agreement, or (ii) under (A) the Provisions
Attaching to the Exchangeable Shares of Daleen Canada, (B) the Registration
Rights Agreement (C) the Indemnity Escrow Agreement, (D) the
Employee/Shareholder Escrow Agreement, (E) the Support Agreement, (F) the
Exchange Trust Agreement, and (G) the respective Inlogic Shareholder's
Employment Agreement executed pursuant to this Agreement.
SECTION 11.14 LOCK-UP AGREEMENT.
Each Inlogic Shareholder hereby agrees, until April 1, 2000 (the
"Lock-Up Period"), not to offer to sell, contract to sell or otherwise sell,
dispose of, loan, pledge or grant any rights with respect to (collectively, a
"DISPOSITION") any shares of Daleen Common Stock, any options or warrants to
purchase any shares of Daleen Common Stock or any securities convertible into or
exchangeable for shares of Daleen Common Stock (collectively, "DALEEN
SECURITIES"), now owned or hereafter acquired directly by the undersigned or
with respect to which the undersigned has or hereafter acquires the power of
disposition, otherwise than with the prior written consent of Daleen, unless
pursuant to a registration pursuant to the Registration Rights Agreement. The
foregoing restriction is expressly agreed to preclude the holder of the Daleen
Securities from engaging in any hedging or other transaction which is designed
to or reasonably expected to lead to or result in a Disposition of Daleen
Securities during the Lock-Up Period even if such Daleen Securities would be
disposed of by someone other than such Inlogic Shareholder. Such prohibited
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hedging or other transactions would include without limitation any short sale
(whether or not against the box) or any purchase, sale or grant of any right
(including without limitation any put or call option) with respect to any Daleen
Securities or with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of
its value from Securities.
Furthermore, each Inlogic Shareholder hereby agrees and consents to the
entry of stop transfer instructions with Daleen's transfer agent against the
transfer of the Daleen Securities held by the undersigned except in compliance
with this Lock-Up Agreement.
SECTION 11.15 U.S. TAX CONSIDERATIONS.
1. The parties hereto agree as follows:
(a) Daleen is the authorized representative of Daleen Canada for
purposes of making elections for U.S. federal tax purposes.
(b) The Inlogic Shareholders will receive interests in Daleen
Canada that are recognized as ownership interests under
Canadian law. However, none of the parties intend that Daleen
Canada will be treated as a partnership for U.S. tax purposes.
If the U.S. tax authorities conclude that Daleen Canada is a
partnership owned by the Inlogic Shareholders and Daleen, the
parties intend that the provisions contained in this addendum
will apply to that partnership and to them as members
(Members) of that partnership for U.S. tax purposes.
(i) Except as otherwise provided in the paragraphs below,
all income, gain, loss, deduction, and credit of
partnership will be allocated to Daleen as the
holder, for U.S. tax purposes, of an interest in
Daleen Canada.
(ii) In accordance with Internal Revenue Code Section
704(c) and the regulations thereunder, income, gain,
loss, and deduction with respect to any property
contributed to the capital of Daleen Canada shall,
solely for U.S. income tax purposes, be allocated
among the Members so as to take account of any
variation between the adjusted basis of such property
to Daleen Canada for U.S. income tax purposes and its
fair market value at the time of contribution.
Allocations pursuant to this section are solely for
U.S. tax purposes and shall not affect, or in any way
be taken into account in computing, any Member's
share of net profit, loss, or distributions.
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(iii) Holders will be allocated income equal to the fair
market value of any cash or other property
distributed to them by Daleen Canada pursuant to
Article 3 of the Exchangeable Share Provisions as a
result of a dividend declared by Daleen.
2. Daleen agrees to indemnify and hold harmless the Inlogic Shareholders
in the event they incur any liability or suffer any Damages as a result
of the agreement set forth in Section 11.15(1).
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives, as of the date first written
above.
DALEEN TECHNOLOGIES, INC.
By:
------------------------------------------
Name: James Daleen
Title:
CANADIAN BUYER:
DALEEN CANADA CORPORATION.
By:
------------------------------------------
Name: James Daleen
Title:
INLOGIC
INLOGIC SOFTWARE INC.
By:
------------------------------------------
Name: Mohammad Aamir
Title:
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INLOGIC SHAREHOLDERS:
---------------------------------------------
Mohammad Aamir
---------------------------------------------
Carl Scase
---------------------------------------------
Corneliu Ionescu
---------------------------------------------
Ming Han
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Charles Barton
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Stephen Smith
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Nahla Rashad
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George Timmes
1303949 ONTARIO INC.
By:
------------------------------------------
Name:
Title:
ATEVENT.COM INC.
By:
------------------------------------------
Name:
Title:
<PAGE> 90
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SIGNATURES CONTINUED
THE VENGROWTH INVESTMENT FUND INC.:
By:
------------------------------------
Name:
Title:
<PAGE> 91
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EXHIBIT "A"
SHAREHOLDERS
3. Mohammad Aamir
4. Carl Scace
5. Cornelia Ionescu
6. Mansoor Ahmed
7. 1303949 Ontario Inc.
8. Ming Han
9. Charles Barton
10. Stephen Smith
11. Nahl Rashad
12. George Timmes
13. The Vengrowth Investment Fund Inc.
<PAGE> 92
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SCHEDULE 8.13
KEY EMPLOYEES
<PAGE> 1
Exhibit 10.1
INDEMNITY ESCROW AGREEMENT
This Indemnity Escrow Agreement (the "AGREEMENT") is entered into as
of December 16, 1999 by and among DALEEN TECHNOLOGIES, INC., ("PARENTCO"),
DALEEN CANADA CORPORATION, a newly formed Nova Scotia unlimited liability
company (the "COMPANY"), the holders of all of the issued and outstanding
shares of INLOGIC SOFTWARE, INC. ("INLOGIC") identified on Exhibit A hereto as
such (collectively, the "INLOGIC SHAREHOLDERS"), Mohammed Aamir as
representative of the Inlogic Shareholders (the "ESCROW REPRESENTATIVE") and
MONTREAL TRUST COMPANY OF CANADA, as escrow agent (the "ESCROW AGENT").
WHEREAS, pursuant to a Share Purchase Agreement (the "PURCHASE
AGREEMENT") dated as of the date hereof, by and among ParentCo, the Company,
Inlogic and the Inlogic Shareholders, the Company is purchasing all of the
issued and outstanding shares in Inlogic in consideration for the issuance of
either exchangeable shares of its share capital (the "EXCHANGEABLE SHARES") or
shares of common stock, $0.01 par value per share, of ParentCo ("PARENTCO
COMMON STOCK");
AND WHEREAS, the Inlogic Shareholders have agreed to indemnify the
Company and ParentCo against breaches of the representations, warranties and
covenants made by the Inlogic Shareholders in the Purchase Agreement and
against certain other matters as specified in Article 9 of the Purchase
Agreement;
AND WHEREAS, to secure payment of the Inlogic Shareholders'
indemnification obligations, 348,485 Exchangeable Shares of the Company and
9,265 shares of ParentCo Common Stock are being deposited, pursuant to Section
2.4 of the Purchase Agreement, in escrow to be held as hereinafter provided;
and
AND WHEREAS the foregoing recitals are made as representations and
statements of fact by the parties other than the Escrow Agent.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises of the parties herein contained, and other good and valuable
consideration, receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Escrow and Escrow Shares.
Pursuant to the Purchase Agreement, the Company shall deposit in
escrow with the Escrow Agent, as escrow agent, such amount in cash as required
by the Purchase Agreement, a stock certificate or certificates representing
348,485 Exchangeable Shares issued, 9,265 shares of ParentCo Common Stock
(together, the "ESCROW SHARES" and together with additions to or earnings on
the same, the "ESCROW DEPOSIT") which Escrowed Shares shall be registered in
the name of the Escrow Agent, or its nominee, as agent for the beneficial
owners of such shares. The Escrow Shares shall be held and distributed by the
Escrow Agent in accordance with the terms and conditions hereof. The number of
Escrow Shares beneficially owned by each Shareholder is set forth in Schedule A
hereto.
<PAGE> 2
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2. Exchange and Permitted Transfers.
The Exchangeable Shares may be exchanged into ParentCo Common Stock (or any
other securities) during the Escrow Period and the Exchangeable Shares may be
transferred within escrow solely in favour of Daleen Callco Corporation, if
required to effect such an exchange. The Inlogic Shareholder desiring such
exchange shall deliver to the Escrow Agent a notice stating the number of
Exchangeable Shares (such number not to exceed the total number of Exchangeable
Shares that the Escrow Agent is holding on behalf of such Inlogic Shareholder)
he or she wishes to exchange. The Escrow Agent shall deliver to the Company
such notice together with an Exchangeable Share certificate(s) representing at
least that number of Exchangeable Share being exchanged. The Company shall
return to the Escrow Agent the ParentCo Common Stock into which the
Exchangeable Shares have been exchanged and any other consideration resulting
from such exchange as well as a new Exchangeable Share certificate representing
the balance of any Exchangeable Shares not exchanged all of which shall form
part of the Escrow Deposit. The Company shall return such consideration within
10 business days.
The ParentCo Common Stock may be transferred within the Escrow Period,
provided that (i) such transfer is effected pursuant to the registration rights
agreement dated the date hereof between ParentCo and the Employee Shareholders
or pursuant to a valid exemption under Rule 144 of the Securities Act of 1933,
as amended; (ii) the Employee Shareholder represents in writing to the Escrow
Agent that he or she does not hold any Exchangeable Shares or ParentCo Common
Stock other than the Escrow Shares or that he or she is transferring any other
ParentCo Common Stock it holds as part of such transfer; and (iii) the Employee
Shareholder shall return to the Escrow Agent to form part of the Escrow Amount,
the pre-tax net proceeds received by the Employee Shareholder from such
transfer. The Escrow Agent shall have no duty to determine the accuracy of such
notice. Upon receipt of such notice the Escrow Agent will forward the ParentCo
Common Stock in question to the Inlogic Shareholder with a power of attorney.
The Inlogic Shareholder shall return to the Escrow Agent to form part of the
Escrow Deposit, the pre-tax net proceeds received by the Inlogic Shareholder
from such transfer and the balance of the ParentCo Common Stock represented by
the certificate released not transferred within 10 business days of the Escrow
Agent's release of same. If the Escrow Agent does not receive such proceeds
within 10 business days it will notify the Company. The Escrow Agent shall have
no duty to ensure that the Inlogic Shareholder deposits such proceeds or to
determine the sufficiency of such proceeds.
3. Investment of Escrow.
The Escrow Agent shall invest all cash, if any, held as part of the
Escrow Deposit only in such specific investments as the Company, The Inlogic
Shareholders and the Escrow Representative shall from time to time jointly
direct in writing to the Escrow Agent. If the amount of cash is insufficient to
invest the cash will be deposited into an interest bearing trust account of the
Escrow Agent.
Until further written notice, cash in the Escrow Deposit shall be
invested in an interest bearing trust account of the Escrow Agent secured by
federal regulators, money market funds, guaranteed investment certificates,
treasury bills, or any debtor bond
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obligations rated AAA by Standard & Poor's or Dominion Bond Rating Service, or
the equivalent rating by such other rating agency as the Escrow Representative,
the Company and the Inlogic Shareholders may direct. Unless otherwise directed
in writing by the Escrow Representative, the Company and the Inlogic
Shareholders, the Escrow Agent shall not invest all or any portion of the
Escrow Deposit in any investment if the maturity date of such investment is
later than the last day of the Escrow Period (as defined below).
4. Rights and Obligations of the Parties.
The Escrow Agent shall be entitled to such rights and shall perform
such duties of the escrow agent as set forth herein (collectively, the
"DUTIES"), in accordance with the terms and conditions of this Agreement.
ParentCo, the Company, the Escrow Representative and the Inlogic Shareholders
shall be entitled to their respective rights and shall perform their respective
duties and obligations as set forth herein, in accordance with the terms
hereof.
5. Escrow Period.
The Escrow Period shall terminate with respect to the Escrow Deposit
at the expiration of eighteen (18) months after the date of this Agreement;
provided, however, that all or a portion of the Escrow Deposit, which is
necessary to satisfy any unsatisfied claims specified in any Officer's
Certificate theretofore delivered to the Escrow Agent and the Escrow
Representative prior to termination of the Escrow Period with respect to facts
and circumstances existing prior to expiration of the Escrow Period, shall
remain in the Escrow Deposit until such claims have been resolved.
6. Delivery of Escrow Shares to Inlogic Shareholders.
Promptly following the termination of the Escrow Period as set forth
above, the Escrow Agent shall deliver to the Inlogic Shareholders the number of
Escrow Shares and the amount of other property in the Escrow Deposit which
exceed the number of Escrow Shares and the amount of any other property
sufficient to satisfy any unsatisfied claims specified in any notice of claim
delivered to the Escrow Agent and the Escrow Representative prior to the
termination of the Escrow Period with respect to facts and circumstances
existing prior to the expiration of the Escrow Period. As soon as all such
claims have been resolved, the Escrow Agent shall deliver to the Inlogic
Shareholders all of the Escrow Shares and other property remaining in the
Escrow Deposit and not required to satisfy such claims. Each Inlogic
Shareholder shall receive that number of Escrow Shares and the amount of any
property in the Escrow Deposit which bears the same relationship to the total
number of Escrow Shares and the amount of any property in the Escrow Deposit
available for distribution as the number of Escrow Shares set forth opposite
the name of each such Inlogic Shareholder on Exhibit A hereto bears to the
total number of Escrow Shares on Exhibit A.
7. Amounts Earned on Escrow Deposit: Tax Matters.
All amounts earned, paid or distributed with respect to the Escrow
Deposit, if any (whether interest, dividends, distributions from ParentCo with
respect to the Escrow Shares or otherwise), shall become a part of the Escrow
Deposit, shall be held hereunder upon the same terms as the original Escrow
Deposit and shall be distributed together with the underlying portion of the
original Escrow Deposit pursuant to the terms of this Agreement.
<PAGE> 4
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The parties agree that the Inlogic Shareholders will include all amounts earned
on the Escrow Deposit (or allocated or distributed with respect thereto) in
their gross income for federal, provincial and local income tax (collectively,
"INCOME TAX") purposes and pay any income tax resulting therefrom, pro rata in
accordance with their combined ownership percentage as set forth on Exhibit A.
8. Claims Against Escrow Deposit.
(a) At any time or times prior to the termination of the Escrow
Period, the Company, ParentCo or any successor of the Company
or ParentCo, may make claims against the Escrow Deposit for
indemnification pursuant to and in accordance with Article 9
of the Purchase Agreement. The Company or ParentCo, as the
case may be, shall notify the Escrow Representative and the
Escrow Agent in writing (by registered mail) promptly upon
determination to make a claim and in any event prior to the
expiration of the Escrow Period of each such claim, including
a summary of the amount of, and bases for, such claim. The
Company or ParentCo shall notify the Escrow Agent forthwith
of the date upon which the Escrow Representative received the
notice by registered mail. The Escrow Agent shall have no
duty to ensure the sufficiency of any claim. If the Escrow
Representative shall dispute such claim, the Escrow
Representative shall give written notice thereof to the
Company or ParentCo and to the Escrow Agent within forty-five
(45) days after receipt of notice of the Company's or
ParentCo's claim, in which case the Escrow Agent shall
continue to hold the Escrow Deposit in accordance with the
terms of this Agreement; otherwise, such claim shall be
deemed to have been acknowledged to be payable out of the
Escrow Deposit in the full amount thereof and the Escrow
Agent shall use its best efforts to pay such claim to the
Company, ParentCo or Inlogic, as the case may be within three
(3) business days after expiration of said forty-five (45)
day period or as soon thereafter as possible following the
determination of the Current Market Price of the Escrow
Shares pursuant to Section 6(b)(ii) below. If the amount of
the claim exceeds the value of the Escrow Deposit, the Escrow
Agent shall have no liability or responsibility for any
deficiency.
(b) The Escrow Agent shall follow the procedure below in making
any payment in satisfaction of a claim against the Escrow
Deposit:
(i) The Escrow Agent shall make such payment first from
cash additions to or earnings on the Escrow Shares
or from the cash initially deposited, if any, until
all cash in the Escrow Deposit has been exhausted.
(ii) To the extent that any claim exceeds the amount of
cash in the Escrow Deposit, the Escrow Agent shall
make payment from the Escrow Shares in such number
of Escrow Shares (computed to the nearest whole
unit) having a value equal to the value of the claim
not satisfied by cash payment. Any payment of Escrow
Shares by the Escrow Agent to the Company or
ParentCo, as the case may be, shall be
<PAGE> 5
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treated as a sale by the Inlogic Shareholders of
such Escrow Shares for the value described herein.
The value of an Escrow Share for purposes of this
Section shall be the Current Market Price of the
ParentCo Common Stock (as hereinafter defined).
ParentCo shall as specified in (iii), below, notify
the Escrow Representative and Escrow Agent in
writing of the Current Market Price. As well,
ParentCo will deliver to the Escrow Agent and the
Escrow Representative written notice of the number
of Escrowed Shares which are to be set aside or paid
out with respect to any claim under this Agreement,
based on its determination of the Current Market
Price on which the Escrow Agent is entitled to rely.
(iii) For the purpose of this Agreement, Current Market
Price for any date means the average of the closing
prices of a share of ParentCo Common Stock during a
period of 20 consecutive trading days ending five
trading days before such date on a national
securities exchange or the Nasdaq National Market
(in either case, a "NATIONAL EXCHANGE").
The Escrow Shares delivered to the Company or ParentCo, as the case
may be, in satisfaction of a claim shall be allocated among the Inlogic
Shareholders so as to reduce each Inlogic Shareholder's interest in the
remaining Escrow Shares in proportion to their respective ownership percentages
as set forth on Exhibit A hereto. In the event that the Escrow Agent must make
payment with a number of Escrow Shares less than or different from the number
of Shares represented by a certificate in the Escrow Deposit, the Escrow Agent
shall surrender such certificate to the Company or ParentCo, as the case may
be, the Company or ParentCo, as the case may be, shall issue to the Escrow
Agent certificates of either Exchangeable Shares of the Company or ParentCo
Common Stock, as the case may be, identical in form but for the number of
Escrow Shares as necessary to allow for proper payment of the claim so long as
the number of Escrow Shares of the new certificates plus the amount of Escrow
Shares used to satisfy such claim shall be equivalent to the total number of
Escrow Shares covered by the surrendered certificate.
9. Disputed Claims.
(a) If the Escrow Representative shall dispute an indemnification
claim of the Company or ParentCo as above provided, the
Escrow Agent shall set aside a portion of the Escrow Deposit
sufficient to pay said claim in full as reasonably determined
by the Company or ParentCo in good faith (the "SET ASIDE
AMOUNT"). ParentCo or the Company shall notify the Escrow
Agent in writing of the Set Aside Amount. If ParentCo or the
Company notifies the Escrow Agent in writing that it has made
out-of-pocket expenditures in connection with any such
disputed claim for which it is entitled to be indemnified
under the Purchase Agreement and provides paid receipts for
such expenditures, in addition to expenditures included in
the Set Aside Amount, an amount equal to such additional
expenditures shall be added to the Set Aside Amount. The
appropriate number of Escrow Shares in the Set Aside Amount
shall be determined by the procedure described in Section
8(b)(ii) above.
<PAGE> 6
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(b) If the disputed indemnification claim has not been resolved
or compromised within sixty (60) days after the Escrow
Agent's receipt of the Escrow Representative's notice of
dispute of the same, or in the event of a third-party claim
or suit, within fifteen (15) days after its resolution or
compromise, said indemnification claim shall be referred to
the American Arbitration Association, to be settled by
binding arbitration before a panel of three arbitrators in
Toronto, in accordance with the commercial arbitration rules
of the Association. The fees and expenses of the arbitrators
shall be borne equally by the Inlogic Shareholders on the one
hand and the Company and ParentCo on the other. In no event
shall the Escrow Agent be responsible for any fee or expense
of any party to any arbitration proceeding. The determination
of the arbitrators as to the amount, if any, of the
indemnification claim which is properly allowable shall be
conclusive and binding upon the parties hereto and judgment
may be entered thereon in any court having jurisdiction
thereof, including, without limitation, any court in the
Province of Ontario. The arbitrators shall have the authority
in their discretion to award to the prevailing party
reasonable costs and expenses including attorney's fees and
the cost of arbitration. The Escrow Agent shall use its best
efforts to make payment of such claim, as and to the extent
allowed, to the Company or ParentCo, as the case may be, of
or out of the Set Aside Amount (or if insufficient, out of
the Escrow Deposit) within three (3) business days following
the Escrow Agent's receipt of said determination or as soon
thereafter as possible.
(c) Notwithstanding Section 9(b), if a disputed indemnification
claim has not been resolved or compromised as of the date of
termination of the Escrow Period, and such claim does not
involve a third-party claim or suit, the Company, ParentCo or
Inlogic and the Escrow Representative shall continue to
negotiate in good faith a settlement of such claims for a
period of ten (10) days after the date of termination of the
Escrow Period. If, after the expiration of such ten-day
period, such indemnification claim still has not been
resolved or compromised, such claim shall be settled in
accordance with the arbitration provisions set forth in
Section 9(b).
(d) It is understood and agreed that should any dispute arise
under this Section 9, the Escrow Agent, upon receipt of
written notice of such dispute or claim by the Escrow
Representative, is authorized and directed to retain in its
possession without liability to anyone, the Set Aside Amount
relating to such dispute plus any expenditures of the Company
or ParentCo made pursuant to Section 9(a) until such dispute
shall have been settled pursuant to this Section 9. The
Escrow Agent may, but shall be under no duty whatsoever to,
institute or defend any legal proceedings which relate to the
Escrow Deposit.
(e) In connection with the resolution of a disputed
indemnification claim, the arbitrator may award, in its
discretion, to the Inlogic Shareholders interest for the
period from the date which is 18 months from the date hereof
until the date of release of the Set Aside Amount or a
portion thereof to the Inlogic Shareholders, provided that
the Company or ParentCo has been unsuccessful
<PAGE> 7
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in its indemnification claim and such interest shall be on
the portion of the Set Aside Amount which is being returned
to the Inlogic Shareholders following resolution of the
dispute. Such amount shall be paid by ParentCo promptly after
such award.
(f) Other than as otherwise provided for in Article 9 of the
Purchase Agreement, the Escrow Deposit shall constitute the
sole recourse of the Company or ParentCo to satisfy its
claims pursuant to such Article 9 of the Purchase Agreement.
(g) Once all outstanding claims have been resolved, ParentCo, the
Company and the Escrow Representative shall jointly execute a
written notice to such effect and deliver such notice to the
Escrow Agent.
10. Termination.
This Agreement shall terminate on the date that the Escrow Deposit is
reduced to zero as the result of payments by the Escrow Agent to the Company,
ParentCo, Inlogic in accordance with the provisions of Section 8 or Section 9.
If, however, the Escrow Deposit has not been reduced to zero as of the date
that there are no outstanding indemnification claims on such date of which the
Escrow Agent has received notice hereunder, the Escrow Agent shall distribute
the amount remaining in the Escrow Deposit to the Inlogic Shareholders in
accordance with Section 6 hereof. After such payment this Agreement shall
terminate; otherwise this Agreement shall continue in effect until all
indemnification claims the Company or ParentCo has made pursuant to Section 9
hereof on or prior to the date of termination of the Escrow Period shall have
been disposed of. As of the date of termination of the Escrow Period, an amount
of the Escrow Deposit adequate to cover all disputed and undisputed claims made
by the Company, ParentCo or Inlogic pursuant to Section 8 hereof will be held
by the Escrow Agent (with the number of Escrow Shares, if any, to be retained
determined in accordance with Section 8(b)(ii)) and the Escrow Agent shall
distribute on the date of termination of the Escrow Period the balance, if any,
of the Escrow Deposit to the Inlogic Shareholders in accordance with their
respective ownership percentages as set forth on Exhibit A hereto. At such time
as all remaining indemnification claims hereunder have been resolved and the
Escrow Agent has received a written notice executed by the Company, ParentCo
and the Escrow Representative pursuant to Section 9(g), or notification of a
determination of the arbitrators pursuant to Section 9(b), to that effect and
any amounts to be distributed to ParentCo or the Company in connection
therewith have been so distributed, the Escrow Agent shall distribute the
remaining Escrow Deposit, if any, to the Inlogic Shareholders in accordance
with their respective ownership percentages as set forth on Exhibit A hereto.
<PAGE> 8
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11. The Escrow Agent.
(a) Direction from the Company, ParentCo and Escrow
Representative. Notwithstanding anything herein to the
contrary, the Escrow Agent shall promptly dispose of all or
any part of the Escrow Deposit as directed by a writing
signed by the Company, ParentCo and Escrow Representative.
(b) Reliance by Escrow Agent; Liability of Escrow Agent. Except
with respect to capitalized terms used herein and defined in
the Purchase Agreement, the Escrow Agent will not be subject
to, or be obliged to recognize, any other agreement between
the parties hereto or directions or instructions not
specifically set forth as provided for herein. The Escrow
Agent will not make any payment or disbursement from or out
of the Escrow Deposit that is not expressly authorized
pursuant to this Agreement. The Escrow Agent undertakes to
perform only such duties as are expressly set forth herein.
The Escrow Agent may rely and shall be protected in acting or
refraining from acting upon any written notice, instruction
or request furnished to it hereunder and believed by it to be
genuine and to have been signed or presented by the proper
party or parties. The Escrow Agent shall be under no duty to
inquire into or investigate the validity, accuracy or content
of any such document. The Escrow Agent shall have no duty to
solicit any payment that may be due hereunder. The Escrow
Agent shall not be liable for any action taken or omitted by
it in good faith unless a court of competent jurisdiction
determines that the Escrow Agent's gross negligence and
willful misconduct was the primary cause of any loss to the
Company, ParentCo or the Inlogic Shareholders. In the
administration of the Escrow Deposit hereunder, the Escrow
Agent may execute any of its powers and perform its duties
hereunder directly or through agents or attorneys and may
consult with counsel, accountants and other skilled persons
to be selected and retained by it. The Escrow Agent shall not
be liable for anything done, suffered or omitted in good
faith by it in accordance with the advice or opinion of any
such counsel, accountants or other skilled persons. The
Company, ParentCo and the Inlogic Shareholders jointly and
severally hereby agree to indemnify and hold the Escrow Agent
and its directors, officers, agents and employees
(collectively, the "INDEMNITEES") harmless from and against
any and all claims, liabilities, losses, damages, fines,
penalties, and expenses, including out-of-pocket and
incidental expenses and legal fees and expenses ("LOSSES")
that may be imposed on, incurred by, or asserted against the
Indemnitees or any of them for following any instructions or
other directions upon which the Escrow Agent is authorized to
rely pursuant to the terms of this Agreement. In addition to
and not in limitation of the immediately preceding sentence,
the Company, ParentCo and the Inlogic Shareholders also agree
jointly and severally to indemnify and hold the Indemnitees
and each of them harmless from and against any and all Losses
that may be imposed on, incurred by, or asserted against the
Indemnitees or any of them in connection with or arising out
of the Indemnities' performance under this Agreement,
provided the Indemnitees have not acted with gross negligence
or engaged in willful misconduct. In addition, without
limiting the foregoing, with respect to a
<PAGE> 9
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distribution made by ParentCo or the Company or any exchange
or transfer of any Escrowed Shares, ParentCo will retain
counsel for the Escrow Agent to advise the Escrow Agent on
tax reporting issues. Anything in this Agreement to the
contrary notwithstanding, in no event shall the Escrow Agent
be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to
lost profits). As between the Company and ParentCo on the one
hand and the Inlogic Shareholders on the other, each shall
bear equally the indemnification obligations set forth in
this Section 11(b). The provisions of this Section 11(b)
shall survive the termination of this Agreement and the
resignation or removal of the Escrow Agent for any reason.
(c) Fees and Expenses of the Escrow Agent. All fees of the Escrow
Agent for its services hereunder, together with any expenses
reasonably incurred by the Escrow Agent in connection with
this Agreement, shall be paid by the Company. All fees of the
Escrow Agent in connection herewith shall be due upon receipt
of an invoice from the Escrow Agent delivered to the Company.
(d) Resignation and Removal of Escrow Agent; Successor Escrow
Agent.
(i) The Escrow Agent may resign from its duties
hereunder by giving each of the parties hereto not
less than thirty (30) days prior written notice of
the effective date of such resignation (which
effective date shall be at least thirty (30) days
after the date such notice is given). In addition,
the Escrow Agent may be removed and replaced on a
date designated in a written instrument (which
effective date shall be at least thirty (30) days
after the date such notice is given) signed by the
Company, ParentCo and the Escrow Representative and
delivered to the Escrow Agent. The parties hereto
intend that a successor escrow agent mutually
acceptable to the Escrow Representative, the
Company, and ParentCo will be appointed to fulfill
the duties of the Escrow Agent hereunder for the
remaining term of this Agreement in the event of the
Escrow Agent's resignation or removal. Upon the
effective date of such resignation or removal, the
Escrow Agent shall deliver the property comprising
the Escrow Deposit to such successor escrow agent,
together with an accounting of the investments held
by it and all transactions related to this
Agreement, including any distributions made and such
records maintained by the Escrow Agent in connection
with its duties hereunder and other information with
respect to the Escrow Deposit as such successor may
reasonably request. If on or before the effective
date of such resignation or removal, a successor
escrow agent has not been appointed, the Escrow
Agent shall cease its functions at the expiry of the
notice period and may retain all and any property in
its possession hereunder on a merely safe keeping
basis, at a fee to be determined by the Escrow
Agent, acting reasonably.
Upon written acknowledgement by a successor escrow agent appointed in
accordance with this Agreement to serve as escrow agent hereunder and the
receipt of the property then
<PAGE> 10
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comprising the Escrow Deposit, the Escrow Agent shall be fully released and
relieved of all duties, responsibilities and obligations under this Agreement,
subject to Section 11(b) of this Agreement, and such successor escrow agent
shall for all purposes hereof be the Escrow Agent.
(ii) Any corporation, association or other
entity into which the Escrow Agent may be
converted or merged, or with which it may
be consolidated, or to which it may sell or
otherwise transfer all or substantially all
of its corporate trust business, or any
corporation, association or other entity
resulting from any such merger, conversion,
consolidation, sale or other transfer,
shall, ipso facto, be and become successor
Escrow Agent hereunder, vested with all of
the powers, discretions, immunities,
privileges and all other matters as was its
predecessor, without the execution or
filing of any instrument or any further act
on the part or any of the parties hereto,
anything herein to the contrary
notwithstanding.
(e) The Escrow Agent shall have the right to consult
with and obtain advice from legal counsel employed
or appointed by it, who may but need not be legal
counsel for the Company, in the event of any
questions as to any of the provisions hereof or its
duties hereunder. The cost of such services shall be
reasonable expenses pursuant to s. 11(c) hereof.
(f) The Escrow Agent shall disburse monies hereunder
only to the extent that monies have been deposited
with it.
(g) The Escrow Agent shall retain the right not to act
and shall not be held liable for refusing to act
unless it has received clear documentation which
complies with the terms of this Agreement. Such
documentation must not require the exercise of any
discretion or independent judgment.
(h) The Escrow Agent shall incur no liability with
respect to the delivery or non-delivery of any
certificate or certificates whether delivered by
hand, mail or any other means.
(i) The forwarding of a cheque by the Escrow Agent will
satisfy and discharge the liability for any amounts
due to the extent of the sum or sums represented
thereby. In the event of the non-receipt of such
cheque by the payee, or the loss or destruction
thereof, the Escrow Agent, upon being furnished with
reasonable evidence of such non-receipt, loss or
destruction and indemnity reasonably satisfactory to
it, will issue to such payee a replacement cheque
for the amount of such cheque.
(j) None of the provisions contained in this Agreement
require the Escrow Agent to expend or to risk its
own funds or otherwise to incur financial liability
in the performance of any of its duties or in the
exercise of any of its rights or powers.
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12. Voting of Escrow Shares.
So long as any Escrow Shares are retained by the Escrow Agent, the
Inlogic Shareholders in accordance with their respective ownership percentages
as set forth on Exhibit A hereto, shall be entitled to exercise the voting
power, if any, with respect to the Escrow Shares, in accordance with their
respective ownership percentages as set forth on Exhibit A hereto. ParentCo and
the Company shall provide to the Escrow Agent such sufficient number of copies
of materials to be provided to the Inlogic Shareholders in sufficient time for
the Escrow Agent to provide the materials to the Inlogic Shareholders in order
that the Inlogic Shareholders may exercise their voting power. The Escrow Agent
shall not exercise the voting power of the Inlogic Shareholders.
13. Governing Law.
IT IS THE PARTIES' INTENT THAT THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE PROVINCE OF ONTARIO AND
THE FEDERAL LAWS APPLICABLE THEREIN.
14. Counterparts.
This Escrow Agreement may be executed in one or more counterparts, all
of which documents shall be considered one and the same document.
15. Notices.
Any notice or other communication required or permitted hereunder
shall be in writing and shall be deemed to have been given when received, if
personally delivered or delivered by overnight delivery service or sent by
facsimile transmission:
TO PARENTCO : Daleen Technologies, Inc.
902 Clint Moore Road
Suite 230
Boca Raton, Florida 33487
Attention: Stephen Wagman
Fax: (561) 995-1979
With a copy to: Morris, Manning & Martin L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: David M. Calhoun
Fax: (404) 365-9532
<PAGE> 12
- 12 -
TO THE COMPANY: Daleen Canada Corporation
902 Clint Moore Road
Suite 230
Boca Raton, Florida 33487
Attention: Stephen Wagman
Fax: (561) 995-1979
With a copy to: Stikeman, Elliott
Barristers & Solicitors
Suite 5300
Commerce Court West
Toronto, Ontario M5L 1B9
Attention: Nathalie Mercure
Facsimile: (416) 947-0866
And a copy to: Morris, Manning & Martin L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: David M. Calhoun
Facsimile: (404) 365-9532
TO THE HOLDERS: See Exhibit B
TO THE ESCROW REPRESENTATIVE: Mohammed Aamir
123 Scadding Avenue
Apt. 819
Toronto, Ontario
M5A 4J3
With a copy to: Blake, Cassels & Graydon
Box 25, Commerce Court West
Toronto, Ontario
M5L 1A9
Attention: John Tuzyk
Facsimile: (416) 863-2653
<PAGE> 13
- 13 -
TO THE ESCROW AGENT: Montreal Trust Company of Canada
151 Front Street West
Suite 605
Toronto, Ontario
M5J 2N1
Attention: Manager Corporate
Trust Services
Facsimile: (416) 981-9777
Addresses may be changed by written notice given pursuant to this
Section. Any notice given hereunder may be given on behalf of any party by his
counsel or other authorized representatives.
16. Force Majeure.
Neither the Company, ParentCo, Inlogic, the Inlogic Shareholders nor
the Escrow Agent shall be responsible for delays or failures in performance
under this Agreement resulting from acts beyond its control. Such acts shall
include but not be limited to acts of God, strikes, lockouts, riots, acts of
war, epidemics, governmental regulations superimposed after the fact, fire,
communication line failures, computer viruses, power failures, earthquakes or
other disasters.
17. Modifications.
This Agreement may not be altered or modified nor may any condition or
covenant set forth herein be waived, without the express written consent of the
parties hereto and the consent of the Escrow Representative shall bind each of
the Inlogic Shareholders. No course of conduct shall constitute a waiver of any
of the terms and conditions of this Escrow Agreement, unless such waiver is
specified in writing, and then only to the extent so specified. A waiver of any
of the terms and conditions of this Escrow Agreement on one occasion shall not
constitute a waiver of the other terms of this Escrow Agreement, or of such
terms and conditions on any other occasion.
18. Reproduction of Documents.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications which may hereafter be
executed, and (b) certificates and other information previously or hereafter
furnished, may be reproduced by a photographic, photostatic, microfilm, optical
disk, micro-card, miniature photographic or other similar process. The parties
agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not
the original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
<PAGE> 14
- 14 -
IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to
be executed as of the date first written above.
DALEEN CANADA CORPORATION
By:
------------------------------------
Name:
Title:
DALEEN TECHNOLOGIES, INC.
By:
------------------------------------
Name:
MONTREAL TRUST COMPANY OF
CANADA
By:
-----------------------------------
Name
By:
-----------------------------------
Name:
-----------------------------------
Mohammed Aamir,
As Escrow Representative
INLOGIC SHAREHOLDERS:
---------------------------------------
MOHAMMED AAMIR
<PAGE> 15
- 15 -
------------------------------------
CARL SCASE
------------------------------------
CORNELIU IONESCU
------------------------------------
MANSOOR AHMED
------------------------------------
MING HAN
------------------------------------
CHARLES BARTON
------------------------------------
STEPHEN SMITH
------------------------------------
NAHLA RASHAD
------------------------------------
GEORGE TIMMES
01303949 ONTARIO INC.
By:
---------------------------------
Name:
Title:
SIGNATURES CONTINUED
THE VENGROWTH INVESTMENT
FUND INC.
By:
---------------------------------
Name:
Title:
<PAGE> 16
EXHIBIT A
OWNERSHIP PERCENTAGES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
NUMBER OF
---------
INLOGIC SHAREHOLDER EXCHANGEABLE SHARES OWNERSHIP PERCENTAGE
------------------- ------------------- --------------------
<S> <C> <C>
- -------------------------------------------------------------------------------------------
VenGrowth 94,351 26.373%
- -------------------------------------------------------------------------------------------
Mohammad Aamir 153,544 42.918%
- -------------------------------------------------------------------------------------------
Carl Scase 9,265 2.589%
- -------------------------------------------------------------------------------------------
Corneliu Ionescu 8,603 2.404%
- -------------------------------------------------------------------------------------------
Mansoor Ahmed 264 0.073%
- -------------------------------------------------------------------------------------------
1303949 Ontario Inc. 72,930 20.386%
- -------------------------------------------------------------------------------------------
Ming Han 2,382 0.665%
- -------------------------------------------------------------------------------------------
Charles Barton 2,382 0.665%
- -------------------------------------------------------------------------------------------
Stephen Smith 2,382 0.665%
- -------------------------------------------------------------------------------------------
Nahla Rashad 2,382 0.665%
- -------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------
NUMBER OF DALEEN
----------------
INLOGIC SHAREHOLDER COMMON STOCK OWNERSHIP PERCENTAGE
------------------- ------------ --------------------
<S> <C> <C>
- -------------------------------------------------------------------------------------------
George Timmes 9,265 2.589%
- -------------------------------------------------------------------------------------------
TOTAL 357,750 99.992%
- -------------------------------------------------------------------------------------------
15%
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 17
EXHIBIT B
ADDRESSES OF EMPLOYEE/SHAREHOLDERS
<TABLE>
<S> <C>
- ----------------------------------------------------------------------
THE VENGROWTH INVESTMENT FUND INC. 145 Wellington Street West
Suite 200
Toronto, Ontario
M5J 1H8
- ----------------------------------------------------------------------
MOHAMMAD AAMIR 123 Scadding Avenue
Suite 819
Toronto, Ontario
M5A 4J3
- ----------------------------------------------------------------------
CARL SCASE 43 Jessie Cres
P.O. Box 194
Sharon, Ontario
L0G 1V0
- ----------------------------------------------------------------------
CORNELIU IONESCU 43 Appian Drive
North York, Ontario
M2J 2P8
- ----------------------------------------------------------------------
MANSOOR AHMED 75 Graydon Hall Drive
#1901
Toronto, Ontario
M3A 3M5
- ----------------------------------------------------------------------
1303949 ONTARIO INC. 55 York Street
Suite 1600
Toronto, Ontario
M5J 1R7
- ----------------------------------------------------------------------
MING HAN 118 Royal Palm Drive
Brampton, Ontario
L6Z 1P7
- ----------------------------------------------------------------------
CHARLES BARTON 44 Dunfield Avenue 1516
Toronto, Ontario
M4S 2H2
- ----------------------------------------------------------------------
STEPHEN SMITH 27 Columbine Avenue
Toronto, Ontario
M4L 1P4
- ----------------------------------------------------------------------
NAHLA RASHAD 1263 Winterbourne Drive
Oakville, Ontario
L6J 7E4
- ----------------------------------------------------------------------
GEORGE TIMMES 1002 Quaker Ridge Way
Duluth, GA 30097
U.S.A.
- ----------------------------------------------------------------------
</TABLE>
<PAGE> 1
Exhibit 10.2
EMPLOYEE/SHAREHOLDER ESCROW AGREEMENT
This Employee/Shareholder Escrow Agreement (the "AGREEMENT") is
entered into as of December 16, 1999 by and among DALEEN TECHNOLOGIES, INC.
("PARENTCO"), DALEEN CANADA CORPORATION, a newly formed Nova Scotia unlimited
liability company (the "COMPANY"), the holders of all of the issued and
outstanding shares of INLOGIC SOFTWARE INC. ("INLOGIC") identified on Exhibit A
hereto as such (collectively, the "EMPLOYEE/SHAREHOLDERS"), Mohammed Aamir as
representative of the Employee/Shareholders (the "ESCROW REPRESENTATIVE") and
MONTREAL TRUST COMPANY OF CANADA, as escrow agent (the "ESCROW AGENT").
WHEREAS, pursuant to a Share Purchase Agreement (the "PURCHASE
AGREEMENT") dated as of the date hereof, by and among ParentCo, the Company,
Inlogic, the Employee/Shareholders and the other shareholders of Inlogic, the
Company is purchasing all of the issued and outstanding shares in Inlogic in
consideration for the issuance of either exchangeable shares of the Company
(the "EXCHANGEABLE SHARES") or shares of common stock, $0.01 par value per
share, of ParentCo ("PARENTCO COMMON STOCK");
AND WHEREAS, the Employee/Shareholders have agreed to have a portion
of the Exchangeable Shares or ParentCo Common Stock, as the case may be, which
they will receive in consideration for their shares in Inlogic, placed in
escrow for a period of time, as specified in Article 7 of the Purchase
Agreement;
AND WHEREAS, 661,242 Exchangeable Shares of the Company and 33,812
Shares of ParentCo Common Stock are being deposited in escrow to be held as
hereinafter provided;
AND WHEREAS the foregoing recitals are made as representations and
statements of fact by the parties hereto other than the escrow Agent;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises of the parties herein contained, and other good and valuable
consideration, receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Escrow and Escrow Shares.
Pursuant to the Purchase Agreement, the Company shall deposit in
escrow with the Escrow Agent, as escrow agent, a stock certificate or
certificates representing 661,242 Exchangeable Shares issued and initially
14,859 shares of ParentCo Common Stock issued and, within 60 days, an
additional 18,953 shares of ParentCo Common Stock issued (together, the "ESCROW
SHARES" Stock and together with additions to or earnings on the same, the
"ESCROW DEPOSIT") which shall be registered in the name of the Escrow Agent, or
its nominee, as agent for the beneficial owners of such shares. The Escrow
Shares shall be held and distributed by the Escrow Agent in accordance with the
terms and conditions hereof. The number of Escrow Shares beneficially owned by
each Shareholder is set forth in Schedule A hereto, subject to adjustments as
set out in Sections 5 and 6 of this Agreement.
<PAGE> 2
- 2 -
2. Investment of Escrow.
The Escrow Agent shall invest all cash, if any, held as part of the
Escrow Deposit only in such specific investments as the Employee/Shareholders
and the Escrow Representative shall from time to time jointly direct in writing
to the Escrow Agent. If the amount of cash is insufficient to invest the cash
will be deposited into an interest bearing trust account of the Escrow Agent.
Until further written notice, cash in the Escrow Deposit shall be
invested in an interest bearing trust account of the Escrow Agent secured by
federal regulators, money market funds, guaranteed investment certificates,
treasury bills, or any debtor bond obligations rated AAA by Standard & Poor's
or Dominion Bond Rating Service or the equivalent rating by such other rating
agency as the Escrow Representative and the Employee/Shareholders may direct.
Unless otherwise directed in writing by the Escrow Representative and the
Employee/Shareholders, the Escrow Agent shall not invest all or any portion of
the Escrow Deposit in any investment if the maturity date of such investment is
later than the last date of the Escrow Period (as defined below).
3. Exchange and Permitted Transfers.
The Exchangeable Shares may be exchanged into ParentCo Common Stock
(or any other securities) during the Escrow Period and the Exchangeable Shares
may be transferred within escrow solely in favour of Daleen Callco Corporation,
if required to effect such exchange. The Employee/Shareholder desiring such
exchange shall deliver to the Escrow Agent a notice stating the number of
Exchangeable Shares (such number not to exceed the total number of Exchangeable
Shares that the Escrow Agent is holding on behalf of such Employee/Shareholder)
he or she wishes to exchange. The Escrow Agent shall deliver to the Company
such notice together with an Exchangeable Share certificate(s) representing at
least that number of Exchangeable Share being exchanged. The Company shall
return to the Escrow Agent the ParentCo Common Stock into which the
Exchangeable Shares have been exchanged and any other consideration resulting
from such exchange as well as a new Exchangeable Share certificate representing
the balance of any Exchangeable Shares not exchanged all of which shall form
part of the Escrow Deposit. The Company shall return such consideration within
10 business days.
The ParentCo Common Stock may be transferred within the Escrow Period,
provided that (i) such transfer is effected pursuant to the registration rights
agreement dated the date hereof between ParentCo and the Employee/Shareholders
or pursuant to a valid exemption under Rule 144 of the Securities Act of 1933,
as amended; (ii) the Employee/Shareholder represents in writing to the Escrow
Agent that he or she does not hold any Exchangeable Shares or ParentCo Common
Stock other than the Escrow Shares or that he or she is transferring any other
ParentCo Common Stock it holds as part of such transfer; and (iii) the
Employee/Shareholder shall return to the Escrow Agent to form part of the
Escrow Amount, the pre-tax net proceeds received by the Employee/Shareholder
from such transfer. The Escrow Agent shall have no duty to determine the
accuracy of such notice. Upon receipt of such notice the Escrow Agent will
forward the ParentCo Common Stock in question to the Employee/Shareholder with
a power of attorney. The Employee/Shareholder shall return to the Escrow Agent
to form part of the Escrow Deposit, the pre-tax net proceeds received by
<PAGE> 3
- 3 -
the Employee/Shareholder from such transfer and the balance of the ParentCo
Common Stock represented by the certificate released not transferred within 10
business days of the Escrow Agent's release of same. If the Escrow Agent does
not receive such proceeds within 10 business days it will notify the Company.
The Escrow Agent shall have no duty to ensure that the Employee/Shareholder
deposits such proceeds or to determine the sufficiency of such proceeds.
4. Rights and Obligations of the Parties.
The Escrow Agent shall be entitled to such rights and shall perform
such duties of the escrow agent as set forth herein (collectively, the
"DUTIES"), in accordance with the terms and conditions of this Agreement.
ParentCo, the Company, the Escrow Representative and the Employee/Shareholders
shall be entitled to their respective rights and shall perform their respective
duties and obligations as set forth herein, in accordance with the terms
hereof.
5. Escrow Period.
(a) Subject to Section 5(b) herein, the Escrow Period shall
terminate with respect to (i) 41.67% of the Escrow Shares
held on behalf of each Employee/Shareholder at the expiration
of six (6) months after the date of this Agreement; (ii)
41.67% of the Escrow Shares held on behalf of each
Employee/Shareholder of the Escrow Shares at the expiration
of twelve (12) months after the date of this Agreement; and
(iii) the remainder of the Escrow Deposit at the expiration
of eighteen (18) months after the date of this Agreement. Any
fractional shares which are to be released pursuant to (i) or
(ii) hereof shall be rounded up to the next whole share.
(b) Notwithstanding Section 5(a) above, if the Escrow Agent and
the Company receive a written notice from the
Employee/Shareholder to the effect that due to a material
breach by the Company of such Employee/Shareholder's
employment agreement with the Company (provided that the
Escrow Agent has not received a written notice from the
Company within 5 business days of receipt of such notice of
material breach, that there is a dispute under the
Employee/Shareholders' employment agreement with respect to
such material breach, in which case the Escrow Agent shall
await receipt of a joint settlement, arbitration award or
court judgment or order or any similar official notice of
resolution of the dispute), all the Escrow Shares of such
Employee/Shareholder shall be released from escrow and the
Escrow Agent shall deliver to such Employee/Shareholder that
number of Escrow Shares and that amount of any other property
in the Escrow Deposit which bears the same relationship to
the total number of Escrow Shares and other Property in the
Escrow Deposit as the number of Escrow Shares set forth
opposite his/her name on Exhibit A hereto, (as may be
adjusted from time to time), bears to the total number of
Escrow Shares on Exhibit A.
<PAGE> 4
- 4 -
6. Delivery of Escrow Shares
(a) Promptly following the termination of each Escrow Period as
set forth above, the Escrow Agent shall deliver to the
Employee/Shareholders that number of Escrow Shares which
bears the same relationship to the total number of Escrow
Shares in the Escrow Deposit and available for distribution
as the number of Escrow Shares set forth opposite the name of
each such Employee/Shareholder on Exhibit A hereto (as may be
adjusted from time to time) bears to the total number of
Escrow Shares on Exhibit A. With respect to the last Escrow
Period, the Escrow Agent shall deliver together with the
Escrow Shares the proportionate amount of property, if any,
in the Escrow Deposit.
(b) MOHAMMED AAMIR - In the event that the Escrow Agent and Mr.
Mohammed Aamir receives a written notice from the Company
that Mr. Mohammed Aamir has been terminated "for cause" under
the terms of his employment agreement with the Company,
provided that the Escrow Agent has not received a written
notice from Mr. Aamir within 5 business days of receipt of
such notice of termination, that there is a dispute under Mr.
Aamir's employment agreement with respect to such
termination, in which case the Escrow Agent shall await
receipt of a joint settlement arbitration award or court
judgment or order or any similar official notice of
resolution of the dispute, (i) 50% of the Escrow Deposit
beneficially held on his behalf hereunder shall be released
from escrow and delivered (in the case of the Escrowed
Shares, for cancellation) to the Company; and (ii) the
remaining 50% of the Escrow Deposit beneficially held on his
behalf hereunder shall be released from escrow and
transferred to a charitable organization which has been
designated on the date hereof or such other charitable
organization as has been designated in writing by Mohammed
Aamir and the Company's Chief Executive Officer. In the event
that Mr. Mohammed Aamir dies by natural or accidental cause
the Company shall give a notice to the Escrow Agent (which
notice shall identify the name of the representative of Mr.
Aamir's estate) and that percentage of the Escrow Deposit
beneficially held on his behalf hereunder shall be released
from escrow and delivered to Mr. Aamir's estate forthwith.
(c) TERMINATION FOR CAUSE OR RESIGNATION - In the event that the
Escrow Agent and the Employee/Shareholder receives a notice
by the Company (i) that such Employee/Shareholder (other than
Mohammed Aamir) has been terminated "for cause" under the
terms of his or her employment agreement with the Company
(other than if the Escrow Agent receives a written notice by
such Employee/Shareholder that there is a dispute under his
or her employment agreement with respect to such termination
within 5 business days of the Escrow Agent's receipt of the
Company's notice of termination, in which case the Escrow
Agent shall await receipt of a joint settlement, arbitration
award or court judgment or order or any similar official
notice of the result of the dispute from the Employee and the
Company); or (ii) that such Employee/Shareholder has resigned
from his or her employment with the
<PAGE> 5
- 5 -
Company (other than if the Escrow Agent receives a written
notice by such Employee/Shareholder that there is a dispute
under his or her employment agreement with respect to such
resignation within 5 business days of the Escrow Agent's
receipt of the Company's written notice of resignation, in
which case the Escrow Agent shall await receipt of a joint
settlement, arbitration award or court judgment or order or
any similar official notice of the result of the dispute from
the Employee and the Company); 100% of the Escrow Deposit
beneficially held on his or her behalf shall be transferred
and reallocated within escrow to all the other
Employee/Shareholders hereunder on a pro rata basis, and the
Escrow Agent shall adjust Exhibit A hereof accordingly. Any
fractional shares arising from such reallocation shall be
returned to the Company for cancellation.
7. Amounts Earned on Escrow Deposit: Tax Matters.
All amounts earned, paid or distributed with respect to the Escrow
Deposit, if any, (whether interest, dividends, distributions from ParentCo with
respect to the Escrow Shares or otherwise) shall become a part of the Escrow
Deposit, shall be held hereunder upon the same terms as the original Escrow
Deposit and shall be distributed together with the underlying portion of the
original Escrow Deposit pursuant to the terms of this Agreement. The parties
agree that the Employee/Shareholders will include all amounts earned on the
Escrow Deposit (or allocated or distributed with respect thereto) in their
gross income for federal, provincial and local income tax (collectively,
"INCOME TAX") purposes and pay any income tax resulting therefrom, pro rata in
accordance with their combined ownership percentage as set forth on Exhibit A.
8. The Escrow Agent.
(a) Direction from ParentCo and Escrow Representative.
Notwithstanding anything herein to the contrary, the Escrow
Agent shall promptly dispose of all or any part of the Escrow
Deposit as directed by a notice in writing signed by the
Company, ParentCo and Escrow Representative.
(b) Reliance by Escrow Agent; Liability of Escrow Agent. Except
with respect to capitalized terms used herein and defined in
the Purchase Agreement, the Escrow Agent will not be subject
to, or be obliged to recognize, any other agreement between
the parties hereto or directions or instructions not
specifically set forth as provided for herein. The Escrow
Agent will not make any payment or disbursement from or out
of the Escrow Deposit that is not expressly authorized
pursuant to this Agreement. The Escrow Agent undertakes to
perform only such duties as are expressly set forth herein.
The Escrow Agent may rely and shall be protected in acting or
refraining from acting upon any written notice, instruction
or request furnished to it hereunder and believed by it to be
genuine and to have been signed or presented by the proper
party or parties. The Escrow Agent shall be under no duty to
inquire into or investigate the validity, accuracy or content
of any such document. The Escrow Agent shall have no duty to
solicit any payment that may be due it hereunder. The Escrow
Agent shall not be liable for any action taken or
<PAGE> 6
- 6 -
omitted by it in good faith unless a court of competent
jurisdiction determines that the Escrow Agent's gross
negligence and willful misconduct was the primary cause of
any loss to the Company, ParentCo or the
Employee/Shareholders. In the administration of the Escrow
Deposit hereunder, the Escrow Agent may execute any of its
powers and perform its duties hereunder directly or through
agents or attorneys and may consult with counsel, accountants
and other skilled persons to be selected and retained by it.
The Escrow Agent shall not be liable for anything done,
suffered or omitted in good faith by it in accordance with
the advice or opinion of any such counsel, accountants or
other skilled persons. The Company, ParentCo and the
Employee/Shareholders jointly and severally hereby agree to
indemnify and hold the Escrow Agent and its directors,
officers, agents and employees (collectively, the
"INDEMNITEES") harmless from and against any and all claims,
liabilities, losses, damages, fines, penalties, and expenses,
including out-of-pocket and incidental expenses and legal
fees and expenses ("LOSSES") that may be imposed on, incurred
by, or asserted against the Indemnitees or any of them for
following any instructions or other directions upon which the
Escrow Agent is authorized to rely pursuant to the terms of
this Agreement. In addition to and not in limitation of the
immediately preceding sentence, the Company, ParentCo and the
Employee/Shareholders also agree jointly and severally to
indemnify and hold the Indemnitees and each of them harmless
from and against any and all Losses that may be imposed on,
incurred by, or asserted against the Indemnitees or any of
them in connection with or arising out of the Indemnities'
performance under this Agreement, provided the Indemnitees
have not acted with gross negligence or engaged in willful
misconduct. In addition, without limiting the foregoing, with
respect to a distribution made by ParentCo or the Company or
any exchange or transfer of any Escrowed Shares, ParentCo
will retain counsel for the Escrow Agent to advise the Escrow
Agent on tax reporting issues. Anything in this Agreement to
the contrary notwithstanding, in no event shall the Escrow
Agent be liable for special, indirect or consequential loss
or damage of any kind whatsoever (including but not limited
to lost profits). As between the Company and ParentCo on the
one hand and the Employee/Shareholders on the other, each
shall bear equally the indemnification obligations set forth
in this Section 8(b). The provisions of this Section 8(b)
shall survive the termination of this Agreement and the
resignation or removal of the Escrow Agent for any reason.
(c) Fees and Expenses of the Escrow Agent. All fees of the Escrow
Agent for its services hereunder, together with any expenses
reasonably incurred by the Escrow Agent in connection with
this Agreement, shall be paid by the Company. All fees of the
Escrow Agent in connection herewith shall be due upon receipt
of an invoice from the Escrow Agent delivered to the Company.
(d) Resignation and Removal of Escrow Agent; Successor Escrow
Agent.
(i) The Escrow Agent may resign from its duties
hereunder by giving each of the parties hereto not
less than thirty (30) days prior written
<PAGE> 7
- 7 -
notice of the effective date of such resignation
(which effective date shall be at least thirty (30)
days after the date such notice is given). In
addition, the Escrow Agent may be removed and
replaced on a date designated in a written
instrument (which effective date shall be at least
thirty (30) days after the date such notice is
given) signed by the Company, ParentCo and the
Escrow Representative and delivered to the Escrow
Agent. The parties hereto intend that a successor
escrow agent mutually acceptable to the Escrow
Representative, the Company and ParentCo will be
appointed to fulfill the duties of the Escrow Agent
hereunder for the remaining term of this Agreement
in the event of the Escrow Agent's resignation or
removal. Upon the effective date of such resignation
or removal, the Escrow Agent shall deliver the
property comprising the Escrow Deposit to such
successor escrow agent, together with an accounting
of the investments held by it and all transactions
related to this Agreement, including any
distributions made and such records maintained by
the Escrow Agent in connection with its duties
hereunder and other information with respect to the
Escrow Deposit as such successor may reasonably
request. If on or before the effective date of such
resignation or removal, a successor escrow agent has
not been appointed, the Escrow Agent shall cease its
functions at the expiry of the notice period and may
retain all and any property in its possession
hereunder on a merely safekeeping basis, at a fee to
be determined by the Escrow Agent, acting
reasonably.
Upon written acknowledgment by a successor escrow agent appointed in
accordance with this Agreement to serve as escrow agent hereunder and the
receipt of the property then comprising the Escrow Deposit, the Escrow Agent
shall be fully released and relieved of all duties, responsibilities and
obligations under this Agreement, subject to Section 8(b) of this Agreement,
and such successor escrow agent shall for all purposes hereof be the Escrow
Agent.
(ii) Any corporation, association or other entity into
which the Escrow Agent may be converted or merged,
or with which it may be consolidated, or to which it
may sell or otherwise transfer all or substantially
all of its corporate trust business, or any
corporation, association or other entity resulting
from any such merger, conversion, consolidation,
sale or other transfer, shall, ipso facto, be and
become successor Escrow Agent hereunder, vested with
all of the powers, discretions, immunities,
privileges and all other matters as was its
predecessor, without the execution or filing of any
instrument or any further act on the part or any of
the parties hereto, anything herein to the contrary
notwithstanding.
(e) The Escrow Agent shall have the right to consult with and
obtain advice from legal counsel employed or appointed by it,
who may but need not be legal counsel for the Company, in the
event of any questions as to any of the provisions hereof or
its duties hereunder. The cost of such services shall be
reasonable expenses pursuant to s. 8(c) hereof.
<PAGE> 8
- 8 -
(f) The Escrow Agent shall disburse monies hereunder only to the
extent that monies have been deposited with it.
(g) The Escrow Agent shall retain the right not to act and shall
not be held liable for refusing to act unless it has received
clear documentation which complies with the terms of this
Agreement. Such documentation must not require the exercise
of any discretion or independent judgment.
(h) The Escrow Agent shall incur no liability with respect to the
delivery or non-delivery of any certificate or certificates
whether delivered by hand, mail or any other means.
(i) The forwarding of a cheque by the Escrow Agent will satisfy
and discharge the liability for any amounts due to the extent
of the sum or sums represented thereby. In the event of the
non-receipt of such cheque by the payee, or the loss or
destruction thereof, the Escrow Agent, upon being furnished
with reasonable evidence of such non-receipt, loss or
destruction and indemnity reasonably satisfactory to it, will
issue to such payee a replacement cheque for the amount of
such cheque.
(j) None of the provisions contained in this Agreement require
the Escrow Agent to expend or to risk its own funds or
otherwise to incur financial liability in the performance of
any of its duties or in the exercise of any of its rights or
powers.
9. Voting of Escrow Shares.
So long as any Escrow Shares are retained by the Escrow Agent, the
Employee/Shareholders in accordance with their respective ownership percentages
as set forth on Exhibit A hereto, shall be entitled to exercise the voting
power, if any, with respect to the Escrow Shares, in accordance with their
respective ownership percentages as set forth on Exhibit A hereto. ParentCo and
the Company shall provide to the Escrow Agent such sufficient number of copies
of materials to be provided to the Employee/Shareholders in sufficient time for
the Escrow Agent to provide the materials to the Employee/Shareholders in order
that the Employee/Shareholders may exercise their voting power. The Escrow
Agent shall not exercise the voting power of the Employee/Shareholders.
10. Termination.
This Agreement shall terminate on the date that the Escrow Deposit is
reduced to zero as the result of releases by the Escrow Agent to
Employee/Shareholders in accordance with this Agreement. Notwithstanding the
foregoing, this Agreement shall no longer apply to any Employee/Shareholder on
whose behalf the Escrow Agent no longer holds any portion of the Escrow Deposit
pursuant to the terms of this Agreement.
11. Governing Law.
IT IS THE PARTIES' INTENT THAT THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL
<PAGE> 9
- 9 -
LAWS OF THE PROVINCE OF ONTARIO AND THE FEDERAL LAWS APPLICABLE THEREIN.
12. Counterparts.
This Escrow Agreement may be executed in one or more counterparts, all
of which documents shall be considered one and the same document.
13. Notices.
Any notice or other communication required or permitted hereunder
shall be in writing and shall be deemed to have been given when received, if
personally delivered or delivered by overnight delivery service or sent by
facsimile transmission:
TO PARENTCO: Daleen Technologies, Inc.
902 Clint Moore Road
Suite 230
Boca Raton, Florida 33487
Attention: Stephen Wagman
Facsimile: (561) 995-1979
With a copy to: Morris, Manning & Martin L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: David M. Calhoun
Facsimile: (404) 365-9532
TO THE COMPANY: Daleen Canada Corporation
902 Clint Moore Road
Suite 230
Boca Raton, Florida 33487
Attention: Stephen Wagman
Fax: (561) 995-1979
With a copy to: Stikeman, Elliott
Barristers & Solicitors
Suite 5300
Commerce Court West
Toronto, Ontario M5L 1B9
Attention: Nathalie Mercure
Facsimile: (416) 947-0866
<PAGE> 10
- 10 -
And a copy to: Morris, Manning & Martin L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: David M. Calhoun
Facsimile: (404) 365-9532
TO THE EMPLOYEE/SHAREHOLDERS: See Exhibit B
TO THE ESCROW REPRESENTATIVE: Mohammed Aamir
123 Scadding Avenue
Apt. 819
Toronto, Ontario
M5A 4J3
With a copy to: Blake Cassels & Graydon
Commerce Court West
P.O. Box 25
Stn. Commerce Court
Toronto, Ontario
M5L 1A9
Attention: John Tuzyk
Facsimile: (416) 863-2653
TO THE ESCROW AGENT: Montreal Trust Company of Canada
151 Front Street West
Suite 605
Toronto, Ontario
M5J 2N1
Attention: Manager Corporate
Trust Services
Fax: (416) 981-9777
Addresses may be changed by written notice given pursuant to this
Section. Any notice given hereunder may be given on behalf of any party by his
counsel or other authorized representatives.
14. Force Majeure.
Neither the Company, ParentCo, the Escrow Representative, the
Employee/Shareholders nor the Escrow Agent shall be responsible for delays or
failures in performance under this Agreement resulting from acts beyond its
control. Such acts shall
<PAGE> 11
- 11 -
include but not be limited to acts of God, strikes, lockouts, riots, acts of
war, epidemics, governmental regulations superimposed after the fact, fire,
communication line failures, computer viruses, power failures, earthquakes or
other disasters.
15. Modifications.
This Agreement may not be altered or modified nor may any condition or
covenant set forth herein be waived, without the express written consent of the
parties hereto and the consent of the Escrow Representative shall bind each of
the Employee/Shareholders. No course of conduct shall constitute a waiver of
any of the terms and conditions of this Escrow Agreement, unless such waiver is
specified in writing, and then only to the extent so specified. A waiver of any
of the terms and conditions of this Escrow Agreement on one occasion shall not
constitute a waiver of the other terms of this Escrow Agreement, or of such
terms and conditions on any other occasion.
16. Reproduction of Documents.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications which may hereafter be
executed, and (b) certificates and other information previously or hereafter
furnished, may be reproduced by a photographic, photostatic, microfilm, optical
disk, micro-card, miniature photographic or other similar process. The parties
agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not
the original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to
be executed as of the date first written above.
DALEEN CANADA CORPORATION
By:
-------------------------------------
Name:
Title:
DALEEN TECHNOLOGIES, INC.
By:
-------------------------------------
Name:
<PAGE> 12
- 12 -
------------------------------------------
Mohammed Aamir,
As Escrow Representative
MONTREAL TRUST COMPANY OF CANADA
By:
------------------------------------------
By:
------------------------------------------
Name:
EMPLOYEE/SHAREHOLDERS:
------------------------------------------
MOHAMMED AAMIR
------------------------------------------
CARL SCASE
------------------------------------------
CORNELIU IONESCU
------------------------------------------
MANSOOR AHMED
------------------------------------------
MING HAN
------------------------------------------
CHARLES BARTON
------------------------------------------
STEPHEN SMITH
------------------------------------------
NAHLA RASHAD
------------------------------------------
GEORGE TIMMES
<PAGE> 13
- 13 -
THE VENGROWTH INVESTMENT
FUND INC.
By:
--------------------------------------
Name:
Title:
01303949 ONTARIO INC.
By:
--------------------------------------
Name:
Title:
<PAGE> 14
EXHIBIT A
OWNERSHIP PERCENTAGES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
NUMBER OF
---------
EMPLOYEE/SHAREHOLDER EXCHANGEABLE SHARES OWNERSHIP PERCENTAGE
-------------------- ------------------- --------------------
<S> <C> <C>
- ----------------------------------------------------------------------------------
Mohammad Aamir 560,286 80.6%
- ---------------------------------------------------------------------------------
Carl Scase 33,812 4.9%
- ---------------------------------------------------------------------------------
Corneliu Ionescu 31,397 4.5%
- ---------------------------------------------------------------------------------
Mansoor Ahmed 967 0.1%
- ---------------------------------------------------------------------------------
Ming Han 8,695 1.3%
- ---------------------------------------------------------------------------------
Charles Barton 8,695 1.3%
- ---------------------------------------------------------------------------------
Stephen Smith 8,695 1.3%
- ---------------------------------------------------------------------------------
Nahla Rashad 8,695 1.3%
- ---------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------
NUMBER OF DALEEN
----------------
EMPLOYEE/SHAREHOLDER COMMON STOCK OWNERSHIP PERCENTAGE
-------------------- ------------ --------------------
<S> <C> <C>
- ---------------------------------------------------------------------------------
George Timmes Initially: 14,859 2.1%
-------------------------------------------------
Within
60 days: 18,953 2.7%
- ---------------------------------------------------------------------------------
TOTAL 695,054 100%
- ---------------------------------------------------------------------------------
</TABLE>
<PAGE> 15
EXHIBIT B
ADDRESSES OF EMPLOYEE/SHAREHOLDERS
<TABLE>
<S> <C>
- ----------------------------------------------------------------------
THE VENGROWTH INVESTMENT FUND INC. 145 Wellington Street West
Suite 200
Toronto, Ontario
M5J 1H8
- ----------------------------------------------------------------------
MOHAMMAD AAMIR 123 Scadding Avenue
Suite 819
Toronto, Ontario
M5A 4J3
- ----------------------------------------------------------------------
CARL SCASE 43 Jessie Cres
P.O. Box 194
Sharon, Ontario
L0G 1V0
- ----------------------------------------------------------------------
CORNELIU IONESCU 43 Appian Drive
North York, Ontario
M2J 2P8
- ----------------------------------------------------------------------
MANSOOR AHMED 75 Graydon Hall Drive
#1901
Toronto, Ontario
M3A 3M5
- ----------------------------------------------------------------------
1303949 ONTARIO INC. 55 York Street
Suite 1600
Toronto, Ontario
M5J 1R7
- ----------------------------------------------------------------------
MING HAN 118 Royal Palm Drive
Brampton, Ontario
L6Z 1P7
- ----------------------------------------------------------------------
CHARLES BARTON 44 Dunfield Avenue 1516
Toronto, Ontario
M4S 2H2
- ----------------------------------------------------------------------
STEPHEN SMITH 27 Columbine Avenue
Toronto, Ontario
M4L 1P4
- ----------------------------------------------------------------------
NAHLA RASHAD 1263 Winterbourne Drive
Oakville, Ontario
L6J 7E4
- ----------------------------------------------------------------------
GEORGE TIMMES 1002 Quaker Ridge Way
Duluth, GA 30097
U.S.A.
- ----------------------------------------------------------------------
</TABLE>
<PAGE> 1
Exhibit 10.3
DALEEN TECHNOLOGIES, INC.
as ParentCo
and
DALEEN CANADA CORPORATION
as Company
and
DALEEN CALLCO CORPORATION
as CallCo
and
THE HOLDERS OF EXCHANGEABLE
SHARES OF THE COMPANY
as the Holders
- --------------------------------------------------------------------------------
SUPPORT AGREEMENT
December 16, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE 1
DEFINITIONS AND INTERPRETATION
<S> <C> <C>
Section 1.1 Defined Terms..............................................................................2
Section 1.2 Interpretation Not Affected by Headings, Etc...............................................2
Section 1.3 Number, Gender, Etc........................................................................2
Section 1.4 Date for Any Action........................................................................2
ARTICLE 2
COVENANTS OF PARENTCO AND THE COMPANY
Section 2.1 Covenants of ParentCo Regarding Exchangeable Shares........................................2
Section 2.2 Reservation for Issuance of ParentCo Common Stock..........................................4
Section 2.3 Segregation of Funds.......................................................................5
Section 2.4 Notification of Certain Events.............................................................5
Section 2.5 Delivery of ParentCo Common Stock..........................................................6
Section 2.6 Qualification of ParentCo Common Stock.....................................................6
Section 2.7 Equivalence................................................................................7
Section 2.8 Tender Offers, Etc.........................................................................7
Section 2.9 Due Performance............................................................................7
ARTICLE 3
CERTAIN RIGHTS OF CALLCO TO ACQUIRE EXCHANGEABLE SHARES
Section 3.1 CallCo Liquidation Call Right..............................................................7
Section 3.2 CallCo Redemption Call Right...............................................................9
Section 3.3 Insolvency Exchange Right.................................................................10
ARTICLE 4
PARENTCO SUCCESSORS
Section 4.1 Certain Requirements in Respect of Combination, Etc.......................................11
Section 4.2 Vesting of Powers in Successor............................................................11
Section 4.3 Wholly-owned Subsidiaries.................................................................12
Section 4.4 Execution of Supplemental Agreements......................................................12
ARTICLE 5
GENERAL
Section 5.1 Term......................................................................................12
Section 5.2 Changes in Capital of ParentCo and the Company............................................12
Section 5.3 Encumbrances, Liens.......................................................................13
Section 5.4 Severability..............................................................................13
Section 5.5 Amendments, Modifications, Etc............................................................13
(i)
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
Section 5.6 Ministerial Amendments....................................................................13
Section 5.7 Meeting to Consider Amendments............................................................14
Section 5.8 Amendments Only in Writing................................................................14
Section 5.9 Enurement.................................................................................14
Section 5.10 Waiver....................................................................................14
Section 5.11 Notices to Parties........................................................................14
Section 5.12 Counterparts..............................................................................16
Section 5.13 Jurisdiction..............................................................................16
Section 5.14 Attornment................................................................................16
Section 5.15 Parentco Not To Vote Exchangeable Shares..................................................16
Section 5.16 Ownership of Outstanding Shares...........................................................16
Section 5.17 Obligations of Holders Several............................................................17
Section 5.18 Guaranty / Assignment.....................................................................17
</TABLE>
(ii)
<PAGE> 4
SUPPORT AGREEMENT
Support Agreement dated December 16, 1999, between Daleen Technologies,
Inc., a corporation organized under the laws of the State of Delaware
("PARENTCO"), the holders of Exchangeable Shares (as hereinafter defined) from
time to time, Daleen Canada Corporation, an unlimited liability company existing
under the laws of the Province of Nova Scotia (the "COMPANY") and Daleen CallCo
Corporation, an unlimited liability company existing under the laws of the
Province of Nova Scotia ("CALLCO").
RECITALS:
(a) The authorized share capital of the Company consists of a
maximum of 10,000,000 Common Shares and 100,000,000
Exchangeable Shares.
(b) Pursuant to a Share Purchase Agreement dated as of December
16, 1999, by and between ParentCo, Inlogic Software Inc. and
the holders of all of the issued and outstanding shares of
Inlogic Software, Inc. (such agreement is hereinafter referred
to as the "PURCHASE AGREEMENT") the parties agreed that on the
closing of the transaction contemplated under the Purchase
Agreement, ParentCo and the Company would execute and deliver
a Support Agreement containing the terms and conditions set
forth in an Exhibit to the Purchase Agreement together with
such other terms and conditions as may be agreed to by the
parties to the Purchase Agreement acting reasonably;
(c) Pursuant to the Purchase Agreement, the Company issued certain
exchangeable shares (the "EXCHANGEABLE SHARES") in the capital
of the Company having attached thereto certain rights,
privileges, restrictions and conditions including, without
limitation, the right to exchange each Exchangeable Share for
one share of Common Stock of ParentCo set forth in the
Company's articles ("PARENTCO COMMON STOCK") (collectively,
the "EXCHANGEABLE SHARE PROVISIONS");
(d) The Holders are the registered holders of the Exchangeable
Shares set out on the execution pages and there is no other
shares outstanding in the capital of the Company as at the
date hereof; and
(e) The parties hereto desire to make appropriate provision and to
establish a procedure whereby ParentCo will take certain
actions and make certain payments and deliveries necessary to
ensure that the Company will be able to make certain payments
and to deliver or cause to be delivered ParentCo Common Stock
in satisfaction of the obligations of the Company under the
Exchangeable Share Provisions
<PAGE> 5
-2-
with respect to the payment and satisfaction of dividends,
Liquidation Amounts, Retraction Prices and Redemption Prices,
all in accordance with and as defined in the Exchangeable
Share Provisions.
In consideration of the foregoing and the mutual agreements contained
herein (the receipt and adequacy of which are acknowledged), the parties agree
as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
SECTION 1.1 DEFINED TERMS.
Each term denoted herein by initial capital letters and not otherwise
defined herein shall have the meaning attributed thereto in the Exchangeable
Share Provisions, unless the context requires otherwise.
SECTION 1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC.
The division of this Agreement into articles, sections and paragraphs
and the insertion of headings are for convenience of reference only and shall
not affect the construction or interpretation of this Agreement.
SECTION 1.3 NUMBER, GENDER, ETC.
Words importing the singular number only shall include the plural and
vice versa. Words importing the use of any gender shall include all genders.
SECTION 1.4 DATE FOR ANY ACTION.
If any date on which any action is required to be taken under this
agreement is not a Business Day, such action shall be required to be taken on
the next succeeding Business Day.
ARTICLE 2
COVENANTS OF PARENTCO AND THE COMPANY
SECTION 2.1 COVENANTS OF PARENTCO REGARDING EXCHANGEABLE SHARES.
So long as any Exchangeable Shares are outstanding, ParentCo (and
CallCo in the case of subclauses (e) and (f)) will:
(a) not declare or pay any dividend on ParentCo Common Stock
unless (A) the Company will have sufficient assets, funds and
other property available to enable the due declaration and the
due and punctual payment in accordance with applicable law of
a dividend in an equivalent amount on the Exchangeable Shares
in accordance with the
<PAGE> 6
-3-
Exchangeable Share Provisions and (B) Subsection 2.1(b) shall
be complied with in connection with such dividend;
(b) cause the Company to declare simultaneously with the
declaration of any dividend on ParentCo Common Stock a
dividend in an equivalent amount to such dividend on the
Exchangeable Shares and, when such dividend is paid on
ParentCo Common Stock, cause the Company to pay simultaneously
therewith a dividend in an equivalent amount on the
Exchangeable Shares, in each case in accordance with the
Exchangeable Share Provisions;
(c) advise the Company sufficiently in advance of the declaration
by ParentCo of any dividend on ParentCo Common Stock and take
all such other actions as are necessary, in co-operation with
the Company, to ensure that the respective declaration date,
record date and payment date for a dividend on the
Exchangeable Shares shall be the same as the record date,
declaration date and payment date for the corresponding
dividend on ParentCo Common Stock;
(d) ensure that the record date for any dividend declared on
ParentCo Common Stock is not less than 10 Business Days after
the declaration for such dividend;
(e) provide or cause to be provided to the Company such assets,
funds and other property as may be necessary in order that the
Company will have sufficient assets, funds, and other property
available to enable (i) the due declaration and the due and
punctual payment, in accordance with applicable law, of all
dividends on the Exchangeable Shares and (ii) the due
performance by the Company of its obligations under this
Agreement and the Company's Articles;
(f) to take all such actions and do all such things as are
necessary or desirable, to enable and permit the Company, or
CallCo if it exercised its Liquidation Call Right, in
accordance with applicable law, to pay and otherwise perform
its obligations with respect to the satisfaction of the
Exchangeable Share Consideration representing the Liquidation
Amount in respect of each issued and outstanding Exchangeable
Share upon the liquidation, dissolution or winding-up of the
Company or any other distribution of the assets of the Company
for the purpose of winding up its affairs, including without
limitation all such actions and all such things as are
necessary or desirable, to enable and permit the Company, or
CallCo, as the case may be, to cause to be delivered ParentCo
Common Stock to the holders of Exchangeable Shares in
<PAGE> 7
-4-
accordance with the provisions of Article 5 of the
Exchangeable Share Provisions or Article 3 herein, as the case
may be;
(g) take all such actions and do all such things as are necessary
or desirable, to enable and permit the Company or CallCo if it
exercises, the Retraction Call Right or the Redemption Call
Right, in accordance with applicable law, to pay and otherwise
perform its obligations with respect to the satisfaction of
the Exchangeable Share Consideration representing the
Retraction Price and the Redemption Price, including without
limitation all such actions and all such things as are
necessary or desirable, to enable and permit the Company or
CallCo to cause to be delivered ParentCo Common Stock to the
holders of Exchangeable Shares, upon the retraction or
redemption of the Exchangeable Shares in accordance with the
provisions of Article 6 or Article 7 of the Exchangeable Share
Provisions, as the case may be;
(h) take all actions and do all such things as are necessary or
desirable to perform the obligations of Parentco or Callco
with respect to the exercise of the Insolvency Exchange Right
or Redemption Call Right, as the case may be, including the
delivery of Parentco Common Stock to the Holders of the
Exchangeable Shares in accordance with the Exchange Share
Provisions;
(i) not to exercise its vote as a shareholder to initiate the
voluntary liquidation, dissolution or winding-up of the
Company nor take any action or omit to take any action that
will result in the liquidation, dissolution or winding-up of
the Company; and
(j) be the authorized representative of the Company for purposes
of making elections for U.S. federal tax purposes and will
otherwise represent the Company in front of the Internal
Revenue Service.
SECTION 2.2 RESERVATION FOR ISSUANCE OF PARENTCO COMMON STOCK.
ParentCo hereby represents, warrants and covenants that it has reserved
for issuance and will at all times keep available, free from pre-emptive and
other rights, out of its authorized and unissued capital shares such number of
ParentCo Common Stock (or other shares or securities into which ParentCo Common
Stock may be reclassified or changed as contemplated by Section 2.6 hereof) (a)
as is equal to the sum of (i) the number of Exchangeable Shares issued and
outstanding from time to time and (ii) the number of Exchangeable Shares
issuable upon the exercise of all rights to acquire Exchangeable Shares
outstanding from time to time and (b) as are now and may hereafter be required
to enable and permit the Company to meet its obligations hereunder, under the
Exchange Trust Agreement, under the Exchangeable Share Provisions and under any
other commitment with respect to
<PAGE> 8
-5-
which ParentCo may now or hereafter be required to issue ParentCo Common Stock.
SECTION 2.3 SEGREGATION OF FUNDS.
Upon Parentco providing or causing to be provided to the Company any
funds, assets or other property in accordance with Section 2.1, the Company
shall deposit such funds in a separate account and segregate such assets and
other property, in each case for the benefit of Holders from time to time of the
Exchangeable Shares, and will use such funds, assets and other property
exclusively for the payment of dividends and the payment or other satisfaction
of the Liquidation Amount and the Retraction Price.
SECTION 2.4 NOTIFICATION OF CERTAIN EVENTS.
In order to assist ParentCo and CallCo to comply with their obligations
hereunder, the Company will give ParentCo and CallCo notice of each of the
following events at the time set forth below:
(a) Subject to the Exchangeable Share Provisions, in the event of
any determination by the Board of Directors of the Company in
accordance with the constating documents of the Company to
institute voluntary liquidation, dissolution or winding-up
proceedings with respect to the Company or to effect any other
distribution of the assets of the Company among its
shareholders for the purpose of winding-up its affairs, at
least 60 days prior to the proposed effective date of such
liquidation, dissolution, winding-up or other distribution;
(b) Immediately, upon the earlier of (i) receipt by the Company of
notice of, and (ii) the Company otherwise becoming aware of,
any threatened or instituted claim, suit, petition or other
proceedings with respect to the involuntary liquidation,
dissolution or winding-up of the Company or to effect any
other distribution of the assets of the Company among its
shareholders for the purpose of winding-up its affairs;
(c) Promptly, upon receipt by the Company of a Retraction Request
or notice of an exercise of an Exchange Right (as defined in
the Exchangeable Share Provisions);
(d) At least 60 days prior to any accelerated Automatic Redemption
Date determined by the Board of Directors of the Company in
accordance with the Exchangeable Share Provisions; and
(e) As soon as practicable upon the issuance by the Company of any
Exchangeable Shares or rights to acquire Exchangeable Shares.
<PAGE> 9
-6-
SECTION 2.5 DELIVERY OF PARENTCO COMMON STOCK.
In furtherance of its obligations hereunder, upon notice of any event
which requires the Company, Parentco or Callco to cause to be delivered ParentCo
Common Stock to any holder of Exchangeable Shares, CallCo shall forthwith
deliver the requisite ParentCo Common Stock to the former holder of the
surrendered Exchangeable Shares, as the Holder shall direct. All such ParentCo
Common Stock shall be duly issued as fully paid and non-assessable and shall be
free and clear of any lien, claim, encumbrance, security interest or adverse
claim or interest created by ParentCo, CallCo or the Company. In consideration
of the delivery of each such ParentCo Common Stock by CallCo, the Exchangeable
Shares held by CallCo shall automatically convert into such number of Common
Shares of the Company as is equal to the fair value of such ParentCo Common
Stock delivered.
SECTION 2.6 QUALIFICATION OF PARENTCO COMMON STOCK.
ParentCo covenants that if any ParentCo Common Stock to be issued and
delivered hereunder (including, for greater certainty, pursuant to the
Exchangeable Share Provisions, or pursuant to the Insolvency Exchange Right or
the Automatic Exchange Rights (both as defined in the Exchange Trust Agreement)
require registration or qualification with or approval of or the filing of any
document including any prospectus or similar document, the taking of any
proceeding with or the obtaining of any order, ruling or consent from any
governmental or regulatory authority under any Canadian or United States
federal, provincial or state law or regulation or pursuant to the rules and
regulations of any regulatory authority, or the fulfilment of any other legal
requirement (collectively, the "APPLICABLE LAWS") before such shares may be
issued and delivered by ParentCo to the initial holder thereof (other than the
Company), ParentCo will, in good faith, expeditiously take all such actions and
do all such things as are necessary to cause such ParentCo Common Stock to be
and remain duly registered, qualified or approved to the extent expressly
provided in the Purchase Agreement or Registration Rights Agreement. ParentCo
represents and warrants that it has, in good faith, taken all actions and done
all things as are necessary under Applicable Laws as they exist on the date
hereof to cause the ParentCo Common Stock to be issued and delivered hereunder
(including, for greater certainty, pursuant to the Exchangeable Share Provisions
or pursuant to the Insolvency Exchange Right and the Automatic Exchange Rights).
ParentCo will, in good faith, expeditiously take all such actions and do all
such things as are necessary to cause all ParentCo Common Stock to be delivered
hereunder (including, for greater certainty, pursuant to Exchangeable Share
Provisions or pursuant to the Insolvency Exchange Right or the Automatic
Exchange Rights) to be listed, quoted or posted for trading on all stock
exchanges and quotation systems on which such shares are listed, quoted or
posted for trading at such time.
<PAGE> 10
-7-
SECTION 2.7 EQUIVALENCE.
ParentCo hereby covenants and agrees to cause the Company to effect the
necessary amendments to the constating documents of the Company to ensure that
the Exchangeable Shares are adjusted to fully reflect the effect of any split,
reverse split, dividend (including any dividend of securities convertible into
ParentCo Common Stock), reorganization, recapitalization or other like change
with respect to ParentCo Common Stock occurring after the date hereof.
SECTION 2.8 TENDER OFFERS, ETC.
In the event that a tender offer, share exchange offer, issuer bid,
take-over bid or similar transaction with respect to ParentCo Common Stock (an
"OFFER") is proposed by ParentCo or is proposed to ParentCo or its shareholders
and is recommended by the board of directors of ParentCo, or is otherwise
effected or to be effected with the consent or approval of the board of
directors of ParentCo, ParentCo shall, in good faith, take all such actions and
do all such things as are necessary or desirable to enable and permit holders of
Exchangeable Shares to participate in such Offer to the same extent and on an
economically equivalent basis as the holders of ParentCo Common Stock, without
discrimination, including, without limiting the generality of the foregoing,
ParentCo will use its good faith reasonable best efforts expeditiously to (and
shall, in the case of a transaction proposed by ParentCo or where ParentCo is a
participant in the negotiation thereof) ensure that Holders of the Exchangeable
Shares may participate in all such Offers without being required to exchange the
Exchangeable Shares for Parentco Common Stock (or, if so required, to ensure
that any such exchange shall be effective only upon, and shall be conditional
upon, the closing of the Offer and only to the extent necessary to tender of
deposit to the Offer).
SECTION 2.9 DUE PERFORMANCE.
On and after the Effective Date, ParentCo and CallCo shall duly and
timely perform all of its obligations under the Exchangeable Share Provisions.
ARTICLE 3
CERTAIN RIGHTS OF CALLCO TO ACQUIRE EXCHANGEABLE SHARES
SECTION 3.1 CALLCO LIQUIDATION CALL RIGHT.
(1) CallCo shall have the overriding right (the "LIQUIDATION CALL RIGHT"),
in the event of and notwithstanding liquidation, dissolution or
winding-up of the Company as referred to in Article 5 of the
Exchangeable Share Provisions, to purchase from all but not less than
all, of the Holders on the Liquidation Date (other than ParentCo or any
Affiliate or Subsidiary thereof) all but not less than all of the
Exchangeable Shares held by each such Holder by Callco delivering or
causing to deliver to each holder the Exchangeable Share Price
<PAGE> 11
-8-
applicable on the last Business Day prior to the Liquidation Date (the
"LIQUIDATION CALL PURCHASE PRICE"), which as provided in this Section
3.1, shall be fully paid and satisfied by the delivery by or on behalf
of CallCo of the Exchangeable Share Consideration representing the
Liquidation Call Purchase Price. In the event of the exercise of the
Liquidation Call Right by ParentCo, each Holder shall be obligated to
sell all of the Exchangeable Shares held by the Holder to CallCo on the
Liquidation Date on delivery by CallCo to the Holder of the
Exchangeable Share Consideration representing the Liquidation Call
Purchase Price for each such share. In connection with payment of the
Exchangeable Share Consideration representing the total Liquidation
Call Purchase Price, CallCo shall be entitled to withhold, sell or
dispose of that number of ParentCo Common Stock otherwise be
deliverable as Exchangeable Share Consideration to the particular
Holder in order to satisfy any statutory withholding tax obligation.
(2) To exercise the Liquidation Call Right, CallCo must notify the Company
and the Trustee on behalf of the holders of Exchangeable Shares in
writing of its intention to exercise such right at least 30 days before
the Liquidation Date in the case of a voluntary liquidation,
dissolution or winding-up of the Company and at least five Business
Days before the Liquidation Date in the case of an involuntary
liquidation, dissolution or winding-up of the Company. The Company will
notify in writing the Trustee on behalf of the holders of Exchangeable
Shares as to whether or not CallCo has exercised the Liquidation Call
Right forthwith after the expiry of the date by which the same may be
exercised by CallCo. If CallCo exercises the Liquidation Call Right, on
the Liquidation Date, CallCo will purchase and the holders will sell
all of the Exchangeable Shares then outstanding for the Exchangeable
Share Consideration representing the total Liquidation Call Purchase
Price.
(3) On and after the Liquidation Date the right of each holder of
Exchangeable Shares will be limited to receiving such holder's
proportionate share of the Exchangeable Share Consideration
representing the total Liquidation Call Purchase Price payable by
CallCo without interest upon presentation and surrender by the holder
of certificates representing the Exchangeable Shares held by such
holder and the holder shall on and after the Liquidation Date be
considered and deemed for all purposes to be the holder of the ParentCo
Common Stock delivered to it. Upon surrender to the Company of a
certificate or certificates representing the Exchangeable Shares,
together with such other documents and instruments as may be required
to effect a transfer of Exchangeable Shares under the Act and the
constating documents of the Company and such additional documents and
instruments as the Company may reasonably require, the holder of such
surrendered certificate or certificates shall be entitled to receive in
exchange therefor, and ParentCo
<PAGE> 12
-9-
shall deliver to such holder, the Exchangeable Share Consideration to
which the holder is entitled. If CallCo does not exercise the
Liquidation Call Right in the manner described above, on the
Liquidation Date the holders of the Exchangeable Shares will be
entitled to receive in exchange therefor the Exchangeable Share
Consideration representing the Liquidation Amount otherwise payable by
the Company in connection with the liquidation, dissolution or
winding-up of the Company pursuant to Article 5 of the Exchangeable
Share Provisions.
SECTION 3.2 CALLCO REDEMPTION CALL RIGHT.
(1) CallCo shall have the overriding right (the "REDEMPTION CALL RIGHT"),
notwithstanding the proposed redemption of the Exchangeable Shares by
the Company pursuant to Article 7 of the Exchangeable Share Provisions,
to purchase from all, but not less than all, of the holders of
Exchangeable Shares on the Automatic Redemption Date (other than
ParentCo or any Affiliate Subsidiary thereof) all but not less than all
of the Exchangeable Shares held by each such holder on delivery by
CallCo to the holder of the Exchangeable Share Price applicable on the
last Business Day prior to the Automatic Redemption Date (the
"REDEMPTION CALL PURCHASE PRICE"), which as provided in this Section
3.2, shall be fully paid and satisfied by the delivery by or on behalf
of CallCo of the Exchangeable Share Consideration representing the
Redemption Call Purchase Price. In the event of the exercise of the
Redemption Call Right by CallCo, each holder shall be obligated to sell
all the Exchangeable Shares held by the holder to CallCo on the
Automatic Redemption Date on delivery by CallCo to the holder of the
Exchangeable Share Consideration representing the Redemption Call
Purchase Price for each such share. In connection with payment of the
Exchangeable Share Consideration representing the total Redemption Call
Purchase Price, CallCo shall be entitled to withhold, sell or dispose
of that number of the ParentCo Common Stock otherwise deliverable to
the particular holder of Exchangeable Shares in order to satisfy any
statutory withholding obligation.
(2) To exercise the Redemption Call Right, ParentCo must notify the Company
in writing of CallCo's intention to exercise such right at least 60
days before the Automatic Redemption Date. The Company will notify the
holders of the Exchangeable Shares in writing as to whether or not
Callco has exercised the Redemption Call Right forthwith after the date
by which the same may be exercised by CallCo. If CallCo exercises the
Redemption Call Right, on the Automatic Redemption Date, CallCo will
purchase and the holders will sell all of the Exchangeable Shares then
outstanding for the Exchangeable Share Consideration representing the
total Redemption Call Purchase Price.
<PAGE> 13
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(3) On and after the Automatic Redemption Date the rights of each holder of
Exchangeable Shares will be limited to receiving such holder's
proportionate share of the Exchangeable Share Consideration
representing the total Redemption Call Purchase Price payable by CallCo
upon presentation and surrender by the holder of certificates
representing the Exchangeable Shares held by such holder and the holder
shall on and after the Automatic Redemption Date be considered and
deemed for all purposes to be the holder of such holder's proportionate
share of such Exchangeable Share Consideration and unless and until
such Exchangeable Share Consideration is so received the holders shall
continue to be treated as holders of the Exchangeable Shares for all
purposes. Upon surrender to the Company of a certificate or
certificates representing Exchangeable Shares, together with such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the Act and the constating documents of the
Company and such additional documents and instruments as the Company
may reasonably require, the holder of such surrendered certificate or
certificates shall be entitled to receive in exchange therefor, and the
Company shall deliver to such holder, the Exchangeable Share
Consideration to which the holder is entitled. If CallCo does not
exercise the Redemption Call Right in the manner described above, on
the Automatic Redemption Date the holders of the Exchangeable Shares
will be entitled to receive in exchange therefor the Exchangeable Share
Consideration representing the Redemption Price otherwise payable by
the Company in connection with the redemption of the Exchangeable
Shares pursuant to Article 7 of the Exchangeable Share Provisions.
SECTION 3.3 INSOLVENCY EXCHANGE RIGHT
Upon and subject to the terms and conditions contained in the
Exchangeable Share Provisions and the Exchange Trust Agreement:
(a) a Holder of Exchangeable Shares shall have the right (the
"INSOLVENCY EXCHANGE RIGHT") upon the occurrence and during
the continuance of an Insolvency Event (as such term is
defined in the Exchange Trust Agreement) to require ParentCo
to purchase all or any part of the Exchangeable Shares of the
Holder; and
(b) upon the exercise by the Holder of the Insolvency Exchange
Right, the Holder shall be required to sell to ParentCo, and
ParentCo shall be required to purchase from the Holder, that
number of Exchangeable Shares in respect of which the
Insolvency Exchange Right is exercised, in consideration of
the payment by ParentCo of the Exchangeable Share Price
applicable thereto which should be fully paid and satisfied by
the delivery by or on behalf of ParentCo of the Exchangeable
Share
<PAGE> 14
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Consideration representing the total applicable Exchangeable
Share Price. In connection with the payment of the
Exchangeable Share Consideration representing the total
applicable Exchangeable Share Price, ParentCo shall be
entitled to withhold, sell or dispose of that number of
ParentCo Common Stock which would otherwise be deliverable as
Exchangeable Share Consideration to the particular Holder
required in order to fund any statutory withholding tax
obligation.
ARTICLE 4
PARENTCO SUCCESSORS
SECTION 4.1 CERTAIN REQUIREMENTS IN RESPECT OF COMBINATION, ETC.
(1) ParentCo shall not enter into any transaction (whether by way of
reconstruction, reorganization, consolidation, merger, or otherwise),
unless:
(a) such other Person or continuing company (the "PARENTCO
SUCCESSOR"), by operation of law, becomes, without more, bound
by the terms and provisions of this Agreement or, if not so
bound, executes, prior to or contemporaneously with the
consummation of such transaction an agreement supplemental
hereto and such other instruments (if any) as are necessary or
advisable to evidence the assumption by the ParentCo Successor
of liability for all moneys payable and property deliverable
hereunder, the covenant of such ParentCo Successor to pay and
deliver or cause to be delivered the same and its agreement to
observe and perform all the covenants and obligations of
ParentCo under this Agreement; and
b) such transaction shall be upon such terms to the satisfaction
of the Trustee and in the opinion of legal counsel to the
Trustee, acting reasonably, which substantially preserve and
do not impair in any material respect any of the rights,
duties, powers and authorities of the Trustee or of the
Holders hereunder.
SECTION 4.2 VESTING OF POWERS IN SUCCESSOR.
In the event that Section 4.1 hereof applies, the ParentCo Successor,
CallCo, the Holders and the Company shall execute and deliver the supplemental
agreement provided for in Section 4.4 hereof, and thereupon the ParentCo
Successor shall possess and from time to time may exercise each and every right
and power of ParentCo under this Agreement in the name of ParentCo or otherwise
and any act or proceeding by any provision of this Agreement required to be done
or performed by the board of directors of ParentCo or any officers of ParentCo
may be done and
<PAGE> 15
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performed with like force and effect by the directors or officers of such
ParentCo Successor.
SECTION 4.3 WHOLLY-OWNED SUBSIDIARIES
Nothing herein shall be construed as preventing the amalgamation or
merger of any wholly-owned subsidiary of ParentCo with or into the ParentCo or
the winding-up, liquidation or dissolution of any wholly-owned subsidiary of
ParentCo provided that all of the assets of such subsidiary are transferred to
ParentCo or another wholly-owned subsidiary of ParentCo and any such
transactions are expressly permitted by this Article 4.
SECTION 4.4 EXECUTION OF SUPPLEMENTAL AGREEMENTS.
From time to time the Company (when authorized by a resolution of its
Board of Directors), ParentCo (when authorized by a resolution of its board of
directors), CallCo (when authorized by a resolution of its board of directors)
and the Holders may, subject to the provisions of these presents, and they
shall, when so directed by these presents, execute and deliver by their proper
officers, agreements or other instruments supplemental hereto, which thereafter
shall form part hereof, to evidence the succession of any ParentCo Successors to
ParentCo and the covenants of and obligations assumed by each such ParentCo
Successor in accordance with the provisions of this Article 4.
ARTICLE 5
GENERAL
SECTION 5.1 TERM.
This Agreement shall come into force and be effective as of the date
hereof and shall terminate and be of no further force and effect at such time as
no Exchangeable Shares (or securities or rights convertible into or exchangeable
for or carrying rights to acquire Exchangeable Shares) are held by any party
other than ParentCo and any of its Subsidiaries or Affiliates.
SECTION 5.2 CHANGES IN CAPITAL OF PARENTCO AND THE COMPANY.
Notwithstanding the provisions of Section 4.7 hereof, at all times
after the occurrence of any event in which or as a result of which either
ParentCo Common Stock or the Exchangeable Shares or both are in any way changed,
this Agreement shall forthwith be amended and modified as necessary in order
that it shall apply with full force and effect, mutatis mutandis, to all new
securities into which ParentCo Common Stock or the Exchangeable Shares or both
are so changed, and the parties hereto shall execute and deliver an agreement in
writing giving effect to and evidencing such necessary amendments and
modifications.
<PAGE> 16
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SECTION 5.3 ENCUMBRANCES, LIENS.
Parentco hereby represents, warrants and covenants that all Parentco
Common Stock issued pursuant to the exercise by a Holder of such Holder's
Exchange Right, the Automatic Exchange or the exercise by Parentco of the
Liquidation Call Right or the Retraction Call Right or otherwise under this
Agreement (each, a "SHARE EXCHANGE") shall be duly issued, fully paid and
non-assessable.
SECTION 5.4 SEVERABILITY.
If any provision of this Agreement is held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remainder of this
Agreement shall not in any way be affected or impaired thereby and this
Agreement shall be carried out as nearly as possible in accordance with its
original terms and conditions.
SECTION 5.5 AMENDMENTS, MODIFICATIONS, ETC.
This Agreement may not be amended or modified except by an agreement in
writing executed by the Company, CallCo and ParentCo and the Holders in
accordance with Section 9.2 of the Exchangeable Share Provisions.
SECTION 5.6 MINISTERIAL AMENDMENTS.
Notwithstanding the provisions of Section 5.7 hereof, the Company and
ParentCo may by written notice to the holders of Exchangeable Shares, at any
time and from time to time, without the approval of the holders of the
Exchangeable Shares, amend or modify this Agreement for the purposes of:
(a) Adding to the covenants of either or both such parties for the
protection of the holders of the Exchangeable Shares;
(b) Making such amendments or modifications not inconsistent with
this Agreement as may be necessary or desirable with respect
to matters or questions which, in the opinion of the board of
directors of each of the Company CallCo and ParentCo, on the
advice of counsel, it may be expedient to make, provided that
such amendments or modifications will not be prejudicial or
adverse to the interests of the holders of the Exchangeable
Shares; or
(c) Making such changes or corrections which, on the advice of
counsel to the Company CallCo and ParentCo, are required for
the purpose of curing or correcting any ambiguity or defect or
inconsistent provision or clerical omission or mistake or
manifest error; provided that the changes or corrections will
not be prejudicial or adverse to the interests of the holders
of the Exchangeable Shares.
<PAGE> 17
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SECTION 5.7 MEETING TO CONSIDER AMENDMENTS.
The Company, at the request of CallCo or ParentCo, shall call a meeting
or meetings of the holders of the Exchangeable Shares for the purpose of
considering any proposed amendment or modification requiring approval of such
shareholders. Any such meeting or meetings shall be called and held in
accordance with the constating documents of the Company, the Exchangeable Share
Provisions and all applicable laws.
SECTION 5.8 AMENDMENTS ONLY IN WRITING.
No amendment to or modification or waiver of any of the provisions of
this Agreement otherwise permitted hereunder shall be effective unless made in
writing and signed by all of the parties hereto.
SECTION 5.9 ENUREMENT.
This Agreement shall be binding upon and enure to the benefit of the
parties hereto and the holders, from time to time, of Exchangeable Shares and
each of their respective heirs, administrators, executors, successors and
assigns.
SECTION 5.10 WAIVER.
Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver hereof.
SECTION 5.11 NOTICES TO PARTIES.
(1) All notices and other communications between the parties shall be in
writing and shall be deemed to have been given if delivered personally
or by confirmed facsimile to the parties at the following addresses (or
at such other address for either such party as shall be specified in
like notice):
TO PARENTCO OR CALLCO: Daleen Technologies, Inc.
902 Clint Moore Road
Suite 230
Boca Raton, Florida 33487
Attention: Stephen Wagman
Fax: (561) 995-1979
<PAGE> 18
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With a copy to: Morris, Manning & Martin
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: David M. Calhoun
Fax: (404) 365-9532
TO THE COMPANY: Daleen Canada Corporation
902 Clint Moore Road
Suite 230
Boca Raton, Florida 33487
With a copy to: Morris, Manning & Martin
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: David M. Calhoun
Fax: (404) 365-9532
With an additional copy to: Stikeman, Elliott
Suite 5300
Commerce Court West
Toronto, Ontario, M9L 1B9
Attention: Roderick Barrett, Esq.
Fax: (416) 947-0866
TO THE HOLDERS: Mohammad Aamir
819-123 Scadding Avenue
Toronto, Ontario
M5A 4J3
With a copy to: Blake, Cassels & Graydon
Commerce Court West
PO Box 25, Stn. Commerce Court
Toronto, Ontario M5L 1A9
Attention: John M. Tuzyk
Fax: (416) 863-2653
(2) Any notice or other communication given personally shall be deemed to
have been given and received upon delivery thereof and if given by
facsimile shall
<PAGE> 19
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be deemed to have been given and received on the date of confirmed
receipt thereof, unless such day is not a Business Day, in which case
it shall be deemed to have been given and received upon the immediately
following Business Day.
SECTION 5.12 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. This Agreement may be executed and delivered by facsimile with
the originals to be delivered in due course.
SECTION 5.13 JURISDICTION.
This Agreement shall be construed and enforced in accordance with the
laws of the Province of Ontario and the laws of Canada applicable therein.
SECTION 5.14 ATTORNMENT.
ParentCo, Callco and the Company agree that any action or proceeding
arising out of or relating to this agreement may be instituted in the courts of
Ontario, waives any objection which it may have now or hereafter to the venue of
any such action or proceeding, irrevocably submits to the jurisdiction of such
courts in any such action or proceeding, agrees to be bound by any judgment of
such courts and not to seek, and hereby waives, any review of the merits of any
such judgment by the courts of any other jurisdiction and hereby appoints
Stikeman, Elliott in the Province of Ontario as CallCo's, the Company's and
ParentCo's attorney for service of process.
SECTION 5.15 PARENTCO NOT TO VOTE EXCHANGEABLE SHARES.
Parentco covenants and agrees that it will appoint and cause to be
appointed proxyholders with respect to all Exchangeable Shares held by Parentco
and its Subsidiaries (as such term is defined in the Purchase Agreement) for the
sole purpose of attending each meeting of holders of exchangeable shares in
order to be counted as part of the quorum for each such meeting. Parentco
further covenants and agrees that it will not, and will cause its Subsidiaries
not to, exercise any voting rights which may be exercisable by holders of
exchangeable shares from time to time pursuant to the Company's Articles or
pursuant to the provisions of the Companies Act (Nova Scotia) (or any successor
other corporate statute by which the Company may in the future be governed) with
respect to any Exchangeable Shares held by it or by its Subsidiaries in respect
of any matter considered at any meeting of holders of exchangeable shares.
SECTION 5.16 OWNERSHIP OF OUTSTANDING SHARES.
Without the prior approval of the holders of Exchangeable Shares given
in accordance with the meeting and voting procedures set forth in the Articles,
in
<PAGE> 20
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respect of which approval the provisions of section 1.5 of this Agreement shall
be applicable, Parentco covenants and agrees that Parentco or a Parentco
Successor will be and remain the direct or indirect beneficial owner of all of
the issued and outstanding shares in the capital of the Company and all
outstanding securities of the Company carrying or otherwise entitled to voting
rights in any circumstances, in each case other than the Exchangeable Shares.
SECTION 5.17 OBLIGATIONS OF HOLDERS SEVERAL.
The obligations of the Holders under this Agreement are several and not
joint and several.
SECTION 5.18 GUARANTY /ASSIGNMENT.
ParentCo hereby unconditionally and irrevocably guarantees the prompt
and full performance by CallCo of, and shall cause CallCo to comply with its
obligations hereunder. The right to exercise any particular Redemption Call
Right and, Retraction Call Right and/or Liquidation Call Right at any time may
be assigned or transferred, in whole or in part, to any affiliate of CallCo or
ParentCo provided, however, that notwithstanding such assignment or transfer in
the event that such assignee or transferee fails to satisfy such obligation,
ParentCo or CallCo hereby absolutely and irrevocably agrees to guarantee such
obligation and ParentCo hereby waives any defences to the strict enforcement
thereof. Parentco may not assign its rights and obligations under this
Agreement.
IN WITNESS WHEREOF the parties have executed this Support Agreement.
DALEEN TECHNOLOGIES, INC.
By:
------------------------------------------
Authorized Signing Officer
DALEEN CANADA CORPORATION
By:
------------------------------------------
Authorized Signing Officer
<PAGE> 21
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DALEEN CALLCO CORPORATION
By:
------------------------------------------
Authorized Signing Officer
THE UNDERSIGNED HOLDERS OF EXCHANGEABLE SHARES HEREBY ACKNOWLEDGE AND ACCEPT THE
RIGHTS OF CALLCO AND PARENTCO AS SET FORTH IN ARTICLE 3 HEREOF.
-------------------------------------------------
MOHAMMAD AAMIR
-------------------------------------------------
CARL SCASE
-------------------------------------------------
CORNELIU IONESCU
-------------------------------------------------
MANSOOR AHMED
-------------------------------------------------
MING HAN
-------------------------------------------------
-------------------------------------------------
CHARLES BARTON
-------------------------------------------------
STEPHEN SMITH
-------------------------------------------------
NAHLA RASHAD
<PAGE> 22
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-------------------------------------------------
GEORGE TIMMES
1303949 ONTARIO INC.
By:
------------------------------------------
Name:
Title:
<PAGE> 23
-20-
SIGNATURES CONTINUED
THE VENGROWTH INVESTMENT
FUND INC.
By:
-----------------------------------------
Name:
Title:
<PAGE> 1
Exhibit 10.4
EXCHANGE TRUST AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE 1
DEFINITIONS AND INTERPRETATION
<S> <C> <C>
Section 1.1 Definitions................................................................................2
Section 1.2 Interpretation Not Affected by Headings, Etc...............................................4
Section 1.3 Number, Gender, Etc........................................................................4
Section 1.4 Date for Any Action........................................................................4
ARTICLE 2
PURPOSE OF AGREEMENT
Section 2.1 Purpose....................................................................................4
ARTICLE 3
PROVISION OF INFORMATION
Section 3.1 Copies of Shareholder Information..........................................................5
Section 3.2 Other Materials............................................................................5
Section 3.3 Distribution of Written Materials..........................................................5
ARTICLE 4
INSOLVENCY EXCHANGE RIGHT AND AUTOMATIC EXCHANGE RIGHTS
Section 4.1 Grant and Ownership of the Insolvency Exchange Right.......................................6
Section 4.2 Legended Share Certificates................................................................7
Section 4.3 General Exercise of the Insolvency Exchange Right..........................................7
Section 4.4 Purchase Price.............................................................................7
Section 4.5 Exercise Instructions......................................................................7
Section 4.6 Delivery of Exchangeable Share Consideration; Effect of Exercise...........................9
Section 4.7 Exercise of the Insolvency Exchange Right In Other Circumstances..........................10
Section 4.8 Stamp or Other Transfer Taxes.............................................................11
Section 4.9 Notice of Insolvency Event................................................................11
Section 4.10 Qualification of ParentCo Common Stock..................................................12
Section 4.11 Reservation of ParentCo Common Stock....................................................12
Section 4.12 Automatic Exchange on Liquidation of ParentCo...........................................13
Section 4.13 Withholding Rights......................................................................15
ARTICLE 5
CONCERNING THE TRUSTEE
Section 5.1 Powers and Duties of the Trustee..........................................................15
Section 5.2 No Conflict of Interest...................................................................16
(i)
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
Section 5.3 Dealings with Transfer Agents, Registrars, Etc............................................17
Section 5.4 Books and Records.........................................................................17
Section 5.5 Income Tax Returns and Reports............................................................18
Section 5.6 Indemnification Prior to Certain Actions by Trustee.......................................18
Section 5.7 Actions by Holders........................................................................18
Section 5.8 Reliance Upon Declarations................................................................19
Section 5.9 Evidence and Authority to Trustee.........................................................19
Section 5.10 Experts, Advisers and Agents............................................................20
Section 5.11 Investment of Moneys Held by Trustee....................................................21
Section 5.12 Trustee Not Required to Give Security...................................................21
Section 5.13 Trustee Not Bound to Act on Request.....................................................21
Section 5.14 Authority to Carry on Business..........................................................21
Section 5.15 Conflicting Claims......................................................................22
Section 5.16 Disbursements...........................................................................22
Section 5.17 Acceptance of Trust.....................................................................22
Section 5.18 Trustee Not Liable......................................................................23
ARTICLE 6
COMPENSATION
Section 6.1 Compensation and Reimbursement............................................................23
ARTICLE 7
INDEMNIFICATION AND LIMITATION OF LIABILITY
Section 7.1 Indemnification of the Trustee............................................................23
Section 7.2 Limitation of Liability...................................................................24
ARTICLE 8
CHANGE OF TRUSTEE
Section 8.1 Resignation...............................................................................24
Section 8.2 Removal...................................................................................25
Section 8.3 Successor Trustee.........................................................................25
Section 8.4 Notice of Successor Trustee...............................................................25
ARTICLE 9
PARENTCO SUCCESSORS
Section 9.1 Certain Requirements in Respect of Combination, Etc.......................................26
Section 9.2 Vesting of Powers in Successor............................................................26
Section 9.3 Wholly-owned Subsidiaries.................................................................26
ARTICLE 10
AMENDMENTS AND SUPPLEMENTAL AGREEMENTS
Section 10.1 Amendments, Modifications, Etc..........................................................27
(ii)
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
Section 10.2 Ministerial Amendments..................................................................27
Section 10.3 Meeting to Consider Amendments..........................................................27
Section 10.4 Changes in Capital of ParentCo and the Company..........................................28
Section 10.5 Execution of Supplemental Agreements....................................................28
ARTICLE 11
TERMINATION
Section 11.1 Term....................................................................................29
Section 11.2 Survival of Agreement...................................................................29
ARTICLE 12
GENERAL
Section 12.1 Severability............................................................................29
Section 12.2 Enurement...............................................................................29
Section 12.3 Notices to Parties......................................................................29
Section 12.4 Notice to Holders.......................................................................31
Section 12.5 Risk of Payments by Post................................................................32
Section 12.6 Counterparts............................................................................32
Section 12.7 Jurisdiction............................................................................32
Section 12.8 Attainment..............................................................................32
(iii)
</TABLE>
<PAGE> 5
EXCHANGE TRUST AGREEMENT
THIS EXCHANGE TRUST AGREEMENT is entered into as of December 16, 1999,
by and between DALEEN TECHNOLOGIES, INC., a corporation organized under the laws
of the State of Delaware ("PARENTCO") DALEEN CALLCO CORPORATION, an unlimited
liability company existing, under the laws of the Province of Nova Scotia
("CALLCO"), and DALEEN CANADA CORPORATION an unlimited liability company
existing under the laws of the Province of Nova Scotia (the "COMPANY"), the
Holders of Exchangeable Shares from time to time (the "HOLDERS"), and MONTREAL
TRUST COMPANY OF CANADA ("TRUSTEE").
WHEREAS, pursuant to a Share Purchase Agreement dated as of December
16, 1999, by and between the Company, Inlogic Software Inc., ParentCo. and the
holders of all of the issued and outstanding shares of Inlogic Software Inc.
(such agreement is hereinafter referred to as the "PURCHASE AGREEMENT") the
parties agreed that on the closing of the transaction contemplated under the
Purchase Agreement, ParentCo, the Company, the Holders and a trustee would
execute and deliver an Exchange Trust Agreement containing the terms and
conditions set forth in an Exhibit to the Purchase Agreement together with such
other terms and conditions as may be agreed to by the parties to the Purchase
Agreement acting reasonably.
WHEREAS, pursuant to the Purchase Agreement, the Company issued certain
exchangeable shares (the "EXCHANGEABLE SHARES") having attached thereto certain
rights, privileges, restrictions and conditions (collectively, the "EXCHANGEABLE
SHARE PROVISIONS" attached hereto as Schedule A).
WHEREAS, ParentCo is to grant to and in favour of the holders (other
than ParentCo and its Affiliates and Subsidiaries) from time to time of
Exchangeable Shares the right, in the circumstances set forth herein, to require
ParentCo to purchase from each such holder all or any part of the Exchangeable
Shares held by the holder;
WHEREAS, these recitals and any statements of fact in this Agreement
are made by ParentCo, CallCo and the Company and not by the Trustee.
NOW THEREFORE, in consideration of the respective covenants and
agreements provided in this agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:
<PAGE> 6
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ARTICLE 1
DEFINITIONS AND INTERPRETATION
SECTION 1.1 DEFINITIONS.
In this agreement, the following terms shall have the following
meanings:
"ACT" means the Companies Act (Nova Scotia);
"AFFILIATES" has the meaning provided in the Exchangeable Share
Provisions;
"AUTOMATIC EXCHANGE RIGHTS" means the benefit of the obligation of
ParentCo to effect the automatic exchange of ParentCo Common Stock for
Exchangeable Shares pursuant to Section 4.12 hereof;
"BOARD OF DIRECTORS" means the Board of Directors of the Company;
"BUSINESS DAY" has the meaning provided in the Exchangeable Share
Provisions;
"EXCHANGEABLE SHARE CONSIDERATION" has the meaning provided in the
Exchangeable Share Provisions;
"EXCHANGEABLE SHARE PRICE" has the meaning provided in the Exchangeable
Share Provisions;
"EXCHANGEABLE SHARE PROVISIONS" has the meaning provided in the
recitals hereto;
"EXCHANGEABLE SHARES" has the meaning provided in the recitals hereto;
"HOLDERS" means the registered holders from time to time of
Exchangeable Shares, other than ParentCo and its Affiliates and
Subsidiaries;
"INSOLVENCY EVENT" means the institution by the Company of any
proceeding to be adjudicated a bankrupt or insolvent or to be dissolved
or wound-up, or the consent of the Company to the institution of
bankruptcy, insolvency, dissolution or winding-up proceedings against
it, or the filing of a petition, answer or consent seeking dissolution
or winding-up under any bankruptcy, insolvency or analogous laws,
including without limitation the Companies Creditor, Arrangement Act
(Canada) and the Bankruptcy and Insolvency Act (Canada), and the
failure by the Company to contest in good faith any such proceedings
commenced in respect of the Company within 15 days of becoming aware
thereof, or the consent by the Company to the filing of any such
petition or to the appointment of a receiver, or the making by the
Company of a general assignment for the benefit of creditors, or the
<PAGE> 7
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admission in writing by the Company of its inability to pay its debts
generally as they become due, or the Company's not being permitted,
pursuant to solvency requirements of applicable law, to redeem any
Retracted Shares pursuant to Section 6.6 of the Exchangeable Share
Provisions;
"INSOLVENCY EXCHANGE RIGHT" has the meaning provided in Article 4
hereof;
"LIQUIDATION CALL RIGHT" has the meaning provided in the Exchangeable
Share Provisions;
"LIQUIDATION EVENT" has the meaning provided in Subsection 4.12(1)(b)
hereof;
"LIQUIDATION EVENT EFFECTIVE TIME" has the meaning provided in
Subsection 4.12(3) hereof;
"OFFICER'S CERTIFICATE" means, with respect to ParentCo, CallCo or the
Company, as the case may be, a certificate signed by any one of the
Chairman of the Board, the President, any Executive Vice-President, any
Senior Vice-President, or any Vice-President of ParentCo, CallCo or the
Company, as the case may be;
"PARENTCO COMMON STOCK" has the meaning provided in the Exchangeable
Share Provisions;
"PARENTCO SUCCESSOR" has the meaning provided in Subsection 9.1(a)
hereof;
"PERSON" includes an individual, body corporate, partnership, company,
unincorporated syndicate or organization, trust, trustee, executor,
administrator and other legal representative;
"REDEMPTION CALL RIGHT" has the meaning provided in the Exchangeable
Share Provisions;
"RETRACTION REQUEST" has the meaning provided in the Exchangeable Share
Provisions;
"RETRACTED SHARES" has the meaning provided in Section 6.1(i) of the
Exchangeable Share Provisions hereof;
"RETRACTION CALL RIGHT" has the meaning provided in the Exchangeable
Share Provisions;
<PAGE> 8
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"SUBSIDIARY" has the meaning provided in the Exchangeable Share
Provisions;
"SUPPORT AGREEMENT" means that certain support agreement made as of the
date hereof by and between ParentCo, CallCo, the Holders and the
Company and attached hereto as Schedule B;
"TRUST" means the trust created by this Agreement;
"TRUST ESTATE" means the Insolvency Exchange Right, the Automatic
Exchange Rights and any money or other property which may be held by
the Trustee from time to time pursuant to this Agreement; and
"TRUSTEE" means Montreal Trust Company of Canada and, subject to the
provisions of Article 8 hereof, includes any successor trustee or
permitted assigns.
SECTION 1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC.
The division of this agreement into articles, sections and paragraphs
and the insertion of headings are for convenience of reference only and shall
not affect the construction or interpretation of this Agreement.
SECTION 1.3 NUMBER, GENDER, ETC.
Words importing the singular number only shall include the plural and
vice versa. Words importing the use of any gender shall include all genders.
SECTION 1.4 DATE FOR ANY ACTION.
If any date on which any action is required to be taken under this
Agreement is not a Business Day, such action shall be required to be taken on
the next succeeding Business Day.
ARTICLE 2
PURPOSE OF AGREEMENT
SECTION 2.1 PURPOSE.
The purpose of this agreement is to create the Trust for the benefit of
the Holders, as herein provided. The Trustee will hold the Insolvency Exchange
Right and the Automatic Exchange Rights in order to enable the Trustee to
exercise such rights, in each case as trustee for and on behalf of the Holders
as provided in this Agreement.
<PAGE> 9
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ARTICLE 3
PROVISION OF INFORMATION
SECTION 3.1 COPIES OF SHAREHOLDER INFORMATION
ParentCo will deliver to the Trustee copies of all proxy materials
(including notices of meetings of holders of ParentCo Common Stock, but
excluding proxies to vote ParentCo Common Stock), information statements,
reports (including without limitation all interim and annual financial
statements) and other written communications that there are to be distributed
from time to time to all of the holders of ParentCo Common Stock in sufficient
quantities and in sufficient time so as to enable the Trustee to send those
materials to each Holder at the same time as such materials are first sent to
holders of ParentCo Common Stock. The Trustee will mail or otherwise send to
each Holder, at the expense of ParentCo, copies of all such materials (and all
materials specifically directed to the Holders or to the Trustee for the benefit
of the Holders by ParentCo) received by the Trustee from ParentCo at the same
time as such materials are first sent to holders of ParentCo Common Stock. The
Trustee will make copies of all such materials available for inspection by any
Holder at the Trustee's principal corporate trust office in the City of Toronto.
SECTION 3.2 OTHER MATERIALS
Immediately after receipt by ParentCo or any member of ParentCo of any
material sent or given generally to the holders of ParentCo Common Stock by or
on behalf of a third party, including without limitation dissident proxy and
information circulars (and related information and material) and tender and
exchange offer circulars (and related information and material), ParentCo shall
obtain and deliver to the Trustee copies thereof in sufficient quantities so as
to enable the Trustee to forward such material (unless the same has been
provided directly to Holders by such third party) to each Holder as soon as
possible thereafter. As soon as practicable after receipt thereof, the Trustee
will mail or otherwise send to each Holder, at the expense of ParentCo, copies
of all such materials received by the Trustee from ParentCo. The Trustee will
also make copies of all such materials available for inspection by any Holder at
the Trustee's principal corporate trust office at the City of Toronto.
SECTION 3.3 DISTRIBUTION OF WRITTEN MATERIALS
Any written materials to be distributed by the Trustee to the Holders
pursuant to this Agreement shall be delivered or sent by mail (or otherwise
communicated in the same manner, subject to the Trustee being advised in writing
of such method of communication and its ability to provide such method, as
ParentCo uses in communications to holders of ParentCo Common Stock) to each
Holder at its address as shown on the books of the Company. The Company shall
provide or cause to be provided to the Trustee for this purpose, on a timely
basis and without charge or other expense:
<PAGE> 10
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(a) Current and accurate lists of the Holders as reflected in the
Company records; and
(b) On the request of the Trustee, mailing labels to enable the
Trustee to carry out its duties under this agreement.
The materials referred to above are to be provided by the Company to
the Trustee in sufficient time to enable the Trustee to fulfil its obligations
as set out in Article 3.
ARTICLE 4
INSOLVENCY EXCHANGE RIGHT AND AUTOMATIC EXCHANGE RIGHTS
SECTION 4.1 GRANT AND OWNERSHIP OF THE INSOLVENCY EXCHANGE RIGHT.
(1) ParentCo hereby grants to the Trustee as trustee for and on behalf of,
and for the use and benefit of, the Holders
(a) the right (the "INSOLVENCY EXCHANGE RIGHT"), upon the
occurrence and during the continuance of an Insolvency Event
hereof, to require ParentCo to purchase from each or any
Holder all or any part of the Exchangeable Shares held by the
Holders, and
(b) the Automatic Exchange Rights,
all in accordance with the provisions of this Agreement. ParentCo hereby
acknowledges receipt from the Trustee as trustee for and on behalf of the
Holders of good and valuable consideration (and the adequacy thereof) for the
grant of the Insolvency Exchange Right and the Automatic Exchange Rights by
ParentCo to the Trustee. During the term of the Trust and subject to the terms
and conditions of this Agreement, the Trustee shall possess and be vested with
full legal ownership of the Insolvency Exchange Right and the Automatic Exchange
Rights and shall be entitled to exercise all of the rights and powers of an
owner with respect to the Insolvency Exchange Right and the Automatic Exchange
Rights, provided that the Trustee shall:
(c) hold the Insolvency Exchange Right and the Automatic Exchange
Rights and the legal title thereto as trustee solely for the
use and benefit of the Holders in accordance with the
provisions of this Agreement; and
(d) except as specifically authorized by this Agreement, have no
power or authority to exercise or otherwise deal in or with
the Insolvency Exchange Right and the Automatic Exchange
Rights, and the Trustee shall not exercise any such rights for
any purpose other than the purposes for which this Trust is
created pursuant to this Agreement.
<PAGE> 11
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SECTION 4.2 LEGENDED SHARE CERTIFICATES.
(1) The Company shall ensure that each certificate representing
Exchangeable Shares bears an appropriate legend notifying the Holders
of:
(a) their right to instruct the Trustee with respect to the
exercise of the Insolvency Exchange Right in respect of the
Exchangeable Shares held by a Holder; and
(b) the Automatic Exchange Rights.
SECTION 4.3 GENERAL EXERCISE OF THE INSOLVENCY EXCHANGE RIGHT
(1) The Insolvency Exchange Right shall be and remain vested in and
exercised by the Trustee. Subject to Section 5.15 hereof, the Trustee
shall exercise the Insolvency Exchange Right only (i) on the basis of
instructions received pursuant to this Article 4 from Holders entitled
to instruct the Trustee as to the exercise thereof; or (ii) to the
extent that no instructions are received from a Holder with respect to
the Insolvency Exchange Right, the Trustee shall not exercise or permit
the exercise of the Insolvency Exchange Right.
SECTION 4.4 PURCHASE PRICE
(1) The purchase price payable by ParentCo for each Exchangeable Share to
be purchased by ParentCo under the Insolvency Exchange Right shall be
an amount equal to the Exchangeable Share Price on the last Business
Day prior to the day of closing of the purchase and sale of such
Exchangeable Share under the Insolvency Exchange Right. In connection
with each exercise of the Insolvency Exchange Right, ParentCo will
provide to the Trustee an Officer's Certificate setting forth the
calculation of the applicable Exchangeable Share Price for each
Exchangeable Share. The applicable Exchangeable Share Price for each
such Exchangeable Share so purchased may be satisfied only by ParentCo
delivering or causing to be delivered to the Trustee, on behalf of the
relevant Holder, the applicable Exchangeable Share Consideration
representing the total applicable Exchangeable Share Price. In
connection with payment of the Exchangeable Share Consideration,
ParentCo shall be entitled to withhold, sell or dispose of that number
of shares of ParentCo Common Stock otherwise deliverable to the
particular holder of Exchangeable Shares in order to satisfy any
statutory withholding tax obligation.
SECTION 4.5 EXERCISE INSTRUCTIONS
(1) Subject to the terms and conditions herein set forth, a Holder shall be
entitled, upon the occurrence and during the continuance of an
Insolvency Event, to instruct the Trustee to exercise the Insolvency
Exchange Right with respect to all of or any part of the Exchangeable
Shares registered in the name of such
<PAGE> 12
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Holder on the books of the Company. To cause the exercise of the
Insolvency Exchange Right by the Trustee, the Holder shall deliver to
the Trustee, in person or by certified or registered mail, at its
principal corporate trust office in Toronto, Ontario or at such other
places in Canada as the Trustee may from time to time designate by
written notice to the Holders, the certificates representing the
Exchangeable Shares which such Holder desires ParentCo to purchase,
duly endorsed for transfer to ParentCo, and accompanied by such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the Act and; the constating documents of the
Company and such additional documents and instruments as the Trustee
may reasonably require, together with:
(a) a duly completed form of notice of exercise of the Insolvency
Exchange Right, contained on the reverse of or attached to the
Exchangeable Share certificates, stating:
(i) that the Holder thereby instructs the Trustee to
exercise the Insolvency Exchange Right so as to
require ParentCo to purchase from the Holder the
number of Exchangeable Shares specified therein,
(ii) that such Holder has good title to and owns all such
Exchangeable Shares to be acquired by ParentCo free
and clear of all liens, claims, encumbrances,
security interests and adverse claims or interests,
(iii) the name in which the certificates representing
ParentCo Common Stock issuable in connection with the
exercise of the Insolvency Exchange Right are to be
issued (which must be the name of the Holder), and
(iv) the names and addresses of the persons to whom the
Exchangeable Share Consideration should be delivered;
and
(b) payment (or evidence satisfactory to the Trustee, the Company,
CallCo and ParentCo of payment) of the taxes (if any) payable
as contemplated by Section 4.8 of this Agreement.
(2) If only a part of the Exchangeable Shares represented by any
certificate or certificates delivered to the Trustee are to be
purchased by ParentCo under the Insolvency Exchange Right, a new
certificate for the balance of such Exchangeable Shares shall be issued
to the Holder at the expense of the Company.
<PAGE> 13
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SECTION 4.6 DELIVERY OF EXCHANGEABLE SHARE CONSIDERATION; EFFECT OF EXERCISE.
(1) Promptly after receipt of the certificates representing the
Exchangeable Shares which the Holder desires ParentCo to purchase under
the Insolvency Exchange Right (together with such documents and
instruments of transfer and a duly completed form of notice of exercise
of the Insolvency Exchange Right), duly endorsed for transfer to
ParentCo, the Trustee shall notify ParentCo and the Company of its
receipt of same, which notice to ParentCo and the Company shall
constitute exercise of the Insolvency Exchange Right by the Trustee on
behalf of the Holder of such Exchangeable Shares, and ParentCo shall
immediately thereafter deliver or cause to be delivered to the Trustee,
for delivery to the Holder of such Exchangeable Shares (or to such
other person, if any, properly designated by such Holder), the
Exchangeable Share Consideration deliverable in connection with the
exercise of the Insolvency Exchange Right; provided, however, that no
such delivery shall be made unless and until the Holder requesting the
same shall have paid (or provided evidence satisfactory to the Trustee,
the Company, CallCo and ParentCo of the payment of) the taxes (if any)
payable as contemplated by Section 4.8 of this Agreement. Immediately
upon the giving of notice by the Trustee to ParentCo and the Company of
the exercise of the Insolvency Exchange Right, as provided in this
Section 4.6, the closing of the transaction of purchase and sale
contemplated by the Insolvency Exchange Right shall be deemed to have
occurred, and the Holder of such Exchangeable Shares shall be deemed to
have transferred to ParentCo all of its right, title and interest in
and to such Exchangeable Shares and the related interest in the Trust
Estate, shall cease to be a holder of such Exchangeable Shares and
shall not be entitled to exercise any of the rights of a holder in
respect thereof, other than the right to receive the Exchangeable Share
Consideration, unless such Exchangeable Share Consideration is not
delivered or cause to be delivered by ParentCo to the Trustee, for
delivery to such Holder (or to such other persons, if any, properly
designated by such Holder), within three Business Days of the date of
the giving of such notice by the Trustee, in which case the rights of
the Holder shall remain unaffected until such Exchangeable Share
Consideration is delivered by ParentCo and any cheque included therein
is honoured. Upon delivery by ParentCo to the Trustee of such ParentCo
Common Stock, the Trustee shall deliver such ParentCo Common Stock to
such Holder (or to such other persons, if any, properly designated by
such Holder). Concurrently with such Holder ceasing to be a holder of
Exchangeable Shares, the Holder shall be considered and deemed for all
purposes to be the holder of the ParentCo Common Stock delivered to it
pursuant to the Insolvency Exchange Right.
<PAGE> 14
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SECTION 4.7 EXERCISE OF THE INSOLVENCY EXCHANGE RIGHT IN OTHER CIRCUMSTANCES.
(1) In the event that a Holder has exercised its right under Article 6 of
the Exchangeable Share Provisions to require the Company to redeem any
or all of the Exchangeable Shares held by the Holder (the "RETRACTED
SHARES") and is notified by the Company pursuant to Section 6.6 of the
Exchangeable Share Provisions that the Company will not be permitted as
a result of solvency requirements under the Act to redeem all such
Retracted Shares, subject to receipt by the Trustee of the Retraction
Request from the Holder or the Company and provided that CallCo shall
not have exercised the Retraction Call Right with respect to the
Retracted Shares and that the Holder has not revoked the retraction
request delivered by the Holder to the Company pursuant to Section 6.8
of the Exchangeable Share Provisions and provided further that the
Trustee has received written notice of same from the Company or
ParentCo, the Retraction Request will constitute and will be deemed to
constitute notice from the Holder to the Trustee instructing the
Trustee to exercise the Insolvency Exchange Right with respect to those
Retracted Shares which the Company is unable to redeem. In any such
event, the Company hereby agrees with the Trustee and in favour of the
Holder immediately to notify the Trustee of such prohibition against
the Company's redeeming all of the Retracted Shares and immediately to
forward or cause to be forwarded to the Trustee all relevant materials
delivered by the Holder to the Company of the Exchangeable Shares
(including without limitation a copy of the Retraction Request
delivered pursuant to Section 6.1 of the Exchangeable Share Provisions)
in connection with such proposed redemption of the Retracted Shares,
and the Trustee will thereupon exercise the Insolvency Exchange Right
with respect to the Retracted Shares which the Company is not permitted
to redeem and will require ParentCo to purchase such shares in
accordance with the provisions of this Article 4.
(2) In any of the following circumstances, namely:
(a) Pursuant to Section 5.2 of the Exchangeable Share Provisions,
a Holder has not received within 30 days of the Liquidation
Date the full Exchangeable Share Consideration representing
such Holder's total Liquidation Amount, or
(b) Pursuant to Section 7.3 of the Exchangeable Share Provisions,
a Holder has not received, within 30 days of the Automatic
Redemption Date, the full Exchangeable Share Consideration
representing such Holder's total Redemption Price; or
(c) Pursuant to Section 6.5 of the Exchangeable Share Provisions,
a Holder has not received, within 30 days of the Retraction
Date, the full
<PAGE> 15
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Exchangeable Share Consideration representing such Holder's
total Retraction Price for any reason whatsoever (other than a
circumstance set forth in Subsection 4.7(1) above);
the Holder may notify the Trustee in writing of such
circumstance, with a copy to CallCo and, provided that CallCo
has not exercised its Liquidation Call Right, Retraction Call
Right or Redemption Call Right, as the case may be, such
notice will constitute and will be deemed to constitute notice
from such Holder to the Trustee instructing the Trustee to
exercise the Insolvency Exchange Right with respect to the
Exchangeable Shares which are the subject of such notice. The
Trustee will thereupon exercise the Insolvency Exchange Right
with respect to the Exchangeable Shares which are the subject
of such notice and will require ParentCo to purchase such
Exchangeable Shares in accordance with the provisions of this
Article 4, mutatis mutandis, with the provisions applicable
upon the occurrence of an Insolvency Event. ParentCo hereby
agrees to purchase such Exchangeable Shares for the full
Exchangeable Share Consideration applicable thereto
immediately following receipt of any such notice.
SECTION 4.8 STAMP OR OTHER TRANSFER TAXES.
(1) Upon any sale of Exchangeable Shares to ParentCo pursuant to the
Insolvency Exchange Right or the Automatic Exchange Rights, the share
certificate or certificates representing ParentCo Common Stock to be
delivered in connection with the payment of the total purchase price
therefor shall be issued in the name of the Holder of the Exchangeable
Shares so sold or in such names as such Holder may otherwise direct in
writing without charge to the holder of the Exchangeable Shares so
sold, provided, however, that such Holder:
(a) shall pay any documentary, stamp or transfer taxes required by
law to be paid by the Holder that may be payable in respect of
any transfer involved in the issuance or delivery of such
shares to a person other than such Holder; or
(b) shall have established to the satisfaction of the Trustee,
ParentCo and the Company acting in good faith and reasonably,
that such taxes, if any, have been paid.
SECTION 4.9 NOTICE OF INSOLVENCY EVENT
(1) Immediately upon the occurrence of an Insolvency Event or any event
that with the giving of notice or the passage of time or both would be
an Insolvency Event, the Company and ParentCo shall give written notice
<PAGE> 16
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thereof to the Trustee. As soon as practicable after receiving notice
from the Company or ParentCo of the occurrence of an Insolvency Event,
the Trustee will mail to each Holder, at the expense of ParentCo, a
notice of such Insolvency Event in the form provided by ParentCo, which
notice shall contain a brief statement of the right of the Holders with
respect to the Insolvency Exchange Right.
SECTION 4.10 QUALIFICATION OF PARENTCO COMMON STOCK
(1) ParentCo covenants that if any ParentCo Common Stock to be issued and
delivered pursuant to the Insolvency Exchange Right or the Automatic
Exchange Rights require registration or qualification with or approval
of or the filing of any document including any prospectus or similar
document, the taking of any proceeding with or the obtaining of any
order, ruling or consent from any governmental or regulatory authority
under any Canadian or United States federal, provincial or state law or
regulation or pursuant to the rules and regulations of any regulatory
authority, or the fulfilment of any other legal requirement
(collectively, the "Applicable Laws") before such shares may be issued
and delivered by ParentCo to the initial holder thereof (other than the
Company), ParentCo will in good faith expeditiously take all such
actions and do all such things as are necessary or desirable to cause
such ParentCo Common Stock to be and remain duly registered, qualified
or approved to the extent expressly provided in the Purchase Agreement
and the Registration Rights Agreement. ParentCo Common Stock shall be
issued pursuant to an exemption from registration under Applicable Laws
and shall not be freely tradeable. ParentCo will in good faith
expeditiously take all such actions and do all such things as are
reasonably necessary or desirable to cause all ParentCo Common Stock to
be delivered pursuant to the Insolvency Exchange Rights or the
Automatic Exchange Rights to be listed, quoted or posted for trading on
all stock exchanges and quotation systems on which outstanding ParentCo
Common Stock have been listed by ParentCo and remain listed and are
quoted or posted for trading at such time.
(2) ParentCo hereby represents, warrants and covenants that the ParentCo
Common Stock issuable as described herein will be duly authorized and
validly issued as fully paid and non-assessable.
SECTION 4.11 RESERVATION OF PARENTCO COMMON STOCK.
(1) ParentCo hereby represents, warrants and covenants that it has reserved
for issuance and will at all times keep available, free from
pre-emptive rights and out of its authorized and unissued capital
shares such number of ParentCo Common Stock:
(a) as is equal to the sum of
<PAGE> 17
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(i) the number of Exchangeable Shares issued and
outstanding from time to time, and
(ii) the number of Exchangeable Shares issuable upon the
exercise of all rights to acquire Exchangeable Shares
outstanding from time to time; and
(b) as are now and may hereafter be required to enable and permit
ParentCo, the Company or CallCo to meet its obligations
hereunder, under the Support Agreement and under the
Exchangeable Share Provisions with respect to which ParentCo
may now or hereafter be required to issue ParentCo Common
Stock.
(2) ParentCo shall provide notice on a timely basis to the Trustee with
respect to any adjustment to the number of ParentCo Common Stock
reserved for issuance pursuant to Section 4.11(1)(a) and (b).
SECTION 4.12 AUTOMATIC EXCHANGE ON LIQUIDATION OF PARENTCO.
(1) ParentCo shall give the Trustee written notice of each of the following
events at the time set forth below:
(a) in the event of any determination by the board of directors of
ParentCo to institute voluntary liquidation, dissolution or
winding-up proceedings with respect to ParentCo or to effect
any other distribution of assets of ParentCo among its
shareholders for the purpose of winding up its affairs, at
least 60 days prior to the proposed effective date of such
liquidation, dissolution, winding-up or other distribution;
and
(b) immediately, upon the earlier of
(i) receipt by ParentCo of notice of; and
(ii) ParentCo's otherwise becoming aware of,
any threatened or instituted claim, suit, petition or other
proceedings with respect to the involuntary liquidation,
dissolution or winding-up of ParentCo or to effect any other
distribution of assets of ParentCo among its shareholders for
the purpose of winding up its affairs.
(2) Immediately following receipt by the Trustee from ParentCo of notice of
any event (a "LIQUIDATION Event") contemplated by Section 4.12(1)
above, the Trustee will give notice thereof to the Holders. Such notice
provided by ParentCo to the Trustee shall include a brief description
of the automatic
<PAGE> 18
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exchange of Exchangeable Shares for ParentCo Common Stock provided for
in Section 4.12(3) below.
(3) In order that the Holders will be able to participate on a pro rata
basis with the holders of ParentCo Common Stock in the distribution of
assets of ParentCo in connection with a Liquidation Event, immediately
prior to the effective time (the "LIQUIDATION EVENT EFFECTIVE TIME") of
a Liquidation Event, all of the then outstanding Exchangeable Shares
shall be automatically exchanged for ParentCo Common Stock. To effect
such automatic exchange, ParentCo shall be deemed to have purchased
each Exchangeable Share outstanding immediately prior to the
Liquidation Event Effective Time held by Holders, and each Holder shall
be deemed to have sold the Exchangeable Shares held by it at such time,
for a purchase price per share equal to the Exchangeable Share Price
applicable at such time. In connection with such automatic exchange,
ParentCo will provide to the Trustee an Officer's Certificate setting
forth the calculation of the purchase price for each Exchangeable
Share.
(4) The closing of the transaction of purchase and sale contemplated by
Section 4.12(3) above shall be deemed to have occurred immediately
prior to the Liquidation Event Effective Time, and each Holder of
Exchangeable Shares shall be deemed to have transferred to ParentCo all
of the Holder's right, title and interest in and to such Exchangeable
Shares and the related interest in the Trust Estate and shall cease to
be a holder of such Exchangeable Shares, and ParentCo shall deliver or
cause to be delivered to the Holder the Exchangeable Share
Consideration deliverable upon the automatic exchange of Exchangeable
Shares. Concurrently with such Holder's ceasing to be a holder of
Exchangeable Shares, the Holder shall be considered and deemed for all
purposes to be the holder of the ParentCo Common Stock issued to it
pursuant to the automatic exchange of Exchangeable Shares for ParentCo
Common Stock, and the certificates held by the Holder previously
representing the Exchangeable Shares exchanged by the Holder with
CallCo pursuant to such automatic exchange shall thereafter be deemed
to represent the ParentCo Common Stock delivered to the Holder by
ParentCo pursuant to such automatic exchange. Upon the request of a
Holder and the surrender by the Holder of Exchangeable Share
certificates to ParentCo deemed to represent ParentCo Common Stock,
duly endorsed for transfer to ParentCo and accompanied by such
instruments of transfer as ParentCo may reasonably require, ParentCo
shall deliver or cause to be delivered to the Holder certificates
representing the ParentCo Common Stock of which the Holder is the
holder.
<PAGE> 19
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SECTION 4.13 WITHHOLDING RIGHTS
ParentCo and CallCo shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
Exchangeable Shares such amounts as ParentCo and CallCo is required by law to
deduct and withhold with respect to the making of such payment under the United
States Internal Revenue Code of 1986, as amended, the Income Tax Act (Canada) or
any applicable provision of state, local, provincial or foreign tax law. To the
extent that amounts are so withheld, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of the shares
in respect of which such deduction and withholding was made, provided that such
withheld amounts are actually remitted to the appropriate taxing authority
within the applicable time limits. To the extent that the amount so required to
be deducted or withheld from any payment to a holder exceeds the cash portion of
the consideration otherwise payable to the holder and ParentCo are hereby
authorized to withhold, sell, or otherwise dispose of at fair market value such
portion of such consideration as is necessary to provide sufficient funds to
ParentCo or CallCo, as the case may be, in order to enable it to comply with
such deduction or withholding requirement and ParentCo and CallCo shall give an
accounting to the holder with respect thereto and any balance of such sale
proceeds.
ARTICLE 5
CONCERNING THE TRUSTEE
SECTION 5.1 POWERS AND DUTIES OF THE TRUSTEE.
(1) The rights, powers and authorities of the Trustee under this Agreement,
in its capacity as trustee of the Trust, shall include:
(a) distributing materials to Holders as provided in this
Agreement;
(b) receiving the grant of the Insolvency Exchange Right and the
Automatic Exchange Rights from CallCo as trustee for and on
behalf of the Holders in accordance with the provisions of
this Agreement;
(c) exercising the Insolvency Exchange Right and enforcing the
benefit of the Automatic Exchange Rights, in each case in
accordance with the provisions of this Agreement, and in
connection therewith receiving from Holders Exchangeable
Shares and other requisite documents and distributing to such
Holders the CallCo Common Stock and cheques, if any, to which
such Holders are entitled upon the exercise of the Insolvency
Exchange Right or pursuant to the Automatic Exchange Rights,
as the case may be;
(d) holding title to the Trust Estate;
<PAGE> 20
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(e) investing any moneys forming, from time to time, a part of the
Trust Estate as provided in this Agreement;
(f) taking action at the direction of a Holder or Holders to
enforce the obligations of CallCo under this Agreement; and
(g) taking such other actions and doing such other things as are
specifically provided in this Agreement.
(2) In the exercise of such rights, powers and authorities the Trustee
shall have (and is granted) such incidental and additional rights,
powers and authority not in conflict with any of the provisions of this
Agreement as the Trustee, acting in good faith and in the reasonable
exercise of its discretion, may deem necessary, appropriate or
desirable to effect the purpose of the Trust. Any exercise of such
discretionary rights, powers and authorities by the Trustee shall be
final, conclusive and binding upon all Persons. For greater certainty,
the Trustee shall have only those duties as are set out specifically in
this Agreement. The Trustee in exercising its rights, powers, duties
and authorities hereunder shall act honestly and in good faith with a
view to the best interests of the Holders and shall exercise the care,
diligence and skill that a reasonably prudent trustee would exercise in
comparable circumstances. The Trustee shall not be bound to give any
notice or do or take any act, action or proceeding by virtue of the
powers conferred on it hereby unless and until it shall be specifically
required to do so under the terms hereof; nor shall the Trustee be
required to take any notice of, or to do or to take any act, action or
proceeding as a result of any default or breach of any provision
hereunder, unless and until notified in writing of such default or
breach, which notices shall distinctly specify the default or breach
desired to be brought to the attention of the Trustee and in the
absence of such notice the Trustee may for all purposes of this
Agreement conclusively assume that no default or breach has been made
in the observance or performance of any of the representations,
warranties, covenants, agreements or conditions contained herein.
SECTION 5.2 NO CONFLICT OF INTEREST.
The Trustee represents to the Holders, the Company and CallCo that at
the date of execution and delivery of this Agreement there exists no material
conflict of interest in the role of the Trustee as a fiduciary hereunder and the
role of the Trustee in any other capacity. The Trustee shall, within 90 days
after it becomes aware that such a material conflict of interest exists, either
eliminate such material conflict of interest or resign in the manner and with
the effect specified in Article 8 hereof. If, notwithstanding the foregoing
provisions of this Section 5.2, the Trustee has such a material conflict of
interest, the validity and enforceability of this Agreement shall
<PAGE> 21
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not be affected in any manner whatsoever by reason only of the existence of such
material conflict of interest. If the Trustee contravenes the foregoing
provisions of this Section 5.2, any interested party may apply to the Ontario
Court (General Division) for an order that the Trustee be replaced as trustee
hereunder.
SECTION 5.3 DEALINGS WITH TRANSFER AGENTS, REGISTRARS, ETC.
(1) The Company, CallCo and ParentCo irrevocably authorize the Trustee,
from time to time, to:
(a) consult, communicate and otherwise deal with the respective
registrars and transfer agents, and with any such subsequent
registrar or transfer agent, of the Exchangeable Shares and
ParentCo Common Stock; and
(b) requisition, from time to time, from any such registrar or
transfer agent any information readily available from the
records maintained by it which the Trustee may reasonably
require for the discharge of its duties and responsibilities
under this Agreement; and
(2) The Company, CallCo and ParentCo irrevocably authorize their respective
registrars and transfer agents to comply with all such requests. Each
of CallCo and ParentCo covenants that it will supply its transfer agent
with duly executed share certificates for the purpose of completing the
exercise from time to time of the Insolvency Exchange Right and the
Automatic Exchange Rights, in each case pursuant to Article 4 hereof.
SECTION 5.4 BOOKS AND RECORDS.
(1) The Trustee shall keep available for inspection by ParentCo, CallCo the
Holders and the Company, at the Trustee's principal corporate trust
office in Toronto, Ontario, correct and complete books and records of
account relating to the Trustee's actions under this Agreement,
including without limitation all information relating to mailings and
instructions to and from Holders and all transactions pursuant to the
Insolvency Exchange Right and the Automatic Exchange Rights for the
term of this Agreement. On or before March 31 in every year after the
date hereof, the Trustee shall transmit to CallCo, the Holders and the
Company a brief report, dated as of the preceding December 30, with
respect to:
(a) property and funds comprising the Trust Estate as of that
date;
(b) the number of exercises of the Insolvency Exchange Right, if
any, and the aggregate number of Exchangeable Shares received
by the Trustee on behalf of Holders in consideration of the
issue and delivery by CallCo of ParentCo Common Stock in
connection with the Insolvency Exchange Right, during the
calendar year ended on such date; and
<PAGE> 22
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(c) all other actions taken by the Trustee in the performance of
its duties under this Agreement which it had not previously
reported.
SECTION 5.5 INCOME TAX RETURNS AND REPORTS.
The Trustee shall, if so advised by the Company or CallCo, prepare and
file on behalf of the Trust appropriate United States and Canadian income tax
returns and, if applicable, any other returns or reports as may be required by
applicable law, and, in connection therewith, may obtain the advice and
assistance of such experts as the Trustee may consider necessary or advisable.
If requested by the Trustee, ParentCo or CallCo shall retain such experts for
purposes of providing such advice and assistance.
SECTION 5.6 INDEMNIFICATION PRIOR TO CERTAIN ACTIONS BY TRUSTEE.
The Trustee shall exercise any or all of the rights, duties, powers or
authorities vested in it by this Agreement at the request, order or direction of
any Holder upon such Holder's furnishing to the Trustee reasonable funding,
security and indemnity against the costs, expenses and liabilities which may be
incurred by the Trustee therein or thereby; provided that no Holder shall be
obligated to furnish to the Trustee any such funding, security or indemnity in
connection with the exercise by the Trustee of any of its rights, duties, powers
and authorities with respect to Article 3 hereof, subject to Section 5.15
hereof, and with respect to the Insolvency Exchange Right pursuant to Article 4
hereof, subject to Section 5.15 hereof, and with respect to the Automatic
Exchange Rights pursuant to Article 4 hereof. None of the provisions contained
in this Agreement shall require the Trustee to expend or risk its own funds or
otherwise incur financial liability in the exercise of any of its rights,
powers, duties or authorities unless funded, given funds, security and
indemnified as aforesaid.
SECTION 5.7 ACTIONS BY HOLDERS.
No Holder shall have the right to institute any action, suit or
proceeding or to exercise any other remedy authorized by this Agreement for the
purpose of enforcing any of its rights or for the execution of any trust or
power hereunder unless the Holder has requested the Trustee to take or institute
such action, suit or proceeding and furnished the Trustee with the funding,
security and indemnity referred to in Section 5.6 hereof and the Trustee shall
have failed to act within a reasonable time thereafter. In such case, but not
otherwise, the Holder shall be entitled to take proceedings in any court of
competent jurisdiction such as the Trustee might have taken; it being understood
and intended that no one or more Holders shall have any right in any manner
whatsoever to affect, disturb or prejudice the rights hereby created by any such
action, or to enforce any right hereunder or under the Insolvency Exchange Right
or the Automatic Exchange Rights, except subject to the conditions and in the
manner herein provided, and that all powers and trusts hereunder shall be
exercised and all proceedings at law shall
<PAGE> 23
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be instituted, had and maintained by the Trustee, except only as herein
provided, and in any event for the equal benefit of all Holders.
SECTION 5.8 RELIANCE UPON DECLARATIONS.
The Trustee shall not be considered to be in contravention of any of
its rights, powers, duties and authorities hereunder if, when required, it acts
and relies in good faith upon lists, mailing labels, notices, statutory
declarations, certificates, opinions, reports or other papers or documents
furnished pursuant to the provisions hereof or required by the Trustee to be
furnished to it in the exercise of its rights, powers, duties and authorities
hereunder, and such lists, mailing labels, notices, statutory declarations,
certificates, opinions, reports or other papers or documents comply with the
provisions of Section 5.9 hereof, if applicable, and with any other applicable
provisions of this Agreement.
SECTION 5.9 EVIDENCE AND AUTHORITY TO TRUSTEE.
(1) The Company and/or ParentCo and/or CallCo shall furnish to the Trustee
evidence of compliance with the conditions provided for in this
Agreement relating to any action or step required or permitted to be
taken by the Company and/or ParentCo and/or CallCo or the Trustee under
this Agreement or as a result of any obligation imposed under this
Agreement, including, without limitation, in respect of and the
Insolvency Exchange Right or the Automatic Exchange Rights and the
taking of any other action to be taken by the Trustee at the request of
or on the application of the Company and/or ParentCo and/or CallCo
forthwith if and when:
(a) such evidence is required by any other section of this
Agreement to be furnished to the Trustee in accordance with
the terms of this Section 5.9; or
(b) the Trustee, in the exercise of its rights, powers, duties and
authorities under this Agreement, gives the Company and/or
ParentCo and/or CallCo written notice requiring it to furnish
such evidence in relation to any particular action or
obligation specified in such notice.
(2) Such evidence shall consist of an Officer's Certificate of the Company
and/or ParentCo and/or CallCo or a statutory declaration or a
certificate made by persons entitled to sign an Officer's Certificate
stating that any such condition has been complied with in accordance
with the terms of this Agreement.
(3) Whenever such evidence relates to a matter other than the Insolvency
Exchange Right or the Automatic Exchange Rights, and except as
otherwise specifically provided herein, such evidence may consist of a
report or opinion of any solicitor, auditor, accountant, appraiser,
valuer, engineer or other expert or any other person whose
qualifications give authority to a statement
<PAGE> 24
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made by him, provided that if such report or opinion is furnished by a
director, officer or employee of the Company and/or ParentCo and/or
CallCo it shall be in the form of an Officer's Certificate or a
statutory declaration.
(4) Each statutory declaration, certificate, opinion or report furnished to
the Trustee as evidence of compliance with a condition provided for in
this Agreement shall include a statement by the person giving the
evidence:
(a) declaring that he has read and understands the provisions of
this Agreement relating to the condition in question;
(b) describing the nature and scope of the examination or
investigation upon which he based the statutory declaration,
certificate, statement or opinion; and
(c) declaring that he has made such examination or investigation
as he believes is necessary to enable him to make the
statements or give the opinions contained or expressed
therein.
SECTION 5.10 EXPERTS, ADVISERS AND AGENTS.
(1) The Trustee may:
(a) in relation to these presents act and rely on the opinion or
advice of or information obtained from or prepared by any
solicitor, auditor, accountant, appraiser, valuer, engineer or
other expert, whether retained by the Trustee or by the
Company and/or ParentCo and/or CallCo or otherwise, and may
employ such assistants as may be necessary to the proper
determination and discharge of its powers and duties and
determination of its rights hereunder and may pay proper and
reasonable compensation for all such legal and other advice or
assistance as aforesaid; and
(b) employ such agents and other assistants as it may reasonably
require for the proper determination and discharge of its
powers and duties hereunder, and may pay reasonable
remuneration for all services performed for it (and shall be
entitled to receive reasonable remuneration for all services
performed by it) in the discharge of the trusts hereof and
compensation for all disbursements, costs and expenses made or
incurred by it in the determination and discharge of its
duties hereunder and in the management of the Trust.
<PAGE> 25
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SECTION 5.11 INVESTMENT OF MONEYS HELD BY TRUSTEE.
Unless otherwise provided in this Agreement, any moneys held by or on
behalf of the Trustee which under the terms of this Agreement may or ought to be
invested or which may be on deposit with the Trustee or which may be in the
hands of the Trustee, may be invested and reinvested in the name or under the
control of the Trustee in securities in which, under the laws of the Province of
Ontario, trustees are authorized to invest trust moneys; provided that such
securities are stated to mature within two years after their purchase by the
Trustee, and the Trustee shall so invest such moneys on the written direction of
the Holders. Pending the investment of any moneys as hereinbefore provided, such
moneys may be deposited in the name of the Trustee in any chartered bank in
Canada or in the deposit department of the Trustee or any other loan or trust
company authorized to accept deposits under the laws of Canada or any province
thereof at the rate of interest then current on similar deposits.
SECTION 5.12 TRUSTEE NOT REQUIRED TO GIVE SECURITY.
The Trustee shall not be required to give any bond or security in
respect of the execution of the trusts, rights, duties, powers and authorities
of this Agreement or otherwise in respect of the premises.
SECTION 5.13 TRUSTEE NOT BOUND TO ACT ON REQUEST.
Except as in this Agreement otherwise specifically provided, the
Trustee shall not be bound to act in accordance with any direction or request of
the Company, CallCo and/or ParentCo or of the directors thereof until a duly
authenticated copy of the instrument or resolution containing such direction or
request shall have been delivered to the Trustee, and the Trustee shall be
empowered to act and rely upon any such copy purporting to be authenticated and
believed by the Trustee to be genuine.
SECTION 5.14 AUTHORITY TO CARRY ON BUSINESS.
The Trustee represents and warrants to the Company, ParentCo and CallCo
that at the date of execution and delivery by it of this Agreement it is
authorized to carry on the business of a trust company in the Province of
Ontario but if, notwithstanding the provisions of this Section 5.14, it ceases
to be so authorized to carry on business, the validity and enforceability of
this Agreement and the Insolvency Exchange Right and the Automatic Exchange
Rights shall not be affected in any manner whatsoever by reason only of such
event; provided, however, the Trustee shall, within 90 days after ceasing to be
authorized to carry on the business of a trust company in the Province of
Ontario, either become so authorized or resign in the manner and with the effect
specified in Article 8 hereof.
<PAGE> 26
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SECTION 5.15 CONFLICTING CLAIMS.
(1) If conflicting claims or demands are made or asserted with respect to
any interest of any Holder in any Exchangeable Shares, including any
disagreement between the heirs, representatives, successors or assigns
succeeding to all or any part of the interest of any Holder in any
Exchangeable Shares resulting in conflicting claims or demands being
made in connection with such interest, then the Trustee shall be
entitled, at its sole discretion, to refuse to recognize or to comply
with any such claim or demand. In so refusing, the Trustee may elect
not to exercise any Insolvency Exchange Right or Automatic Exchange
Rights subject to such conflicting claims or demands and, in so doing,
the Trustee shall not be or become liable to any person on account of
such election or its failure or refusal to comply with any such
conflicting claims or demands. The Trustee shall be entitled to
continue to refrain from acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to the
Insolvency Exchange Right or Automatic Exchange Rights subject
to such conflicting claims or demands have been adjudicated by
a final judgement of a court of competent jurisdiction; or
(b) all differences with respect to the Insolvency Exchange Right
or Automatic Exchange Rights subject to such conflicting
claims or demands have been conclusively settled by a valid
written agreement binding on all such adverse claimants, and
the Trustee shall have been furnished with an executed copy of
such agreement.
(2) If the Trustee elects to recognize any claim or comply with any demand
made by any such adverse claimant, it may in its discretion require
such claimant to furnish such surety bond or other security
satisfactory to the Trustee as it shall deem appropriate fully to
indemnify it as between all conflicting claims or demands.
SECTION 5.16 DISBURSEMENTS.
The Trustee shall not be obligated to disburse any funds beyond those
which have been deposited with it and which remain in the Trust at the time of
any requirement that the Trustee disburse such funds.
SECTION 5.17 ACCEPTANCE OF TRUST.
The Trustee hereby accepts the Trust created and provided for by and in
this Agreement and agrees to perform the same upon the terms and conditions
herein set forth and to hold all rights, privileges and benefits conferred
hereby and by law in trust for the various persons who shall from time to time
be Holders, subject to all the terms and conditions herein set forth.
<PAGE> 27
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SECTION 5.18 TRUSTEE NOT LIABLE.
The Trustee shall not be responsible for the validity or quantity of
shares or securities that it receives as a result of an exchange.
ARTICLE 6
COMPENSATION
SECTION 6.1 COMPENSATION AND REIMBURSEMENT.
ParentCo, CallCo and the Company jointly and severally agree to pay to
the Trustee reasonable compensation for all of the services rendered by it under
this Agreement and will reimburse the Trustee for all reasonable expenses
(including but not limited to taxes, compensation paid to experts, agents and
advisors and travel expenses) and disbursements, including the cost and expense
of any suit or litigation of any character and any proceedings before any
governmental agency, reasonably incurred by the Trustee in connection with its
rights and duties under this Agreement; provided that ParentCo, CallCo and the
Company shall have no obligation to reimburse the Trustee for any expenses or
disbursements paid, incurred or suffered by the Trustee in any suit or
litigation in which the Trustee is determined to have acted in bad faith or with
negligence or wilful misconduct. Any and all accounts for services rendered
hereunder shall be sent by the Trustee to the Company at the address noted in
Section 12.3.
ARTICLE 7
INDEMNIFICATION AND LIMITATION OF LIABILITY
SECTION 7.1 INDEMNIFICATION OF THE TRUSTEE.
ParentCo, CallCo and the Company jointly and severally agree to
indemnify and hold harmless the Trustee and each of its directors, officers,
employees and agents appointed and acting in accordance with this agreement
(collectively, the "INDEMNIFIED PARTIES") against all claims, losses, damages,
costs, penalties, fines and reasonable expenses (including reasonable expenses
of the Trustee's legal counsel) which, without fraud, negligence, wilful
misconduct or bad faith on the part of such Indemnified Party, may be paid,
incurred or suffered by the Indemnified Party by reason of or as a result of the
Trustee's acceptance or administration of the Trust, its compliance with its
duties set forth in this Agreement, or any written or oral instructions
delivered to the Trustee by ParentCo, CallCo or the Company pursuant hereto. In
no case shall ParentCo, CallCo or the Company be liable under this indemnity for
any claim against any of the Indemnified Parties unless ParentCo, CallCo and the
Company shall be notified by the Trustee of the written assertion of a claim or
of any action commenced against the Indemnified Parties, promptly after any of
the Indemnified Parties shall have received any such written assertion of a
claim or shall have been served with a summons or other first legal process
giving
<PAGE> 28
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information as to the nature and basis of the claim. Subject to (i) below,
ParentCo, CallCo and the Company shall be entitled to participate at their own
expense in the defence and, if ParentCo, CallCo or the Company so elect at any
time after receipt of such notice, either of them may assume the defence of any
suit brought to enforce any such claim. The Trustee shall have the right to
employ separate counsel in any such suit and participate in the defence thereof,
but the fees and expenses of such counsel shall be at the expense of the Trustee
unless: (i) the employment of such counsel has been authorized by ParentCo or
the Company, such authorization not to be unreasonably withheld; or (ii) the
named parties to any such suit include both the Trustee and CallCo or ParentCo
or the Company and the Trustee shall have been advised by counsel acceptable to
ParentCo, CallCo or the Company that there may be one or more legal defenses
available to the Trustee that are different from or in addition to those
available to ParentCo, CallCo or the Company and that an actual or potential
conflict of interest exists (in which case ParentCo, CallCo and the Company
shall not have the right to assume the defense of such suit on behalf of the
Trustee, but shall be liable to pay the reasonable fees and expenses of counsel
for the Trustee). Such indemnification shall survive the resignation or removal
of the Trustee and the termination of this Agreement.
SECTION 7.2 LIMITATION OF LIABILITY.
The Trustee shall not be held liable for any loss which may occur by
reason of depreciation of the value of any part of the Trust Estate or any loss
incurred on any investment of funds pursuant to this Agreement, except to the
extent that such loss is attributable to the fraud, negligence, wilful
misconduct or bad faith on the part of the Trustee.
ARTICLE 8
CHANGE OF TRUSTEE
SECTION 8.1 RESIGNATION.
The Trustee, or any trustee hereafter appointed, may at any time resign
by giving written notice of such resignation to ParentCo, CallCo, the Holders
and the Company specifying the date on which it desires to resign, provided that
such notice shall never be given less than 60 days before such desired
resignation date unless ParentCo, CallCo the Holders and the Company otherwise
agree and provided further that such resignation shall not take effect until the
date of the appointment of a successor trustee and the acceptance of such
appointment by the successor trustee. Upon receiving such notice of resignation,
ParentCo, CallCo, the Holders and the Company shall promptly appoint a successor
trustee by written instrument in duplicate, one copy of which shall be delivered
to the resigning trustee and one copy to the successor trustee. Failing
acceptance by a successor
<PAGE> 29
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trustee, a successor trustee may be appointed by an order of the Ontario
Superior Court of Justice upon application of one or more of the parties hereto.
SECTION 8.2 REMOVAL.
The Trustee, or any trustee hereafter appointed, may be removed with or
without cause, at any time on 60 days' prior notice by written instrument
executed by ParentCo, CallCo, the Holders and the Company, in duplicate, one
copy of which shall be delivered to the trustee so removed and one copy to the
successor trustee, provided that, in connection with such removal, provision is
made for a replacement trustee similar to that contemplated in Section 8.1.
SECTION 8.3 SUCCESSOR TRUSTEE.
Any successor trustee appointed as provided under this Agreement shall
execute, acknowledge and deliver to ParentCo, CallCo, Holders and the Company
and to its predecessor trustee an instrument accepting such appointment.
Thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor under this Agreement, with like effect as if
originally named as trustee in this Agreement. However, on the written request
of ParentCo, CallCo, the Holders and the Company or of the successor trustee,
the trustee ceasing to act shall, upon payment of any amounts then due it
pursuant to the provisions of this Agreement, execute and deliver an instrument
transferring to such successor trustee all the rights and powers of the trustee
so ceasing to act. Upon the request of any such successor trustee, ParentCo,
CallCo, the Holders, the Company and such predecessor trustee shall execute any
and all instruments in writing for more fully and certainly vesting in and
confirming to such successor trustee all such rights and powers.
SECTION 8.4 NOTICE OF SUCCESSOR TRUSTEE.
Upon acceptance of appointment by a successor trustee as provided
herein, ParentCo, CallCo and the Company shall cause to be mailed notice of the
succession of such trustee hereunder to each Holder. If ParentCo, CallCo or the
Company shall fail to cause such notice to be mailed within 10 days after
acceptance of appointment by the successor trustee, the successor trustee shall
cause such notice to be mailed at the expense of ParentCo, CallCo and the
Company.
<PAGE> 30
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ARTICLE 9
PARENTCO SUCCESSORS
SECTION 9.1 CERTAIN REQUIREMENTS IN RESPECT OF COMBINATION, ETC.
(1) ParentCo shall not enter into any transaction (whether by way of
reconstruction, reorganization, consolidation, merger or otherwise),
unless:
(a) such other Person or continuing company (the "PARENTCO
SUCCESSOR"), by operation of law, becomes, without more, bound
by the terms and provisions of this Agreement or, if not so
bound, executes, prior to or contemporaneously with the
consummation of such transaction an agreement supplemental
hereto and such other instruments (if any) as are necessary or
advisable to evidence the assumption by the ParentCo Successor
of liability for all moneys payable and property deliverable
hereunder, the covenant of such ParentCo Successor to pay and
deliver or cause to be delivered the same and its agreement to
observe and perform all the covenants and obligations of
ParentCo under this Agreement; and
(b) such transaction shall be upon such terms to the satisfaction
of the Trustee and in the opinion of legal counsel to the
Trustee, acting reasonably, which substantially preserve and
do not impair in any material respect any of the rights,
duties, powers and authorities of the Trustee or of the
Holders hereunder.
SECTION 9.2 VESTING OF POWERS IN SUCCESSOR.
In the event that Section 9.1 hereof applies, the Trustee, the ParentCo
Successor, CallCo, the Holders and the Company shall execute and deliver the
supplemental agreement provided for in Article 10 hereof, and thereupon the
ParentCo Successor shall possess and from time to time may exercise each and
every right and power of ParentCo under this Agreement in the name of ParentCo
or otherwise and any act or proceeding by any provision of this Agreement
required to be done or performed by the board of directors of ParentCo or any
officers of ParentCo may be done and performed with like force and effect by the
directors or officers of such ParentCo Successor.
SECTION 9.3 WHOLLY-OWNED SUBSIDIARIES
Nothing herein shall be construed as preventing the amalgamation or
merger of any wholly-owned subsidiary of ParentCo with or into the ParentCo or
the winding-up, liquidation or dissolution of any wholly-owned subsidiary of
ParentCo provided that all of the assets of such subsidiary are transferred to
ParentCo or another wholly-owned subsidiary of ParentCo and any such
transactions are expressly permitted by this Article 9.
<PAGE> 31
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ARTICLE 10
AMENDMENTS AND SUPPLEMENTAL AGREEMENTS
SECTION 10.1 AMENDMENTS, MODIFICATIONS, ETC.
Subject to Section 10.4 hereof, this Agreement may not be amended,
modified or waived except by an agreement in writing executed by the Company,
the Holders, CallCo, ParentCo and the Trustee. No amendment to or modification
or waiver of any of the provisions of this Agreement otherwise permitted
hereunder shall be effective unless made in writing and signed by all of the
parties hereto.
SECTION 10.2 MINISTERIAL AMENDMENTS.
(1) Notwithstanding the provisions of Section 10.1 hereof, the parties to
this Agreement, other than the Holders may, by written notice to the
Holders, at any time and from time to time, without the approval of the
Holders, amend or modify this Agreement for the purposes of:
(a) adding to the covenants of any or all of the parties hereto
for the protection of the Holders hereunder;
(b) making such amendments or modifications not inconsistent with
this Agreement as may be necessary or desirable with respect
to matters or questions which, in the opinion of the board of
directors of each of ParentCo, CallCo and the Company and in
the opinion of the Trustee and its counsel, having in mind the
best interests of the Holders as a whole, it may be expedient
to make, provided that such amendments and modifications will
not be prejudicial to the interests of the Holders; or
(c) making such changes or corrections which, on the advice of
counsel to the Company, CallCo, ParentCo and the Trustee, are
required for the purpose of curing or correcting any ambiguity
or defect or inconsistent provision or clerical omission or
mistake or manifest error; provided that the Trustee and its
counsel changes or corrections will not be prejudicial to the
interests of the Holders.
SECTION 10.3 MEETING TO CONSIDER AMENDMENTS.
The Company, at the request of ParentCo or CallCo shall call a meeting
or meetings of the Holders for the purpose of considering any proposed amendment
or modification requiring approval pursuant hereto. Any such meeting or meetings
shall be called and held in accordance with the constating documents of the
Company, the Exchangeable Share Provisions and all applicable laws.
<PAGE> 32
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SECTION 10.4 CHANGES IN CAPITAL OF PARENTCO AND THE COMPANY.
At all times after the occurrence of any event effected pursuant to
Section 2.6 or Section 2.7 of the Support Agreement, as a result of which either
ParentCo Common Stock or the Exchangeable Shares or both are in any way changed,
this Agreement shall forthwith be amended and modified as necessary in order
that it shall apply with full force and effect, mutatis mutandis, to all new
securities into which ParentCo Common Stock or the Exchangeable Shares or both
are so changed, and the parties hereto shall execute and deliver a supplemental
agreement giving effect to and evidencing such necessary amendments and
modifications.
SECTION 10.5 EXECUTION OF SUPPLEMENTAL AGREEMENTS.
(1) From time to time the Company (when authorized by a resolution of its
Board of Directors), ParentCo (when authorized by a resolution of its
board of directors), CallCo (when authorized by a resolution of its
board of directors) the Holders and the Trustee may, subject to the
provisions of these presents, and they shall, when so directed by these
presents, execute and deliver by their proper officers, agreements or
other instruments supplemental hereto, which thereafter shall form part
hereof, for any one or more of the following purposes:
(a) evidencing the succession of any ParentCo Successors to
ParentCo and the covenants of and obligations assumed by each
such ParentCo Successor in accordance with the provisions of
Article 9 hereof and the successor of any successor trustee in
accordance with the provisions of Article 8 hereof;
(b) making any additions to, deletions from or alterations of the
provisions of this agreement or the Insolvency Exchange Right
or the Automatic Exchange Rights which, in the opinion of the
Trustee and its counsel, will not be prejudicial to the
interests of the Holders as a whole or are in the opinion of
counsel to the Trustee necessary or advisable in order to
incorporate, reflect or comply with any legislation the
provisions of which apply to ParentCo, CallCo, the Company,
the Trustee or this Agreement; and
(c) for any other purposes not inconsistent with the provisions of
this Agreement, including without limitation to make or
evidence any amendment or modification to this Agreement as
contemplated hereby, provided that, in the opinion of the
Trustee and its counsel, the rights of the Trustee and the
Holders will not be prejudiced thereby.
<PAGE> 33
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ARTICLE 11
TERMINATION
SECTION 11.1 TERM.
(1) The Trust created by this Agreement shall continue until the earliest
to occur of the following events:
(a) no outstanding Exchangeable Shares are held by a Holder;
(b) each of the Company, the Holders and ParentCo, CallCo elects
in writing to terminate the Trust; and
(c) 21 years after the death of the last survivor of the
descendants of His Majesty King George VI of the United
Kingdom of Great Britain and Northern Ireland living on the
date of the creation of the Trust.
SECTION 11.2 SURVIVAL OF AGREEMENT.
This Agreement shall survive any termination of the Trust and shall
continue until there are no Exchangeable Shares outstanding held by a Holder;
provided, however, that the provisions of Articles 6 and 7 hereof shall survive
any such termination of this Agreement.
ARTICLE 12
GENERAL
SECTION 12.1 SEVERABILITY.
If any provision of this Agreement is held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remainder of this
Agreement shall not in any way be affected or impaired thereby, and this
Agreement shall be carried out as nearly as possible in accordance with its
original terms and conditions.
SECTION 12.2 ENUREMENT.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executioners, administrators,
successors and permitted assigns.
SECTION 12.3 NOTICES TO PARTIES.
(1) All notices and other communications between the parties hereunder
shall be in writing and shall be deemed to have been given if delivered
personally or by confirmed telecopy to the parties at the following
addresses (or at such other address for such party as shall be
specified in like notice):
<PAGE> 34
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TO PARENTCO: Daleen Technologies, Inc.
902 Clint Moore Road
Suite 230
Boca Raton, Florida 33487
Attention: Stephen Wagman
Fax: (561) 995-1979
With a copy to: Morris, Manning & Martin L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: David M. Calhoun
Fax: (404) 365-9532
TO THE COMPANY: Daleen Canada Corporation
902 Clint Moore Road
Suite 230
Boca Raton, Florida 33487
Attention: Stephen Wagman
Fax: (561) 995-1979
With a copy to: Morris, Manning & Martin
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: David M. Calhoun
Fax: (404) 365-9532
With an additional copy to: Stikeman, Elliott
Suite 5300
Commerce Court West
Toronto, Ontario, M9L 1B9
Attention: Roderick Barrett, Esq.
Fax: (416) 947-0866
-31-
<PAGE> 35
-31-
TO CALLCO: Daleen CallCo Corporation
902 Clint Moore Road
Suite 230
Boca Raton, Florida 33487
Attention: Stephen Wagman
Fax: (561) 995-1979
With a Copy to: Morris, Manning & Martin L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: David M. Calhoun
Fax: (404) 365-9532
With an additional copy to: Stikeman, Elliott
Suite 5300
Commerce Court West
Toronto, Ontario, M9L 1B9
Attention: Roderick Barrett, Esq.
Fax: (416) 947-0866
TO THE TRUSTEE: Montreal Trust Company of Canada
151 Front Street West, Suite 605
Toronto, Ontario, M5J 1N2
Attention: Manager Client Services
Fax: (416) 981-9777
(2) Any notice or other communication given personally shall be deemed to
have been given and received upon delivery thereof, and if given by
telecopy shall be deemed to have been given and received on the date of
receipt thereof unless such day is not a Business Day in which case it
shall be deemed to have been given and received upon the immediately
following Business Day.
SECTION 12.4 NOTICE TO HOLDERS.
Any and all notices to be given and any documents to be sent to any
Holders may be given or sent to the address of such Holder shown on the register
of Holders of Exchangeable Shares in any manner permitted by the Exchangeable
Share Provisions and shall be deemed to be received (if given or sent in such
manner) at the time specified in such Exchangeable Share Provisions, the
provisions of which
<PAGE> 36
-32-
Exchangeable Share Provisions shall apply mutatis mutandis to notices or
documents as aforesaid sent to such Holders.
SECTION 12.5 RISK OF PAYMENTS BY POST.
Whenever payments are to be made or documents are to be sent to any
Holder by the Trustee, by the Company, by CallCo or by ParentCo or by such
Holder to the Trustee or to ParentCo, or to CallCo or the Company, the making of
such payment or sending of such document sent through the post shall be at the
risk of the Company or CallCo or ParentCo, in the case of payments made or
documents sent by the Trustee or the Company or CallCo or ParentCo, and the
Holder, in the case of payments made or documents sent by the Holder.
SECTION 12.6 COUNTERPARTS.
This agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and the
same instrument.
SECTION 12.7 JURISDICTION.
This agreement shall be construed and enforced in accordance with the
laws of the Province of Ontario and the laws of Canada applicable therein.
SECTION 12.8 ATTAINMENT.
ParentCo and CallCo agree that any action or proceeding arising out of
or relating to this Agreement may be instituted in the courts of Ontario, waives
any objection which it may have now or hereafter to the venue of any such action
or proceeding, irrevocably submits to the jurisdiction of such courts in any
such action or proceeding, agrees to be bound by any judgement of such courts
and agrees not to seek, and hereby waives, any review of the merits of any such
judgement by the courts of any other jurisdiction and hereby appoints Stikeman,
Elliott at its registered office in the Province of Ontario as ParentCo's and
CallCo's attorney for service of process.
IN WITNESS WHEREOF, the parties hereby have caused this agreement to be
duly executed as of the date first above written.
DALEEN TECHNOLOGIES, INC.
By:
---------------------------------
Authorized Signing Officer
<PAGE> 37
-33-
DALEEN CANADA CORPORATION.
By:
---------------------------------
Authorized Signing Officer
DALEEN CALLCO CORPORATION.
By:
------------------------------------
Authorized Signing Officer
MONTREAL TRUST COMPAMY OF CANADA
By:
------------------------------------
Authorized Signing Officer
By:
------------------------------------
Authorized Signing Officer
HOLDERS:
----------------------------------------
Mohammad Aamir
----------------------------------------
Carl Scase
----------------------------------------
Corneliu Ionescu
----------------------------------------
Mansoor Ahmed
----------------------------------------
Ming Han
<PAGE> 38
-34-
----------------------------------------
Charles Barton
----------------------------------------
Stephen Smith
----------------------------------------
Nahla Rashad
----------------------------------------
George Timmes
1303949 ONTARIO INC.
By:
------------------------------------
Name:
Title:
THE VENGROWTH INVESTMENT
FUND INC.
By:
------------------------------------
Name:
Title:
<PAGE> 1
Exhibit 10.5
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of December 16, 1999, by and among Daleen Technologies, Inc., a
Delaware corporation ("Daleen"), and all of the shareholders of Inlogic
Software Inc., a Nova Scotia limited liability company ("Inlogic"), each of
whom are identified on the signature page hereof (collectively, the "Inlogic
Shareholders").
WHEREAS, Daleen, Daleen Canada Corporation, a Nova Scotia unlimited
company ("Canadian Buyer"), and the Inlogic Shareholders have entered into a
Share Purchase Agreement of a date even herewith (the "Share Purchase
Agreement"); and
WHEREAS, pursuant to the Share Purchase Agreement, the Inlogic
Shareholders shall receive either (i) exchangeable shares of Canadian Buyer
(the "Exchangeable Shares") that, upon request of the Inlogic Shareholders, are
immediately convertible into or exchangeable for common shares of Daleen (the
"Common Stock"), or (ii) shares of Common Stock;
WHEREAS, to induce the Inlogic Shareholders to execute and deliver the
Share Purchase Agreement, Daleen has agreed to provide certain registration
rights under the U.S. Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledge, Daleen, Canadian Buyer
and the Inlogic Shareholders hereby agree as follows:
1. DEFINITIONS
1.1 As used in this Agreement, the following terms shall have the
following respective meanings:
(a) "Commission" shall mean the U.S. Securities and Exchange
Commission or any other U.S. federal agency at the time
administering the 1933 Act.
(b) "Holder" shall mean each Inlogic Shareholder who holds
Exchangeable Shares or Common Stock issued in exchange for
Exchangeable Shares.
(c) The terms "register", "registered" and "registration" shall
refer to a registration effected by preparing and filing a
registration statement in
<PAGE> 2
compliance with the 1933 Act and applicable rules and
regulations thereunder, and the declaration or ordering of
the effectiveness of such registration statement.
(d) "Registrable Securities" shall mean (i) the shares of Common
Stock issued pursuant to the Share Purchase Agreement,
including the shares issuable upon exchange of Exchangeable
Shares, and (ii) any Common Stock issued as a dividend or
other distribution with respect to or in exchange for or in
replacement of the shares referenced in (i) above, provided,
however, that Registrable Securities shall not include any
shares of Common Stock that have previously been registered
or that have otherwise been sold to the public.
(e) "Registration Expenses" shall mean all expenses incurred by
Daleen in compliance with Sections 2.1 and 2.2 hereof,
including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel
for Daleen, blue sky fees and expenses, reasonable fees and
disbursements of one counsel for all the selling Holders, and
Other Shareholders, and the expense of any special audits
incident to or required by any such registration.
(f) "Registration Period" means, with regard to any Inlogic
Shareholder and the shares of Registrable Securities then
held by such Inlogic Shareholder, that period beginning on
the closing date of the transactions contemplated by the
Share Purchase Agreement (the "Closing Date") and ending on
the later of (i) the third anniversary of the Closing Date
and (ii) the date on which such shares of Registrable
Securities may be publicly sold pursuant to Rule 144 of the
Commission under the 1933 Act. It is understood and agreed
that the termination of the Registration Period applicable to
one or more Inlogic Shareholders shall not result in the
termination of the Registration Period applicable to other
Inlogic Shareholders.
(g) "Selling Expenses" shall mean all underwriting discounts,
selling commissions and transfer taxes applicable to the sale
of Registrable Securities.
1.2 Capitalized terms used herein and not otherwise defined shall
have the same meanings as set forth in the Share Purchase Agreement.
<PAGE> 3
2. REGISTRATION
2.1 Piggy-Back Registration.
(a) If at any time prior to the expiration of the Registration
Period Daleen shall determine to register with the Commission
a registration statement relating to an offering for its own
account or the account of others under the 1933 Act of any
shares of its Common Stock (other than on Form S-4 or Form
S-8 or their then equivalents relating to equity securities
to be issued solely in connection with any acquisition of any
entity or business or equity securities issuable in
connection with stock option or other employee benefit plans
or a registration on any registration form which does not
permit secondary sales or does not include substantially the
same information as would be required to be included in a
registration statement covering the sale of Registrable
Securities), Daleen shall send to the Holders written notice
of such determination and, if within ten (10) days after
receipt of such notice, any Holder shall so request in
writing (the "Requesting Holders"), Daleen shall include in
such registration statement all or any part of the
Registrable Securities the Requesting Holders request to be
registered, except that if, in connection with any
underwritten public offering, the managing underwriter(s)
thereof shall impose a limitation on the number of shares of
Registrable Securities which may be included in the
registration statement because, in such underwriter(s)'
judgment, marketing or other factors (including the fact that
any other Daleen shareholder has included their shares in the
registration statement (such shareholders are referred to as
the "Other Shareholders")) dictate such limitation is
necessary to facilitate public distribution, then Daleen
shall be obligated to include in such registration statement
only such limited portion of the Registrable Securities with
respect to which the Requesting Holders have requested
inclusion hereunder; provided, that no portion of the equity
securities which Daleen is offering for its own account shall
be excluded. Any exclusion of Registrable Securities shall be
made pro rata among the Requesting Holders and the Other
Holders seeking to include Registrable Securities, in
proportion to the number of Registrable Securities sought to
be included by such Requesting Holders and the Other Holders.
If an offering in connection with which Holders are entitled
to registration under this Section 2.1 is an underwritten
offering, then each Requesting Holder shall offer and sell
such Registrable Securities in the underwritten offering
using the same underwriter or underwriters and on the same
terms and conditions as other shares of Common Stock included
in such underwritten offering.
<PAGE> 4
(b) Notwithstanding the foregoing, Daleen shall not be obligated
to effect, or to take any action to effect, any such
registration pursuant to this Section 2.1 in any jurisdiction
in which Daleen would be required to execute a general
consent to service of process in effecting such registration,
qualification or compliance, or in which the cost of the
foregoing is unreasonable in light of the number of
Registrable Securities requested to be sold in such
jurisdiction, unless Daleen is already subject to service in
such jurisdiction and except as may be required by the 1933
Act or applicable rules or regulations thereunder; or
All Requesting Holders shall (together with Daleen and the Other
Shareholders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for underwriting by Daleen or the Other Shareholders as
the case may be.
2.2 Registration Procedures.
In the case of each registration effected by Daleen pursuant to
Section 2, Daleen will keep each Holder advised in writing as to the initiation
of each registration and as to the completion thereof. At its expense, Daleen
will:
(a) Furnish such number of prospectuses and other documents
incident thereto as a Holder from time to time may reasonably
request;
(b) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 2.1 hereof,
enter into an underwriting agreement reasonably necessary to
effect the offer and sale of Common Stock, provided such
underwriting agreement contains customary underwriting
provisions; and
(c) Obtain a comfort letter from Daleen's independent public
accountants in customary form and covering such matters of
the type customarily covered by comfort letters and an
opinion from Daleen's counsel in customary form and covering
such matters of the type customarily covered in a public
issuance of securities, in each case addressed to the
Holders.
3. EXPENSES OF REGISTRATION.
All Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to Section 2 hereof shall be
borne by Daleen, and all Selling Expenses shall be borne by the holders of the
securities so registered pro rata on the basis of the number of their shares so
registered; provided, however, that Daleen shall not be required to pay any
Registration Expenses if, as a result of
<PAGE> 5
the withdrawal of a request for registration by Requesting Holders (other than
any refusal to proceed based upon the advice of counsel that the registration
statement, or any prospectus contained therein, contains an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing), the registration statement does not become
effective, in which case the Requesting Holders shall bear such Registration
Expenses pro rata on the basis of the number of their shares so included in the
registration request.
4. INDEMNIFICATION.
(a) Daleen will, and hereby does, indemnify each Requesting
Holder, each of its officers, directors and partners, and
each person controlling such Requesting Holder, with respect
to which registration, qualification or compliance has been
effected pursuant to Section 2.1, against all claims, losses,
damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any
prospectus, offering circular or other document (including
any related registration statement, notification or the like)
incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading,
or any violation or alleged violation by Daleen of the 1933
Act, the U.S. Securities Exchange Act of 1934, as amended, or
any state securities law or any rule or regulation thereunder
applicable to Daleen and relating to action or inaction
required of Daleen in connection with any such registration,
qualification or compliance, and will reimburse each such
Holder, each of its officers, directors and partners, and
each person controlling such Holder, for any reasonable legal
and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage,
liability or action, provided that Daleen will not be liable
in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any
untrue statement or omission based upon written information
furnished to Daleen by any Requesting Holder, underwriter or
Other Shareholder.
(b) Each Requesting Holder, severally and not jointly, will, if
Registrable Securities held by him are included in the
securities as to which such registration, qualification or
compliance is being effected, indemnify Daleen, each of its
directors and officers and each underwriter, if any, of
Daleen's securities covered by such a registration statement,
each person who controls Daleen or such underwriter within
the meaning
<PAGE> 6
of the 1933 Act, the U. S. Securities Exchange Act of 1934,
as amended, or any state securities law, and the rules and
regulations thereunder, each other such Requesting Holder and
Other Shareholder and each of their officers, directors and
partners, and each person controlling such Requesting Holder
or Other Shareholder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement)
of a material fact contained in any such registration
statement, prospectus, offering circular or other document,
or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, and will
reimburse Daleen and such Requesting Holders, Other
Shareholders, directors, officers, partners, persons,
underwriters or control persons for any legal or any other
expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information
furnished to Daleen by such Requesting Holder; provided,
however, that the indemnity agreement contained in this
Section 4(b) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder,
which consent shall not be unreasonably withheld.
(c) Each party entitled to indemnification under this Section 4
(the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual
knowledge of any claim as to which indemnity may be sought,
but the failure of any Indemnified Party to give notice shall
not relieve the Indemnifying Party of its obligation under
this Section 4. The Indemnifying Party will be entitled to
participate in, and to the extent that it may elect by
written notice delivered to the Indemnified Party promptly
after receiving the aforesaid notice from such Indemnified
Party, at its expense to assume, the defense of any such
claim or any litigation resulting therefrom, with counsel
reasonably satisfactory to such Indemnified Party, provided
that the Indemnified Party may participate in such defense at
its expense, notwithstanding the assumption of such defense
by the Indemnifying Party, and provided, further, that if the
defendants in any such action shall include both the
Indemnified Party and the Indemnifying Party and the
Indemnified Party shall have reasonably
<PAGE> 7
concluded that there may be legal defenses available to it
and/or other Indemnified Parties which are different from or
additional to those available to the Indemnifying Party, the
Indemnified Party or Parties shall have the right to select
separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf
of such Indemnified Party or Parties and the fees and
expenses of such counsel shall be paid by the Indemnifying
Party. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an
unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and
litigation resulting therefrom.
5. INFORMATION BY HOLDER.
Each Holder of Registrable Securities, and each Other Shareholder
holding securities included in any registration, shall furnish to Daleen such
information regarding such Holder or Other Shareholder and the distribution
proposed by such Holder or Other Shareholder as Daleen may reasonably request
in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in Section 2.1.
6. RULE 144 REPORTING.
With a view to making available the benefits of certain rules and
regulations of the Commission which may permit the sale of certain restricted
securities to the public without registration, Daleen agrees to:
(a) make and keep public information available as those terms are
understood and defined in Rule 144 under the 1933 Act, at all
times during the Registration Period;
(b) file with the Commission in a timely manner all reports and
other documents required of Daleen under the 1933 Act and the
Securities Exchange Act of 1934, as amended during the
Registration Period; and
(c) so long as a Holder owns any Securities that are "restricted
securities" under the 1933 Act, furnish to the Holder
forthwith upon written request a written statement by Daleen
as to its compliance with the
<PAGE> 8
reporting requirements of Rule 144, and of the Securities
Exchange Act of 1934, as amended, a copy of the most recent
annual or quarterly report of Daleen, and such other reports
and documents so filed as a Holder may reasonably request in
availing itself of any rule or regulation of the Commission
allowing a Holder to sell any such securities without
registration.
7. TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS.
The rights of each Inlogic Shareholder under this Agreement shall be
assignable to a transferee of Registrable Securities; provided, however, that
Daleen is given written notice at the time of such assignment stating the name
and address of the assignee and identifying the Registrable Securities with
respect to which the rights and benefits hereunder are being assigned and such
assignee expressly agrees in writing with Daleen and the other Holders of
Registrable Securities to be bound by and to comply with all applicable
provisions of this Agreement, whereupon such person or entity shall have the
benefits of, and shall be subject to the restrictions contained in, this
Agreement with respect to such securities; provided that the assignee of such
rights is not deemed by the board of directors of Daleen to be a competitor of
Daleen. Any assignment pursuant to this Section 7 shall not relieve, release or
otherwise discharge the Holder effecting such assignment from its obligations
under this Agreement.
8. "MARKET STAND-OFF" AGREEMENT.
Each Inlogic Shareholder, if requested by Daleen and an underwriter of
Common Stock (or other equity securities) of Daleen, not to sell or otherwise
transfer or dispose of any Common Stock (or other equity securities) of Daleen
held by such Inlogic Shareholder during the 180 day period following the
effective date of a registration statement of Daleen (or such shorter period as
may be requested by Daleen and the underwriter) filed under the 1933 Act,
provided that all executive officers and directors of Daleen enter into similar
agreements.
Such agreement shall be in writing in a form satisfactory to Daleen
and such underwriter. The Company may impose stop-transfer instructions with
respect to the shares (or securities) subject to the foregoing restriction
until the end of such ninety-day period.
9. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of Daleen, and
the Holders. Any
<PAGE> 9
amendment or waiver effected in accordance with this Section 9 shall be binding
upon Daleen, Canadian Buyer and the Inlogic Shareholders.
10. MISCELLANEOUS.
10.1 Notices.
All notices, claims, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or if sent by nationally-recognized overnight courier, by
telecopy, or by registered or certified mail, return receipt requested and
postage prepaid, addressed as follows:
If to Daleen: Daleen Technologies, Inc.
902 Clint Moore Road
Boca Raton, Florida 33487
If to the Inlogic Shareholders: Mohammad Aamir
819 - 123 Scadding Avenue
Toronto, Ontario
M5A 4J3
or to such other address as the party to whom notice is to be given may have
furnished to the other parties in writing in accordance herewith. Any such
notice or communication shall be deemed to have been received (a) in the case
of personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the
date when sent, (c) in the case of telecopy transmission, when received, and
(d) in the case of mailing, on the fifth business day following that on which
the piece of mail containing such communication is posted.
10.2 Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
10.3 This Agreement shall be enforced, governed by and construed
in accordance with the laws of the State of Florida without giving effect to
any choice or conflict of law provision or rule (whether of the State of
Florida or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Florida. In the event that any
provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability
of any other provision hereof.
<PAGE> 10
10.4 This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
10.5 Subject to the requirements of Section 7 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
10.6 The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
10.7 This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a
party, may be delivered to the other party hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
10.8 Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish
the purposes of this Agreement and the consummation of the transactions
contemplated hereby.
<PAGE> 11
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
DALEEN TECHNOLOGIES, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
INLOGIC SHAREHOLDERS
---------------------------------------
Mohammad Aamir
---------------------------------------
Carl Scase
---------------------------------------
Corneliu Ionescu
---------------------------------------
Mansoor Ahmed
---------------------------------------
Ming Han
---------------------------------------
Charles Barton
---------------------------------------
Stephen Smith
---------------------------------------
Nahla Rashad
---------------------------------------
George Timmes
<PAGE> 12
1303949 ONTARIO INC.
By:
------------------------------------
Name:
Title:
<PAGE> 13
THE VENGROWTH INVESTMENT
FUND INC.
By:
------------------------------------
Name:
Title:
