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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 18, 1999
REGISTRATION NO. 333-82487
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DALEEN TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
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DELAWARE 7372 APPLIED FOR
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
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902 CLINT MOORE ROAD
BOCA RATON, FLORIDA 33487
(561) 999-8000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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JAMES DALEEN
CHIEF EXECUTIVE OFFICER
DALEEN TECHNOLOGIES, INC.
902 CLINT MOORE ROAD
BOCA RATON, FLORIDA 33487
(561) 999-8000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
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COPIES TO:
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JOHN C. YATES, ESQ. BRENT B. SILER, ESQ.
JEFFREY L. SCHULTE, ESQ. HALE AND DORR LLP
VIPANJ B. PATEL, ESQ. 1455 PENNSYLVANIA AVENUE, N.W.
MORRIS, MANNING & MARTIN, L.L.P. WASHINGTON, D.C. 20004
1600 ATLANTA FINANCIAL CENTER (202) 942-8400
3343 PEACHTREE ROAD, N.E. (202) 942-8484 (FACSIMILE)
ATLANTA, GEORGIA 30326
(404) 233-7000
(404) 365-9532 (FACSIMILE)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement is declared effective.
If any of the securities being registered on this Form are offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as
amended (the "Securities Act"), please check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell securities, and we are not soliciting offers to buy these securities, in
any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED AUGUST , 1999
SHARES
[COMPANY LOGO]
DALEEN TECHNOLOGIES, INC.
COMMON STOCK
We are offering shares of our common stock. This is our
initial public offering and no public market currently exists for our shares. We
have applied to have the shares we are offering approved for quotation on the
Nasdaq National Market under the symbol DALN. We anticipate that the initial
public offering price will be between $ and $ per share.
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INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
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PER SHARE TOTAL
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Public offering price....................................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds to Daleen Technologies, Inc........................ $ $
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THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
We and one of our stockholders have granted the underwriters a 30-day
option to purchase up to an additional shares of common stock to
cover over-allotments. We will not receive any proceeds from the sale of shares
by the selling stockholder. BancBoston Robertson Stephens Inc. expects to
deliver the shares of common stock to purchasers on , 1999.
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BANCBOSTON ROBERTSON STEPHENS
DONALDSON, LUFKIN & JENRETTE
HAMBRECHT & QUIST
ROBERT W. BAIRD & CO.
INCORPORATED
The date of this prospectus is , 1999
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Description of Graphics
Chart 1. Front Cover
The center of the graphic has "BillPlex" within a globe, and there are four
offshoots from the center graphic. The top of the page offshoot has an image of
a man using a conductor's baton in front of five personal computers. Underneath
that graphic are the phrases "STREAMLINES OPERATIONS," "WITH ENTERPRISE
INTEGRATION," "OF OPERATIONAL AND," and "BUSINESS SUPPORT SYSTEMS" centered on
sequential lines. The right offshoot has a graphic of a piece of paper with a
title "CONVERGENT INVOICE." Underneath the graphic are the following lines of
text centered on sequential lines: "INCREASE," "MARKET SHARE AND,"ACCELERATE
REVENUE,"INTEGRATED BILLING" AND, "CUSTOMER MANAGEMENT." The bottom graphic
depicts a group of mainframe size computers and other electronic equipment.
Above this graphic are the following lines of text centered on sequential
lines: "SIMPLIFY SERVICE AND DELIVERY," "WITH INTEGRATED DATA COLLECTION AND
PROVISIONING," "LOCAL - LONG DISTANCE - DATA - INTERNET -WIRELESS CABLE." The
left side graphic has two separate images. The first is a woman with a
telephone headset on her head. The other is of two overlapping images, a man
with a child on his lap typing at a personal computer and the other is a
computer screen that reads ABC Telecom. Between the two images on the left side
are the following lines of text centered on sequential lines: "IMPROVE,"
"CUSTOMER SERVICE," WHILE REDUCING COST," "WITH SINGLE POINT," "OF CONTACT AND
WEB," "ENABLED SELF-CARE."
Chart 4. N-Tier, Version 2. - insert at Technology p42
This graphic is titled "BILLPLEX N-TIER ARCHITECTURE" across the top. The image
is of a graphical chart with column headings across the top which read
"BillPlex Client" with an image of a woman on the telephone underneath,
"Self-Care User" with an image of a computer screen with "ABC Telecom"
displayed, "Sales Agent" with the image of a woman using a laptop computer and
talking to a man, "Network Administrator" with an image of a man in front of
three computer screens. The first row has the caption "Client" after the
previous images. The second row has three boxes with text and the caption
"Enterprise Applications" at the end. The first box has the text "Web
Applications," the second box "Customer Relationship Management Applications"
and the last box "OSS/BSS Applications." The third row has the title "Object
Transaction Manager" at the beginning and "Enterprise Applications" at the end.
Between those two are three lines stacked on top of each other, "Business
Process Objects," "Business Rule Objects," and "Business Data Objects." The
fourth row has three phrases "BillPlex Database," "Third Party Databases" and
"Data." The last row has "Event Framework" as the beginning and "Billing
Application Framework" as the last phrase. In between those two is a
rectangular block with "Billing Applications" as the title. Hanging from that
rectangle are five circles with the following titles within: "Rating,"
"Provisioning," "Address Validation," " Taxation," "...others."
Chart 6. Back Cover.
This graphic is titled "THE BILLPLEX ADVANTAGE." Underneath are the lines
"IMPROVING A SERVICE PROVIDER'S POWER TO COMPETE" AND "WHILE LOWERING TOTAL
COST OF OWNERSHIP." Underneath that are the following phrases in a bulleted
list: INCREASE REVENUE AND MARKET SHARE, IMPROVES CUSTOMER SERVICE AND
RETENTION, A PRE-CONFIGURED WHOLE PRODUCTS SOLUTION, ENTERPRISE INTEGRATION AND
INTEROPERABILITY, FLEXIBILITY, SCALABILITY AND RELIABILITY, INCREASE
PRODUCTIVITY AND LOWER TOTAL OPERATING COSTS. Then, Underneath is a round
globe-like image with BillPlex as a label. Underneath the globe is the text
"LEADING CUSTOMERS AND MARKETING ALLIANCES." Then there is a line and beneath
are the names and logos of some of the companies we have relationships with.
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TABLE OF CONTENTS
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PAGE
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Summary..................................................... 1
Risk Factors................................................ 5
Special Note Regarding Forward-Looking Statements........... 15
Use of Proceeds............................................. 16
Dividend Policy............................................. 16
Capitalization.............................................. 17
Dilution.................................................... 18
Selected Consolidated Financial Data........................ 19
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 21
Business.................................................... 32
Management.................................................. 47
Certain Transactions........................................ 57
Principal Stockholders...................................... 60
Description of Capital Stock................................ 63
Shares Eligible for Future Sale............................. 66
Underwriting................................................ 68
Legal Matters............................................... 70
Experts..................................................... 70
Where You Can Find More Information......................... 70
Index to Consolidated Financial Statements.................. F-1
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF THE COMMON STOCK.
UNTIL 1999, ALL DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
"Daleen(TM)," "Daleen Technologies(TM)," "BillPlex(TM)," the Daleen logo
and the BillPlex logo are trademarks of Daleen Technologies, Inc. Other
trademarks or service marks appearing in this prospectus are the property of
their respective holders.
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SUMMARY
Because this is only a summary, it does not contain all the information
that may be important to you. You should read the entire prospectus, especially
"Risk Factors" and the consolidated financial statements and notes, before
deciding to invest in shares of our common stock.
DALEEN TECHNOLOGIES, INC.
We are a leading provider of next-generation billing and customer care
software that can serve as the core of an enterprise solution for integrated
communications providers, or ICPs. Our BillPlex product is designed to be a
comprehensive solution that enables providers of multiple communications
services, such as voice, data, internet access, video and application hosting,
to compete more effectively while lowering the cost of billing and customer care
services. The majority of our customers are ICPs who have indicated to us that
they already utilize or plan to utilize BillPlex to support internet access and
data services in addition to traditional voice services. BillPlex enables
service providers to quickly and cost-effectively launch convergent service
offerings and provides mission-critical functions such as account and service
provisioning, subscriber care and management, rating, billing and payment
processing. BillPlex is designed to serve as the central integration point for a
service provider's enterprise information system.
We believe new and existing communications service providers are seeking
next-generation billing and customer care software. From inception, BillPlex has
been designed to enable service providers to capture the key benefits of:
- Increased revenue and market share by shortening the time to launch new
services, allowing immediate activation of new subscribers and enabling
targeted marketing programs and service bundles;
- A pre-configured, comprehensive software solution that reduces
implementation time, complexity and costs;
- Improved customer service and customer retention through convergent
invoicing, access to up-to-date subscriber account information, and
allowing subscribers to access their own account information over the
internet;
- Interoperability with other software applications to permit a service
provider to effectively integrate BillPlex into the core of their
information systems environment;
- Flexibility, scalability and reliability so that BillPlex can grow as a
service provider adds more users and communications service offerings;
and
- Increased productivity and lower total operating costs over the life of
the system.
OUR MARKET OPPORTUNITY
The deregulation of the communications industry in the United States and
abroad has spurred the proliferation of new service providers that are fiercely
competing with each other and with existing service providers for market share.
As core communications services have become commoditized and new technologies
have emerged, service providers have begun to bundle a variety of communications
services, such as wireline and wireless voice, internet access and data, video,
internet telephony and application hosting in order to distinguish themselves
and attract and retain
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customers. The new generation of service providers who offer multiple
communications services are referred to as integrated communications providers.
Billing and customer care, or BACC, systems are a key component of a
service provider's information systems, because they enable the provider to
better manage its customers and revenue, and to dynamically change and expand
its service offerings, marketing programs and rate plans. However, many BACC
systems currently in use were created before the emergence of today's
competitive market which we believe is seeking bundled services. Over the last
decade, the first generation of third-party BACC vendors emerged, but many of
their products employ older technologies and architectures, were designed before
the proliferation of ICPs, and require a substantial amount of costly
customization and maintenance. We believe that existing and emerging ICPs
require a next-generation BACC solution that is designed to support multiple
communications services, to interoperate with other components of their
information system, to allow for rapid implementation with little customization,
and to be easily modified and maintained without a costly information technology
staff.
OUR STRATEGY
Our goal is to become the leading provider of BACC solutions to the ICP
industry. We are pursuing this objective by:
- Aggressively targeting ICPs with a comprehensive software solution based
on BillPlex and its market-based packages;
- Building a scalable, software-based business model designed to meet our
customers' needs and to permit us to achieve rapid revenue growth with
high margins;
- Leveraging strategic marketing alliances to accelerate our growth and
extend our market coverage;
- Developing and maintaining long-term customer relationships to attract
and retain customers through all phases of their growth; and
- Expanding into new geographic markets and industry segments to pursue
market leadership and sustained profitable growth.
OUR COMPANY
From our founding in 1989 through 1996, we operated as a software
consulting company performing contract consulting and software development
services and contract placement and staffing services. In 1996, we discontinued
our consulting work, sold our contract placement and staffing business to a
third party and began development of the BillPlex product. We introduced
BillPlex in 1997 and first recognized revenue from BillPlex license fees and
related professional services in 1998.
We were originally incorporated in Illinois in 1990, were reincorporated in
Florida in 1996, and were reincorporated in Delaware in August 1999. Our
principal executive offices are located at 902 Clint Moore Road, Boca Raton,
Florida 33487 and our telephone number is (561) 999-8000. Our worldwide web
address is www.daleen.com, although information contained on our website does
not constitute part of this prospectus. In this prospectus, references to
"Daleen," "we," "us," and "our" refers to Daleen Technologies, Inc. and its
subsidiary.
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THE OFFERING
Common stock offered............... shares
Common stock to be outstanding
after this offering.............. shares
Use of proceeds.................... Working capital and other general
corporate purposes, including product
development, expansion of our sales and
marketing capabilities and potential
acquisitions.
Proposed Nasdaq National Market
symbol........................... DALN
The number of shares to be outstanding after the offering is based on
shares outstanding at June 30, 1999 and excludes shares that may be issued upon
exercise of the following options and warrants:
- 2,323,986 shares subject to outstanding options at a weighted average
exercise price of $3.51 per share;
- 1,865,000 shares subject to outstanding warrants at a weighted average
exercise price of $3.30 per share; and
- 238,381 additional shares reserved for issuance under our stock incentive
plan. On July 5, 1999, our board of directors increased the number of
shares reserved for issuance under this plan by 750,000 shares.
-------------------------
Except as otherwise indicated, all information in this prospectus:
- reflects the conversion of each outstanding share of preferred stock into
one share of common stock, which will occur automatically upon the
completion of this offering; and
- assumes no exercise of the underwriters' over-allotment option.
3
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table is a summary of the financial data for our business.
You should read this information together with the consolidated financial
statements and the related notes appearing at the end of this prospectus and the
information under "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The pro forma net loss applicable to common
stockholders per share calculations reflects the automatic conversion of all
outstanding shares of preferred stock into shares of common stock upon the
closing of this offering as if such closing occurred on January 1, 1998 or the
date preferred shares were issued if such issuance occurred subsequent to
January 1, 1998 and the pro forma balance sheet data assumes the conversion of
all outstanding shares of our preferred stock into shares of common stock as of
the closing of this offering as if such closing occurred on June 30, 1999. The
pro forma as adjusted balance sheet data also reflect the sale of the common
stock offered by us, after deducting underwriting discounts and estimated
offering expenses payable by us. See note 1 to the consolidated financial
statements appearing elsewhere in this prospectus for information regarding net
loss applicable to common stockholders and shares used in computing net loss
applicable to common stockholders per share -- basic and diluted and pro forma
net loss applicable to common stockholders per share -- basic and diluted.
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SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
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1996 1997 1998 1998 1999
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CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue:
License fees........................................... $ -- $ -- $ 1,879 $ 487 $ 3,748
Professional services and other........................ 2,550 156 3,352 975 3,367
------ ------- -------- ------- -------
Total revenue................................... 2,550 156 5,231 1,462 7,115
Operating loss........................................... (2,809) (6,472) (12,923) (6,096) (4,607)
Net loss................................................. (1,526) (7,984) (12,169) (6,053) (4,508)
Net loss applicable to common stockholders............... (1,526) (7,984) (12,234) (6,053) (4,587)
Net loss applicable to common stockholders per
share -- basic and diluted............................. $(0.81) $ (3.48) $ (3.78) $ (1.88) $ (1.41)
Weighted average shares -- basic and diluted............. 1,879 2,295 3,237 3,218 3,242
Pro forma net loss applicable to common stockholders..... $(12,169) $(4,508)
Pro forma net loss applicable to common stockholders per
share -- basic and diluted............................. $ (1.22) $ (0.36)
Pro forma weighted average shares -- basic and diluted... 9,991 12,372
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JUNE 30, 1999
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PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
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CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 14,988 $14,988 $
Working capital............................................. 13,781 13,781
Total assets................................................ 22,325 22,325
Total stockholders' (deficit) equity........................ (18,324) 16,980
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RISK FACTORS
You should carefully consider the following risks in addition to the
remainder of this prospectus before purchasing our common stock. This offering
involves a high degree of risk. If any of the following risks actually occur,
our business, financial condition and results of operations would likely suffer.
In this case, the market price of our common stock could decline, and you might
lose all or part of the money you paid to buy our common stock.
RISKS RELATED TO DALEEN
WE HAVE NOT ACHIEVED PROFITABILITY AND MAY CONTINUE TO INCUR NET LOSSES FOR AT
LEAST THE NEXT SEVERAL QUARTERS.
We incurred net losses of approximately $12.2 million in 1998, $8.0 million
in 1997 and $1.5 million in 1996. As of June 30, 1999, we had an accumulated
deficit of approximately $27.1 million. We have not yet realized any profit and
we cannot predict when, if ever, we will achieve profitability. We expect to
significantly increase our sales and marketing, product development and
administrative expenses. As a result, we will need to generate significant
additional revenue from sales of our products to achieve and maintain
profitability. For this reason, we expect to continue to incur net losses for at
least the next several quarters, even if sales of our products continue to grow.
Even if we do achieve profitability, we may not be able to sustain or increase
profitability on a quarterly or annual basis in the future.
IT IS DIFFICULT TO EVALUATE OUR BUSINESS BECAUSE WE HAVE A LIMITED HISTORY
OPERATING AS A SOFTWARE COMPANY.
We have a limited operating history as a software company. As a result, the
progress of our business to date and our historical financial information are of
limited value in predicting our future operating results. In 1996, we changed
our business from providing consulting services to operating as a software
company. We introduced our principal product, BillPlex, in 1997 and we had no
license revenue until 1998. As of June 30, 1999, we had signed contracts with
only 20 customers and, of these, only five had completed implementation and were
using BillPlex in their day-to-day operations. Because our software offering is
new, we have little revenue from recurring sources and must depend heavily on
revenue from new sales. Changing our business also required us to adjust our
business processes and make a number of significant personnel changes, including
changes and additions to our sales and marketing, professional services and
support, research and development and management teams. For all these reasons,
as you evaluate our business, you must consider the risks and difficulties
frequently encountered by early stage companies in new and rapidly evolving
markets. Our new business strategy may not be successful and we may not
successfully address these risks.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE IN FUTURE PERIODS, AND WE MAY FAIL
TO MEET EXPECTATIONS.
Our revenue and operating results may vary significantly from quarter to
quarter due to a number of factors. This fluctuation may cause our operating
results to be below the expectations of public market analysts and investors,
and the price of our common stock may fall. Factors that could cause quarterly
fluctuations include:
- variations in demand for our products and services;
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- our ability to develop and attain market acceptance of enhancements to
BillPlex and any new products and services;
- the pace of product implementation and the timing of customer acceptance;
- the timing of implementation of our product by third-party systems
integrators;
- changes in our pricing policies or the pricing policies of our
competitors;
- delays of purchases in 1999 and early 2000 by customers who temporarily
stop purchasing software or reduce information technology spending due to
year 2000 concerns;
- the mix of products and services sold; and
- the mix of sales channels through which our products and services are
sold.
In any given quarter, most of our revenue has been attributable to a small
number of relatively large contracts and we expect this to continue. As a
result, the cancellation or deferral of even a small number of contracts in a
particular quarter could significantly reduce our revenue, which would hurt our
quarterly financial performance. In addition, a substantial portion of our costs
are relatively fixed and based upon anticipated revenue. A failure to book an
expected order in a given quarter would not be offset by a corresponding
reduction in costs and could adversely affect our operating results. As a result
of these factors, we believe that period-to-period comparisons of our revenue
and operating results are not necessarily meaningful.
OUR BUSINESS IS HIGHLY DEPENDENT ON A LIMITED NUMBER OF CUSTOMERS.
All of our revenue is currently derived from a very limited number of
customers. If a large contract is cancelled or deferred, or if an anticipated
contract does not materialize, our financial results could be materially harmed.
In addition, continued industry consolidation or the formation of alliances
among network operators and service providers could reduce our customer base,
reduce the number of potential customers we can target and decrease the demand
for our products and services. We had two customers who accounted for 100% of
our total revenue in 1997, five customers who accounted for 99% of our total
revenue in 1998, and five customers who accounted for 64% of our total revenue
in the first six months of 1999. Most of our major customers typically pay us
up-front license fees and they do not have any obligation to purchase additional
licenses. There can be no assurance these customers will purchase licenses for
additional seats or processors or continue with our maintenance programs.
WE FACE SIGNIFICANT COMPETITION FROM COMPANIES THAT MAY HAVE GREATER RESOURCES
THAN WE DO.
The communications billing and customer care systems business is very
competitive. We expect competition to increase in the future. Our principal
competitors include:
- Kenan Systems Corporation, a wholly-owned subsidiary of Lucent
Technologies Inc.;
- Saville Systems, PLC, the subject of a recently announced proposed
acquisition by ADC Telecommunications, Inc.;
- Portal Software, Inc.;
- LHS Group, Inc.;
- Amdocs Limited; and
- Intertech Management Group, Inc.
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We also compete with other billing and customer care system providers, such
as Intasys Corporation, International Telecommunications Data Systems, Inc. and
Sema Group, PLC, and operation support system providers, systems integrators and
service bureaus. In addition, we compete with the internal information
technology departments of larger communications companies, which may elect to
develop functionalities such as those provided by our product in-house rather
than buying them from outside suppliers.
Many of our current and future competitors may have advantages over us,
including:
- longer operating histories;
- larger customer bases;
- substantially greater financial, technical, sales, marketing and other
resources;
- greater name recognition; and
- ability to more easily provide a comprehensive hardware and software
solution.
Our current and potential competitors have established, and may continue to
establish in the future, cooperative relationships among themselves or with
third parties that would increase their ability to compete with us. In addition,
competitors may be able to adapt more quickly than we can to new or emerging
technologies and changes in customer needs, or to devote more resources to
promoting and selling their products.
If we fail to adapt to market demands and to compete successfully with
existing and new competitors, our business and financial performance would
suffer.
IF WE FAIL TO EFFECTIVELY MANAGE THE GROWTH OF OUR OPERATIONS, OUR ABILITY TO
PURSUE OUR STRATEGY WOULD BE COMPROMISED AND OUR BUSINESS WOULD SUFFER.
Our business could suffer if we fail to effectively manage our growth. We
continue to increase the scope of our operations and have grown our employee
headcount substantially. On June 30, 1999, we had a total of 169 full-time
employees, compared to a total of 112 employees on January 1, 1999. We expect to
continue to hire new employees at a rapid pace. Similarly, our revenue grew from
$156,000 in 1997 to $5.2 million in 1998. Our revenue for the six months ended
June 30, 1999 was $7.1 million. Our growth has placed, and will continue to
place, a significant strain on our management systems and resources. We expect
that we will need to continue to improve our financial and managerial controls
and reporting systems and procedures, and will need to expand, train and manage
our work force. We are currently attempting to expand our facilities, and we may
face difficulties and significant expenses identifying and moving into suitable
space.
OUR LENGTHY SALES CYCLE MAKES IT DIFFICULT TO ANTICIPATE THE TIMING OF SALES,
AND REVENUE MAY VARY FROM PERIOD TO PERIOD.
The sales cycle associated with the purchase of our products is lengthy,
and the time between the initial proposal to a prospective customer and the
signing of a license agreement can be as long as one year. Our products involve
a commitment of capital which may be significant to the customer, with attendant
delays frequently associated with large capital expenditures and implementation
procedures within an organization. These delays may reduce our revenue in a
particular period without a corresponding reduction in our costs, which could
hurt our results of operations for that period.
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THE SKILLED EMPLOYEES THAT WE NEED MAY BE DIFFICULT AND EXPENSIVE TO HIRE AND
RETAIN IN TODAY'S TIGHT LABOR MARKET.
Our success depends in large part on our ability to attract, train,
motivate and retain highly-skilled information technology professionals,
software programmers and sales and marketing professionals. Qualified personnel
in these fields are in great demand and are likely to remain a limited resource.
We may be unable to attract or continue to retain the skilled employees we
require. Any inability to do so could prevent us from managing and competing for
existing and future projects or to compete for new customer contracts. In
addition, an increase in expenses required to attract and retain such personnel
may reduce our operating margins.
WE DEPEND IN SOME CASES ON STRATEGIC BUSINESS ALLIANCES TO SELL AND IMPLEMENT
OUR PRODUCTS, AND ANY FAILURE TO DEVELOP OR MAINTAIN THESE ALLIANCES COULD HURT
OUR FUTURE GROWTH.
Third parties such as operation support system providers, consulting firms
and systems integration firms help us with marketing, sales, lead generation,
customer support and implementation of our products. In some instances, these
third parties provide most or all of the sales and implementation efforts. In
order to grow successfully, we must maintain our relationships with these firms,
develop additional similar relationships and generate new business opportunities
through joint marketing and sales efforts.
We may encounter difficulties in forging and maintaining long-term
relationships with these firms for a variety of reasons. For example, they may
have more established relationships with our principal competitors or they may
decide to compete directly with us by developing their own products and
services.
These firms may discontinue their relationships with us, fail to devote
sufficient resources to market our products or develop relationships with our
competitors. In addition, these firms may delay the product implementation or
negatively impact our customer relationships. Our agreements with these firms
typically are in the form of a non-exclusive referral fee or license and package
discount arrangement that may be terminated by either party without cause or
penalty and with limited notice.
WE RELY HEAVILY ON SALES OF ONE PRODUCT.
Since our introduction of BillPlex in 1997, substantially all of our
revenue has been attributable to this product. We expect to continue to be
heavily dependent on this product. As a result, a decline in demand for BillPlex
or failure to achieve broad market acceptance of BillPlex would cause our
business and financial performance to suffer.
IF WE FAIL TO DEVELOP LONG-TERM RELATIONSHIPS WITH SUCCESSFUL CUSTOMERS, OUR
FUTURE SUCCESS WILL BE JEOPARDIZED.
We believe that our future success depends to a significant extent on our
ability to develop and maintain long-term relationships with successful
communications service providers. We believe these relationships will provide us
with repeat business, referrals and ongoing maintenance revenue. We may be
unable to develop new customer relationships and our new or existing customers
may be unsuccessful. Our failure to attract new customer relationships or the
failure of new or existing customers to be successful would result in a loss of
future business.
8
<PAGE> 13
IF OUR CUSTOMERS CANNOT SECURE ADEQUATE FINANCING, WE MAY NOT GET THEIR
BUSINESS.
Many of our potential customers are new entrants into the communications
market and lack significant financial resources. These companies rely to a large
degree on access to the capital markets for growth. Their failure to raise
capital would hurt their financial viability and their demand for our products.
If our potential customers cannot obtain the resources to purchase our products,
they may turn to other options such as service bureaus, which would hurt our
business.
IF WE DO NOT CONTINUALLY ENHANCE OUR PRODUCT OFFERING TO MEET THE CHANGING NEEDS
OF SERVICE PROVIDERS, WE WILL LOSE FUTURE BUSINESS TO OUR COMPETITORS.
We believe that our future success will depend to a significant extent upon
our ability to enhance our product offering and to introduce new products and
features to meet the requirements of our customers in a rapidly developing and
evolving market. We are currently devoting significant resources to refining and
expanding our BillPlex software, developing additional pre-configured
market-based packages and investigating complimentary products and technologies.
We believe our product currently meets customer requirements regarding
scalability and throughput, and we are working to improve our system
performance. However, due to potential customer growth, acquisitions and
mergers, and technology improvements, the requirements of our customers may
change. Our present or future products may not satisfy the evolving needs of the
communications market. If we are unable to anticipate or respond adequately to
customer needs, or achieve sufficient throughput and scalability, we will lose
business and our financial performance will suffer.
IF WE CANNOT CONTINUE TO OBTAIN OR IMPLEMENT THE THIRD-PARTY SOFTWARE THAT WE
INCORPORATE INTO OUR PRODUCT OFFERING, WE MAY HAVE TO DELAY OUR PRODUCT
DEVELOPMENT OR REDESIGN EFFORTS.
Our product offering involves integration with products and systems
developed by third parties. If any of these third-party products should become
unavailable for any reason, fail under operation with our product offering or
fail to be supported by their vendors, it would be necessary for us to redesign
our product offering. We might encounter difficulties in accomplishing any
necessary redesign in a cost-effective or timely manner. We also could
experience difficulties integrating our product offering with other hardware and
software. Furthermore, if new releases of third-party products and systems occur
before we develop products compatible with these new releases, we could
experience a decline in demand for our product offering, which could cause our
business and financial performance to suffer.
LOSS OF OUR SENIOR MANAGEMENT PERSONNEL WOULD LIKELY HURT OUR BUSINESS.
Our future success depends to a significant extent on the continued
services of our senior management and other key personnel, particularly James
Daleen, our founder and chief executive officer. If we lost the services of Mr.
Daleen or other key employees it would likely hurt our business. We have
employment and non-compete agreements with some of our executive officers,
including Mr. Daleen. However, these agreements do not obligate them to continue
working for us.
9
<PAGE> 14
WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY, AND OUR COMPETITORS MAY
INFRINGE ON OUR TECHNOLOGY.
Any misappropriation of our technology or the development of competitive
technology could seriously harm our business. We regard a substantial portion of
our software product as proprietary and rely on a combination of patent,
copyright, trademark and trade secret laws, customer license agreements,
employee and third-party non-disclosure agreements and other methods to protect
our proprietary rights. We do not include in our software any mechanisms to
prevent or inhibit unauthorized use, but we generally enter into confidentiality
agreements with our employees, consultants, customers and potential customers
and limit access to and distribution of proprietary information.
The steps we have taken to protect our proprietary rights may not be
adequate. If so, we might not be able to prevent others from using what we
regard as our technology to compete with us. Existing patent, copyright,
trademark and trade secret laws offer only limited protection. Policing
unauthorized use of our product offering is difficult, and we cannot be certain
that the steps we have taken will prevent misappropriation of our intellectual
property, particularly in foreign countries where the laws may not protect
proprietary rights as fully as do the laws of the United States. Other companies
could independently develop similar or superior technology without violating our
proprietary rights.
If we have to resort to legal proceedings to enforce our intellectual
property rights, the proceedings could be burdensome and expensive and could
involve a high degree of risk.
CLAIMS BY OTHERS THAT WE INFRINGE THEIR PROPRIETARY TECHNOLOGY COULD DIVERT OUR
RESOURCES, RESULT IN UNEXPECTED LICENSE FEES AND HARM OUR BUSINESS.
Although we have not received any notices from third parties alleging
infringement claims, third parties could claim that our current or future
products or technology infringe their proprietary rights. Any claim of
infringement by a third party could cause us to incur substantial costs
defending against the claim, even if the claim is invalid, and could distract
our management from the operation of our business. Furthermore, a party making
such a claim could secure a judgment that requires us to pay substantial
damages. A judgment could also include an injunction or other court order that
could prevent us from selling our product offering. Any of these events could
seriously harm our business.
If anyone asserts a claim against us relating to proprietary technology or
information, we might seek to license their intellectual property or to develop
non-infringing technology. We might not be able to obtain a license on
commercially reasonable terms, if at all. Alternatively, our efforts to develop
non-infringing technology could be unsuccessful. Our failure to obtain the
necessary licenses or other rights or to develop non-infringing technology could
prevent us from selling our products and could seriously harm our business.
PRODUCT DEFECTS OR SOFTWARE ERRORS COULD ADVERSELY AFFECT OUR BUSINESS DUE TO
COSTLY REDESIGNS, PRODUCTION DELAYS AND CUSTOMER DISSATISFACTION.
Design defects or software errors in our product may cause delays in
product introductions or damage customer satisfaction, either of which could
seriously harm our business. Our software products are highly complex and may,
from time to time, contain design defects or software errors that may be
difficult to detect and correct. We have a customer support organization that is
responsible for providing maintenance and support to our customers. Maintenance
and support includes identifying and correcting any reported product defects or
software errors. As of the
10
<PAGE> 15
date of this prospectus, we are not aware of any product defect or software
error that would have a material adverse effect on our business.
Because our products are generally used by our customers to perform
critical functions, design defects, software errors or other potential problems
with our products could result in financial or other damages to our customers.
This could result in the termination of our relationship with that customer or
could give rise to claims against us. Although we have license agreements with
our customers that contain provisions designed to limit our exposure to
potential claims and liabilities arising from customer problems, these
provisions may not effectively protect us against all claims. In addition,
claims and liabilities arising from customer problems could significantly damage
our reputation and hurt our business.
YEAR 2000 ISSUES MAY DISRUPT OUR OPERATIONS AND CAUSE US TO LOSE REVENUE.
Failure of BillPlex to be year 2000 compliant could result in a significant
decrease in market acceptance of our product and legal liability. If a claim
were to be brought against us, regardless of its merit, the claim would likely
be time-consuming and expensive to defend, would divert management time and
attention and could result in adverse publicity. We intend to have this testing
process completed during the third quarter of 1999. As of the date of this
prospectus, we have no material year 2000 compliance issues with respect to the
product that we currently license. However, BillPlex operates in complex network
environments and directly and indirectly interacts with a number of other
hardware and software systems. We have not performed extensive tests on all
hardware, software, switches and other devices that may operate in conjunction
with BillPlex, or provide data to or receive data from BillPlex. We also have
not tested custom interfaces written for BillPlex. Some of our customers may
have year 2000 problems with products that we believe are year 2000 ready.
We may also be affected by year 2000 issues related to non-compliant
internal systems developed by us or by third-party vendors. If the internal
systems developed by us prove to be non-compliant, or if our third-party vendors
or any suppliers of non-information technology systems do not identify year 2000
problems with their products or fail to correct their year 2000 problems, we
could have failures that result in an interruption of our normal business
activities or operations.
OUR STRATEGY TO EXPAND INTO INTERNATIONAL MARKETS MAY NOT SUCCEED AS A RESULT OF
LEGAL, BUSINESS AND ECONOMIC RISKS SPECIFIC TO INTERNATIONAL OPERATIONS.
Our strategy includes expansion into international markets through a
combination of strategic relationships and internal business expansion. In
addition to risks generally associated with international operations, our future
international operations might not succeed for a number of reasons, including:
- dependence on sales efforts of third party distributors;
- failure to localize our product offering for foreign markets;
- difficulties in supporting customers in foreign countries;
- greater difficulty in collecting accounts receivable;
- legal uncertainties inherent in transnational operations such as export
and import regulations, taxation issues, tariffs and other trade
barriers;
11
<PAGE> 16
- new competitors having greater financial, technical personnel and
marketing resources; and
- issues relating to uncertainties of laws and enforcement relating to the
protection of intellectual property.
We may not be able to successfully execute our business plan in foreign
markets. If revenue from international ventures is not adequate to cover our
investment in those ventures, our business and financial performance could
suffer.
ACQUISITIONS OF COMPANIES OR TECHNOLOGIES COULD RESULT IN DISRUPTIONS TO OUR
BUSINESS, DIVERSION OF MANAGEMENT AND COULD REQUIRE THAT WE ENGAGE IN FINANCING
TRANSACTIONS THAT COULD HURT OUR FINANCIAL PERFORMANCE.
Although we have not done so in the past, we may in the future make
acquisitions of other companies, products or technologies, or enter into
strategic relationship agreements that require substantial up-front investments.
If we make any acquisitions or enter into strategic relationships, we will be
required to assimilate the operations, products and personnel of the acquired
businesses and train, retain and motivate key personnel from the acquired
businesses. We may be unable to maintain uniform standards, controls, procedures
and policies if we fail in these efforts. Similarly, acquisitions may cause
disruptions in our operations and divert management's attention from the
day-to-day operations of our business, which could impair our relationships with
our current employees, customers and strategic marketing alliances.
We may have to incur debt or issue equity securities to pay for any future
acquisitions. The issuance of equity securities for any acquisition could be
substantially dilutive to our stockholders. In addition, our profitability may
suffer because of acquisition-related costs or amortization costs for acquired
goodwill and other intangible assets.
RISKS RELATED TO THIS OFFERING AND TO OUR COMMON STOCK
THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK, THE MARKET PRICE OF
OUR COMMON STOCK MAY BE VOLATILE, AND YOU MAY EXPERIENCE INVESTMENT LOSSES.
Our common stock has never been sold in a public market. An active trading
market for our common stock may not develop or be sustained upon the completion
of this offering. Also, many factors could cause the market price of our common
stock to rise and fall. Some of these factors are:
- variations in our quarterly operating results;
- acquisitions or strategic alliances by us or others in our industry;
- changes in estimates of our performance or recommendations by financial
analysts;
- market and regulatory trends in the communications industry; and
- market conditions in the industry and the economy as a whole.
In addition, the stock market experiences significant price and volume
fluctuations. These fluctuations particularly affect the market prices of the
securities of many high-technology companies. These broad market fluctuations
could adversely affect the market price of our common stock. When the market
price of a stock has been volatile, holders of that stock have
12
<PAGE> 17
often instituted securities class action litigation against the company that
issued the stock. If any of our stockholders brought a securities class action
lawsuit against us, we could incur substantial costs defending the lawsuit. The
lawsuit could also divert the time and attention of our management. Any of these
events could seriously harm our business.
OUR EXECUTIVE OFFICERS AND DIRECTORS OWN A LARGE PERCENTAGE OF OUR VOTING STOCK
AND COULD EXERT SIGNIFICANT INFLUENCE OVER MATTERS REQUIRING STOCKHOLDER
APPROVAL AFTER THIS OFFERING.
Following this offering, our officers and directors will beneficially own
approximately % of our common stock. As a result, our officers and
directors will effectively be able to significantly influence:
- election of our directors;
- amendment or prevent amendment of our certificate of incorporation or
bylaws;
- effecting or preventing a merger, sale of assets or other corporate
transaction; and
- outcome of other matters submitted for stockholders' vote.
Our public stockholders, for so long as they hold less than 50% of our
common stock, will be unable to control the outcome of these matters. The
concentration of stock ownership by our officers and directors may discourage a
potential acquirer from making a tender offer or attempting to obtain control of
our company, which in turn could reduce our stock price or prevent our
stockholders from realizing a premium over our stock price.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE CAUSING INVESTOR
LOSSES.
Sales of a substantial number of shares of our common stock in the public
market following this offering could adversely affect the market price of our
common stock. After this offering, shares of our common stock will be
outstanding. All of the shares sold in this offering will be freely tradable
unless held by our affiliates. The remaining shares of common stock outstanding
after this offering will be restricted as a result of securities laws or lock-up
agreements signed by the holders and will be available for sale in the public
market as follows:
- shares will be eligible for sale as of the date of this
prospectus;
- approximately shares will be eligible for sale 90 days after the
date of this prospectus;
- approximately shares will be eligible for sale 180 days after the
date of this prospectus upon the expiration of lock-up agreements with
BancBoston Robertson Stephens Inc.; and
- approximately shares will become eligible for sale at various
times beginning 180 days after the date of this prospectus.
BancBoston Robertson Stephens Inc. may, in its sole discretion and at any
time without prior notice, release all or any portion of the common stock
subject to lock-up agreements.
13
<PAGE> 18
ANTI-TAKEOVER PROVISIONS AND OUR RIGHT TO ISSUE PREFERRED STOCK COULD MAKE A
THIRD-PARTY ACQUISITION OF OUR COMPANY DIFFICULT EVEN IF AN ACQUISITION WOULD BE
BENEFICIAL TO US.
We are a Delaware corporation. There are provisions in our charter and
bylaws and the anti-takeover provisions of Delaware law that could make it more
difficult for a third party to acquire control of us, even if a change in
control would be beneficial to stockholders. In addition, our bylaws provide for
a classified board, with board members serving staggered three-year terms. The
Delaware anti-takeover provisions and the existence of a classified board could
make it more difficult for a third party to acquire us.
After this offering, the board of directors will have the authority to
issue up to 10,000,000 shares of preferred stock. Without any further vote or
action on the part of the stockholders, the board of directors will have the
authority to determine the price, rights, preferences, privileges and
restrictions of the preferred stock. This preferred stock, if issued, may have
preference over the rights of the holders of common stock. Although the ability
to issue preferred stock provides us with flexibility in connection with
possible acquisitions and other corporate purposes, the issuance may also make
it more difficult for a third party to acquire a majority of our outstanding
voting stock.
14
<PAGE> 19
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus are forward-looking
statements. These statements relate to future events or our future financial
performance, and involve known and unknown risks and uncertainties that may
cause our or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements.
In some cases, you can identify forward-looking statements by words such as
may, will, should, expects, plans, anticipates, believes, estimates, predicts,
potential or continue, or the negative of these and other similar words.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Our actual results could differ
materially from the results anticipated in these forward-looking statements.
Moreover, neither we nor any other person assumes responsibility for the
accuracy and completeness of forward-looking statements. We are under no duty to
update any of the forward-looking statements after the date of this prospectus
to conform these statements to actual results.
15
<PAGE> 20
USE OF PROCEEDS
We estimate the net proceeds that we will receive from the sale of shares
of common stock in this offering will be approximately $ million, assuming
an initial public offering price of $ per share and after deducting the
underwriting discounts and commissions and estimated offering expenses. If the
underwriters exercise their over-allotment option, we will receive $ million
in additional net proceeds. We will not receive any proceeds from the sale of
shares by the selling stockholder in connection with the exercise of the
underwriters' over-allotment option.
We currently expect to use the net proceeds primarily for working capital
and general corporate purposes, including funding product development and
expanding our sales and marketing organization. In addition, we may use a
portion of the net proceeds for further development of our product lines through
acquisitions of products, technologies and businesses, although we have no
present commitments or agreements to make any acquisitions. The amount of net
proceeds that we actually expend for working capital purposes will vary
significantly depending on a number of factors, including future revenue growth,
if any, and the amount of cash we generate from operations. Thus, management
will have significant discretion in applying the net proceeds of this offering.
Pending the uses described above, we will invest the net proceeds in short-term,
investment grade, interest-bearing securities.
DIVIDEND POLICY
We have never paid any cash dividends on our common stock and do not
anticipate paying any cash dividends. We currently intend to retain future
earnings, if any, to fund the development and growth of our business.
16
<PAGE> 21
CAPITALIZATION
The following table describes our capitalization as of June 30, 1999:
- on an actual basis;
- on a pro forma basis to reflect the automatic conversion of all of our
outstanding shares of convertible preferred stock into common stock on
the closing of this offering as if such closing occurred on June 30,
1999; and
- on a pro forma as adjusted basis to reflect the sale of the shares of
common stock offered by us in this offering and our receipt of the
estimated net proceeds, after deducting the estimated underwriting
discounts and commissions and the estimated offering expenses that we
expect to pay in connection with this offering.
You should read this table along with "Management's Discussion and Analysis
of Financial Condition and Results of Operations," our consolidated financial
statements and the related notes to them and the other financial information in
this prospectus. Par value is the face amount assigned to each share of stock by
our charter.
<TABLE>
<CAPTION>
JUNE 30, 1999
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- ---------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Long-term debt, including current maturities............... $ -- $ -- $ --
Redeemable preferred stock:
Mandatorily redeemable convertible series A preferred
stock; 3,000,000 shares authorized, issued and
outstanding, actual; no shares authorized issued and
outstanding, pro forma and pro forma as adjusted....... 7,500 -- --
Mandatorily redeemable convertible series D and D-1
preferred stock; 4,908,379 shares authorized, issued
and outstanding, actual; no shares authorized, issued
and outstanding, pro forma and pro forma adjusted...... 14,376 -- --
Mandatorily redeemable convertible series E preferred
stock; 1,496,615 shares authorized, issued and
outstanding, actual; no shares authorized, issued and
outstanding, pro forma and pro forma as adjusted....... 13,428 -- --
Stockholders' (deficit) equity:
Convertible series C preferred stock, $.01 par value per
share; 1,222,222 shares authorized, 1,213,584 shares
issued and outstanding, actual; no shares authorized,
issued and outstanding, pro forma and pro forma as
adjusted............................................... 5,301 -- --
Preferred stock, par value $0.01 per share; 11,250,000
shares authorized; none issued and outstanding, actual,
pro forma and pro forma as adjusted.................... -- -- --
Common stock, par value $0.01 per share; 70,000,000
shares authorized; 3,653,651 shares issued and
outstanding, actual; 14,272,229 shares issued and
outstanding, pro forma; shares issued and
outstanding, pro forma as adjusted..................... 37 143
Stockholders notes receivable............................ (435) (435)
Additional paid in capital............................... 3,868 44,367
Accumulated deficit...................................... (27,095) (27,095)
-------- -------- --------
Total stockholders' (deficit) equity................. (18,324) 16,980
-------- -------- --------
Total capitalization.............................. $ 16,980 $ 16,980 $
======== ======== ========
</TABLE>
The number of shares of common stock outstanding as of June 30, 1999 does
not reflect 4,188,986 shares issuable under options and warrants outstanding as
of June 30, 1999 at a weighted average exercise price of $3.42 per share and
238,381 additional shares reserved for issuance under our stock incentive plan.
On July 5, 1999, our board of directors increased the number of shares reserved
for issuance under our stock incentive plan by an additional 750,000 shares.
17
<PAGE> 22
DILUTION
Our pro forma net tangible book value as of June 30, 1999 was $16.7
million, or $1.17 per share of common stock. The formula for calculating pro
forma net tangible book value per share is pro forma total tangible assets less
total liabilities, divided by the total pro forma number of shares of common
stock outstanding, after giving effect to the conversion of the preferred stock
into common stock. After giving effect to the sale of shares of
common stock in this offering, our adjusted pro forma net tangible book value as
of June 30, 1999 would have been $ , or $ per share.
This amount represents an immediate increase in pro forma net tangible book
value of $ per share to existing stockholders and an immediate dilution
of $ per share to new investors. The following table illustrates
this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of June 30,
1999................................................... $ 1.17
Pro forma increase in net tangible book value per share
attributable to this offering..........................
------
Pro forma net tangible book value per share after the
offering...............................................
------
Dilution per share to new investors......................... $
======
</TABLE>
The following table summarizes, on the pro forma basis discussed above, as
of June 30, 1999, the total number of shares of common stock purchased, the
total consideration paid and the average price per share paid by existing
stockholders and to be paid by new investors in this offering.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- --------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
----------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.............. 14,272,229 % $44,510,000 % $3.12
New investors...................... $
----------- ----- ----------- -----
Total.................... 100.0% $ 100.0%
=========== ===== =========== =====
</TABLE>
If the underwriters exercise their over-allotment option in full, the
number of shares held by existing stockholders will decrease to ,
or % of the total shares outstanding, and the number of shares held by new
investors will increase to , or %, of the total shares
outstanding.
The above computations exclude 4,188,986 shares of common stock issuable
upon the exercise of options or warrants outstanding as of June 30, 1999 at an
average exercise price of $3.42 per share. If any of those options and warrants
are exercised, investors will incur further dilution. From July 1, 1999 through
, 1999, options were exercised to purchase an aggregate of
shares of common stock.
18
<PAGE> 23
SELECTED CONSOLIDATED FINANCIAL DATA
You should read the following selected consolidated financial data together
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes included
at the end of this prospectus. The consolidated statement of operations data and
balance sheet data in the table below as of and for each of the years in the
five year period ended December 31, 1998 have been derived from our consolidated
financial statements, which have been audited by KPMG LLP, independent certified
public accountants. Our consolidated balance sheets as of December 31, 1994,
1995 and 1996 and the consolidated statements of operations for the years ended
December 31, 1994 and 1995 are not included in this prospectus. The selected
financial data as of June 30, 1999 and for the six months ended June 30, 1998
and June 30, 1999 have been derived from our unaudited consolidated financial
statements, which appear elsewhere in this prospectus and which, in the opinion
of management, have been prepared on the same basis as the audited consolidated
financial statements and contain all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation. See note 1 to the
consolidated financial statements for a discussion of the shares and amounts
used to compute net loss applicable to common stockholders per share and pro
forma net loss applicable to common stockholders per share. The pro forma net
loss applicable to common stockholders per share calculation reflects the
automatic conversion of all outstanding shares of preferred stock into shares of
common stock upon the closing of this offering as if such closing occurred on
January 1, 1998 or the date preferred shares were issued if such issuance
occurred subsequent to January 1, 1998. The historical results are not
necessarily indicative of results to be expected for any future period.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------------------- -----------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------- ------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue:
License fees............................. $ -- $ -- $ -- $ -- $ 1,879 $ 487 $ 3,748
Professional services and other.......... 2,090 4,324 2,550 156 3,352 975 3,367
------ ------ ------- ------- -------- ------- -------
Total revenue.................... 2,090 4,324 2,550 156 5,231 1,462 7,115
------ ------ ------- ------- -------- ------- -------
Cost of revenue:
License fees............................. -- -- -- -- 3 1 3
Professional services and other.......... 1,310 2,437 1,396 293 4,239 1,109 3,655
------ ------ ------- ------- -------- ------- -------
Total cost of revenue............ 1,310 2,437 1,396 293 4,242 1,110 3,658
------ ------ ------- ------- -------- ------- -------
Gross profit............................... 780 1,887 1,154 (137) 989 352 3,457
Operating expenses:
Sales and marketing...................... 210 359 450 962 2,435 1,217 1,282
Research and development................. -- -- 1,067 1,669 6,653 3,474 3,488
General and administrative............... 894 1,767 2,446 3,704 4,824 1,757 3,294
------ ------ ------- ------- -------- ------- -------
Total operating expenses......... 1,104 2,126 3,963 6,335 13,912 6,448 8,064
------ ------ ------- ------- -------- ------- -------
Operating loss............................. (324) (239) (2,809) (6,472) (12,923) (6,096) (4,607)
Nonoperating income (expense).............. (61) (154) 1,283 (1,512) 754 43 99
------ ------ ------- ------- -------- ------- -------
Net loss................................... (385) (393) (1,526) (7,984) (12,169) (6,053) (4,508)
------ ------ ------- ------- -------- ------- -------
Accretion of preferred stock............... -- -- -- -- (65) -- (79)
------ ------ ------- ------- -------- ------- -------
Net loss applicable to common
stockholders............................. $ (385) $ (393) $(1,526) $(7,984) $(12,234) $(6,053) $(4,587)
====== ====== ======= ======= ======== ======= =======
Net loss applicable to common stockholders
per share -- basic and diluted........... $(0.21) $(0.21) $ (0.81) $ (3.48) $ (3.78) $ (1.88) $ (1.41)
====== ====== ======= ======= ======== ======= =======
Weighted average shares -- basic and
diluted.................................. 1,879 1,879 1,879 2,295 3,237 3,218 3,242
====== ====== ======= ======= ======== ======= =======
</TABLE>
19
<PAGE> 24
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------------------- -----------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------- ------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Pro forma data:
Pro forma net loss applicable to common
stockholders.......................... $(12,169) $(4,508)
======== =======
Pro forma net loss applicable to common
stockholders per
share -- basic and diluted............ $ (1.22) $ (0.36)
======== =======
Pro forma weighted average shares --basic
and diluted........................... 9,991 12,372
======== =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------- JUNE 30,
1994 1995 1996 1997 1998 1999
----- ----- ------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 121 $ 105 $ 813 $ 5,030 $ 723 $ 14,988
Total assets....................................... 406 833 2,065 8,516 11,025 22,325
Notes payable...................................... 300 271 3,200 1,618 -- --
Current portion of long-term debt and obligations
under capital leases............................. 42 151 146 -- -- --
Long-term debt and obligations under capital
leases, less current portion..................... 63 204 77 -- -- --
Stockholders' deficit.............................. (177) (556) (1,914) (1,946) (13,897) (18,324)
</TABLE>
20
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We are a leading provider of next-generation billing and customer care
software that can serve as the core of an enterprise solution for integrated
communications providers. From our founding in 1989 through 1996, we operated as
a software consulting company, performing contract consulting and software
development services and contract placement and staffing business. We
discontinued our consulting business and sold the contract placement and
staffing business to a third party in 1996. We began development work on our
flagship product, BillPlex, in 1996. In 1997, we introduced BillPlex and
installed the product at our first customer site. We recognized $156,000 in
revenue from the sale of third-party hardware and software products to this
customer during 1997. We recognized the first revenue from BillPlex license fees
and related professional services in 1998.
We derive our revenue primarily from license sales of BillPlex and from
related professional services, including implementation and customization
services, maintenance and support activities and training services. In addition,
professional services and other revenue include the revenue derived from the
sale of third-party software, which we provide when our customers require it.
Since the introduction of BillPlex, we had signed contracts with 20
communications service providers through June 30, 1999, ten of which were signed
in the six months ended June 30, 1999. As we have signed new contracts, our
revenue from license fees has grown both in absolute terms and as a percentage
of total revenue.
Revenue from license fees is based on the number of authorized system users
and computer processors. We receive license fees from our customers upon initial
license, and we expect to receive additional license fees under our pay as you
grow pricing model when our customers add new users and processors. We also
derive license fee revenue from existing customers who purchase additional
market packages to increase the functionality of their current system. We have
also entered into arrangements with service bureau providers that will utilize
our products to service their customers. We expect to receive fees from these
activities in the future.
The nature of each licensing arrangement determines how we recognize
revenue:
- If the contract requires us to perform significant production,
modification or customization of software, revenue is recognized using
the percentage of completion method, based on the ratio of total labor
hours incurred to date to total estimated labor hours. The total revenue
under these contracts represents license fees and professional services.
To date, most of our revenue has been recognized on this basis.
- If the contract requires us to deliver the product to the end user with
no future obligation to perform the implementation, we follow the current
provisions of Statement of Position 97-2 and recognize revenue upon
shipment of the product if the fee is fixed and determinable and
collectibility is probable.
- If the contract requires us to deliver the product to a third-party
integrator, we also follow the provisions of SOP 97-2, as amended by SOP
98-4 and SOP 98-9. However, we do not recognize revenue until the
software implementation is complete because of our obligation under the
contract to be available to assist the third-party integrator throughout
the implementation process. In the future, as our third-party systems
integrators gain more experience with our products, we may change our
contracts so that we have no
21
<PAGE> 26
further obligation after the delivery of the software. This will enable
us to recognize revenue when we ship our product.
Since late 1998, we have been investing heavily in our professional
services organization, including opening our Atlanta offices and the hiring of
consulting professionals, training professionals and customer support
professionals. We believe these investments are necessary to help insure the
satisfaction of our customers as we focus on increasing the number of our
BillPlex license transactions and expanding our business. We anticipate the
profit margin from our professional services organization to improve in future
quarters as the number of our BillPlex implementations increase and more
customers subscribe to our maintenance and support. We recognize revenue from
professional services associated with core BillPlex implementations on a
percentage of completion basis along with the license fees. Revenue from other
professional services and training services is recognized as those services are
performed. We recognize revenue from maintenance and customer support ratably
over the term of our maintenance and support agreements.
Sales and marketing expenses have been increasing since the introduction of
BillPlex in 1997, and are expected to increase in the future as we add
additional sales and marketing personnel and as we enter new geographical
markets.
Since 1996, we have invested heavily in research and development. All of
these costs have been expensed as incurred and we had no capitalized software
development costs as of June 30, 1999. To enhance our product offering and
market position, we believe that it will be essential for us to continue to make
significant investments in research and development. Accordingly, we anticipate
that research and development expenses are likely to increase in future periods.
As we grow and add additional facilities and personnel, we expect to incur
additional general and administrative expenses to support this growth.
We currently have a net operating loss carryforward for federal income tax
purposes in excess of $20 million, and are continuing to experience operating
losses for tax purposes. Therefore, we currently do not pay any federal income
taxes. However, the amount of the net operating loss and credit carryforwards
that we may utilize each year may be limited due to changes in stock ownership
that have occurred over the past several years.
22
<PAGE> 27
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data
expressed as a percentage of total revenue for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------- ------------------
1996 1997 1998 1998 1999
------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C>
Revenue:
License fees......................... --% --% 35.8% 33.3% 52.7%
Professional services and other...... 100.0 100.0 64.2 66.7 47.3
------ -------- ------ -------- ------
Total revenue................ 100.0 100.0 100.0 100.0 100.0
------ -------- ------ -------- ------
Cost of revenue:
License fees......................... -- -- 0.1 0.1 0.1
Professional services and other...... 54.8 187.8 81.0 75.9 51.4
------ -------- ------ -------- ------
Total cost of revenue........ 54.8 187.8 81.1 76.0 51.5
------ -------- ------ -------- ------
Gross profit........................... 45.2 (87.8) 18.9 24.0 48.5
Operating expenses:
Sales and marketing.................. 17.6 617.4 46.6 83.2 18.0
Research and development............. 41.8 1,069.8 127.2 237.6 49.0
General and administrative........... 95.9 2,374.5 92.2 120.2 46.3
------ -------- ------ -------- ------
Total operating expenses..... 155.4 4,061.7 266.0 441.0 113.3
Operating loss......................... (110.2) (4,149.5) (247.1) (417.0) (64.8)
------ -------- ------ -------- ------
Nonoperating income (expense).......... 50.3 (968.9) 14.4 2.9 1.4
------ -------- ------ -------- ------
Net loss............................... (59.9)% (5,118.4)% (232.7)% (414.1)% (63.4)%
====== ======== ====== ======== ======
</TABLE>
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Revenue
Total revenue increased $5.6 million to $7.1 million for the six months
ended June 30, 1999 from $1.4 million for the six months ended June 30, 1998.
Revenue from both licenses and services accounted for this increase due to a
significant increase in the number of implementations and newly booked contracts
in the six months ended June 30, 1999 compared to the six months ended June 30,
1998.
License Fees. License fees increased $3.2 million to $3.7 million for the
six months ended June 30, 1999 from $487,000 for the six months ended June 30,
1998. License fees increased to 52.7% of total revenue for the six months ended
June 30, 1999 from 33.3% for the six months ended June 30, 1998. These increases
were due to having more booked contracts and product implementations for the six
months ended June 30, 1999 than for the six months ended June 30, 1998, shortly
after we introduced BillPlex. As our business grows and as we continue to pursue
our software-based business model, we expect license fees to account for an
increasing percentage of total revenue.
Professional Services and Other. Professional services and other revenue
increased $2.4 million to $3.4 million for the six months ended June 30, 1999
from $975,000 for the six months ended June 30, 1998. This increase was due to
increased implementation services directly related to increased sales of
BillPlex. Professional services and other revenue decreased to 47.3% of total
23
<PAGE> 28
revenue for the six months ended June 30, 1999 from 66.7% for the six months
ended June 30, 1998.
Cost of Revenue
Total cost of revenue increased $2.6 million to $3.7 million for the six
months ended June 30, 1999 from $1.1 million for the six months ended June 30,
1998. Total cost of revenue as a percentage of total revenue decreased to 51.4%
for the six months ended June 30, 1999 from 75.9% for the six months ended June
30, 1998.
Cost of License Fees. Cost of license fees includes direct cost of labor,
benefits and packaging material for fulfillment and shipment of the BillPlex
software and related documentation, which is typically an insignificant
component of total cost of license fees. Cost of license fees increased to
$3,000 for the six months ended June 30, 1999 from $1,000 for the six months
ended June 30, 1998. This increase was due to increased license sales of
BillPlex.
Cost of Professional Services and Other. Cost of professional services and
other revenue includes direct cost of labor, benefits, materials and related
corporate overhead costs to provide professional services to customers. Cost of
professional services and other increased $2.6 million to $3.7 million for the
six months ended June 30, 1999 from $1.1 million for the six months ended June
30, 1998. These costs increased as we deployed more resources to support the
greater number of implementations that we performed during the period. Cost of
professional services and other revenue as a percentage of professional services
and other revenue decreased to 51.5% for the six months ended June 30, 1999 from
75.9% for the six months ended June 30, 1998. Cost of professional services and
other revenue for both periods includes expenses related to the following
activities performed after the initial release of BillPlex:
- Buildup of the infrastructure of the professional services organization
in order to better serve anticipated customers; and
- Performing beta testing and engineering services for initial reference
customers.
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries and commissions earned by sales and marketing personnel, travel,
promotional and related corporate overhead costs. These expenses increased
$65,000 or 5.3% to $1.3 million for the six months ended June 30, 1999 from $1.2
million for the six months ended June 30, 1998. The increase was primarily due
to costs associated with additional staffing. As a percentage of total revenue,
these expenses decreased to 18.0% for the six months ended June 30, 1999 from
83.2% for the six months ended June 30, 1998, due to the growth in our total
revenue.
Research and Development. Research and development expenses consist
primarily of salaries and benefits for software developers, management and
quality assurance personnel and related corporate overhead costs. Our research
and development expenses remained relatively constant at $3.5 million both for
the six months ended June 30, 1999 and for the six months ended June 30, 1998.
Expenses remained constant because the use of subcontractors was discontinued as
additional staff was hired. As a percentage of total revenue, these expenses
decreased to 49.0% for the six months ended June 30, 1999 from 237.6% for the
six months ended June 30, 1998.
General and Administrative. General and administrative expenses consist
primarily of salaries and benefits for our executive, finance, administrative,
human resources and information
24
<PAGE> 29
systems personnel, and related corporate overhead costs. Our general and
administrative expenses increased $1.5 million, or 87.5%, to $3.3 million for
the six months ended June 30, 1999 from $1.8 million for the six months ended
June 30, 1998. This increase was primarily due to the addition of finance,
executive, information systems and human resources personnel needed to support
the growth of our business. As a percentage of total revenue, general and
administrative expenses decreased to 46.3% for the six months ended June 30,
1999 from 120.2% for the six months ended June 30, 1998.
Nonoperating Income (Expense)
Nonoperating income consists primarily of interest income, net of interest
expense. Nonoperating income increased $56,000, or 130%, to $99,000 for the six
months ended June 30, 1999 from $43,000 for the six months ended June 30, 1998.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Revenue
Total revenue increased $5.1 million to $5.2 million in 1998 from $156,000
in 1997. Revenue increases from both license fees and professional services
accounted for this increase due to the increased number of contracts and related
implementations of BillPlex, which began in 1998.
License Fees. License fees increased to $1.9 million in 1998 from none in
1997. License fees increased to 35.8% of total revenue in 1998 from 0% in 1997.
We recognized our first license revenues from BillPlex in 1998 after the
introduction of the BillPlex product in 1997.
Professional Services and Other. Professional services and other revenue
increased $3.2 million to $3.4 million in 1998 from $156,000 in 1997. This
increase was due to increased implementation services performed directly related
to increase in license fees. Professional services and other revenue decreased
to 64.2% of total revenue in 1998 from 100.0% in 1997.
Cost of Revenue
Total cost of revenue increased $3.9 million to $4.2 million in 1998 from
$293,000 in 1997. Total cost of revenue as a percentage of total revenue
decreased to 81.1% in 1998 from 187.8% in 1997.
Cost of License Fees. Cost of license fees increased to $3,000 in 1998
from none in 1997 due to initiation of BillPlex license sales in 1998.
Cost of Professional Services and Other. Cost of professional services and
other revenue increased $3.9 million to $4.2 million in 1998 from $293,000 in
1997. These costs increased with the increase in revenue from services for 1998.
Cost of professional services and other revenue decreased to 126.5% of
professional services and other revenue in 1998 compared to 187.8% in 1997.
Operating Expenses
Sales and Marketing. Sales and marketing expenses increased $1.5 million,
or 152.9%, to $2.4 million in 1998 from $962,000 in 1997. This increase was
primarily due to the addition of personnel in sales and marketing, and the costs
of recruiting and relocating these personnel. As a percentage of total revenue,
these expenses decreased to 46.6% in 1998 from 617.4% in 1997.
25
<PAGE> 30
Research and Development. Research and development expenses increased $5.0
million, or 298.7%, to $6.7 million in 1998 from $1.7 million for 1997. The
increase in these expenses was due to the significantly increased investment in
software developers, quality assurance personnel and outside contractors to
support the continued development of BillPlex. As a percentage of total revenue,
these expenses decreased to 127.2% in 1998 from 1,069.8% in 1997.
General and Administrative. General and administrative expenses increased
$1.1 million, or 30.2%, to $4.8 million in 1998 from $3.7 million for 1997. This
increase was primarily due to the addition of finance, executive, information
services and human resources personnel to support the growth of our business. As
a percentage of total revenue, these expenses decreased to 92.2% in 1998 from
2,374.5% in 1997.
Nonoperating Income (Expense)
Nonoperating income was $754,000 in 1998 compared to nonoperating expense
of $1.5 million in 1997. Nonoperating income for 1998 was primarily attributable
to the investment of the proceeds of our preferred stock offering received
during 1998 and to a gain on sale of an unrelated software product. Interest
expense in 1997 was primarily attributable to interest on our notes payable.
Notes payable in the amount of $1.6 million plus accrued interest were repaid
from the proceeds of the preferred stock offering.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenue
Total revenue decreased $2.4 million to $156,000 in 1997 from $2.6 million
in 1996. This decrease was due primarily to our discontinuance of contract
consulting services in June 1996 and the sale of our placement services business
in November 1996. We performed no contract consulting services in 1997 while we
were engaged in the development and release of BillPlex.
License Fees. We had no license fees in either period as our first
BillPlex license fees were recognized in 1998. We installed our first BillPlex
system in 1997, but we did not recognize any license revenue from this
installation.
Professional Services and Other. Professional services and other revenue
decreased $2.4 million to $156,000 in 1997 from $2.6 million in 1996. We derived
all of our 1996 revenue from our contract consulting and contract placement
services business, which we discontinued and sold in 1996. In 1997, we received
$156,000 in revenue, attributable entirely to the sale of third-party software
products in connection with our first BillPlex installation.
Cost of Revenue
Total cost of revenue decreased $1.1 million to $293,000 due to the
decrease in revenue generating activities discussed above. Personnel and other
resources that had previously performed contract consulting services for us were
primarily reassigned to research and development activities. The $293,000 in
total cost of revenue in 1997 represented compensation and travel expenses of
our professional services employees and the cost of third party software
products in connection with our first BillPlex installation.
26
<PAGE> 31
Operating Expenses
Sales and Marketing. Sales and marketing expenses increased $512,000, or
113.9%, to $962,000 in 1997 from $450,000 in 1996. This increase was primarily
due to additional personnel in sales and marketing, and the costs of recruiting
and relocating these personnel. As a percentage of total revenue, these expenses
increased to 617.4% in 1997 from 17.6% in 1996.
Research and Development. Research and development expenses increased
$602,000, or 56.4%, to $1.7 million in 1997 from $1.1 million for 1996. The
increase in these expenses was primarily related to increases in the number of
software developers and quality assurance personnel required to support our
product development and testing activities for BillPlex. As a percentage of
total revenue, these expenses increased to 1,069.8% in 1997 from 41.8% in 1996.
General and Administrative. General and administrative expenses increased
$1.3 million, or 51.5%, to $3.7 million in 1997 from $2.4 million for 1996. This
increase was primarily the result of our addition of finance, executive, and
administrative personnel necessary to support the growth of our business during
this period. As a percentage of total revenue, these expenses increased to
2,374.5% in 1997 from 95.9% in 1996.
Nonoperating Income (Expense)
We had nonoperating expense of $1.5 million in 1997 compared to
nonoperating income of $1.3 million in 1996. The expense in 1997 was primarily
attributable to interest on our notes payable. The income in 1996 was primarily
attributable to gains on the sale of the placement division and the sale of
marketing rights to an unrelated software product for a combined total gain of
$1.8 million. In addition, interest expense was higher in 1997 than in 1996 due
to higher levels of debt during 1997.
27
<PAGE> 32
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth consolidated statement of operations data
for the last six quarters, as well as such data expressed as a percentage of
total revenue for those periods. This data has been derived from our unaudited
consolidated financial statements, which have been prepared on the same basis as
the audited consolidated financial statements and, in the opinion of our
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the information.
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1998 1998 1998 1998 1999 1999
--------- -------- --------- -------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
License fees........................... $ 57 $ 430 $ 973 $ 419 $ 949 $ 2,799
Professional services and other........ 138 837 1,557 820 830 2,537
------- ------- ------- ------- ------- -------
Total revenue................... 195 1,267 2,530 1,239 1,779 5,336
------- ------- ------- ------- ------- -------
Cost of revenue:
License fees........................... 0 1 0 2 2 1
Professional services and other........ 264 845 2,040 1,090 1,266 2,389
------- ------- ------- ------- ------- -------
Total cost of revenue........... 264 846 2,040 1,092 1,268 2,390
------- ------- ------- ------- ------- -------
Gross profit............................. (69) 421 490 147 511 2,946
Operating expenses:
Sales and marketing.................... 576 641 686 532 485 797
Research and development............... 1,388 2,086 1,411 1,768 1,577 1,911
General and administrative............. 998 759 1,329 1,738 1,465 1,829
------- ------- ------- ------- ------- -------
Total operating expenses........ 2,962 3,486 3,426 4,038 3,527 4,537
------- ------- ------- ------- ------- -------
Operating loss........................... (3,031) (3,065) (2,936) (3,891) (3,016) (1,591)
Nonoperating income (expense)............ 69 (26) 527 184 58 41
------- ------- ------- ------- ------- -------
Net loss................................. $(2,962) $(3,091) $(2,409) $(3,707) $(2,958) $(1,550)
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
(AS A PERCENTAGE OF TOTAL REVENUE)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
License fees........................... 29.2% 33.9% 38.5% 33.8% 53.3% 52.5%
Professional services and other........ 70.8 66.1 61.5 66.2 46.7 47.5
--------- ------- ------- ------- ------- -------
Total revenue................... 100.0 100.0 100.0 100.0 100.0 100.0
--------- ------- ------- ------- ------- -------
Cost of revenue:
License fees........................... 0.1 0.1 0.0 0.2 0.1 0.0
Professional services and other........ 135.2 66.7 80.6 88.0 71.2 44.8
--------- ------- ------- ------- ------- -------
Total cost of revenue........... 135.3 66.8 80.6 88.2 71.3 44.8
--------- ------- ------- ------- ------- -------
Gross profit............................. (35.3) 33.2 19.4 11.8 28.7 55.2
--------- ------- ------- ------- ------- -------
Operating expenses:
Sales and marketing.................... 295.4 50.6 27.1 42.9 27.3 14.9
Research and development............... 711.8 164.6 55.6 124.7 88.6 35.8
General and administrative............. 511.8 59.9 52.5 140.3 82.3 34.3
--------- ------- ------- ------- ------- -------
Total operating expenses........ 1,519.0 275.1 135.4 325.9 198.2 85.0
--------- ------- ------- ------- ------- -------
Operating loss........................... (1,554.3) (241.9) (116.0) (313.9) (169.5) (29.8)
Nonoperating income (expense)............ 35.5 (2.1) 20.8 14.9 3.3 0.8
--------- ------- ------- ------- ------- -------
Net loss................................. (1,518.8)% (244.0)% (95.2)% (299.0)% (166.2)% (29.0)%
========= ======= ======= ======= ======= =======
</TABLE>
28
<PAGE> 33
Our operating results have varied significantly from quarter to quarter in
the past and may continue to vary significantly from quarter to quarter in the
future due to a variety of factors. For example, our revenues decreased in the
fourth quarter of 1998 as compared to the second and third quarters of 1998
primarily because of delays in completing contract negotiations with several new
customers. Quarterly fluctuations have occurred as a result of the timing of the
completion of contracts with customers since we derive a large part of our
revenue each quarter from a small number of customers. Due to the recent
introduction of BillPlex, we have not experienced the same seasonal fluctuations
as some of our competitors, such as a slowdown during the summer months and an
increase in revenue during the last quarter of the year. However, as we grow, we
may experience similar quarterly fluctuations due to seasonality. For all these
reasons, we believe that results of operations for interim periods should not be
relied upon as any indication of the results to be expected in any future
period.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have funded our operations primarily through sales of
equity securities and, to a lesser degree, through notes payable. Through June
30, 1999, we have raised approximately $41.5 million of equity capital and have
raised $6.2 million through the issuance of notes payable. All notes payable had
been repaid or converted to equity securities as of June 30, 1999. From 1996
through June 30, 1999, we have invested $4.6 million in capital expenditures.
Beyond our capital expenditures, the funds we have raised have been applied to
support our working capital needs. Our working capital needs have expanded
significantly as our client base has grown. Our sources of liquidity as of June
30, 1999 consisted principally of cash and cash equivalents and securities
available for sale of $15.0 million.
Net cash used in operating activities was $3.9 million for the six months
ended June 30, 1999, $11.2 million in 1998, $5.9 million in 1997, and $1.3
million in 1996. The principal use of cash for all periods was to fund our
losses from operations.
Net cash used in investing activities was $6.0 million in 1998, $2.9
million in 1997 and $332,000 in 1996 and net cash provided by investing
activities was $4.6 million for the six months ended June 30, 1999.
Net cash provided by financing activities was $13.6 million for the six
months ended June 30, 1999, $12.9 million in 1998, $13.0 million in 1997 and
$2.4 million in 1996. Cash provided by financing activities was attributable to
sales of our common and preferred stock and the issuance of notes payable.
We believe that the net proceeds from this offering, together with our
current cash and cash equivalents, will be sufficient to meet our anticipated
cash needs for working capital and capital expenditures for at least the next 18
months. We may require additional funds to support our working capital
requirements or for other purposes and we may seek to raise additional funds
through public or private equity financing or from other sources. There can be
no assurance that additional financing will be available at all or that if
available, such financing will be obtainable on terms favorable to us or that
any additional financing would not be dilutive.
YEAR 2000 READINESS
Some computers, software and other equipment include programming code in
which calendar year data is abbreviated to only two digits. As a result of this
design decision, some of these systems could fail to operate or fail to produce
correct results if, for example, 00 is interpreted to mean 1900, rather than
2000. These problems are widely expected to increase in
29
<PAGE> 34
frequency and severity as the year 2000 approaches and are commonly referred to
as the "year 2000 problem."
State of Readiness of our BillPlex Product. Our review of the year 2000
readiness of BillPlex is performed as a part of our normal quality assurance
program. This program requires testing of computer processes with the hardware
system clock set to dates in the year 2000 and includes testing of dates in the
year 2000 as inputs. We have created version 2.3 of BillPlex on which we are
currently conducting systematic year 2000 tests based on a variety of test plans
and system test scenarios. We intend to have this testing process completed
during the third quarter of 1999. As of the date of this prospectus, we have
identified no material year 2000 compliance issues with respect to BillPlex as
currently licensed. However, BillPlex operates in complex network environments
and directly and indirectly interacts with a number of other hardware and
software systems. We have not performed extensive tests on all hardware,
software, switches and other devices that may operate in conjunction with
BillPlex, or provide data to or receive data from BillPlex. We also have not
tested custom interfaces written for BillPlex. Some customers using BillPlex may
have year 2000 problems.
State of Readiness of our Internal Information Technology Systems. We may
be affected by year 2000 issues related to non-compliant internal systems
developed by us or by third-party vendors. We believe that we have identified
substantially all major computers, software applications and related equipment
used with our internal operations that must be modified, upgraded or replaced to
minimize the possibility of a material disruption to our business. We have begun
modifying, upgrading and replacing these systems and expect to complete this
process before the end of the third quarter of 1999. We have also received
assurances from our third-party vendors for their material systems in use by us
that their systems are year 2000 ready.
Systems Other Than Information Technology Systems. Our internal operations
and businesses are also dependent upon computer-controlled systems of third
parties such as suppliers, customers and service providers. The operation of our
office and facilities equipment, such as fax machines, photocopiers, telephone
switches, security systems, elevators, other common devices and utilities, may
be affected by the year 2000 problem. We are currently assessing the potential
effect of, and costs of remediating, the year 2000 problem on this equipment. We
believe that, absent a critical failure beyond our control, such as prolonged
loss of electrical or telephone service, year 2000 problems experienced by third
parties will not have a material impact upon us.
Cost Assessment. We do not separately track expenditures to achieve year
2000 readiness. Those expenditures are primarily absorbed within our development
organization. To date, our costs related to year 2000 readiness have not been
material relative to our overall development expenditures. Furthermore, based on
our experience to date, and our assessment as of the date of this prospectus, we
do not anticipate that costs associated with remediating non-compliant products
or internal systems, if any, will be material. However, as we have not completed
the assessment of our internal systems, we cannot assure you of that outcome.
Risks. Any failure of our products to achieve year 2000 readiness could
result in a decrease of sales of our products, an increase in allocation of
resources to address year 2000 problems of our customers without additional
revenue commensurate with such dedication of resources, or an increase in
litigation costs relating to losses suffered by our customers due to such year
2000 problems. Failures of our internal systems could prevent us from processing
orders, issuing invoices, and developing products, and could require us to
devote significant resources to correcting such problems. Due to the general
uncertainty inherent in the year 2000
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computer problem, resulting from the uncertainty of the year 2000 readiness of
third-party suppliers and vendors, we are unable to determine at this time
whether the consequences of year 2000 failures will have a material impact on
our business, results of operation, and financial condition.
Contingency Plans. We are currently developing contingency plans to be
implemented as part of our efforts to identify and correct year 2000 problems
affecting our internal systems. We expect to complete our contingency plans by
the end of the third quarter of 1999. Depending on the systems affected, these
plans could include:
- accelerated replacement of affected equipment or software;
- the use of backup equipment and software;
- increased work hours for our employees or use of contract personnel to
correct on an accelerated schedule any year 2000 problems which arise or
to provide manual workarounds for information systems; and
- other similar approaches.
If we are required to implement any of these contingency plans, these plans
could have a material adverse effect on our business, financial condition or
operating results.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1998, the AICPA issued Statement of Position 98-1, Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use, or SOP
98-1. We have adopted SOP 98-1 and its adoption did not have a material effect
on our financial position or results of operations.
In March 1998, the AICPA issued Statement of Position 98-5 Reporting on the
Costs of Start-Up Activities. SOP 98-5 states that all costs associated with
start-up activities, including organization costs, should be expensed as
incurred. Companies that previously capitalized such costs are required to write
off the unamortized portion of such costs as a cumulative effect of a change of
accounting principle. We had no such costs capitalized as of January 1, 1999 and
therefore the adoption of this statement had no impact on our consolidated
financial statements.
In June 1998, the FASB issued SFAS No. 133 Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 requires the recognition of all
derivatives as either assets or liabilities in the balance sheet and the
measurement of those instruments at fair value. The accounting change in the
fair value of a derivative depends on the planned use of the derivative and the
resulting designation. We are required to implement the statement in the first
quarter of 2000. We have not used derivative instruments and believe the
adoption of this statement will not have significant effect on our financial
statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our financial instruments consist of cash that is invested in institutional
money market accounts. At June 30, 1999, the carrying value of our financial
instruments approximated their fair values based on current market prices and
rates. We do not use derivative financial instruments in our operations or
investments and do not have significant operations subject to fluctuations in
commodities prices or foreign currency exchange rates.
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BUSINESS
OVERVIEW
We are a leading provider of next-generation billing and customer care
software that can serve as the core of an enterprise solution for integrated
communications providers, or ICPs. Our flagship product, BillPlex, is designed
to enable providers of multiple communications services, such as voice, data,
internet access, video and application hosting, to compete more effectively
while lowering the total costs of their strategic billing and customer care
services. The majority of our customers are ICPs who have indicated to us that
they already utilize or plan to utilize BillPlex to support interest access and
data services in addition to traditional voice services. BillPlex's innovative
software architecture gives service providers the ability to rapidly and cost-
effectively deploy a truly convergent service offering -- including multiple,
usage-based services; a single, unified invoice; and a single point for customer
management across all services. Our solution provides mission-critical functions
such as account and service provisioning, subscriber care and management,
rating, billing and payment processing. BillPlex was designed to serve as the
central integration point for a service provider's enterprise information
systems. We utilize our direct sales organization and a variety of strategic
marketing alliances to reach our targeted customer base of companies that are
seeking to provide multiple, convergent communications services.
INDUSTRY BACKGROUND
The Communications Industry
There is significant competition in the communications industry today in
the United States, due to deregulation that began with the breakup of AT&T in
1984 and intensified as a result of the Telecommunications Act of 1996. These
events, along with similar deregulation and privatization trends in Canada,
Latin America, Europe and Asia, have increased competition worldwide by allowing
new entrants into the market. Many new service providers have emerged that seek
to gain market share from incumbent service providers, such as local exchange
carriers, long distance service providers, and wireless companies. At the same
time, customers have begun to demand, and service providers are making
available, an increasing variety of communications services, including:
- traditional voice services, such as local exchange and long distance;
- wireless services, such as cellular, paging, personal communication
services, or PCS, and satellite communications;
- data services, such as internet access and digital subscriber lines;
- video services, such as cable television and pay-per-view services;
- new voice services, such as voice over internet protocol, or internet
telephony; and
- application hosting services, such as those offered by third-party
application solution providers, or ASPs, providing end users with remote
access and usage of application software systems.
Customers now have greater freedom of choice for their communications needs
and, consequently, core communications services have become commoditized in this
highly competitive market. As customers seek the lowest priced communications
services, the rate of customer turnover among providers, or churn, has increased
dramatically. As a result, service providers must find new ways to distinguish
themselves from their competitors to win new
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customers and retain their existing customers. Service providers are seeking to
acquire new customers by focusing on rapid new service deployment, increased
marketing activities, attractive new rate programs and creative discounting.
These service providers are also trying to attract new customers as well as
retain existing customers by providing superior customer care. In addition, many
service providers have increasingly begun to bundle together and cross-discount
various combinations of communications services to differentiate themselves.
Emergence of Integrated Communications Providers and Convergent Services
These vast changes in the communications environment, particularly the
growth of internet usage and other data services, have spawned a new generation
of integrated communications providers, or ICPs, that bundle a variety of
communications services. This merging of formerly separate services, known as
convergence, has created the framework for new market entrants and incumbent
providers to aggressively move toward multi-service market offerings. ICPs can
be incumbent service providers, such as AT&T, Worldcom, Sprint and BellSouth,
who historically offered a single service but are adding cable television,
wireless telephony, internet access or other services, or new market entrants,
such as Level 3 Communications and Qwest Communications International and other
emerging regional ICPs.
Service Provider Information Systems
Convergence has far-reaching effects on a service provider's business model
and the processes and systems that support it. Service providers rely on
information systems to perform mission-critical operations such as service
activation, provisioning, customer service and billing. Limitations in a
provider's information system can increase the provider's operating costs, as
well as prevent it from offering new services or marketing programs, thereby
impairing its competitiveness and financial performance.
Billing and customer care systems, or BACC systems, are among the key
components of a service provider's information systems because they enable the
provider to better manage its customers and revenues and to dynamically change
and grow service offerings, marketing programs and rate plans. In today's
intensely competitive communications market, we believe BACC systems can provide
a competitive advantage as service providers attempt to differentiate themselves
by providing superior features such as bundled service offerings,
cross-discounting, one-call customer service and a single bill for multiple
services.
Many BACC systems currently in use were created before the emergence of
today's competitive market which we believe is seeking bundled services. Service
providers have been forced to repeatedly modify these legacy systems over time
as they have introduced new offerings, marketing promotions and rate plans in
response to intense competition. As a result, many existing service providers
maintain an extremely complex information systems environment consisting of
numerous proprietary systems. These systems have only a limited interoperability
with other elements of the information system that may be acquired by a service
provider or created as a result of a new product or service offering. These
patchwork systems frequently employ older technologies, are costly to maintain
and were designed to support a single communications service. They require
significant time, resources and effort to modify, making it difficult for
service providers to respond quickly and competitively with innovative marketing
promotions and new service offerings.
Next-Generation BACC Requirements
Over the past decade, a first-generation of third-party BACC vendors
emerged as service providers began to replace their older BACC software. While
several sizable and profitable BACC vendors have emerged, we believe the
first-generation BACC systems still have not
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delivered the performance and functionality that service providers demand. In
general, first-generation BACC systems still employ older technologies and
architectures, were designed before the proliferation of ICPs, are inflexible
and require substantial amounts of costly customization and maintenance.
BACC systems must enable service providers to respond quickly to
competition and changing market conditions in today's fast-growing, dynamic
environment. We believe that both existing and emerging ICPs are looking for
next-generation BACC solutions that are designed to:
- support multiple, convergent communications services;
- speed deployment of new services and pricing programs;
- interoperate with other components of the service provider's information
system; and
- enable easy modification and maintenance without a costly information
technology staff.
THE DALEEN SOLUTION
We are a leading provider of next-generation BACC software that can serve
as the core of an enterprise solution for integrated communications providers.
Our flagship product, BillPlex, enables our customers to provide comprehensive
billing, provisioning, and customer care for a wide array of communications
services that include local, long distance and wireless voice; internet access
and other data services; and application hosting. The majority of our customers
have indicated to us that they are utilizing or planning to utilize BillPlex to
support data services in addition to traditional voice services. BillPlex plays
a key strategic role in a service provider's business by improving its ability
to compete effectively while simultaneously lowering the total cost of providing
BACC services. BillPlex is designed to enable service providers to capture the
key business benefits of:
Increased revenue and market share. From inception, BillPlex has been
designed as a next-generation, convergent software solution to provide billing
and customer care for companies seeking to provide multiple communications
services. BillPlex's innovative architecture has the inherent flexibility to
enable the offering of new communications services and marketing programs and to
respond rapidly to dynamic market conditions without being constrained by its
BACC system. BillPlex enables a service provider to increase revenue and market
share by:
- shortening the initial time required for a new market entrant to launch
its business;
- shortening the time to market for an existing provider to offer new
promotions and services;
- allowing a provider to immediately activate services when a subscriber is
added to the system;
- enabling a provider to offer targeted marketing programs and service
bundles that are optimized for maximum revenue and market penetration;
and
- generating real-time bills that are accurate and easy to understand,
reducing fraud, disputed charges and uncollected revenue.
A pre-configured, whole-product solution. BillPlex is a complete BACC
solution, providing a comprehensive suite of functions and the ability to offer
multiple, convergent communications services under a single, unified invoice. In
addition, BillPlex is available in pre-configured market packages, which enable
providers to enter specific markets and rapidly launch customized
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services with minimal system implementation costs. We currently offer a package
for competitive local exchange carriers, or CLECs, and are in the process of
developing packages for the markets for internet service providers, or ISPs,
integrated communications providers, or ICPs, application service providers, or
ASPs, and wireless providers.
Improved customer service and customer retention. BillPlex enables a
service provider to offer superior customer care and responsiveness, thus
increasing customer retention. With BillPlex, service providers can create
flexible, unified invoices for all segments of their customer bases. For
example, BillPlex enables service providers to better serve business subscribers
through custom-tailored invoices that match individual organizational structures
and accounting needs. For residential customers, BillPlex allows service
providers to create personalized service bundles that increase customer loyalty
and the costs of switching to a different service provider. In addition,
BillPlex enables a customer service representative to provide superior customer
care and responsiveness through real-time access to all necessary subscriber
account information. Customers are also able to access their own account
information 24 hours per day over the internet.
Enterprise integration and interoperability. BillPlex was designed as a
next-generation BACC software platform, enabling seamless integration with other
applications in a service provider's enterprise operations environment. Our
industry standards-based, open application programming interfaces, or APIs,
allow BillPlex to interoperate with other software programs without writing
custom interfaces. Our open APIs lower the cost of installation and allow
customers to upgrade BillPlex and other enterprise applications independently,
reducing the lifetime costs of system operation and maintenance.
Flexibility, scalability and reliability. BillPlex can grow with a service
provider's needs, scaling down to the needs of the smallest new market entrant
or scaling up for the environment of a large, incumbent service provider. Our
pay as you grow pricing model permits customers to purchase additional licenses
and functionality only as they need them. In addition, BillPlex's flexible
architecture enables our customers to easily support additional communication
service offerings, should they choose to bundle more services in the future.
BillPlex allows providers to distribute database information and processing
across multiple servers, which minimizes the impact of a server failure and
maximizes system availability and reliability.
Increased productivity and lower total operating costs. BillPlex
simplifies system management and user training, because it is a comprehensive
billing solution that allows multi-service rating, customer management, and
invoicing from a common platform. Because additions and modifications to service
offerings, rate plans, and subscribers do not require changes to core BillPlex
software, customers have significantly lower maintenance costs in comparison
with first-generation systems due to reduced reprogramming and information
technology support required to operate and maintain the system. We provide a
toolkit and related training that allow our customers to perform all functions
necessary to adapt, extend, maintain and update their BillPlex solution.
Finally, the ability of BillPlex to integrate quickly with other existing
enterprise software programs and to operate in a Windows NT, Unix or mixed
configuration protects a customer's investment in software, hardware and
supporting personnel, knowledge and data.
STRATEGY
Our goal is to become the leading provider of BACC software solutions to
ICPs by:
Aggressively targeting ICPs. We believe our flagship product, BillPlex, is
well suited for the ICP market because it has been designed from inception as a
truly convergent, rapid time-
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to-market solution. BillPlex provides a comprehensive product solution for
billing and customer care that a communications service provider needs to be
competitive. We believe that our innovative solution provides us with an
opportunity for significant growth as broad industry trends continue to drive
the dynamic expansion of the ICP market.
Building a scalable, software-based business model. We provide
pre-configured software solutions that require minimal customization, as
compared to the highly customized nature of most legacy and first-generation
systems. We believe that our pre-integrated packaged solution provides us with a
competitive advantage that we intend to exploit as we pursue our market
leadership goal. This approach is designed to permit us to achieve the high
margins and rapid growth typical of software companies.
Leveraging strategic marketing alliances. We have established strategic
marketing alliances with industry-leading information systems integrators, such
as CAP Gemini, Danet, Integris Groupe Bull and Unisys, and with providers of
complementary information system components, such as Eftia, Oracle, Telcordia
and Vertex. These alliances help extend our market coverage and provide us with
new business leads and access to a large pool of highly trained implementation
personnel. We are continually seeking to expand the number of partners we work
with to further penetrate the market and accelerate our growth.
Developing and maintaining long-term customer relationships. We seek to
develop and maintain long-term, mutually beneficial relationships with our
customers. Our pay as you grow pricing model is targeted to attract and retain
customers through all phases of their growth. We believe that long-term
relationships with rapidly growing customers will lead to additional product
sales, customer references and ongoing support and maintenance revenue.
Expanding into new geographic markets and industry segments. Our current
customers are located primarily in the United States and Latin America. We
intend to target and penetrate new geographic markets, particularly Europe and
other international markets, as these markets continue to experience market
trends similar to those that have driven growth in the United States. Our
current plans are for entry into Europe in 2000 and into Southeast Asia in 2001.
Further, we intend to penetrate additional market segments, such as the cable
television and utilities markets, through the development and release of
pre-configured packages specifically targeted at those market segments. We have
no scheduled entry dates for penetrating these markets at this time.
PRODUCTS
Our flagship product, BillPlex, is a next-generation BACC software platform
that provides centralized integration of a comprehensive enterprise solution,
enabling communications service providers to perform complex, mission-critical
functions such as account and service provisioning, subscriber care and
management, rating, billing and payment processing. BillPlex's design gives
service providers the ability to rapidly and cost effectively deploy a
convergent service offering -- including multiple, usage-based services, a
single, unified invoice, and a single point for customer relationship
management. The BillPlex system's flexible, distributed architecture supports
the Windows NT and Unix operating systems. Its industry-standard open APIs allow
rapid integration with a variety of operational and business support systems.
BillPlex also provides an optional web interface that allows subscribers to view
their account status and perform other self-care functions at any time over the
internet.
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Key features of BillPlex are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
CATEGORY DESCRIPTION
- ------------------------------------------------------------------------------------
<S> <C> <C>
ACCOUNT AND - Allows a service provider to add, change or delete
SERVICE residential and business subscribers and set up
PROVISIONING multi-tier organizational relationships; assign services
to each subscriber; and bundle services through an
easy-to-use Windows task-based graphical user interface
that utilizes icons to represent computer commands.
- Supports an easy-to-use interface for managing complex
accounting and organizational invoicing requirements
- Supports dynamically configurable subscriber
characteristics for capturing demographic information
customized to the provider's needs
- Enables commission calculation by allowing a service
provider to keep track of sales agent information for
each subscriber and service
- Manages inventory of connection numbers, such as
telephone numbers and internet protocol addresses
- Provisions services at network elements and application
servers through its network mediation interface and
optional third-party network mediation devices
- Enables subscriber access to account information through
the internet
- ------------------------------------------------------------------------------------
SUBSCRIBER - Allows a service provider to provide immediate, or
MANAGEMENT real-time, access to information about the account and
each service subscribed to a single customer service
representative
- Logs all customer interactions for quality assurance
- Enables analysis of marketing program effectiveness
- ------------------------------------------------------------------------------------
USAGE PROCESSING - Allows a service provider to collect and process usage
data for multiple services from a variety of sources in
real time, batch mode or both
- Provides a graphical user interface for configuring usage
data import formats to accommodate differences among the
network elements of various vendors
- Archives usage data based on a service provider's policy
- ------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
CATEGORY DESCRIPTION
- ------------------------------------------------------------------------------------
<S> <C> <C>
BILLING - Provides an easy-to-read, accurate, unified bill that
enables flexible, competitive marketing programs through
bundling of convergent services, including cross-service
and volume discounting
- Supports flexible billing hierarchies so that volume
discounts can be applied to various organizational
structures
- Supports comprehensive taxation plans
- Allows a service provider to extend and adapt BillPlex
functions such as creating new rate plans and integrating
with existing enterprise applications, such as general
ledger
- Allows subscribers to access and view their account
statements from the internet
- ------------------------------------------------------------------------------------
PAYMENT PROCESSING - Enables fast, low-cost payment processing for cash,
credit card and batch lockbox payments
- Reduces potential losses through effective collection and
credit management
- Supports prepaid deposit, refund and returned check
processing
- Verifies customer credit information through BillPlex's
real-time credit bureau link
- Allows payment to one or more open invoices for a given
subscriber
- ------------------------------------------------------------------------------------
REPORTING - Offers 32 standard reports
- Provides a toolkit including a custom report generation
utility
- ------------------------------------------------------------------------------------
SYSTEM - Allows a service provider to assign different levels of
ADMINISTRATION authorization to customer service representatives so that
they can only access and perform functions for which they
are authorized
- Allows a service provider to define system-wide rules and
policies for system operation
- ------------------------------------------------------------------------------------
INTERNATIONAL - Encapsulates language sensitive components for easy
SUPPORT language translation
- Supports a different currency selection for each account
- ------------------------------------------------------------------------------------
</TABLE>
BillPlex Market Packages. Our current market packages and those under
development are designed to provide a complete, service-ready rating and billing
system that includes:
- pre-configured data reports that enable the provision of services, a
standard invoice, rate plans, payment applications and documentation
that tailor BillPlex to meet the requirements for particular markets;
and
- the ability to easily work with third-party applications, such as
taxation and address validation, for a particular market.
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In addition, we provide standardized set-up, configuration and testing of
BillPlex and our market packages to ensure proper implementation and optimal
performance within predefined parameters.
We believe service providers gain a number of advantages from our
pre-configured market packages. Providers are able to launch service much faster
and at lower costs than if they implemented a traditional BACC system since all
of the business processes and program settings appropriate to their market model
have already been pre-configured in the BillPlex market package software.
Because the market packages are based on the core BillPlex product, the service
provider retains all of the system flexibility, adaptability, and low total cost
of ownership that the BillPlex architecture provides. Providers can quickly add
new services, rate plans, and promotional programs as needed without expensive
and time-consuming customization.
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We currently have or plan to make available the following market packages:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
PACKAGE DESCRIPTION
- ----------------------------------------------------------------------------------
<S> <C>
CLEC (currently A complete, service-ready BACC system that enables a CLEC to
available) bill for:
- Residential and business local and long distance services,
such as switched and dedicated services and custom calling
features
- Calling card services
- Wholesale service offering support
- Includes basic local calling area taxation setup
- ----------------------------------------------------------------------------------
ISP/DATA SERVICES A complete, service-ready BACC system that will enable an
(scheduled for ISP to bill for:
release in 3rd - Residential and business dial-up, digital subscriber line,
quarter of 1999) or DSL, and dedicated internet access
- Web and content hosting
- Virtual private network, or VPN
- ----------------------------------------------------------------------------------
ICP A complete, service-ready BACC system that will enable an
(scheduled for ICP to bill for:
release in 3rd - Residential and business local and long distance services,
quarter of 1999) such as switched and dedicated services and custom calling
features,
- Calling card services
- Wholesale service offering support
- Residential and business dial-up, DSL, and dedicated
internet access
- Web and content hosting
- VPN
- Integrated voice and data services on a single invoice
- ----------------------------------------------------------------------------------
ASP A complete, service-ready BACC system that will enable an
(scheduled for ASP to bill for:
release in 4th - Flat-rate application hosting services
quarter of 1999) - Usage-sensitive application billing services
- ----------------------------------------------------------------------------------
WIRELESS A complete, service-ready BACC system that will enable a
(scheduled for wireless carrier to bill for:
release in 1st - Residential and business zoned wireless and personal
quarter of 2000) communications services, or PCS, such as free airtime
minutes and tiered airtime rating charges and discounts
- Long distance services, such as zoned toll areas and
custom calling wireless features
- The processing, clearing and billing of third party
network calls
- ----------------------------------------------------------------------------------
</TABLE>
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CUSTOMER SERVICE AND TECHNICAL SUPPORT
Our customer services are designed to provide customers with superior
support while giving them the tools and knowledge they need to independently run
their day-to-day operations. We provide the following services:
Professional consulting services. We provide a variety of professional
consulting services to assist customers in the implementation, modification and
customization of the BillPlex product and its market-based packages. We work
with customers to establish business models and processes that utilize BillPlex
to increase their market power and lower their operating costs.
Training. We offer training programs for system operators, billing
administrators and supervisors of customer service representatives. Our training
programs are designed to provide customers with the tools and education they
need to be able to train their own personnel for maximum effectiveness.
Maintenance. We have a comprehensive maintenance and support program which
provides customers with timely and high-quality maintenance and support services
for our products. These services are generally provided under maintenance
agreements between our customers and us. These agreements entitle our customers
to multiple levels of telephone technical support for prompt and professional
response to customer questions or problems and maintenance. We also provide
customer self-service capabilities 24 hours per day through our on-line
maintenance tracking system.
Third-party software fulfillment. When our customers require it, we
provide a complete solution by offering third-party software products they may
need in order to rapidly implement their systems. We provide enabling platform
products, such as the Windows NT operating system and Oracle database software;
complementary products that integrate with BillPlex, such as QMS address
validation software; and tools that support development and reporting on the
data in BillPlex, like Crystal Reports or Borland's development toolkit
software.
TECHNOLOGY
BillPlex was developed using an open architecture with industry
standards-based application programming interfaces, or APIs, which enable it to
readily integrate with other software applications. These APIs create an
object-oriented, multi-layered architecture that supports an enterprise-wide,
distributed environment, with the following benefits:
- increased system price/performance, reliability, scalability and
manageability;
- a plug-and-play environment in which applications can be integrated
rapidly and upgraded independently;
- simplified, lower-cost application development and maintenance efforts;
- the ability to easily extend and adapt BillPlex functionality; and
- interoperability with a large number of applications and systems.
Our multi-layer, or N-tier, architecture consists of the following:
Billing application framework. This tier employs a flexible and scalable
messaging protocol to support a distributed, event-driven framework for
extending and adapting BillPlex functions to meet the most complex customer
requirements. The API provided by the billing application framework allows a
customer to tailor BillPlex's functions like rating and enables its
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interoperability with external third-party systems like taxation or mediation.
The billing application framework allows applications to run on any server in a
network environment, offering greater scalability and throughput.
Data tier. Using a layer of business data objects, enterprise applications
can access not only BillPlex's Oracle relational database but also third-party
data sources, enabling the development of applications with transparent access
to any data source. Business data objects encapsulate data access functions for
entities such as subscriber, service and rate plans.
Enterprise application framework. This three-layer framework consists of
business process objects, business rule objects, and business data objects.
Business process objects encapsulate processes such as service order creation.
Business rule objects enforce rules required by customers and the underlying
data model. This partitioning offers greater flexibility by allowing dynamic
modification of business rules and processes without changing data objects. The
enterprise application framework supports transaction integrity and resource
pooling, offering a scalable, reliable environment for mission-critical
enterprise applications.
Enterprise application tier. This tier includes enterprise applications,
such as customer relationship management, decision support, enterprise resource
planning software and network management systems, that use the BillPlex
enterprise application framework API to access BillPlex's data and functions, as
well as other databases and applications supported by the framework.
Client tier. The client tier includes any application that allows an end
user to access BillPlex. For example, such an application can be a customer
service representative using BillPlex's graphical user interface client, an
internet user browsing for self-care, a sales agent using a customer
relationship management application to sell services to customers or a network
administrator using an operating support system application to manage network
inventory.
[GRAPHIC INSERT HERE]
CUSTOMERS
Our typical customers are companies that are seeking to provide multiple
communications services including local, long distance and wireless voice
communications, internet access and other data communications services. We
believe our customers benefit from BillPlex's design for multiple, convergent
services, as well as its scalability and flexibility. We also believe our
customers value BillPlex's comprehensive design, rapid installation time, ease
and speed of downstream changes, pre-integration with other enterprise
applications and low operating costs.
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As of June 30, 1999, we had 20 customers, consisting of local and
competitive local exchange carriers, interexchange carriers, internet service
and other data services providers, wireless carriers, and ICPs. These customers
are located in the United States, Canada, Latin America and Europe. Our
customers include: America Latina Telecomunicacoes Avencades, SA; KINI L.C.;
PaeTec Corp.; Pac-West Telecomm, Inc.; NewSouth Communications Corp.; Network
Access Solutions; and 2nd Century Communications, Inc.
For the six months ended June 30, 1999, CTC Communications, Inc., NewSouth
Communications Corp., Q-Comm Corporation, Pac-West Telecomm, Inc. and Gabriel
Communications, Inc. each accounted for 10% or more of our total revenue.
SALES AND MARKETING
Sales. Our sales strategy is focused on emerging ICPs, including carriers
who need a solution that supports multiple communications services, as well as
carriers with a single-service offering who plan to migrate to a
multiple-service offering. Through our direct sales approach, we have developed
relationships with service providers through a problem-solving sales process and
work closely with them to define and determine how their needs can be fulfilled
by our BillPlex product. Through our indirect sales channel approach, we have
developed relationships with leading professional services providers that can
sell, implement and customize our products. In addition, we have developed
relationships with other leading communications-focused companies that offer
products complementary to ours, and who can sell our products jointly with their
solutions.
Due to the sophisticated nature of our products and services, the duration
of a sales cycle can typically range anywhere from 30 days to one year. We
intend to gradually increase the size of our direct sales organization while
also focusing on the ongoing development of the indirect sales channel through
our marketing alliances.
Marketing. Our marketing programs are focused on creating awareness,
interest and preference for our products and services. We engage in a variety of
marketing activities, including:
- supporting our strategic marketing alliances;
- conducting seminars, trade shows and special events;
- creating and placing advertisements;
- creating direct mail and direct response programs;
- conducting ongoing public and press relations programs;
- creating, managing and maintaining our web site;
- participating in industry consortia and partnership programs with key
influencers; and
- establishing and maintaining close relationships with recognized industry
analysts.
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<PAGE> 48
STRATEGIC MARKETING ALLIANCES
We have developed strategic marketing alliances that expand the coverage of
our direct sales organization and provide implementation and customization
services for our products. These alliances enable us to focus our resources on
product development, enhancement and customer service. Our strategy is to
leverage our current marketing relationships and to develop new marketing
alliances to help achieve our sales and implementation targets.
Our marketing alliance program is based on two types of relationships,
business alliances and enterprise alliances:
- Our business alliances are primarily with systems integrators that can
sell, implement and customize our products, and include: American
Management Systems, Incorporated; CAP Gemini America, LLC; Danet, Inc.;
and Unisys Corp. These and our other business alliances have successfully
completed BillPlex projects to the satisfaction of our customers and
within our quality standards. To become an affiliate in our business
alliance program, a company must establish an implementation team that
has been trained and certified by us.
- Enterprise alliances are with companies in the business of developing and
marketing enterprise information system products that are complementary
to and interoperable with our products. Some of our enterprise alliance
affiliates include Oracle, The Hutton Company and Vertex, Inc. These
companies are able to effectively market our products, because customers
purchase them together as part of the deployment of a comprehensive
enterprise information solution.
RESEARCH AND DEVELOPMENT
Our product development capabilities are essential to our strategy of
enhancing our core technology, developing additional applications incorporating
that technology and maintaining the competitiveness of BillPlex and related
products and services. We have invested heavily in software development in order
to ensure that we have the product design skills and tools for achieving our
market leadership objective. We recognize that our ability to create and extend
our products with each release comes from hiring exceptionally talented software
engineers, quality assurance testers and billing and telecommunications
specialists. We have also created a structured process for both platform and
market package releases that serves as a framework for minimizing our product
development cycle times and ensuring quality software releases that meet or
exceed our customers' requirements.
Our research and development expenses totaled approximately $1.1 million
for 1996, $1.7 million for 1997, and $6.7 million for 1998. As of June 30, 1999,
approximately 52 employees were engaged in research and development activities.
COMPETITION
The markets in which we compete are relatively new, intensely competitive,
highly fragmented and rapidly changing. We expect this competition to increase
in the future. Our products compete on the basis of performance, scalability,
extensibility, ease of integration and cost of ownership. The principal
competitive factors in our market include responsiveness to the needs of our
customers, product features, timeliness of implementation, quality and
reliability of products, price, project management capability and technical
expertise.
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<PAGE> 49
We believe that our ability to compete depends in part on the performance
of the competition, including the development by others of software that is
competitive with our products and services, the price at which others offer
competitive software and services, the extent of competitors' responsiveness to
customer needs and the ability of our competitors to hire, retain and motivate
key personnel.
Our main competitors include:
- Kenan Systems Corporation, a wholly-owned subsidiary of Lucent
Technologies Inc.;
- Saville Systems, PLC, the subject of a recently announced proposed
acquisition by ADC Telecommunications, Inc.;
- Portal Software, Inc.;
- LHS Group, Inc.;
- Amdocs Limited; and
- Intertech Management Group, Inc.
Other companies with which we compete are International Telecommunications
Data Systems, Inc., Sema Group, PLC and Intasys Corporation. We also compete
with systems integrators, service bureaus and with the internal information
technology departments of large communications companies, who may elect to
develop functionalities such as those provided by our product in-house rather
than buying them from outside suppliers. No competitor is dominant, and we
believe that each of the largest companies with whom we directly compete holds
less than a 10% share of the market.
We anticipate continued growth and competition in the communications
industry and the entrance of new competitors into the billing and customer care
software market, and that the market for our products will remain intensely
competitive. We compete with a number of companies that have longer operating
histories, larger customer bases, substantially greater financial, technical,
sales, marketing and other resources, and greater name recognition than us.
In addition, as we expand, we will market our products and services to
service providers in geographic and industry markets that we do not currently
serve. Upon our entrance into these markets, we may encounter new competitors,
some of which could have significantly greater resources than we have.
INTELLECTUAL PROPERTY
We regard significant portions of our software products and related
processes as proprietary and rely on a combination of patent, copyright,
trademark and trade secret law, contractual provisions and nondisclosure
agreements to protect our intellectual property rights. We currently have four
patent applications pending in the United States. In addition, we have filed a
number of trademark applications to protect our trademarks and tradenames. There
is no guarantee that our pending patent or trademark applications will result in
issued patents or trademarks, or will provide us with any competitive
advantages. In addition, our patent and trademark applications may be challenged
by third parties.
We generally enter into confidentiality or license agreements with our
employees and consultants. When we license our products, we use signed license
agreements that limit access to and distribution of our intellectual property
and contain confidentiality terms customary in the industry. We license our
products in object code only, a format that does not allow the user to change
the software source code. However, some of our license agreements do require us
to
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<PAGE> 50
place the source code for BillPlex into escrow. Such agreements generally
provide that these licensees' would have a limited, non-exclusive right to use
the software source code if there is a bankruptcy proceeding by or against us,
if we cease to do business without a successor or if we discontinue providing
maintenance and support on BillPlex.
EMPLOYEES
As of June 30, 1999, we had 169 full-time employees, of whom 64 were in
product implementation and support, 12 in sales and marketing, 52 in research
and product development and 32 in administration. We have never had a work
stoppage and none of our employees are represented under collective bargaining
agreements. We consider our employee relations to be good.
FACILITIES
We lease an aggregate of approximately 31,000 square feet in two separate
offices in an office complex located in Boca Raton, Florida. We occupy these
premises under two leases, which expire in May 2000 and January 2001. We
recently subleased approximately 46,500 square feet in a three-story
professional office building in Boca Raton. The term of this sublease is from
October 1, 1999 to May 30, 2008. In addition to our corporate office space in
Boca Raton, Florida, we also lease approximately 24,000 square feet of office
space in Atlanta, Georgia. The Atlanta lease commences on September 1, 1999, and
expires on August 31, 2004. We also have sales offices in Boston, Massachusetts,
Charlotte, North Carolina, and Chicago, Illinois.
LEGAL PROCEEDINGS
We are not a party to any material legal proceeding.
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<PAGE> 51
MANAGEMENT
The following table sets forth information about our executive officers and
directors:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
James Daleen.............. 39 Chairman of the Board of Directors and Chief
Executive Officer
David B. Corey............ 39 President, Chief Operating Officer and Director
Richard A. Schell......... 48 Chief Financial Officer, Treasurer and Director
Stephen M. Wagman......... 39 Executive Vice President of Corporate Development
and Secretary
Phillip R. Davis.......... 32 Vice President of Human Resources
Frank D. Dickinson........ 29 Vice President of Development
David J. McTarnaghan...... 37 Vice President of Sales
Timothy C. Moss........... 33 Vice President of Operations
Timothy N. Murray......... 38 Vice President of Product Management and Marketing
John Z. Yin............... 40 Vice President of Technology
Paul G. Cataford.......... 35 Director
Neil E. Cox............... 49 Director
Daniel Foreman............ 40 Director
Stephen J. Getsy.......... 54 Director
Ofer Nemirovsky........... 41 Director
William A. Roper, Jr...... 53 Director
</TABLE>
JAMES DALEEN, our founder, has served as chairman of the board and chief
executive officer since our inception in 1989. Mr. Daleen served as president
and chief executive officer of Sound Impulse Company, an electrical construction
company, from 1983 until 1995.
DAVID B. COREY has served as president and chief operating officer since
February 1998 and as a director since June 1998. Prior to joining us, Mr. Corey
served as senior vice president of Global Marketing for Westell, Inc., a
telecommunications equipment company, from November 1996 to February 1998, and
as vice president and managing director/Asia Pacific for Westell International,
a telecommunications company, from January 1994 to November 1996.
RICHARD A. SCHELL has served as chief financial officer since November 1994
and as a director since December 1995. Mr. Schell was also elected secretary and
treasurer in December 1995 and resigned as Secretary in June 1999. Mr. Schell
served as vice president of finance and chief financial officer of Fibercorp
International, Inc., a software and hardware company, from 1993 until 1994. Mr.
Schell has been a certified public accountant since 1973 and was an audit
partner with KPMG LLP until 1993.
STEPHEN M. WAGMAN joined us in June 1999 as executive vice president of
corporate development. Mr. Wagman was appointed secretary in June 1999. Prior to
joining us, Mr. Wagman served in various capacities with PowerCerv Corporation,
an enterprise resource planning software company, from August 1995 to June 1999,
including chief financial officer, treasurer, senior vice president of
administration, chief counsel and secretary. Prior to that,
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<PAGE> 52
Mr. Wagman served as vice president, treasurer and secretary for International
Data Matrix, Inc., a bar code and machine vision technology company, from July
1988 until August 1995.
PHILLIP R. DAVIS joined us as vice president of human resources in June
1999. Prior to joining us, he served as the senior vice president of human
resources for HomeBanc Mortgage Corporation from December 1997 to June 1999.
Prior to that, Mr. Davis was human resources manager for Chase Manhattan
Mortgage Corporation from July 1995 to December 1997, director of human
resources for Main Street Mortgage, L.P., a mortgage service, from November 1994
to June 1995 and process manager of Chase Manhattan Bank from July 1989 to
November 1994.
FRANK D. DICKINSON has served as vice president of development since
December 1996. Prior to assuming his current position, Mr. Dickinson worked for
us as director of research and development from April 1996 to December 1996, as
project manager from November 1994 to April 1996 and as a software engineer from
November 1991 to November 1993.
DAVID J. MCTARNAGHAN has served as vice president of global sales since
June 1998. Prior to joining us, Mr. McTarnaghan was employed by Fujitsu BCS, a
communications services company, from May 1991 to June 1998, last serving as a
district general manager.
TIMOTHY C. MOSS has served as vice president of operations since January
1999. Prior to joining us, Mr. Moss was employed by Carolina PCS, a wireless
communications company, as executive vice president of operations from April
1998 to December 1998. From June 1995 to January 1998, Mr. Moss was vice
president of information technology for Powertel, Inc., a wireless
communications company, and from January 1994 to June 1995, director of
information systems and customer support for InterCel, a cellular communications
company.
TIMOTHY N. MURRAY joined us as vice president of product management and
marketing in August 1999. Prior to joining us, Mr. Murray served as president of
Athena Information Systems, an application service provider, from December 1998
to June 1999. Mr. Murray was the vice president of marketing and product
management of Ariel Corporation, a data communications hardware and software
company, from December 1996 to October 1998. Mr. Murray served as business area
director for Voice Technologies Group, a computer telephony integration
supplier, from November 1994 to November 1996.
JOHN Z. YIN joined us as director of technology in April 1997, was promoted
to vice president of technology in June 1997 and since December 1998 has served
as vice president of technology. Prior to joining us, Mr. Yin served as vice
president of technology of Fleet.Net, Inc., a software development and internet
service company, from October 1996 until April 1997. Mr. Yin was a senior member
of the technical staff of Pacific Communications Sciences, Inc., a hardware and
software development company in the wireless communications market, from August
1995 until October 1996. From December 1987 until August 1995, Mr. Yin held
various positions with IBM Corp., a multinational hardware and software services
company, last serving as senior programmer.
PAUL G. CATAFORD has served as a director since August 1998. Mr. Cataford
has served as vice president of investments for BCE Capital, Inc., a management
company charged with all venture capital activities of Bell Canada, from August
1997 to present. From January 1994 until July 1997, Mr. Cataford was the team
leader of investments of Working Ventures Canadian Fund, a venture capital fund.
Mr. Cataford also serves on the board of directors of the audit committee of
Sierra Wireless Inc., a company that develops wireless data modems.
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<PAGE> 53
NEIL E. COX has served as a director since August 1999. Mr. Cox has served,
since January 1998, as the president of SecurityLink from Ameritech, a business
unit of Ameritech Corporation that provides international security and
monitoring services. From 1987 to January 1998, Mr. Cox served in various
management capacities at Ameritech, a full-service communications company, last
serving as president of information services.
DANIEL FOREMAN has served as a director since June 1998. Mr. Foreman has
served as managing director of ABN AMRO, Inc., an investment firm, since October
1997 and was previously vice president of investments and acquisitions for
Ameritech Corporation, a communications company, from October 1987 to October
1997.
STEPHEN J. GETSY has served as a director since October 1997. Mr. Getsy has
been the president and chief executive officer of On-Line Ventures, Inc., a
business consulting and investment company, from November 1993 to present.
OFER NEMIROVSKY has served as a director since September 1997. Mr.
Nemirovsky has been a managing director of HarbourVest Partners, LLC since
January 1997. HarbourVest Partners, LLC was formed by the management team of
Hancock Venture Partners where Mr. Nemirovsky had served in various capacities
since 1986. Mr. Nemirovsky is a director of The Ultimate Software Group,
Paradigm Geophysical Ltd. and Primix Solutions, Inc.
WILLIAM A. ROPER, JR. has served as a director since July 1999. Mr. Roper
has been the senior vice president and chief financial officer of Science
Applications International Corporation, or SAIC, a technology research and
development company, since April 1990. Prior to joining SAIC, Mr. Roper served
as executive vice president and chief financial officer of Intelogic Trace,
Inc., from 1987 to 1990. Mr. Roper is also a director of Network Solutions, Inc.
a provider of internet address registration, intranet development and network
security services, and ODS Networks, Inc., a provider of high performance
telecommunications and security products.
Pursuant to agreements that will terminate upon completion of this
offering:
- Holders of common stock were entitled to elect three directors, who are
currently Messrs. Daleen, Corey and Schell;
- Holders of series A convertible preferred stock were entitled to elect
three directors and have elected Messrs. Nemirovsky, Getsy and Cox to
serve on the board of directors;
- BCE Capital, Inc., a holder of series D convertible preferred stock, was
entitled to elect one director, who is currently Mr. Cataford;
- Holders of series D and D-1 convertible preferred stock, other than BCE
Capital, Inc., were entitled to elect one director, who is currently Mr.
Foreman; and
- Holders of series E convertible preferred stock were entitled to elect
one director, who is currently Mr. Roper.
OBSERVER RIGHTS AFTER THE OFFERING
After the offering, several existing stockholders will have a right under
their preferred stock purchase agreements to have one representative attend each
meeting of the board of directors so long as they continue to own a specified
number of shares of the common stock they receive upon the automatic conversion
in the offering of the convertible preferred stock held by them. Specifically,
St. Paul Venture Capital IV, L.L.C. and JK&B Capital, L.P. each have the right
to
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<PAGE> 54
have an observer present so long as they continue to hold 198,891 and 163,612
shares of common stock.
COMMITTEES OF THE BOARD OF DIRECTORS
The audit committee consists of Mr. Foreman, the chairman, and Mr. Roper.
The audit committee reviews the scope and timing of our audit services and any
other services our independent auditors are asked to perform, the auditor's
report on our financial statements following completion of their audit and their
policies and procedures with respect to internal accounting and financial
control. In addition, the audit committee makes annual recommendations to the
board of directors for the appointment of independent auditors for the following
year.
The compensation committee consists of Mr. Getsy, the chairman, and Messrs.
Cataford and Nemirovsky. The compensation committee reviews and evaluates the
compensation and benefits of all our officers, reviews general policy matters
relating to compensation and benefits of our employees and makes recommendations
concerning these matters to the board of directors. The compensation committee
also administers our stock option plans.
COMPENSATION OF DIRECTORS
Neither employee nor non-employee directors receive compensation for
services performed in their capacity as directors. We reimburse each director
for reasonable out-of-pocket expenses incurred in attending meetings of the
board of directors and any of its committees. In addition, it is our policy that
outside directors who are not employed by venture capital firms are eligible to
receive options to purchase our common stock under our Amended and Restated
Stock Incentive Plan. The board of directors determines the vesting schedule for
options granted to non-employee directors under our Amended and Restated Stock
Incentive Plan.
The board of directors granted Mr. Levine options to purchase 15,000 shares
of common stock on December 16, 1996 at a purchase price of $3.00 per share and
December 18, 1998 at a purchase price of $3.25 per share. The options became
fully exercisable upon grant. In October 1997, the board of directors granted
Mr. Getsy an option to purchase 75,000 shares of common stock at $3.25 per
share. Our board of directors also granted Mr. Getsy an option to purchase
15,000 shares at $3.25 per share in December 1998. The options become
exercisable at the rate of 25% of the total number of shares per year. None of
these options have been exercised.
TERMS OF DIRECTORS AND EXECUTIVE OFFICERS
Immediately after this offering, our board of directors will be divided
into three classes, each of whose members will serve for a staggered three-year
term. At each annual meeting of stockholders, a class of directors will be
elected for a three-year term to succeed the directors of the same class whose
terms are then expiring. Our bylaws provide that such directors will be
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<PAGE> 55
elected by a plurality of all votes cast at such meeting. The board will
initially consist of the following directors:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
EXPIRATION OF
CLASS DIRECTORS TERM
<S> <C> <C>
- -----------------------------------------------------------------------------------------
Class I Paul G. Cataford 2000
William A. Roper, Jr.
Richard A. Schell
- -----------------------------------------------------------------------------------------
Class II David B. Corey 2001
Daniel Foreman
Neil E. Cox
- -----------------------------------------------------------------------------------------
Class III James Daleen 2002
Stephen J. Getsy
Ofer Nemirovsky
- -----------------------------------------------------------------------------------------
</TABLE>
Each executive officer serves at the discretion of the board of directors
and holds office until his successor is elected and qualified or until his
earlier resignation or removal. There are no family relationships among any of
our directors or executive officers.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the compensation committee of the board of directors are
currently Messrs. Cataford, Getsy and Nemirovsky, none of whom have ever been an
officer or employee of our company.
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<PAGE> 56
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued by us
in 1998 for our Chief Executive Officer and our four other most highly
compensated executive officers who were serving as executive officers as of
December 31, 1998 and whose total annual salary and bonuses were in excess of
$100,000 in 1998. Information on Mr. Wagman, executive vice president of
corporate development and secretary, is not provided below because he was not an
employee of our company on December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS SECURITIES
COMPENSATION ------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- --------------------------- ---- ------------ ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C>
James Daleen...................... 1998 $260,000 $136,500 201,459 $ --
Chairman of the Board and
Chief Executive Officer
David B. Corey.................... 1998 176,154 93,500 304,500 101,725(2)
President and Chief Operating
Officer(1)
Richard A. Schell................. 1998 165,000 86,625 81,000 --
Chief Financial Officer
and Treasurer
Frank D. Dickinson................ 1998 105,000 29,183 30,000 --
Vice President of Development
John Z. Yin....................... 1998 115,000 30,454 30,000 --
Vice President of Technology
</TABLE>
- -------------------------
(1) Mr. Corey commenced employment with Daleen on February 10, 1998; his
annualized base salary for fiscal 1998 was $200,000.
(2) Includes closing cost reimbursement for relocation expenses of $58,554 and a
payment of $43,171 to reimburse Mr. Corey for taxes paid by him.
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<PAGE> 57
OPTION GRANTS IN 1998
The following table sets forth all individual grants of stock options
during the year ended December 31, 1998 to each of the named executive officers.
These options were granted with an exercise price equal to the fair market value
of our common stock on the date of grant as determined by our board of
directors. The 5% and 10% assumed annual rates of compound stock price
appreciation are prescribed by the rules and regulations of the Securities and
Exchange Commission and do not represent our estimate or projection of the
future trading prices of our common stock. There can be no assurance that the
actual stock price appreciation over the ten-year option term will be at the
assumed 5% and 10% levels or at any other defined level. Actual gains, if any,
on stock option exercises are dependent on numerous factors, including our
future performance, overall market conditions and the option holder's continued
employment with us throughout the entire vesting period and option term, which
factors are not reflected in this table. The potential realizable value is
calculated by multiplying the fair market value per share of the common stock on
the date of grant as determined by the board of directors, which is equal to the
exercise price per share, by the stated annual appreciation rate compounded
annually for the option term, subtracting the exercise price per share from the
product, and multiplying the remainder by the number of shares underlying the
option granted.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
OPTION GRANTS IN 1998 VALUE AT ASSUMED
--------------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED EXERCISE FOR OPTION TERM
OPTIONS TO EMPLOYEES PRICE EXPIRATION --------------------
NAME GRANTED(#) IN FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ---- ---------- ---------------- ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
James Daleen................... 76,923(1) 6.8% $2.50 1/5/03 $ 53,131 $117,406
124,536(2) 11.0 3.25 12/31/08 254,540 645,055
David B. Corey................. 86,923(1) 7.7 2.50 2/5/03 60,038 132,668
94,500(2) 8.3 3.25 12/31/08 193,149 489,478
123,077(2) 10.8 3.25 2/5/03 110,513 244,204
Richard A. Schell.............. 81,000(2) 7.1 3.25 12/31/08 165,557 419,553
Frank D. Dickinson............. 30,000(2) 2.6 3.25 12/31/08 61,317 155,390
John Z. Yin.................... 30,000(2) 2.6 3.25 12/31/08 61,317 155,390
</TABLE>
- -------------------------
(1) This option is a nonqualified stock option, vests over two years and has a
five-year term.
(2) This option is an incentive stock option, vests over four years and has a
ten-year term.
AGGREGATE OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
The following table summarizes the value of the outstanding options held by
the named executive officers at December 31, 1998. No stock options were
exercised by any of these individuals during 1998. The value columns represent
the difference between the fair market value of the shares of common stock
underlying the options at December 31, 1998 as
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<PAGE> 58
determined by our board of directors, $3.25 per share, less the exercise price
payable upon exercise of such options.
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES IN 1998
AND YEAR-END OPTION VALUES
-----------------------------------------------------------------------
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FY-END(#) AT FY-END($)
--------------------------------- -----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
James Daleen........................ 330,909 146,536 $515,394 $63,192
David B. Corey...................... -- 304,500 -- 65,192
Richard A. Schell................... 84,559 182,199 91,750 3,333
Frank D. Dickinson.................. 29,921 62,917 20,897 1,667
John Z. Yin......................... 16,250 68,750 833 1,667
</TABLE>
STOCK OPTION AND OTHER COMPENSATION PLANS
Amended and Restated Stock Incentive Plan. We have established a new stock
incentive plan, the Amended and Restated Stock Incentive Plan. The plan is
intended to promote our interests by providing employees and key persons the
opportunity to purchase shares of common stock and to receive compensation based
upon appreciation in the value of those shares. We have reserved 1,348,881
shares of common stock for issuance under this plan. The plan provides for the
grant of four types of awards:
- incentive stock options that qualify for tax benefits;
- non-qualified stock options;
- restricted stock awards; and
- stock appreciation rights.
This plan supercedes a number of prior plans that we adopted which are
described below. Under this new plan, options have been granted to purchase
360,500 shares of our common stock at a weighted average exercise price of $5.48
per share.
Beginning in year 2000, this plan authorizes us to automatically adjust the
number of shares of common stock available for issuance under this plan on the
first day of each fiscal year by a number of shares such that the total number
of shares reserved for issuance under this plan equals the sum of:
- the aggregate number of shares previously issued under this plan;
- the aggregate number of shares subject to outstanding options granted
under this plan; and
- 5% of the number of shares outstanding on the last day of the preceding
fiscal year;
with a maximum annual increase of 800,000 shares.
Prior Stock Option Plans. We adopted six stock option plans between 1994
and 1998. Some of these plans provided for incentive stock options within the
meaning of Subsection 422 of the Internal Revenue Code while others provided for
non-qualified stock options. All of these plans are administered by a stock
option committee consisting of not less than two nor more than five members
appointed by our board of directors.
As of June 30, 1999, options to purchase an aggregate of 1,963,486 shares
of common stock were outstanding under these plans at a weighted average
exercise price of $3.14 per share.
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<PAGE> 59
413,631 shares of common stock have been issued upon exercise of options granted
under these plans. We are not authorized to issue any more options under any of
these plans.
EMPLOYMENT AGREEMENTS
We entered into a five-year employment agreement with James Daleen, our
chief executive officer, on December 1, 1994, which was amended on September 5,
1997 and March 1, 1999. Upon expiration of the current term in December 1999,
the agreement automatically renews for additional terms of three years each
unless either party notifies the other of its intent to terminate the agreement.
The agreement provides for a base salary of $286,000 in 1999 and an annual bonus
to be determined by our compensation committee, with the annual bonus targeted
at 50% of his base salary. The agreement also provides for annual salary
increases, as determined by our compensation committee, and option grants under
our stock option plans, as determined by our board of directors. In the event of
the termination of his employment without substantial cause, Mr. Daleen is
entitled to severance payment equal to two years' base salary in effect at the
time of termination and a bonus in addition to the payment of all related
excise, federal or state income taxes incurred by the executive as a result of
the lump sum cash payment.
We entered into a three-year employment agreement with Richard Schell, our
chief financial officer and treasurer, on November 15, 1994, which was amended
on January 31, 1997. Upon expiration of the current term in November 2000, the
agreement automatically extends for additional three-year terms unless either
party notifies the other of its intent to terminate the agreement. The agreement
provides for a base salary of $181,000 per annum and an annual bonus to be
determined by our compensation committee, with the annual bonus targeted at 50%
of his base salary. The agreement also provides for salary increases as
determined by our compensation committee. In the event of the termination of Mr.
Schell's employment without substantial cause, he is entitled to a severance
payment equal to one year's base salary in effect at the time of termination.
We entered into an employment agreement with David Corey, our president and
chief operating officer, on January 31, 1998. This agreement may be terminated
by either party at any time. The agreement provides for a base salary of
$220,000 per annum, an annual salary increase to be determined by our
compensation committee, and an annual bonus to be determined by our compensation
committee, with the annual bonus targeted at 50% of his base salary. In the
event of the termination of his employment without substantial cause, Mr. Corey
is entitled to a severance payment equal to one year's base salary in effect at
the time of termination. We can elect to pay Mr. Corey only six months of
severance if we release him from his non-compete agreement.
We entered into an employment agreement with Stephen Wagman, our executive
vice president of corporate development and secretary, on April 28, 1999. The
agreement can be terminated by either party at any time. The agreement provides
for a base salary of $170,000 per annum and an annual salary increase to be
determined by our compensation committee, with an annual bonus targeted at 40%
of the executive's base salary. In addition to his base salary, benefits and
bonus compensation, Mr. Wagman was granted a stock option to purchase 100,000
shares of common stock at an exercise price of $6.00 per share. The option vests
over a four-year period. In the event of the termination of his employment
without substantial cause, Mr. Wagman is entitled to a severance payment equal
to one year's base salary in effect at the time of termination, or six months'
base salary if he has been employed for less than 180 days. We can elect to pay
Mr. Wagman only six months of severance if we release him from his non-compete
agreement.
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<PAGE> 60
We entered into an employment agreement with Frank D. Dickinson, our vice
president of development, in August 1997. The agreement can be terminated by
either party at any time. This agreement addresses Mr. Dickinson's annual base
salary and bonus. In the event of the termination of his employment without
substantial cause, Mr. Dickinson is entitled to a lump sum severance payment
ranging from two to ten weeks base pay.
We entered into an employment with Dr. John Z. Yin, our vice president of
technology, on April 7, 1997. The agreement can be terminated by either party at
any time. This agreement addresses Mr. Yin's annual base salary and bonus. In
the event of the termination of his employment without substantial cause, Dr.
Yin is entitled to a lump sum severance payment ranging from two to nine weeks
base pay.
We entered into an employment agreement with David J. McTarnaghan, our vice
president of sales, in June 1998. The agreement can be terminated by either
party of at any time. The agreement provides for a current base salary of
$140,000 per year and an annual bonus to be determined by our compensation
committee. The agreement also provides for annual salary increases, as
determined by our compensation committee, and option grants under our stock
option plans, as determined by our board of director. In the event of the
termination of his employment without substantial cause, Mr. McTarnaghan is
entitled to a lump sum severance payment equal to six months of base pay.
We entered into an employment agreement with Timothy C. Moss, our vice
president of operations in December 1998. The agreement can be terminated by
either party at any time. The agreement provides for a current base salary of
$150,000 per year and an annual bonus to be determined by our compensation
committee. The agreement also provides for annual salary increases, as
determined by our compensation committee, and option grants under our stock
option plans, as determined by our board of directors. In the event of the
termination of his employment without substantial cause, Mr. Moss is entitled to
a lump sum severance payment equal to twelve months pay.
We entered into an employment agreement with Timothy N. Murray, our vice
president of product management and marketing, in August 1999. The agreement can
be terminated by either party at any time. The agreement provides for a current
base salary of $140,000 per year and annual bonus to be determined by our
compensation committee. The agreement also provides for annual salary increases,
as determined by our compensation committee, and option grants under our stock
option plans, as determined by our board of directors. In the event of the
termination of his employment without substantial cause, Mr. Murray is entitled
to a lump sum severance payment of up to one year base pay according to his
length of service.
Each of our executive officers and other of our employees have signed
invention assignment and confidentiality agreements as well as non-compete
agreements. Under the invention assignment and confidentiality agreement, these
individuals have assigned to us all of their copyrights, trade secrets and
patent rights that relate to our business. Under the terms of the non-compete
agreement, each of these individuals have agreed not to compete, directly or
indirectly, with us in the billing and customer care industry during the term of
employment and for one year after termination of employment. Each also has
agreed not to solicit our customers or employees, directly or indirectly, during
the period of employment and for one year following termination of employment.
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LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our certificate of incorporation provides that the liability of the
directors for monetary damages shall be eliminated to the fullest extent
permissible under Delaware law and that we shall indemnify our officers,
employees and agents to the fullest extent permitted under the Delaware law.
Our certificate of incorporation provides that our directors will not be
personally liable to our company or any stockholder for monetary damages for
breach of fiduciary duty as a director, except if the director:
- is liable under Section 174 of the Delaware General Corporation Law;
- has breached the director's duty of loyalty to Daleen or its
stockholders;
- has acted in a manner involving intentional misconduct or a knowing
violation of law or, in failing to act, has acted in a manner
involving intentional misconduct or a knowing violation of law; or
- has derived an improper personal benefit.
Any amendment, modification or repeal of these provisions will not
eliminate or reduce their effect in respect of any act or failure to act, or any
cause of action, suit or claim that would accrue or arise prior to any
amendment, repeal or adoption of this inconsistent provision. If Delaware law is
amended to provide for further limitations on the personal liability of
directors of corporations for breach of duty of care or other duty as a
director, then the personal liability of the directors will be so further
limited to the greatest extent permitted by Delaware law.
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CERTAIN TRANSACTIONS
SERIES A PREFERRED STOCK AND WARRANTS FOR SERIES B PREFERRED STOCK
In September 1997, we issued and sold 3,000,000 shares of series A
preferred stock and warrants to purchase up to 1,250,000 shares of series B
preferred stock to HarbourVest Partners V Direct Fund, L.P. The aggregate
purchase price was $7.5 million, of which $7.4 million was allocated to the
series A preferred stock and $100,000 was allocated to the warrants. The
warrants have an exercise price of $3.056 per share. Mr. Ofer Nemirovsky, one of
our directors, is associated with HarbourVest. Immediately prior to the
consummation of this offering, each outstanding share of series A preferred
stock will be automatically converted into one share of common stock and the
warrant will become exercisable to purchase 1,250,000 shares of common stock.
SERIES C PREFERRED STOCK
From November 1997 to January 1998, we issued and sold 1,213,584 shares of
series C preferred stock at an aggregate purchase price of approximately $5.5
million, or $4.50 per share, to accredited investors in a private offering.
Stephen J. Getsy, one of our directors, purchased 22,223 shares of series C
preferred stock in this offering at $4.50 per share. Immediately prior to the
consummation of this offering, each outstanding share of series C preferred
stock will be automatically converted into one share of common stock at a
conversion price of $4.50 per share.
SERIES D AND D-1 PREFERRED STOCK
From June 1998 to August 1998, we issued and sold 4,221,846 shares of
series D preferred stock to the investors below and 686,533 shares of series D-1
preferred stock to ABN AMRO for aggregate net proceeds of $15.0 million, or
approximately $3.06 per share. The complete list of investors in this offering
is as follows:
<TABLE>
<CAPTION>
NAME OF INVESTOR NO. OF SHARES PURCHASE PRICE
- ---------------- ------------- --------------
<S> <C> <C>
JK&B Capital, L.P......................................... 654,450 $ 1,999,999
JK&B Capital II, L.P...................................... 327,225 1,000,000
I Eagle Trust............................................. 248,459 759,291
ABN AMRO, Inc............................................. 46,685 142,669
ABS Ventures IV, L.P...................................... 523,561 1,600,002
ABX Fund, L.P............................................. 130,890 400,000
St. Paul Venture Capital IV, L.L.C........................ 795,566 2,431,250
St. Paul Venture Capital Affiliates Fund I, L.L.C......... 22,497 68,751
HarbourVest Partners V Direct Fund, L.P................... 818,063 2,500,001
BCE Capital, Inc.......................................... 654,450 1,999,999
ABN AMRO Capital (U.S.A.) Inc............................. 686,533 2,098,045
--------- -----------
Total........................................... 4,908,379 $15,000,006
</TABLE>
Mr. Nemirovsky of HarbourVest Partners, Mr. Foreman of ABN AMRO and Mr.
Cataford of Bell Canada currently serve on our board of directors. Immediately
prior to the consummation of this offering, each outstanding share of series D
and series D-1 preferred stock will be automatically converted into one share of
common stock.
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SERIES E PREFERRED STOCK
In June 1999, we issued and sold 1,496,615 shares of series E preferred
stock to a strategic investor, SAIC, for an aggregate purchase price of $13.5
million, or $9.00 per share. Mr. Roper, one of our directors, is senior vice
president and chief financial officer of SAIC.
TRANSACTIONS WITH COMPANIES ASSOCIATED WITH SAIC
Mr. Roper, a member of our board of directors, is the senior vice president
and chief financial officer of SAIC and SAIC is a significant stockholder of our
company. SAIC owns 43% of all voting stock of Danet, Inc. and 100% of the voting
stock of Telcordia. Danet is both a customer of ours as well as a distributor of
our products. As a customer, Danet paid us $334,794 in 1998 and $140,613 in
1999. We paid Danet, in its capacity as distributor of our products, $2.2
million in 1998 and approximately $96,000 in 1999. While we had a strategic
alliance relationship with Telcordia, we had no revenue and made no payments in
connection with this relationship as of June 30, 1999.
REGISTRATION RIGHTS
Holders of shares of preferred stock are entitled to registration rights
with respect to the common stock issued or issuable upon conversion of the
preferred stock. These rights are explained more fully under "Description of
Capital Stock".
LOANS TO EXECUTIVES
In June 1999, we offered loans to our employees for the purposes of
providing funds for the exercise of vested, non-qualified stock options and for
the payment of tax obligations resulting from the exercise of those options.
Messrs. Daleen, Schell, and Dickinson have entered into loan agreements with us
in connection with the exercise of their options in the amount of $356,976,
$54,347 and $21,332, respectively. We expect to enter into loan agreements with
these officers and with Mr. Corey for reimbursement of their tax liabilities
incurred from the exercise of these options when these amounts become due. It is
anticipated that the loan to Mr. Daleen will be $520,000, the loan to Mr. Schell
will be $84,000, the loan to Mr. Dickinson will be $21,000, and the loan to Mr.
Corey will be $62,000. The existing loans are, and all future tax-related loans
will be, evidenced by promissory notes that bear interest at a rate of 8.75% per
year and that require interest to be paid annually. All principal and accrued
interest payable under the notes for the option exercises is due no later than
June 2004 and all principal and accrued interest payable on the tax-related
notes will be due five years from the date of the loans. The executive officers
are fully liable and each officer has pledged the stock issued upon exercise of
his options as security for his loan and has agreed to repay the portion of the
principal and unpaid interest for any shares of the pledged stock that he may
transfer prior to repayment of the entire principal and interest amounts owed.
Our board of directors considered and approved the loan requests and forms of
the loan documents.
OTHER RELATED PARTY TRANSACTIONS
We intend to enter into an indemnification agreement with each of our
executive officers and directors containing provisions that may require us to
indemnify these individuals against liabilities that may arise by reason of
their status or service as officers and directors, other than liabilities
arising from willful misconduct of a culpable nature, and to advance expenses
incurred as a result of any proceedings against them as to which they could be
indemnified.
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POLICY ON FUTURE TRANSACTIONS
Our board of directors has adopted a resolution providing that all future
transactions with related parties, including our officers, directors, principal
stockholders or affiliates, must be approved by a majority of the board of
directors, including a majority of the independent and disinterested members of
the board of directors, or a majority of the disinterested stockholders and must
be on terms no less favorable to us than could be obtained from unaffiliated
third parties.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock as of June 30, 1999 by:
- each stockholder known by us to be the beneficial owner of more than 5%
of the outstanding shares of common stock;
- each director and each executive officer named in the summary
compensation table; and
- all of our executive officers and directors as a group.
One of our stockholders, James Daleen, has granted to the underwriters the
option to purchase up to 150,000 shares of common stock to cover
over-allotments. See "Underwriting." Footnote 5 to the table provides
information concerning the stock holdings of Mr. Daleen after the offering if
the over-allotment option is exercised in full.
Beneficial ownership is determined under the rules of the Securities and
Exchange Commission. The number of shares beneficially owned by a person
includes shares of common stock subject to options held by that person that are
currently exercisable or exercisable within 60 days of June 30, 1999. The shares
issuable pursuant to these options are deemed outstanding for computing the
percentage ownership of the person holding these options but are not deemed
outstanding for the purposes of computing the percentage ownership of any other
person.
For purposes of calculating the percentage beneficially owned, the number
of shares of common stock deemed outstanding prior to and after the offering
consists of 14,272,229 shares outstanding as of June 30, 1999, including shares
issuable upon automatic conversion of our preferred stock as a result of this
offering. Except as noted below, the business address of the named beneficial
owner is c/o Daleen Technologies, Inc., 902 Clint Moore Road, Boca Raton,
Florida 33487.
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<TABLE>
<CAPTION>
PERCENT
BENEFICIALLY
OWNED
-------------------
NUMBER OF BEFORE AFTER
NAME OF BENEFICIAL OWNER SHARES BENEFICIALLY OWNED OFFERING OFFERING
- ------------------------ ------------------------- -------- --------
<S> <C> <C> <C>
HarbourVest Partners V-Direct Fund L.P.(1).... 5,068,063 35.5% %
One Financial Center, 44th Floor
Boston, MA 02111
James Daleen(2)(3)............................ 1,762,599 12.3
Science Applications International
Corporation................................. 1,496,615 10.5
10260 Campus Pointe Drive
San Diego, CA 92121
ABN AMRO Capital (U.S.A.) Inc.(4)............. 981,677 6.9
200 S. LaSalle St, 10th Floor
Chicago, IL 60604
JK&B Capital L.P.(5).......................... 981,675 6.9
205 North Michigan Avenue, Suite 808
Chicago, Illinois 60601
St. Paul Venture Capital IV, L.L.C.(6)........ 818,063 5.7
10400 Viking Drive, Suite 5500
Eden Prairie, MN 55344
Bruns Grayson(7).............................. 654,451 4.6
1 South Street, Suite 2150
Baltimore, MD 21202
Bell Canada................................... 654,450 4.6% %
200 Bay Street, Suite 3120
Toronto, Ontario, Canada MSJ 2J2
Ofer Nemirovsky(8)............................ 5,068,063 35.5
William A. Roper, Jr.(9)...................... 1,496,615 10.5
Daniel Foreman(10)............................ 981,667 6.9
Paul G. Cataford(11).......................... 654,450 4.6
Richard A. Schell(12)......................... 128,810 * *
David B. Corey(13)............................ 74,230 * *
Frank D. Dickinson(14)........................ 33,255 * *
Stephen J. Getsy(15).......................... 23,151 * *
John Z. Yin(16)............................... 16,250 * *
All directors and executive officers as a
group
(15 persons)(17)............................ 10,266,790 72% %
</TABLE>
- -------------------------
* Represents beneficial ownership of less than 1% of the outstanding shares of
common stock.
(1) Includes 1,250,000 shares issuable upon exercise of a warrant within 60
days after June 30, 1999.
(2) Includes 48,027 shares issuable upon exercise of an option that will be
exercisable within 60 days of June 30, 1999, 50,000 shares held by The
James Daleen Irrevocable Trust, 38,000 shares held by Linda Brodsky over
which Mr. Daleen has sole voting power, and 1,804 shares held by Judith
Daleen, wife of Mr. Daleen. Mr. Daleen disclaims ownership of all shares
held by his wife.
(3) If the underwriters exercise their over-allotment option in full, Mr.
Daleen will sell shares of common stock in this offering and
thereafter would beneficially own shares, representing % of the
total shares outstanding.
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(4) Consists of 686,533 shares held by ABN AMRO Capital (U.S.A.) Inc., 248,459
by I Eagle Trust, and 46,685 by ABN AMRO, Inc.
(5) Consists of 654,450 shares held by JK&B Capital L.P. and 327,225 by JK&B
Capital II L.P.
(6) Consists of 795,566 shares held by St. Paul Venture Capital IV, L.L.C. and
22,497 by St. Paul Venture Capital Affiliates Fund I, L.L.C.
(7) Includes 523,561 shares held by ABS Ventures IV, L.P. and 130,890 shares
held by ABX Fund, L.P. Mr. Grayson is the managing member of Calvert
Capital L.L.C., the general partner of ABS, and is the managing member of
Calvert Capital II, L.L.C., the general partner of ABX, and therefore may
be considered to share beneficial ownership of the shares held by ABS and
ABX. Mr. Grayson disclaims beneficial ownership of these shares.
(8) Consists of 5,068,063 shares held by HarbourVest Partners V-Direct Fund
L.P. HarbourVest Partners, LLC is the managing member of the general
partner of HarbourVest Partners V-Direct Fund L.P. Mr. Nemirovsky is a
managing director of HarbourVest Partners, LLC and a member of the general
partner of HarbourVest Partners V-Direct Fund L.P. and therefore may be
considered to share beneficial ownership of the shares held by HarbourVest.
Mr. Nemirovsky disclaims beneficial ownership of these shares.
(9) Consists of 1,496,615 shares held by Science Applications International
Corporation, of which Mr. Roper is a senior vice president and the chief
financial officer.
(10) Consists of 981,677 shares held by ABN AMRO. Mr. Foreman is a managing
director of this firm and therefore may be considered to share beneficial
ownership of these shares.
(11) Consists of 654,450 shares held by Bell Canada. Mr. Cataford is the Vice
President of Investments for BCE Capital, Inc., a management company
charged with all venture capital activities of Bell Canada, and therefore
may be considered to share beneficial ownership of these shares.
(12) Includes 47,133 shares issuable upon exercise of an option that will be
exercisable within 60 days of June 30, 1999.
(13) Includes 30,769 shares issuable upon exercise of an option that will be
exercisable within 60 days of June 30, 1999. Also includes 3,000 shares
held by The Luke Corey Irrevocable Trust and 3,000 shares held by The
Sydney Corey Irrevocable Trust. Mr. Corey disclaims beneficial ownership of
these shares.
(14) Includes 20,943 shares issuable upon exercise of an option that will be
exercisable within 60 days of June 30, 1999.
(15) Includes 18,750 shares issuable upon exercise of options that will be
exercisable within 60 days of June 30, 1999 and 22,223 shares held by
Stephen Getsy Living Trust.
(16) Includes 16,250 shares issuable upon exercise of an option that will be
exercisable within 60 days of June 30, 1999.
(17) Includes 239,372 shares issuable upon exercise of options that will be
exercisable within 60 days of June 30, 1999. See also footnotes (2), (3)
and (8) through (16) above.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
Our authorized capital stock upon the closing of this offering will consist
of 70,000,000 shares of common stock, par value $0.01 per share, and 10,000,000
shares of preferred stock. The following is only a summary and you should read
the provisions of our certificate of incorporation and bylaws, which have been
filed as exhibits to the Registration Statement of which this prospectus is a
part.
Upon the closing of this offering, 14,272,229 shares of common stock will
be outstanding. At June 30, 1999, we had 178 stockholders.
COMMON STOCK
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. There are no
cumulative voting rights. Subject to preferences that may be applicable to any
outstanding shares of preferred stock, the holders of common stock are entitled
to receive ratably such dividends, if any, as may be declared by the board of
directors out of funds legally available for the payment of dividends. In the
event of a liquidation, dissolution or winding up, the holders of common stock
are entitled to share ratably in all assets remaining after payment of
liabilities and liquidation preferences of any outstanding shares of preferred
stock. Holders of common stock have no preemptive rights or rights to convert
their common stock into any other securities. There are no redemption or sinking
fund provisions applicable to the common stock. All outstanding shares of common
stock are fully paid and nonassessable, and the shares of common stock to be
sold in this offering will be fully paid and nonassessable.
PREFERRED STOCK
Under our certificate of incorporation, the board of directors has the
authority, without further action by the stockholders, to issue up to 10,000,000
shares of preferred stock in one or more series and to fix the designations,
powers, preferences, privileges and relative, participating, optional or special
rights and the qualifications, limitations or restrictions, including dividend
rights, conversion rights, voting rights, terms of redemption and liquidation
preferences, any or all of which may be greater than the rights of the common
stock. The board of directors, without stockholder approval, can issue preferred
stock with voting, conversion or other rights that could adversely affect the
voting power and other rights of the holders of common stock. Preferred stock
could be issued quickly with terms calculated to delay or prevent a change of
control or make removal of management more difficult. Additionally, the issuance
of preferred stock may have the effect of decreasing the market price of the
common stock and may adversely affect the voting and other rights of the holders
of common stock. We have no plans to issue any preferred stock.
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WARRANTS
As of June 30, 1999 there were outstanding warrants to purchase 1,865,000
shares of stock, including:
- warrants to purchase 90,000 shares of common stock at an exercise price
of $3.25 per share;
- warrants to purchase 25,000 shares of common stock at an exercise price
of $4.00 per share;
- warrants to purchase 215,000 shares of common stock at an exercise price
of $3.056 per share;
- warrants to purchase 1,250,000 shares of series B preferred stock at an
exercise price of $3.056 per share; and
- warrants to purchase 285,000 shares of series C preferred stock at an
exercise price of $4.50 per share.
ANTI-TAKEOVER PROVISIONS OF OUR CERTIFICATE OF INCORPORATION, BYLAWS, AND
DELAWARE LAW
Our certificate of incorporation authorizes the board to establish one or
more series of undesignated preferred stock, the terms of which can be
determined by the board at the time of issuance. The certificate of
incorporation also provides that all stockholder action must be effected at a
duly called meeting of stockholders and not by a consent in writing. In
addition, our bylaws do not permit our stockholders to call a special meeting of
stockholders. Only our chief executive officer, president, chairman of the board
or a majority of the board are permitted to call a special meeting of
stockholders. The certificate of incorporation also provides that the board is
divided into three classes, with each director assigned to a class with a term
of three years. The bylaws also require that stockholders give advance notice to
our secretary of any nominations for director or other business to be brought by
stockholders at any stockholders' meeting, and that the chairman has the
authority to adjourn any such meeting. The bylaws also require a supermajority
vote of stockholders or a majority vote of the board of directors to amend the
bylaws. These provisions of the certificate of incorporation and the bylaws
could discourage potential acquisition proposals and could delay or prevent a
change in control of our company. These provisions also may have the effect of
preventing changes in the management of our company.
EFFECT OF DELAWARE ANTI-TAKEOVER STATUTE
We are subject to Section 203 of the Delaware General Corporation Law,
which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that the stockholder became an
interested stockholder, unless:
- prior to that date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
- upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for
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purposes of determining the number of shares outstanding those shares
owned by persons who are directors and also officers; or
- on or subsequent to that date, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock that is not owned by the
interested stockholder.
A business combination generally includes a merger, asset or stock sale, or
other transaction resulting in a financial benefit to the interested
stockholder. In general, an interested stockholder is a person who, together
with affiliates and associates, owns, or within three years prior to the
determination of interested stockholder status, did own, 15% or more of a
corporation's voting stock.
REGISTRATION RIGHTS
Pursuant to stock purchase agreements entered into among our company and
the holders of our series A preferred stock, series D and D-1 preferred stock
and series E preferred stock, investors holding an aggregate of 9,121,963 shares
of common stock they will receive upon the conversion of their preferred stock
are entitled to rights with respect to the registration of these shares under
the Securities Act. At any time following this offering, any investor or group
of investors described above may request that we file a registration statement
that covers the sale of at least 50% of the shares of common stock held by those
investors. These investors may require the we register our common stock for
resale only twice, other than as described below. After we qualify to file our
registration statements on Form S-3, the investors may request an unlimited
number of times that we register their common stock for resale using a Form S-3,
except that the investors cannot request more that two Form S-3 registrations in
any year. In addition, if we propose to register any of our securities under the
Securities Act, either for our own account or for the account of other security
holders, the investors described above and three additional stockholders holding
151,274 shares of our common stock are entitled to notice of the registration
and to include shares of common stock in the registration at our expense. All of
these registration rights are subject to conditions and limitations, among them
the right of the underwriters of an offering to limit the number of shares
included in the registration.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is SunTrust Bank,
Atlanta, Georgia.
NASDAQ NATIONAL MARKET LISTING
We have applied for approval of our common stock to be listed on the Nasdaq
National Market under the symbol DALN.
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<PAGE> 71
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect the prevailing market price of our common stock and impair our
ability to raise equity capital in the future.
Upon completion of the offering, we will have outstanding shares
of common stock. Of these shares, the shares sold in the offering,
plus any shares issued upon exercise of the underwriters' over-allotment option,
will be freely tradable without restriction under the Securities Act, unless
purchased by our affiliates. The term affiliates is defined in Rule 144 under
the Securities Act. In general, affiliates include officers, directors or 10%
stockholders.
The remaining shares outstanding are restricted securities within
the meaning of Rule 144. Restricted securities may be sold in the public market
only if registered or if they qualify for an exemption from registration under
Rules 144, 144(k) or 701 promulgated under the Securities Act, which are
summarized below. Sales of restricted securities in the public market, or the
availability of these shares for sale, could adversely affect the market price
of the common stock.
Our directors, officers and stockholders have entered into lock-up
agreements in connection with this offering generally providing that they will
not offer, sell, contract to sell or grant any option to purchase or in any way
transfer or dispose of our common stock or any securities exercisable for or
convertible into our common stock owned by them for a period of 180 days after
the date of this prospectus without the prior written consent of BancBoston
Robertson Stephens. Notwithstanding possible earlier eligibility for sale under
the provisions of Rules 144, 144(k)and 701, shares subject to lock-up agreements
will not be salable until these agreements expire or are waived by BancBoston
Robertson Stephens. Taking into account the lock-up agreements, and assuming
BancBoston Robertson Stephens does not release stockholders from these
agreements, the following restricted shares will be eligible for sale in the
public market at the following times:
- Beginning on the effective date of this prospectus, shares will
be immediately available for sale in the public market.
- Beginning 90 days after the effective date, approximately
shares will be eligible for sale, none of which will be subject, in some
cases, to volume, manner of sale and other limitations under Rule 144.
- Beginning 180 days after the effective date, approximately
shares will be eligible for sale, of which will be subject to
volume, manner of sale and other limitations under Rule 144.
- The remaining shares will become eligible for sale under Rule
144 upon the expiration of various one-year holding periods during the
six months following 180 days after the effective date.
In general, under Rule 144 a person who has beneficially owned restricted
securities for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
- 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after the offering; or
67
<PAGE> 72
- the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale.
Sales under Rule 144 are also subject to requirements with respect to manner of
sale, notice, and the availability of current public information about us.
Under Rule 144(k), a person who is not deemed to have been our affiliate at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, is entitled to sell
his or her shares without complying with the manner of sale, public information,
volume limitation or notice provisions of Rule 144.
Rule 701, as currently in effect, permits our employees, officers,
directors or consultants who purchased shares under a written compensatory plan
or contract to resell these shares in reliance upon Rule 144 but without
compliance with specific restrictions. Rule 701 provides that affiliates may
sell their Rule 701 shares under Rule 144 without complying with the holding
period requirement and that non-affiliates may sell their shares in reliance on
Rule 144 without complying with the holding period, public information, volume
limitation or notice provisions of Rule 144.
In addition, we intend to file registration statements under the Securities
Act as promptly as possible after the effective date to register shares to be
issued under our employee benefit plans. As a result, any options or rights
exercised under any of our existing stock option plans or any other benefit plan
after the effectiveness of the registration statements will also be freely
tradable in the public market. However, such shares held by affiliates will
still be subject to the volume limitation, manner of sale, notice and public
information requirements of Rule 144 unless otherwise exempt under Rule 701. As
of June 30, 1999 there were outstanding options for the purchase of 2,323,986
shares of common stock, of which options to purchase 586,469 shares were
exercisable.
Following this offering, the holders of an aggregate of 9,273,237 shares of
outstanding common stock will have rights to require us to register their shares
for future sale.
68
<PAGE> 73
UNDERWRITING
The underwriters named below acting through their representatives,
BancBoston Robertson Stephens Inc., Donaldson, Lufkin & Jenrette Securities
Corporation, Hambrecht & Quist LLC and Robert W. Baird & Co. Incorporated, have
each agreed with us, subject to the terms and conditions of the underwriting
agreement, to purchase from us the number of shares of common stock opposite
their names below. The underwriters are committed to purchase and pay for all
such shares if any are purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
<S> <C>
BancBoston Robertson Stephens Inc...........................
Donaldson Lufkin & Jenrette Securities Corporation..........
Hambrecht & Quist LLC.......................................
Robert W. Baird & Co. Incorporated..........................
--------
Total.............................................
========
</TABLE>
We have been advised by the representatives that the underwriters propose
to offer the shares of common stock to the public at the public offering price
set forth on the cover page of this prospectus and to other dealers at such
price less a concession of not more than $ per share, of which $ may
be reallowed to other dealers. After this offering, the public offering price,
concession, and reallowance to dealers may be reduced by the representatives. No
such reduction will change the amount of proceeds to be received by us as set
forth on the cover page of this prospectus.
We and James Daleen, our chief executive officer, have granted to the
underwriters an option, exercisable during the 30-day period after the date of
this prospectus, to purchase up to additional shares of common stock
to cover over-allotments, if any, at the public offering price less the
underwriting discount set forth on the cover page of this prospectus. If the
underwriters exercise the option in full, we will sell additional shares and
Mr. Daleen will sell additional shares. If the underwriters exercise this
option only in part, the option shares will be sold first by Mr. Daleen and we
will sell shares only if, and to the extent, the total number of shares to be
purchased by the underwriters exceeds . To the extent that the
underwriters exercise such option, each of the underwriters has committed to
purchase approximately the same percentage of such additional shares that the
number of shares of common stock to be purchased by it shown in the above table
represents as a percentage of the shares offered. If purchased, such
additional shares will be sold by the underwriters on the same terms as those on
which the shares are being sold. We and the selling stockholder will
be obligated, pursuant to the option, to sell shares to the extent the option is
exercised. The underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the shares of common stock
offered in this offering.
The underwriting agreement contains covenants of indemnity among the
underwriters, us and the selling stockholder against civil liabilities,
including liabilities under the Securities Act
69
<PAGE> 74
and liabilities arising from breaches of representations and warranties
contained in the underwriting agreement.
Each officer and director and substantially all other stockholders of
Daleen have agreed, for a period of 180 days after the date of this prospectus,
subject to specified exceptions, not to offer to sell, contract to sell, sell,
or in any way transfer or dispose of, loan, pledge or grant any rights with
respect to any shares of common stock or any options to purchase any shares of
common stock, or any securities convertible into or exchangeable for shares of
common stock owned as of the date of this prospectus or later acquired directly
by such holders or with respect to which they have the power of disposition,
without the prior written consent of BancBoston Robertson Stephens Inc.
In addition, we have agreed that during the period of 180 days after the
date of this prospectus we will not, without the prior written consent of
BancBoston Robertson Stephens Inc., subject to specified exceptions, issue,
sell, contract to sell, or in any way transfer or dispose of, any shares of
common stock, any options to purchase any shares of common stock or any
securities convertible into, exercisable for or exchangeable for shares of
common stock other than our sale of shares in this offering, the issuance of
common stock upon the exercise of outstanding options or warrants, and the our
issuance of options and shares under existing stock option and incentive plans.
See "Shares Eligible for Future Sale."
The underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Prior to this offering, there has been no public market for the common
stock. Consequently, the public offering price for the common stock offered by
this prospectus will be determined through negotiations among the
representatives and us. Among the factors to be considered in such negotiations
will be prevailing market conditions, our financial information, market
valuations of other companies that we and the representatives believe to be
comparable to us, estimates of our business potential, the present state of our
development and other factors that we and the representatives may deem relevant
at the time.
The representatives have advised us that, under Regulation M under the
Exchange Act of 1934, some persons participating in this offering may engage in
transactions that may have the effect of stabilizing or maintaining the market
price of the common stock at a level above that which might otherwise prevail in
the open market. These transaction may include stabilizing bids, syndicate
covering transactions or the imposition of penalty bids, as described below:
- A stabilizing bid is a bid for or the purchase of common stock on behalf
of the underwriters for the purpose of fixing or maintaining the price of
the common stock.
- A syndicate covering transaction is the bid for or the purchase of common
stock on behalf of the underwriters to reduce a short position incurred
by the underwriters in connection with this offering.
- A penalty bid is an arrangement permitting the representatives to reclaim
the selling concession otherwise accruing to an underwriter or syndicate
member in connection with this offering if the common stock originally
sold by such underwriter or syndicate member is purchased by the
representatives in a syndicate covering transaction and has therefore not
been effectively placed by such underwriter or syndicate member.
These transactions may be effected on the Nasdaq National Market or through
other means and, if commenced, may be discontinued at any time.
70
<PAGE> 75
LEGAL MATTERS
The validity of the common stock in this offering will be passed upon for
us by Morris, Manning & Martin, LLP, Atlanta, Georgia. Legal matters in
connection with this offering will be passed upon for the underwriters by Hale
and Dorr LLP, Washington, D.C.
EXPERTS
The consolidated financial statements and financial statement schedule of
Daleen Technologies Inc. and subsidiary as of December 31, 1997 and 1998, and
for each of the years in the three-year period ended December 31, 1998, have
been included herein and in the registration statement in reliance upon the
reports of KPMG LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1 under the Securities Act with respect to the offered
shares of common stock. This prospectus is only a part of the registration
statement and does not contain all of the information included in the
registration statement. Further information with respect to us and the common
stock offered hereby can be found in the registration statement. Statements made
in this prospectus as to the contents of any contract, agreement or other
document are summaries and are not complete descriptions of all terms. The
registration statement and its exhibits and schedules may be inspected without
charge at the Public Reference Room maintained by the Commission in Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the following regional
offices of the Commission: Seven World Trade Center, Room 1400, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, Room 1024, at prescribed rates. You may obtain information on the
operation of the Commission's Public Reference Room by calling the Commission at
1-800-SEC-0330. In addition, we are required to file electronic versions of
these documents with the Commission through the Commission's Electronic Data
Gathering, Analysis, and Retrieval, EDGAR, system. The Commission maintains an
internet site at http://www.sec.gov, which contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. Information concerning us is also available
for inspection at the offices of The Nasdaq Stock Market, Reports Section, 1735
K Street, N.W., Washington, D.C. 20006.
71
<PAGE> 76
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................. F-2
Consolidated Balance Sheets as of December 31, 1997 and
1998 and as of June 30, 1999 (unaudited) and pro forma
as of June 30, 1999 (unaudited)........................ F-3
Consolidated Statements of Operations for each of the
years in the three-year period ended December 31, 1998,
and the six months ended June 30, 1998 and 1999
(unaudited)............................................ F-4
Consolidated Statements of Redeemable Preferred Stock and
Stockholders' Deficit for each of the years in the
three-year period ended December 31, 1998, and the six
months ended June 30, 1999 (unaudited)................. F-5
Consolidated Statements of Cash Flows for each of the
years in the three-year period ended December 31, 1998,
and the six months ended June 30, 1998 and 1999
(unaudited)............................................ F-6
Notes to Consolidated Financial Statements................ F-7
</TABLE>
F-1
<PAGE> 77
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Daleen Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of Daleen
Technologies, Inc. and Subsidiary as of December 31, 1997 and 1998, and the
related consolidated statements of operations, redeemable preferred stock and
stockholders' deficit and cash flows for each of the years in the three-year
period ended December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Daleen
Technologies, Inc. and Subsidiary as of December 31, 1997 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles.
KPMG LLP
Miami, Florida
May 10, 1999 except as to note 2 and the
third paragraph of note 9 which are as of
June 30, 1999 and the last paragraph of note 1(m)
which is as of August 16, 1999
F-2
<PAGE> 78
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, HISTORICAL PRO FORMA
------------------- JUNE 30, JUNE 30,
1997 1998 1999 1999
-------- -------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 5,030 $ 723 $ 14,988 $ 14,988
Restricted cash........................................... -- -- 120 120
Securities available for sale............................. 1,770 5,753 -- --
Accounts receivable, less allowance for doubtful accounts
of $17 at December 31, 1997, $9 at December 31, 1998 and
(unaudited) $167 at June 30, 1999....................... 19 1,202 2,154 2,154
Costs in excess of billings............................... -- 503 1,298 1,298
Other current assets...................................... 229 176 316 316
-------- -------- -------- --------
Total current assets................................ 7,048 8,357 18,876 18,876
Property and equipment, net (note 3)........................ 1,379 2,516 2,958 2,958
Deferred offering costs..................................... -- -- 250 250
Other assets................................................ 89 152 241 241
-------- -------- -------- --------
Total assets........................................ $ 8,516 $ 11,025 $ 22,325 $ 22,325
======== ======== ======== ========
LIABILITIES, REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Notes payable (note 5).................................... $ 1,618 $ -- $ -- $ --
Accounts payable.......................................... 292 459 457 457
Accrued payroll and other accrued expenses................ 905 2,237 3,366 3,366
Billings in excess of costs............................... -- 429 1,492 1,492
Other current liabilities................................. 147 -- 30 30
-------- -------- -------- --------
Total current liabilities........................... 2,962 3,125 5,345 5,345
-------- -------- -------- --------
Commitments and contingencies (notes 7 and 8)
Redeemable preferred stock (note 9):
Mandatorily redeemable convertible Series A Preferred
Stock -- 3,000,000 shares authorized, issued and
outstanding ($7,500 liquidation value) as of December
31, 1997 and 1998 and (unaudited) June 30, 1999; none
issued and outstanding pro forma as of June 30, 1999
(unaudited)............................................. 7,500 7,500 7,500 --
Mandatorily redeemable convertible Series D and D-1
Preferred Stock -- 4,908,379 shares authorized, issued
and outstanding at December 31, 1998 and (unaudited)
June 30, 1999 ($15,000 liquidation value); none issued
and outstanding pro forma as of June 30, 1999
(unaudited)............................................. -- 14,297 14,376 --
Mandatorily redeemable convertible Series E Preferred
Stock -- 1,496,615 authorized; none issued and
outstanding at December 31, 1998 and 1,496,615 shares
issued and outstanding at June 30, 1999 (unaudited);
none issued and outstanding pro forma as of June 30,
1999 (unaudited)........................................ -- -- 13,428 --
Stockholders' (deficit) equity (note 8):
Series C Convertible Preferred stock -- $.01 par value.
Authorized 1,222,222 shares; issued and outstanding
1,150,493 shares in 1997 and 1,213,584 shares in 1998
($4.50 per share liquidation value) and (unaudited) as
of June 30, 1999; and none issued and outstanding pro
forma as of June 30, 1999 (unaudited)................... 5,092 5,301 5,301 --
Preferred stock -- $.01 par value. Authorized 11,250,000
shares; none issued or outstanding...................... -- -- -- --
Common stock -- $.01 par value. Authorized 70,000,000
shares; issued and outstanding 3,209,987 shares in 1997
and 3,240,020 shares in 1998 and 3,653,651 shares at
June 30, 1999 (unaudited); issued and outstanding
14,272,229 shares pro forma as of June 30, 1999
(unaudited)............................................. 32 32 37 143
Stockholders notes receivable............................. -- -- (435) (435)
Additional paid-in capital................................ 3,204 3,278 3,868 44,367
Accumulated deficit....................................... (10,274) (22,508) (27,095) (27,095)
-------- -------- -------- --------
Total stockholders' (deficit) equity................ (1,946) (13,897) (18,324) 16,980
-------- -------- -------- --------
Total liabilities, redeemable preferred stock and
stockholders' (deficit) equity...................... $ 8,516 $ 11,025 $ 22,325 $ 22,325
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE> 79
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------- ------------------
1996 1997 1998 1998 1999
------- ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
License fees............................. $ -- $ -- $ 1,879 $ 487 $ 3,748
Professional services and other.......... 2,550 156 3,352 975 3,367
------- ------- -------- ------- --------
Total revenue......................... 2,550 156 5,231 1,462 7,115
------- ------- -------- ------- --------
Cost of revenue:
License fees............................. -- -- 3 1 3
Professional services and other.......... 1,396 293 4,239 1,109 3,655
------- ------- -------- ------- --------
Total cost of revenue................. 1,396 293 4,242 1,110 3,658
------- ------- -------- ------- --------
Gross profit............................... 1,154 (137) 989 352 3,457
Operating expenses:
Sales and marketing...................... 450 962 2,435 1,217 1,282
Research and development................. 1,067 1,669 6,653 3,474 3,488
General and administrative............... 2,446 3,704 4,824 1,757 3,294
------- ------- -------- ------- --------
Total operating expenses.............. 3,963 6,335 13,912 6,448 8,064
------- ------- -------- ------- --------
Operating loss............................. (2,809) (6,472) (12,923) (6,096) (4,607)
------- ------- -------- ------- --------
Nonoperating income (expense):
Interest income (expense)................ (528) (1,570) 249 (30) 79
Other income (notes 12 and 13)........... 1,811 58 505 73 20
------- ------- -------- ------- --------
Total nonoperating income (expense)... 1,283 (1,512) 754 43 99
------- ------- -------- ------- --------
Net loss................................... (1,526) (7,984) (12,169) (6,053) (4,508)
Accretion of preferred stock............... -- -- (65) -- (79)
------- ------- -------- ------- --------
Net loss applicable to common
stockholders............................. $(1,526) $(7,984) $(12,234) $(6,053) $ (4,587)
======= ======= ======== ======= ========
Net loss applicable to common stockholders
per share -- basic and diluted........... $ (0.81) $ (3.48) $ (3.78) $ (1.88) $ (1.41)
======= ======= ======== ======= ========
Weighted average shares -- basic and
diluted.................................. 1,879 2,295 3,237 3,218 3,242
======= ======= ======== ======= ========
Pro forma data:
Pro forma net loss applicable to common
stockholders (unaudited).............. $(12,169) $ (4,508)
======== ========
Pro forma net loss applicable to common
stockholders per share -- basic and
diluted (unaudited)................... $ (1.22) $ (0.36)
======== ========
Pro forma weighted average shares --basic
and diluted (unaudited)............... 9,991 12,372
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE> 80
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' DEFICIT
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
REDEEMABLE PREFERRED STOCK
------------------------------------------------------------------------
SERIES A SERIES D AND D-1 SERIES E
------------------ ------------------- -------------------
NUMBER NUMBER NUMBER
OF SHARES AMOUNT OF SHARES AMOUNT OF SHARES AMOUNT TOTAL
--------- ------ --------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995......................... -- $ -- -- $ -- -- $ -- $ --
Stock options granted............................. -- -- -- -- -- -- --
Stock purchase warrants granted................... -- -- -- -- -- -- --
Net loss.......................................... -- -- -- -- -- -- --
--------- ------ --------- ------- --------- ------- -------
Balance, December 31, 1996......................... -- -- -- -- -- -- --
Warrants issued on bridge loan.................... -- -- -- -- -- -- --
Warrants issued as part of inducement on bridge
loan............................................ -- -- -- -- -- -- --
Exercise of bridge loan warrants.................. -- -- -- -- -- -- --
Stock issued for convertible debt................. -- -- -- -- -- -- --
Issuance of preferred stock -- Series A........... 3,000,000 7,500 -- -- -- -- 7,500
Issuance of preferred stock -- Series C........... -- -- -- -- -- -- --
Stock options issued for consulting services...... -- -- -- -- -- -- --
Stock options exercised........................... -- -- -- -- -- -- --
Net loss.......................................... -- -- -- -- -- -- --
--------- ------ --------- ------- --------- ------- -------
Balance, December 31, 1997......................... 3,000,000 7,500 -- -- -- -- 7,500
Issuance of preferred stock -- Series D and D-1... -- -- 4,908,379 14,232 -- -- 14,232
Accretion of preferred stock -- Series D and
D-1............................................. -- -- -- 65 -- -- 65
Issuance of preferred stock -- Series C........... -- -- -- -- -- -- --
Stock issued for consulting services.............. -- -- -- -- -- -- --
Redemption of bridge warrants..................... -- -- -- -- -- -- --
Stock issued for options and bridge loan warrants
exercised....................................... -- -- -- -- -- -- --
Net loss.......................................... -- -- -- -- -- -- --
--------- ------ --------- ------- --------- ------- -------
Balance, December 31, 1998......................... 3,000,000 7,500 4,908,379 14,297 -- -- 21,797
Accretion of preferred stock -- Series D and D-1
(unaudited)..................................... -- -- -- 79 -- -- 79
Issuance of preferred stock -- Series E
(unaudited)..................................... -- -- -- -- 1,496,615 13,428 13,428
Stock issued for options exercised for notes
receivable and cash (unaudited)................. -- -- -- -- -- -- --
Net loss (unaudited).............................. -- -- -- -- -- -- --
--------- ------ --------- ------- --------- ------- -------
Balance, June 30, 1999 (unaudited)................. 3,000,000 $7,500 4,908,379 $14,376 1,496,615 $13,428 $35,304
========= ====== ========= ======= ========= ======= =======
</TABLE>
<TABLE>
<CAPTION>
STOCKHOLDERS' DEFICIT
--------------------------------------------------------------------------------------------------
SERIES C
PREFERRED STOCK COMMON STOCK
------------------ ------------------ STOCKHOLDERS ADDITIONAL
NUMBER NUMBER PAR NOTES PAID-IN ACCUMULATED
OF SHARES AMOUNT OF SHARES VALUE RECEIVABLE CAPITAL DEFICIT TOTAL
--------- ------ ---------- ----- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995........ -- $ -- 1,879,153 $19 $ -- $ 189 $ (764) $ (556)
Stock options granted............ -- -- -- -- -- 81 -- 81
Stock purchase warrants granted.. -- -- -- -- -- 87 -- 87
Net loss......................... -- -- -- -- -- -- (1,526) (1,526)
--------- ------ ---------- --- ----- ------ -------- --------
Balance, December 31, 1996........ -- -- 1,879,153 19 -- 357 (2,290) (1,914)
Warrants issued on bridge loan... -- -- -- -- -- 120 -- 120
Warrants issued as part of
inducement on bridge loan...... -- -- -- -- -- 375 -- 375
Exercise of bridge loan warrants. -- -- 619,080 6 -- 613 -- 619
Stock issued for convertible
debt........................... -- -- 688,264 7 -- 1,714 -- 1,721
Issuance of preferred stock --
Series A....................... -- -- -- -- -- -- -- --
Issuance of preferred stock --
Series C....................... 1,150,493 5,092 -- -- -- -- -- 5,092
Stock options issued for
consulting services.............. -- -- -- -- -- 25 -- 25
Stock options exercised.......... -- -- 23,490 -- -- -- -- --
Net loss......................... -- -- -- -- -- -- (7,984) (7,984)
--------- ----- ---------- --- ----- ------ -------- --------
Balance, December 31, 1997........ 1,150,493 5,092 3,209,987 32 -- 3,204 (10,274) (1,946)
Issuance of preferred stock --
Series D and D-1............... -- -- -- -- -- -- -- --
Accretion of preferred stock --
Series D and D-1............... -- -- -- -- -- -- (65) (65)
Issuance of preferred stock --
Series C....................... 63,091 279 -- -- -- -- -- 279
Stock issued for consulting
services....................... -- (70) 21,600 -- -- 70 -- --
Redemption of bridge warrants.... -- -- -- -- -- (4) -- (4)
Stock issued for options and
bridge loan warrants exercised. -- -- 8,433 -- -- 8 -- 8
Net loss......................... -- -- -- -- -- -- (12,169) (12,169)
--------- ------ ---------- --- ----- ------ -------- --------
Balance, December 31, 1998........ 1,213,584 5,301 3,240,020 32 -- 3,278 (22,508) (13,897)
Accretion of preferred stock --
Series D and D-1 (unaudited)... -- -- -- -- -- -- (79) (79)
Issuance of preferred stock --
Series E (unaudited)........ -- -- -- -- -- -- -- --
Stock issued for options exercised
for notes receivable and cash
(unaudited).................... -- -- 413,631 5 (435) 590 -- 160
Net loss (unaudited)............. -- -- -- -- -- -- (4,508) (4,508)
--------- ------ ---------- --- ----- ------ -------- --------
Balance, June 30, 1999
(unaudited).................... 1,213,584 $5,301 3,653,651 $37 $(435) $3,868 $(27,095) $(18,324)
========= ====== ========== === ===== ====== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE> 81
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------- ------------------
1996 1997 1998 1998 1999
------- ------- -------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(1,526) $(7,984) $(12,169) $ (6,053) $(4,508)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 300 352 918 370 691
Stock compensation...................................... 81 26 -- -- --
Amortization of financing costs and warrants issued on
bridge loan........................................... -- 413 -- -- --
Warrants issued as inducement for bridge loan........... -- 375 -- -- --
Bad debt expense........................................ 359 167 247 -- 167
Changes in assets and liabilities:
Restricted cash....................................... 65 36 -- -- (120)
Accounts receivable................................... (449) 1 (1,431) (1,217) (1,197)
Costs in excess of billings........................... -- -- (503) (254) (795)
Other current assets.................................. 87 (193) 53 186 (390)
Other assets.......................................... (13) (2) (63) 62 (89)
Accounts payable...................................... (408) 161 166 (156) (2)
Accrued payroll and other accrued expenses............ 164 627 1,332 1,696 1,129
Billings in excess of costs........................... -- -- 429 617 1,063
Other current liabilities............................. 38 103 (147) 127 108
------- ------- -------- -------- -------
Net cash used in operating activities.............. (1,302) (5,918) (11,168) (4,622) (3,943)
------- ------- -------- -------- -------
Cash flows from financing activities:
Proceeds from issuance of notes payable................... 5,000 1,160 -- -- --
Proceeds from sale of mandatorily redeemable convertible
preferred stock -- Series A, net........................ -- 7,500 -- -- --
Proceeds from sale of preferred stock -- Series C, net.... -- 5,092 279 279 --
Proceeds from sale of mandatorily redeemable convertible
preferred stock -- Series D and D-1, net................ -- -- 14,232 10,231 --
Proceeds from sale of preferred stock -- Series E, net.... -- -- -- -- 13,428
Proceeds from exercise of stock options and bridge
warrants................................................ -- 619 8 4 160
Deferred financing costs.................................. (332) -- -- -- --
Redemption of bridge warrants............................. -- -- (4) -- --
Principal payments on notes payable and capital lease
obligations............................................. (2,260) (1,347) (1,618) -- --
------- ------- -------- -------- -------
Net cash provided by financing activities.......... 2,408 13,024 12,897 10,514 13,588
------- ------- -------- -------- -------
Cash flows from investing activities:
Purchase of securities available for sale................. -- (1,770) (48,697) (16,752) (18,974)
Sales and maturities of securities available for sale..... -- -- 44,715 17,800 24,727
Investment in joint venture............................... (14) 30 -- -- --
Capital expenditures...................................... (318) (1,113) (2,054) (1,183) (1,133)
------- ------- -------- -------- -------
Net cash (used in) provided by investing
activities....................................... (332) (2,853) (6,036) (135) 4,620
------- ------- -------- -------- -------
Net increase (decrease) in cash and cash equivalents........ 774 4,253 (4,307) (5,757) 14,625
Cash and cash equivalents at beginning of period............ 3 777 5,030 5,030 723
------- ------- -------- -------- -------
Cash and cash equivalents at end of period.................. $ 777 $ 5,030 $ 723 $ 10,787 $14,988
======= ======= ======== ======== =======
Supplemental disclosures of cash flow information:
Cash paid during the period for Interest.................. $ 273 $ 640 $ 142 $ 1 $ 1
======= ======= ======== ======== =======
Non-cash Investing and Financing Activities (in thousands):
The Company entered into capital leases for new equipment of
$56 in 1996.
In 1997, notes payable in the amount of $1,618 and accrued
interest of $103 were converted into common stock.
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE> 82
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX-
MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS
Daleen Technologies, Inc. (the "Company") is a provider of next-generation
billing and customer care software that can serve as the core of an enterprise
solution for integrated communication service providers. The Company provides
comprehensive billing, provisioning and customer care systems for wireline and
wireless network operators and service providers. It also provides customer care
and billing systems to companies that offer multiple service packages, commonly
referred to as convergent services, such as wireline and wireless voice,
internet access and data, video, internet telephony and application hosting.
Prior to the development of the Company's products, the Company was a
computer consulting company which provided software and hardware development
services to customers on a contract basis. The Company ceased performing these
contract consulting services in June 1996. The Company also provided temporary
software and hardware computer specialists to companies on a contract basis
until the sale of the Company's placement services division in November 1996
(note 13).
The Company currently has a professional services department to provide
custom integration and configuration services to its customers, as well as
training and support for customers and business partners. The Company maintains
a customer service department to provide technical assistance to customers, in
addition to providing customer care for upgrades and new releases of its
products.
In February 1996, the Company formed a foreign sales corporation, Daleen
International, Inc., which is wholly owned. Daleen International, Inc. had no
operations for each of the years in the three-year period ended December 31,
1998.
(B) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts and operations
of the Company and its wholly owned subsidiary. The Company accounted for the
investment in the Indian joint venture discussed in note 10 on the equity method
of accounting. All intercompany accounts and transactions have been eliminated.
(C) REVENUE RECOGNITION
The Company recognizes revenue from long-term contracts involving
significant production, modification or customization of software under
Statement of Position 81-1 using the percentage of completion method, based on
the ratio of total labor hours incurred to date to total estimated labor hours.
Changes in job performance, job conditions, estimated profitability and final
contract settlement may result in revisions to costs and income and are
recognized in the period in which the revisions are determined. Contract costs
include all direct material and labor costs and those indirect costs related to
contract performance, such as indirect labor and supplies. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. Amounts billed in excess of revenue recognized to date
are classified as "Billings in
F-7
<PAGE> 83
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX-
MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
excess of costs", whereas revenue recognized in excess of amounts billed are
classified as "Costs in excess of billings" in the accompanying consolidated
balance sheets.
In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 97-2, Software Revenue Recognition (SOP
97-2). Effective January 1, 1998, the Company adopted SOP 97-2 for all software
transactions entered into that did not require significant production,
modification or customization. SOP 97-2 generally requires revenue earned on
software arrangements involving multiple elements to be allocated to each
element based on vendor specific objective evidence (VSOE) of the relative fair
values of the elements. VSOE is determined by the price charged when the element
is sold separately. The revenue allocated generally is recognized when the
software has been delivered and installed, the fee is fixed and determinable and
collectibility is probable.
Revenue related to customer maintenance agreements is deferred and
recognized ratably on a straight-line basis over the maintenance period of the
agreement.
Revenue related to professional services under a time and materials
arrangement is recognized as services are performed.
For license fee revenue sold to end users, the Company recognizes revenue
upon shipment when it has no further obligations under the contract. In these
arrangements a third-party integrator contracts directly with the customer to
perform the installation. Upon shipment, delivery has occurred, persuasive
evidence of an arrangement exists, collectibility is probable and the fee is
fixed and determinable.
The Company recognizes revenue after installation is complete if the
Company sells the license to a third-party integrator. Under these types of
arrangements, the Company's involvement in the integration is on an as-needed
basis throughout the integration process. Therefore, the obligation is not
complete until the software has been installed and accepted by the end user.
In March 1999, the Company adopted SOP 98-9, Modification of SOP 97-2,
Software Revenue Recognition, With Respect to Certain Transactions. SOP 98-9
amends SOP 97-2 to require recognition of revenue using the "residual method"
when (1) there is VSOE of the fair values of all undelivered elements in a
multiple-element arrangement that is not accounted for using long-term contract
accounting, (2) VSOE of fair value does not exist for one or more of the
delivered elements in the arrangement, and (3) all revenue-recognition criteria
in SOP 97-2 other than the requirement for VSOE of the fair value of each
delivered element of the arrangement are satisfied. Under the residual method,
the arrangement fee is recognized as follows: (1) the total fair value of the
undelivered elements, as indicated by VSOE, is deferred and subsequently
recognized in accordance with the relevant sections of SOP 97-2 and (2) the
difference between the total arrangement fee and the amount deferred for the
undelivered elements is recognized as revenue related to the delivered elements.
The adoption of SOP 98-9 did not have a material impact on results of
operations.
F-8
<PAGE> 84
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX-
MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
(D) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
(E) SECURITIES AVAILABLE FOR SALE
Securities available for sale are recorded at fair value. Unrealized gains
and losses are recorded as other comprehensive income in stockholders' deficit.
The fair value of securities available for sale approximated the historical cost
for all periods presented and thus, no significant unrealized gains or losses
existed.
(F) PROPERTY AND EQUIPMENT, NET
Property and equipment is stated at cost. Depreciation on property and
equipment is calculated using the straight-line method over the estimated useful
lives of the assets, ranging from three to seven years. Leasehold improvements
are amortized over their useful lives or the term of the related lease,
whichever is shorter.
(G) SOFTWARE DEVELOPMENT COSTS
The Company accounts for software development costs under Statement of
Financial Accounting Standards No. 86, Accounting for Costs of Computer Software
to Be Sold, Leased or Otherwise Marketed ("SFAS No. 86"). Under SFAS No. 86, the
costs associated with software development are required to be capitalized after
technological feasibility has been established. Based on the Company's product
development process, technological feasibility is generally established upon
completion of the working model. Costs incurred by the Company between
completion of the working model and the point at which the product is ready for
general release have been insignificant and, as a result, the Company has not
capitalized any software development costs.
(H) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Impairment of assets to be held and used is determined by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.
(I) INCOME TAXES
The Company uses the asset and liability method of accounting for income
taxes. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
F-9
<PAGE> 85
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX-
MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
(J) STOCK OPTION PLANS
The Company accounts for its stock option plans in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations. As such, compensation
expense would be recorded on the date of grant only if the current market price
of the underlying stock exceeded the exercise price. Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation, ("SFAS
No. 123") permits entities to recognize as expense over the vesting period the
fair value of all stock-based awards on the date of grant. Alternatively, SFAS
No. 123 also allows entities to continue to apply the provisions of APB Opinion
No. 25 and provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants made in 1995 and future years as if
the fair-value-based method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB Opinion No. 25
and provide the pro forma disclosures of SFAS No. 123.
(K) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Value of Financial Instruments, requires disclosure of fair value of certain
financial instruments. Cash and cash equivalents, accounts receivable,
securities available for sale and prepaid expenses and other current assets, as
well as accounts payable, accrued expenses and other current liabilities, as
reflected in the consolidated financial statements, approximate fair value
because of the short-term maturity of these instruments.
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
(L) USE OF ESTIMATES
Management has made a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent assets and
liabilities to prepare the accompanying financial statements in conformity with
generally accepted accounting principles. Actual results could differ from those
estimates.
(M) BASIC AND DILUTED NET LOSS PER SHARE
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, Earnings Per Share ("SFAS No. 128"). SFAS No. 128
establishes new standards designed to improve the earnings per share ("EPS")
information provided in financial
F-10
<PAGE> 86
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX-
MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
statements by simplifying the existing computational guidelines, revising the
disclosure requirements and increasing the comparability of EPS data on an
international basis. The adoption of SFAS No. 128 did not have a significant
impact on the Company's reported EPS.
In accordance with Securities and Exchange Commission ("SEC") Staff
Accounting Bulletin No. 98, certain common stock and common stock equivalents
issued for nominal consideration prior to the initial filing of a registration
statement relating to an IPO are treated as outstanding for the entire period.
The Company had no nominal issuances during this period.
Basic and diluted net loss applicable to common stockholders per share were
computed by dividing net loss applicable to common stockholders by the
weighted-average number of shares of common stock outstanding for each period
presented. Common stock equivalents were not considered for each of the years in
the three year period ended December 31, 1998 since their effect would be
antidilutive. Net loss applicable to common stockholders differs from net loss
in the year ended December 31, 1998 and the six months ended June 30, 1999 due
to accretion on the preferred stock.
On August 16, 1999, the Company filed its Agreement and Plan of Merger with
the Secretaries of State in Florida and Delaware, the effect of which increased
the authorized number of shares of common stock to 70,000,000 and decreased the
authorized number of shares of preferred stock to 21,877,216.
(N) UNAUDITED PRO FORMA FINANCIAL INFORMATION
Unaudited pro forma basic and diluted net loss applicable to common
stockholders per share for the year ended December 31, 1998, and for the six
months ended June 30, 1999 were computed by dividing pro forma net loss
applicable to common stockholders by the pro forma weighted average number of
shares of common stock outstanding, which reflects the conversion of preferred
stock as described below:
<TABLE>
<CAPTION>
(IN THOUSANDS)
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- --------------
<S> <C> <C>
Net loss applicable to common stockholders......... $(12,234) $(4,587)
Reversal of accretion of preferred stock........... 65 79
-------- -------
Pro forma net loss applicable to common
stockholders..................................... $ 12,169 $ 4,508
======== =======
Weighted average shares............................ 3,237 3,242
Common stock issued upon conversion of preferred
stock............................................ 6,754 9,130
-------- -------
Pro forma weighted average shares.................. 9,991 12,372
======== =======
Pro forma basic and diluted net loss applicable to
common stockholders per share.................... $ (1.22) $ (0.36)
======== =======
</TABLE>
Pro forma net loss applicable to common stockholders reflects the automatic
conversion of all outstanding shares of preferred stock into shares of common
stock as if such conversion
F-11
<PAGE> 87
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX-
MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
occurred on January 1, 1998 or the date preferred shares were issued if such
issuance occurred subsequent to January 1, 1998.
The unaudited pro forma consolidated balance sheet at June 30, 1999
reflects the conversions of the Series A, D, D-1, and E Mandatorily Redeemable
Convertible Preferred Stock and Series C Convertible Preferred Stock to common
stock which conversions will automatically occur upon the closing of an initial
public offering as if such closing occurred on June 30, 1999.
(O) CAPITAL STRUCTURE
The Company has a total of 21,877,216 authorized shares of preferred stock.
In September 1997, the Company designated 3,000,000 shares of preferred stock as
Mandatorily Redeemable Convertible Series A Preferred Stock (see note 9). In
November 1997, the Company designated 1,222,222 shares of preferred stock as
Series C Convertible Preferred Stock (see note 8(b)). In June 1998, the Company
designated 4,221,846 shares and 686,533 shares, respectively, of preferred stock
as Series D and D-1 Preferred Stock (see note 9). In June 1999, the Company
designated 1,496,615 shares of preferred stock as Series E Preferred Stock (see
note 9). The Board has the ability to set the rights, preferences, and dividends
of preferred stock without shareholder approval.
(P) COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS No. 130").
SFAS No. 130 establishes standards for reporting and displaying comprehensive
income and its components in a full set of general purpose financial statements.
SFAS No. 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in financial statements and (b) display the
accumulated balance of other comprehensive income separately from accumulated
deficit and additional paid in capital in the equity section of the balance
sheets. Comprehensive income is defined as a change in equity during the
financial reporting period of a business enterprise resulting from non-owner
sources. There were no differences between net loss and comprehensive loss for
each of the years in the three-year period ended December 31, 1998.
(Q) SEGMENT INFORMATION
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information ("SFAS No. 131"). SFAS No. 131 establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
stockholders. The Company operates in one segment for management reporting
purposes.
F-12
<PAGE> 88
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX-
MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
(R) UNAUDITED INTERIM FINANCIAL INFORMATION
The unaudited consolidated balance sheet as of June 30, 1999, the unaudited
consolidated statements of operations and cash flows for the six months ended
June 30, 1998 and 1999 and the unaudited consolidated statement of redeemable
preferred stock and stockholders' deficit for the six months ended June 30, 1999
include, in the opinion of management, all adjustments (consisting of normal
recurring adjustments) necessary to present fairly the Company's consolidated
financial position, results of operations and cash flows. Operating results for
the six months ended June 30, 1999 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1999.
2. LIQUIDITY
The Company has incurred substantial losses and utilized substantial
amounts of cash in its operating activities for the years ended December 31,
1997 and 1998, and has an accumulated deficit of $22,508,291 at December 31,
1998. An additional loss was incurred in the amount of $4,508,821 during the six
months ended June 30, 1999. During these loss periods, the Company incurred
significant costs related to the development of its current primary product. The
Company plans to increase sales and profitability by marketing its current
primary product and increasing sales in the United States, United Kingdom and
Latin America. During the year ended December 31, 1998, the Company's revenue
from license fees increased due to certain major contracts that were entered
into in 1998. In addition, as discussed in note 9, the Company received $13.5
million in June 1999 from the proceeds of a private placement offering of
mandatorily redeemable preferred stock.
3. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consist of the following at December 31:
<TABLE>
<CAPTION>
(IN THOUSANDS) ESTIMATED
1997 1998 USEFUL LIFE
------ ------- -----------
<S> <C> <C> <C> <C>
Computer hardware........................... $ 787 $ 2,093 3 - 5 years
Purchased computer software................. 300 472 3 - 5
Office furniture and equipment.............. 383 755 5 - 7
Transportation equipment.................... 43 43 5
Leasehold improvements...................... 194 757 lease term
Construction in progress.................... 459 8 --
------ -------
2,166 4,128
Less accumulated depreciation and
amortization.............................. (787) (1,612)
------ -------
Property and equipment, net................. $1,379 $ 2,516
====== =======
</TABLE>
F-13
<PAGE> 89
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX-
MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
4. INCOME TAXES
The Company did not have income tax expense for the years ended December
31, 1996, 1997 and 1998. This differed from an income tax benefit computed by
applying the Federal income tax rate of 34% to pretax losses as a result of the
following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1996 1997 1998
----- ------- -------
<S> <C> <C> <C>
Computed "expected" tax benefit............................ $ 519 $ 2,715 $ 4,137
Increase (reduction) in income taxes resulting from:
State income taxes....................................... 55 594 439
Increase in the valuation allowance for deferred tax
assets................................................ (564) (3,016) (4,360)
Other items.............................................. (10) (293) (216)
----- ------- -------
$ -- $ -- $ --
===== ======= =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at December 31, 1997 and 1998 are presented
below:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1997 1998
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........................ $ 3,682 $ 7,791
Depreciation and amortization........................... 28 106
Allowance for doubtful accounts......................... 112 3
Accrued expenses........................................ -- 274
Other................................................... (8) --
------- -------
Gross deferred tax assets............................... 3,814 8,174
Less valuation allowance................................ (3,814) (8,174)
------- -------
Total net deferred tax asset.................... $ -- $ --
======= =======
</TABLE>
Realization of deferred tax assets associated with net operating loss and
credit carryforwards is dependent upon generating sufficient taxable income
prior to their expiration. Management believes that there is a risk that these
net operating loss and credit carryforwards may expire unused and has
established a valuation allowance for the deferred tax assets.
Net operating loss carryforwards for Federal and state income tax purposes
amount to approximately $20,843,000 and expire through year 2018. The
utilization of the Company's net operating loss carryforwards may be limited due
to the defined changes in ownership that have occurred over the past several
years.
5. NOTES PAYABLE
During 1996, the Company completed a private placement of 60 units of
subordinated promissory notes (the "1996 Notes"), along with warrants to
purchase shares of the Company's common stock. The gross proceeds of the
placement were $3,000,000 and the expenses related to
F-14
<PAGE> 90
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX-
MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
the placement were $381,424. Each unit consisted of a $50,000 note payable and a
warrant to purchase 8,400 shares of the Company's common stock at a price equal
to the greater of $3.00 per share or one-half of the initial offering price per
share in the event that the Company completes an initial public offering ("IPO")
of its common stock. The proceeds were allocated between the estimated value of
the warrants and the note payable. The estimated value of the warrants is
reflected as a discount to the note payable. The expenses and discount related
to the private placement were amortized into interest expense over the term of
the 1996 Notes.
During June 1997, the Company completed an offering of subordinated notes
payable with aggregate proceeds of $375,000. The notes were due in June 1998
with interest payable in arrears at 10%. The Company also granted 90,000
warrants for the purchase of common stock at $3.25 per share to the investors of
the subordinated notes payable. These notes were repaid with proceeds from the
September 1997 offering discussed in note 9.
On July 10, 1997, the Company completed a restructuring of the 1996 Notes
and an additional offering of the new units described below. The Company offered
each holder of the 1996 units the right to exchange the old units for new units
comprised of a $50,000 convertible subordinated note payable ("1997 Notes") with
a new maturity date which was one year from the original maturity date, thereby
extending the maturity dates on the converted notes from September through
November 1997 to September through November 1998. One half of the 1997 Notes
plus accrued interest converts to the Company's common stock at the rate of
$3.00 per share upon completion of a private or public equity financing of at
least $2,500,000. If the equity financing is for less than $3.00 per share, the
conversion rate is for the lesser amount. The fair value of the underlying stock
was less than the conversion price. Should any portion of the 1997 Notes remain
outstanding after the maturity date, the Company was obligated to issue common
shares to the holder at a rate of 700 common shares per month for each $50,000
outstanding. The 8,400 warrants associated with each 1996 Note converted to the
1997 Note were required to be immediately exercised on July 10, 1997 at a
purchase price of $1.00 per share. The Company recorded inducement expense of
$375,000 related to the reduction of the exercise price of these warrants from
the original exercise price of $3.00 per share to the reduced exercise price of
$1.00 per share. This inducement expense is included in interest expense in the
accompanying consolidated statement of operations for the year ended December
31, 1997 and as a credit to additional paid-in capital. Of the 60 original units
of 1996 Notes, 49 were converted to the new units of 1997 Notes and the related
warrants were exercised. At the same time, the Company also offered the new
units of 1997 Notes to certain additional investors. A total of 15.7 new units
was sold to investors. Total proceeds from the offering of the new units of 1997
Notes and from the warrants exercised was $1,328,480 and a total of 543,480 new
shares of common stock was issued to the investors.
Because of the completion of the financing on September 12, 1997, described
in note 9, one half of the 1997 Notes amounting to $1,617,500 plus associated
interest of approximately $100,000 were converted on that date to common stock
at $2.50 per share, amounting to approximately 690,000 new shares of common
stock. In addition to the conversion of one half of the new units of 1997 Notes
to common stock, the new unit holders received a total of 215,000 warrants to
purchase common stock at $4.00 per share, similar to the Series B Preferred
Stock
F-15
<PAGE> 91
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX-
MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
warrants described in note 8. As a result of the offering of the Series D
preferred stock, as discussed in note 9, the warrants have been repriced at
$3.056.
Notes payable at December 31, 1997 consisted of the 1997 Notes of
$1,617,500, due at the earlier of the closing of an IPO or at dates ranging from
September 1998 to November 1998, and bore interest at 9%, due at maturity.
Upon completion of the financing in June 1998, described in note 9, the
outstanding balance of the 1997 Notes amounting to $1,617,500, plus associated
interest of approximately $180,000 was repaid.
6. ACCRUED PAYROLL AND OTHER ACCRUED EXPENSES
Accrued payroll and other accrued expenses consist of the following at
December 31:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1997 1998
----- -------
<S> <C> <C>
Accrued payroll and related expenses........................ $266 $ 249
Due to subcontractors....................................... 138 760
Accrued bonuses............................................. 457 953
Other accrued expenses...................................... 44 275
---- ------
$905 $2,237
==== ======
</TABLE>
7. COMMITMENTS
(A) LEASES
The Company leases office space and certain equipment under operating
leases that expire through January, 2001. Future minimum lease payments under
noncancelable operating leases (with initial or remaining lease terms in excess
of one year) for the years ending December 31, are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1999........................................................ $220
2000........................................................ 203
2001........................................................ 15
----
Total minimum lease payments...................... $438
====
</TABLE>
Total rent expense for operating leases was $185,498, $279,708, and
$370,919, for the years ended December 31, 1996, 1997 and 1998, respectively.
(B) 401(K) PROFIT SHARING & TRUST
The Daleen Technologies, Inc. 401(k) Profit Sharing & Trust plan covers
substantially all of its employees. The Company matches 25% of the employees'
contribution, up to a maximum of 8% deferral made by the employees. In addition,
the Plan allows discretionary contributions
F-16
<PAGE> 92
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX-
MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
from us. The total expense associated with this plan for 1996, 1997 and 1998 was
$0, $36,277, and $71,923, respectively.
(C) EMPLOYMENT AGREEMENTS
The Company has employment agreements with specified employment terms with
two executives that provide for annual base salaries, annual salary increases,
an annual bonus and periodic stock option grants subject to the approval by the
compensation committee of the Company's board of directors. The terms of their
agreements vary in length up to five years and provide for aggregate annual base
salaries of $467,500. These agreements, and other employment agreements with
other executives that do not have specified employment terms, provide for
severance payments of up to two years base salary.
(8) STOCKHOLDERS' DEFICIT
(A) STOCK OPTIONS
The Company has six fixed stock option plans: the 1994 Employee
Non-Qualified Stock Option Plan ("the 1994 Plan"), the 1995 Qualified Employee
Incentive Stock Option Plan ("the 1995 Plan"), the 1996 Employee Non-Qualified
Stock Option Plan ("the 1996 Plan"), the 1997 Employee Incentive Stock Option
Plan ("the 1997 Plan"), the 1998 Non-Qualified Employee Stock Option Plan ("the
1998 Plan") and the 1998 Qualified Employee Incentive Stock Option Plan ("the
1998 ISO Plan"). Each Plan provides that the exercise price of the options
granted will be issued at no less than the fair market value of the underlying
common stock at the date of grant. A summary of the Company's stock option plans
is presented below:
<TABLE>
<CAPTION>
SHARES
AUTHORIZED
FOR ISSUANCE CONTRACTUAL LIFE
UNDER PLAN VESTING PERIOD OF OPTIONS
------------ ------------------------- -------------------
<S> <C> <C> <C>
1994 Plan...................... 125,000 100% upon grant 5 years from grant
1995 Plan...................... 200,000 100% upon grant 5 years from grant
1996 Plan...................... 400,000 100% upon grant 5 years from grant
1997 Plan...................... 200,000 33.3% each year for first 5 years from grant
three years from grant
1998 Plan...................... 500,000 25% each year for first 5 years from grant
four years from grant
1998 ISO Plan.................. 1,600,000 25% each year for first 5 years from grant
four years from grant
</TABLE>
On February 25, 1999 the Company established a new stock incentive plan
("the 1999 Plan"). The number of shares reserved for grants under the 1999 Plan
was initially 598,881. In July 1999, the Board authorized an additional 750,000
shares to be issued under this plan. In addition, the 1999 Plan authorizes the
Company to automatically adjust the number of shares of common stock available
for issuance on the first day of each fiscal year beginning in 2000, up to
F-17
<PAGE> 93
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX-
MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
an annual increase of 800,000 shares. The contractual life of the options under
this plan is up to ten years from the date of grant.
A summary of the status of the Company's stock option plans, as of December
31, 1996, 1997 and 1998, and changes during the years then ended, is presented
below:
<TABLE>
<CAPTION>
1996 1997 1998
-------------------- ---------------------- ----------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
-------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year.... 113,425 $0.87 520,303 $1.73 1,476,498 $2.67
Granted................ 422,293 1.94 988,732 3.18 1,012,600 3.25
Exercised.............. -- -- -- -- -- --
Forfeited.............. (15,415) 0.92 (32,537) 3.00 (125,401) 3.13
-------- ---------- ----------
Outstanding at end of
year................. 520,303 $1.73 1,476,498 $2.67 2,363,697 $2.89
======== ========== ==========
Options exercisable at
end of year.......... 459,478 503,885 957,814
Weighted average fair
value of options
granted during the
year................. $0.50 $0.38 $0.61
</TABLE>
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------- -----------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
- -------- ----------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$0.10 to $1.00......... 319,305 2.28 $0.97 319,305 $0.97
$2.00 to $3.00......... 403,733 3.01 2.98 349,624 2.97
$3.25 to $4.00......... 1,640,659 4.45 3.25 288,885 3.25
--------- -------
2,363,697 3.91 2.89 957,814 2.39
========= =======
</TABLE>
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock option plans. The fair value of each option granted to
employees is estimated on the date of grant using the Black-Scholes model with
the following assumptions: expected dividends of zero; a risk-free interest rate
ranging from 4.4% to 6.6%; and an expected life of five years.
F-18
<PAGE> 94
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX-
MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
Had compensation expense for the Company's plans been determined consistent
with FASB Statement No. 123, the Company's net loss and net loss per share would
have been increased to pro forma amounts indicated below:
<TABLE>
<CAPTION>
(IN THOUSANDS)
PRO FORMA DISCLOSURES 1996 1997 1998
- --------------------- ------- ------- --------
<S> <C> <C> <C>
Net loss:
As reported.................................... $(1,526) $(7,984) $(12,169)
Pro forma...................................... (1,761) (8,342) (12,444)
Net loss applicable to common stockholders per
share:
As reported.................................... (0.81) (3.48) (3.78)
Pro forma...................................... (0.94) (3.64) (3.84)
</TABLE>
The Company accounts for stock options granted to nonemployees based on the
fair value of the stock options granted. During 1996 and 1997, the Company
recorded $81,000 and $25,782, respectively, of stock compensation expense
related to stock options for the purchase of 23,490 and 113,756 shares of common
stock, respectively, granted to nonemployees. The fair value of such stock
options was estimated on the dates of grant using the Black-Scholes model.
(B) COMMON AND PREFERRED STOCK
In November 1997, the Company began an offering of Series C convertible
preferred stock ("Series C Preferred Stock"). The Series C Preferred Stock was
offered for $4.50 per share and is convertible at the option of the holder to
common stock on a one-for-one basis. The Series C Preferred Stock automatically
converts to common stock upon the completion of an IPO. The Company raised a
total of approximately $5,301,000 for 1,213,584 shares of Series C Preferred
Stock, of which approximately $5,092,000 and $279,000 was received in 1997 and
1998, respectively. Dividends on the Series C Preferred Stock are payable if and
when declared by the Company's board of directors, at an amount to be determined
by the Company's board of directors. In connection with this offering the
Company issued warrants to purchase an additional 285,000 shares of the
Company's common stock at $4.50 per share.
In January 1998, the Company issued 21,600 shares of common stock to
certain individuals for consulting services. The fair value of $70,200 of the
shares of common stock issued was reclassified from the carrying value of the
Series C Preferred Stock to common stock and additional paid-in capital.
9. REDEEMABLE PREFERRED STOCK
On September 12, 1997, the Company completed a sale of mandatorily
redeemable convertible Series A preferred stock ("Series A Preferred Stock") to
a venture capital fund. The Company issued 3,000,000 shares of Series A
Preferred Stock to the fund at $2.50 per share for total proceeds of $7,500,000.
The Series A Preferred Stock is convertible on a one to one basis into the
Company's common stock at the option of the holder, until an IPO occurs, at
which time the Series A Preferred Stock is automatically converted. The Series A
Preferred Stock is
F-19
<PAGE> 95
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX-
MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
redeemable at the option of the holder if an IPO is not completed within five
years from the date of issuance at $2.50 per share which is the fair market
value of the common stock on the date of issuance. In addition, the Company
issued to the venture capital fund 1,250,000 warrants to purchase Series B
Preferred Stock at $4.00 per share. As a result of the offering of the Series D
preferred stock, the warrants have been repriced to $3.056. The Series B
Preferred Stock is also convertible to common stock on a one to one basis and
has the same automatic conversion and redemption features as the Series A
Preferred Stock.
In June 1998, the Company completed a private placement with a group of
venture capital funds for an investment of $15,000,006 in the Company. Under the
terms of the private placement, the Company issued 4,221,846 shares and 686,533
shares, respectively, of newly authorized Series D and D-1 redeemable
convertible preferred stock ("Series D and D-1 Preferred Stock"). The Series D
and D-1 Preferred Stock is convertible on a one to one basis into the Company's
common stock at the option of the holder and will be automatically convertible
to common stock in the event of an IPO of at least $20,000,000 at a price per
share of at least three times the Series D and D-1 Preferred Stock conversion
price ($9.00). The fair market value was equal to the conversion price per share
at the date of issuance. The Company is required to redeem one-third of the
Series D and D-1 Preferred Stock on each of June 18, 2002, 2003 and 2004. Costs
of the offering were $768,275 and were recorded as a discount to the fair value
of the Series D and D-1 Preferred Stock at its date of issuance. This discount
is being accreted into the carrying value of the Series D and D-1 Preferred
Stock, using the effective interest method, so that one-third of the carrying
value of the Series D and D-1 Preferred Stock will equal its redemption value on
each of June 18, 2002, 2003 and 2004. The net proceeds of the private placement
after payment of expenses, were used for working capital and to repay notes
payable and accrued interest of approximately $1,800,000, as discussed in note
5.
On June 30, 1999, the Company completed a sale of mandatorily redeemable
convertible Series E Preferred Stock ("Series E Preferred Stock") to a strategic
partner. The Company issued 1,496,615 shares of Series E Preferred Stock at
$9.00 per share for total proceeds of $13.5 million. The Series E Preferred
Stock is convertible on a one to one basis into the Company's common stock at
the option of the holder, until an IPO occurs, at which time the Series E
Preferred Stock is automatically converted. The Series E Preferred Stock is
redeemable at the option of the holder if an IPO is not completed within five
years from the date of issuance at $9.00 per share.
Dividends on the Series A Preferred Stock, Series B Preferred Stock, Series
D and D-1 Preferred Stock and the Series E Preferred Stock are payable if and
when declared by the Company's board of directors, at an amount to be determined
by the Company's board of directors.
10. JOINT VENTURE
On September 21, 1995, the Company entered into a joint venture agreement
with Macmet India Ltd., an Indian company, to form a new joint venture company
in India to market telecommunications products and services. The Indian joint
venture was named Macmet Daleen Teleware Ltd. In July 1997, the Company was
reimbursed for our investment in the Indian joint
F-20
<PAGE> 96
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX-
MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
venture and as of that date, the joint venture was terminated. The Company
incurred an immaterial loss related to this sale of the joint venture.
11. BUSINESS AND CREDIT CONCENTRATIONS
Historically, when the Company was a consulting company, a substantial
amount of the Company's business activity was with customers located within the
state of Florida and with customers in various industries. Over the past year, a
greater percentage of business was done with customers located in different
areas of the United States and in Latin America and Europe, and the Company has
focused on customers in the communications industry. Foreign revenue is less
than 10% of total revenue in each period presented.
Normal credit terms are granted to customers. Project retainers are
received on most contracts. The Company has the right to cancel software
licenses in the event that the customer is in default of its license agreement
with the Company.
During the years ended December 31, 1996, 1997 and 1998, 54%, 100% and 99%,
respectively, of the Company's total revenue were attributed to two, two and
five customers, respectively. Sales to the two customers in 1996 represented 40%
and 14% of total revenue. Sales to two customers in 1997 accounted for 74% and
26% of total sales. Sales to five customers in 1998 accounted for 19%, 22%, 27%,
15% and 15%. In addition, there were accounts receivable from four customers and
one customer at December 31, 1997 and 1998, respectively, each of which exceeded
10% of total accounts receivable and aggregated approximately $19,000 and
$1,130,000, respectively. These amounts were collected subsequent to December
31, 1998 and 1997, respectively.
The Company estimates an allowance for doubtful accounts generally based on
an analysis of collections in prior years, the credit worthiness of its
customers as well as general economic conditions. Consequently, an adverse
change in those factors could effect the Company's estimate of its bad debts.
12. RELATED PARTY TRANSACTIONS
A member of the board of directors is the Senior Vice President and Chief
Financial Officer of Science Applications International Corporation (SAIC). SAIC
is a significant stockholder of the Company. SAIC owns 43 percent of all voting
stock of Danet, Inc. and 100 percent of the voting stock of Telecordia. Danet is
a customer and distributor of the Company.
Sales to Danet for the years ended December 31, 1998, 1997, and 1996
amounted to $334,794, $0 and $0. The Company paid Danet, in its capacity as
distributor of its products, $2.2 million, $0 and $0 for the years ended
December 31, 1998, 1997 and 1996. The Company had a strategic alliance
relationship with Telecordia. No revenue was received and no payments were made
in connection with this relationship for the three year period ended December
31, 1998.
F-21
<PAGE> 97
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX-
MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
13. SALE OF PLACEMENT DIVISION
Effective November 30, 1996, the Company sold all of the net assets
relating to its placement services division at a sale price of $1.3 million in
cash. The net assets related to the division were primarily customer contracts
relating to ongoing temporary placements of personnel, along with the employment
contracts for the personnel in the placement services division. Therefore, there
were no recorded assets or liabilities on our balance sheet related to the sale
and the resulting gain of $1,300,000 was recorded as other nonoperating income.
Costs of the sale were insignificant and the Company has no further
responsibilities for the operations of the placement services division.
14. SALE OF UNRELATED SOFTWARE PRODUCT
In May 1996, the Company sold the marketing rights to an unrelated software
product for an initial cash payment of $500,000, guaranteed minimum sales levels
by the buyer of this product for a three-year period and common stock in a
publicly-traded company affiliated with the buyer. The fair value of the common
stock at the date of the license agreement was $289,464. At December 31, 1996,
the Company wrote down the common stock to its fair value of $165,408 and
recorded the resulting loss of $124,056. Subsequently, during 1997, such stock
became worthless and the Company wrote off the asset, recording a loss of
$165,408. The Company entered into a related settlement and release agreement
with the buyer. Under the terms of this agreement, the sale of the marketing
rights and all related obligations were canceled. However, the Company retained
the initial $500,000 payment and the common stock received in the transaction.
In July 1998, the Company sold the source code and all rights to this
unrelated software product to another buyer for $400,000.
These amounts are included in other income in the accompanying consolidated
statements of operations.
15. NEW ACCOUNTING PRONOUNCEMENTS
In March 1998, the AICPA issued Statement of Position 98-5 Reporting on the
Costs of Start-Up Activities (SOP 98-5). Pursuant to the provisions of SOP 98-5,
all costs associated with start-up activities, including organization costs,
should be expensed as incurred. Companies that previously capitalized such costs
are required to write off the unamortized portion of such costs as a cumulative
effect of a change of accounting principle. The Company has no start-up costs
capitalized at December 31, 1998.
In March 1998, the AICPA issued Statement of Position 98-1 (SOP 98-1),
accounting for the costs of software developed or obtained for internal use.
This standard requires companies to capitalize qualifying computer software
costs, which are incurred during the application development stage, and amortize
them over the software's estimated useful life. SOP 98-1 is effective for fiscal
years beginning after December 15, 1998. The Company expects no impact on its
financial statements related to SOP 98-1.
F-22
<PAGE> 98
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX-
MONTH PERIODS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 requires the
recognition of all derivatives as either assets or liabilities in the balance
sheet and the measurement of those instruments at fair value. Gains and losses
resulting from changes in the values of those derivatives would be accounted for
depending on the use of the derivative and whether it qualifies for hedge
accounting. SFAS No. 133 is expected to be effective for the Company's year
ending December 31, 2000. The Company expects this SFAS to have no material
impact on its financial statements.
16. SUBSEQUENT EVENTS
In June 1999, the Company offered loans to three executive officers and
other employees for an aggregate amount of approximately $435,000 for the
purpose of providing funds for the exercise of vested, non-qualified stock
options and payment of tax obligations resulting from the exercise of those
options. The loans bear interest at the rate of 8.75 percent per annum and
require interest to be paid annually. All principal and accrued interest payable
under the notes is due no later than June 2004. The loans are full recourse and
each officer has pledged the stock issued upon exercise of this option as
security for his loan. In addition, the Company has agreed to loan these
officers and other employees an amount to pay the income tax related to the
exercise of these options. Such amount is estimated to be up to approximately
$750,000.
In June 1999, the Company entered into a lease for its Atlanta office. The
lease has a five year initial term with options for two renewal periods of three
years each. Monthly base rent is approximately $47,000 during the first year and
increases by 2% per year after the initial year.
In August 1999, the Company entered into a sublease for its new Boca Raton
office space. The remaining sublease term begins October 1999 and ends May 2008.
The sublease may be cancelled in March 2005 and September 2006 with penalties in
accordance with the terms of the sublease. Monthly base rent is $61,000 per
month plus operating expenses. These amounts will increase by 3% per year after
the initial year.
F-23
<PAGE> 99
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 15,846
National Association of Securities Dealers, Inc. fee........ 6,200
Nasdaq National Market listing fee.......................... *
Accountants' fees and expenses.............................. *
Legal fees and expenses..................................... *
Blue Sky fees and expenses.................................. *
Transfer Agent's fees and expenses.......................... *
Printing and engraving expenses............................. *
Miscellaneous............................................... *
--------
Total expenses.................................... $ *
========
</TABLE>
- -------------------------
* To be completed by amendment
All fees other than the SEC registration fee, the NASD fee and the Nasdaq
National Market listing fee are estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Daleen's certificate of incorporation provides that the liability of the
directors for monetary damages shall be eliminated to the fullest extent
permissible under the Delaware General Corporation Law (the "DGCL") and that we
may indemnify our officers, employees and agents to the fullest extent permitted
under the DGCL.
Daleen's bylaws provide that Daleen must indemnify its directors against
all liabilities to the fullest extent permitted under the DGCL and that Daleen
must advance all reasonable expenses incurred in a proceeding in which the
director was either a party or a witness because he or she was a director.
The DGCL provides that, in general, a corporation may indemnify an
individual who is or was a party to any proceeding (other than action by, or in
the right of, such corporation) by reason of the fact that he or she is or was a
director of the corporation, against liability incurred in connection with such
proceeding, including any appeal thereof, provided certain standards are met,
including that such officer or director acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation, and provided further that, with respect to any criminal action
or proceeding, the officer or director had no reasonable cause to believe his or
her conduct was unlawful. In the case of proceedings by or in the right of the
corporation, the DGCL provides that, in general, a corporation may indemnify an
individual who was or is a party to any such proceeding by reason of the fact
that he or she is or was a director of the corporation against reasonable
expenses incurred in connection with such proceeding, if it is determined that
the director has met the relevant standard of conduct. To the extent that any
directors are successful on the merits or otherwise in the defense of any of the
proceedings described above, the DGCL provides that a corporation is required to
indemnify such officers or directors against reasonable expenses incurred in
connection therewith. The DGCL further provides, in general, for the advancement
of reasonable expenses incurred by a director who is a party to a proceeding if
the director furnishes the corporation (1) a written affirmation of his good
faith belief that he or she has met the
II-1
<PAGE> 100
standard of conduct under the DGCL or that the proceeding involves conduct for
which liability has been eliminated under the corporation's certificate of
incorporation; and (2) a written undertaking to repay any advances if it is
ultimately determined that he or she is not entitled to indemnification. In
addition, the DGCL provides for the indemnification of officers, employees and
agents in certain circumstances.
Daleen maintains directors' and officers' liability insurance covering
liabilities that may be incurred by our directors and officers, including
liabilities under the Securities Act.
Section of the Underwriting Agreement filed as Exhibit 1.1 hereto also
contains certain provisions pursuant to which certain officers, directors and
controlling persons of Daleen may be entitled to be indemnified by the
underwriters named therein.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, Daleen has issued the securities set forth
below which were not registered under Section 5 of the Securities Act of 1933:
1. Between September and November 1996, we completed a private placement
of 60 units of subordinated notes and warrants to purchase shares of our common
stock. The gross proceeds of the placement were $3 million. Each warrant
entitled the holder to purchase 8,400 shares of our common stock at a price
equal to the greater of one-half of our initial public offering price or $3.00
per share. In July 1997, we offered these investors the right to convert their
units to new units which required immediate exercise of the warrants outstanding
and would convert these notes to common stock. In addition, the new units were
offered to new investors. Total proceeds from our sale of notes and warrants to
these and additional investors were $1.3 million and a total of 543,480 new
shares of common stock were issued as a result of the warrant exercise.
In September 1997, one-half of these notes were converted to approximately
690,000 shares of common stock under the terms of the notes and the remainder of
the notes and accrued interest was paid. These investors also received a total
of 215,000 warrants to purchase our common stock at $4.00 per share. As a result
of the series D preferred stock offering as described below, the convertible
warrants have been repriced at $3.056.
2. In June 1997, we completed an offering of subordinated notes for
$375,000. We also granted 90,000 warrants for the purchase of common stock at
$3.25 per share to these investors.
3. In September 1997, we issued and sold 3,000,000 shares of series A
convertible preferred stock at $2.50 per share and warrants to purchase up to
1,250,000 shares of series B convertible preferred stock to HarbourVest Partners
V-Direct Fund L.P. The aggregate purchase price was $7,500,000, of which
$7,400,000 was allocated to the series A convertible preferred stock and
$100,000 was allocated to the warrants.
4. From November 1997 through January 1998, we issued and sold 1,213,584
shares of Series C convertible preferred stock at an aggregate purchase price of
$5,461,128, or $4.50 per share, to accredited investors in a private offering.
In connection with this offering, the company issued warrants to purchase an
additional 285,000 shares of the company's common stock at $4.50 per share.
5. In January 1998, we issued and sold 22,223 shares of series C
convertible preferred stock to Mr. Stephen J. Getsy, a director of the company,
for $100,000, or approximately $4.50 per share.
II-2
<PAGE> 101
In January 1998, the company issued 21,600 shares of common stock to two
individuals for consulting services performed in conjunction with the
restructuring of some of the company's notes and stock.
6. From June 1998 through August 1998, we issued and sold to private
investors 4,221,846 shares of series D convertible preferred stock and 686,533
shares of series D-1 preferred stock for aggregate net proceeds to us of
$15,000,006, or approximately $3.06 per share.
7. In June 1999, we issued and sold 1,496,615 shares of series E
convertible preferred stock at $9.00 per share for aggregate net proceeds to us
of $13,500,000 to a private investment company.
The issuance of the securities in the transactions described above were
exempt from registration under Section 5 of the Securities Act in reliance on
Section 4(2) of the Securities Act and Regulation D promulgated thereunder as
transactions by an issuer not involving any public offering.
As of June 30, 1999, Daleen has issued and outstanding stock options to
purchase an aggregate of 2,323,986 shares of common stock.
The issuance of securities in the transaction described above was deemed to
be exempt from registration under the Securities Act in reliance on Section 4(2)
and Rule 701 of the Securities Act.
ITEM 16. (A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation of Daleen Technologies, Inc.
3.2 Bylaws of Daleen Technologies, Inc.
4.1 See Exhibits 3.1 and 3.2 for provisions of the certificate
of incorporation and bylaws of Daleen Technologies, Inc.
defining rights of the holders of common stock of Daleen
Technologies, Inc.
4.2 Specimen stock certificate.
5.1* Opinion of Morris, Manning & Martin, LLP, counsel to Daleen
Technologies, Inc., as to the legality of the shares being
registered.
10.1+ Employment Agreement, dated December 1, 1994, between James
Daleen and Daleen Technologies, Inc.
10.2+ Amendment to Employment Agreement, dated September 5, 1997,
between James Daleen and Daleen Technologies, Inc.
10.3+ Third Amendment to the Employment Agreement, effective March
1, 1999, between James Daleen and Daleen Technologies,
Inc.
10.4+ Employment Agreement, dated, January 31, 1998, between David
B. Corey and Daleen Technologies, Inc.
10.5+ Employment Agreement, dated November 15, 1994, between
Richard A. Schell and Daleen Technologies, Inc.
10.6+ Amendment to Employment Agreement, dated January 31, 1997,
between Richard A. Schell and Daleen Technologies, Inc.
10.7+ Second Amendment to Employment Agreement, dated September 5,
1997, between Richard A. Schell and Daleen Technologies,
Inc.
10.8+ Third Amendment to Employment Agreement, effective March 1,
1999, between Richard A. Schell and Daleen Technologies,
Inc.
</TABLE>
II-3
<PAGE> 102
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.9+ Employment Agreement, dated April 28, 1999, between Stephen
M. Wagman and Daleen Technologies, Inc.
10.10+ Form of Indemnification Agreement.
10.11 Daleen Technologies, Inc. Amended and Restated Stock
Incentive Plan.
10.12+ Daleen Technologies, Inc. 1998 Incentive Stock Option Plan.
10.13+ Daleen Technologies, Inc. 1997 Incentive Stock Option Plan.
10.14+ Daleen Technologies, Inc. 1995 Incentive Stock Option Plan.
10.15+ Daleen Technologies, Inc. 1998 Employee Non-Qualified Stock
Option Plan.
10.16+ Daleen Technologies, Inc. 1996 Employee Non-Qualified Stock
Option Plan.
10.17+ Daleen Technologies, Inc. 1994 Employee Non-Qualified Stock
Option Plan.
10.18+ Lease Agreement, dated August 4, 1992, by Innovative
Selective Software, Inc., and Crow-Childress-Donner,
Limited.
10.19+ First Amendment to Lease Agreement, dated December 29, 1994,
by Daleen Technologies Inc, successor to Innovative
Selective Software, Inc., and Regent Holding Corporation,
successor to Crow-Childress-Donner.
10.20+ Lease Agreement, dated August 27, 1998, by Daleen
Technologies, Inc. and Regent Holding Corporation.
10.21+ First Amendment to Lease, dated December 2, 1998, between
Daleen Technologies, Inc. and Regent Holding Corporation.
10.22* Second Amendment to Lease, dated January 16, 1996, between
Daleen Technologies, Inc. and Regent Holding Corporation.
10.23* Warrant to Purchase Series B Preferred Stock.
10.24 Sublease Agreement, dated August 2, 1999, between W.R. Grace
& Co. and Daleen Technologies, Inc.
10.25 Employment Agreement, dated April 7, 1997, between John Z.
Yin and Daleen Technologies, Inc.
10.26 Employment Agreement, dated April 7, 1997, between Frank
Dickinson and Daleen Technologies, Inc.
10.27 Employment Agreement, dated July 22, 1998, between David
McTarnaghan and Daleen Technologies, Inc.
10.28 Employment Agreement, dated December 15, 1998, between
Timothy C. Moss and Daleen Technologies, Inc.
10.29 Employment Agreement, dated August 9, 1999, between Timothy
N. Murray and Daleen Technologies, Inc.
21.1 Subsidiaries.
23.1 Independent Auditors' Consent and Report on Financial
Statement Schedule of KPMG LLP.
23.2* Consent of Morris, Manning & Martin, LLP (included in
Exhibit 5.1).
24.1+ Powers of Attorney (included on signature page).
27.1+ Financial Data Schedule (for SEC use only).
</TABLE>
- -------------------------
+ Previously filed.
* To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULE
Schedule II -- Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and
II-4
<PAGE> 103
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(c) The Registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.
(ii) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 104
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boca Raton, State of
Florida on the 18th day of August, 1999.
Daleen Technologies, Inc.
By: /s/ Richard A. Schell
-----------------------------------
Richard A. Schell, Chief Financial
Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and August 18, 1999
- --------------------------------------------- Chief Executive Officer
James Daleen (Principal Executive
by Richard A. Schell Officer)
Attorney-in-Fact
* President, Chief Operating August 18, 1999
- --------------------------------------------- Officer and Director
David B. Corey
by Richard A. Schell
Attorney-in-Fact
/s/ Richard A. Schell Chief Financial Officer August 18, 1999
- --------------------------------------------- (Principal Financial and
Richard A. Schell Accounting Officer)
* Director August 18, 1999
- ---------------------------------------------
Paul G. Cataford
by Richard A. Schell
Attorney-in-Fact
* Director August 18, 1999
- ---------------------------------------------
Daniel Foreman
by Richard A. Schell
Attorney-in-Fact
* Director August 18, 1999
- ---------------------------------------------
Stephen J. Getsy
by Richard A. Schell
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 105
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Neil E. Cox Director August 18, 1999
- ---------------------------------------------
Neil E. Cox
* Director August 18, 1999
- ---------------------------------------------
Ofer Nemirovsky
by Richard A. Schell
Attorney-in-Fact
* Director August 18, 1999
- ---------------------------------------------
William A. Roper, Jr.
by Richard A. Schell
Attorney-in-Fact
*By: /s/ RICHARD A. SCHELL
----------------------------------------
Richard A. Schell
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 106
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
CHARGED TO
BALANCE AT BAD DEBT BALANCE AT END
BEGINNING OF PERIOD EXPENSE DEDUCTIONS OF PERIOD
------------------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1996........ 3,015 359,563 (347,392) 15,186
Year ended December 31, 1997........ 15,186 166,803 (165,408) 16,581
Year ended December 31, 1998........ 16,581 247,052 (254,588) 9,045
</TABLE>
S-1
<PAGE> 107
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation of Daleen Technologies, Inc.
3.2 Bylaws of Daleen Technologies, Inc.
4.1 See Exhibits 3.1 and 3.2 for provisions of the certificate
of incorporation and bylaws of Daleen Technologies, Inc.
defining rights of the holders of common stock of Daleen
Technologies, Inc.
4.2 Specimen stock certificate.
5.1* Opinion of Morris, Manning & Martin, LLP, counsel to Daleen
Technologies, Inc., as to the legality of the shares being
registered.
10.1+ Employment Agreement, dated December 1, 1994, between James
Daleen and Daleen Technologies, Inc.
10.2+ Amendment to Employment Agreement, dated September 5, 1997,
between James Daleen and Daleen Technologies, Inc.
10.3+ Third Amendment to the Employment Agreement, effective March
1, 1999, between James Daleen and Daleen Technologies,
Inc.
10.4+ Employment Agreement, dated, January 31, 1998, between David
B. Corey and Daleen Technologies, Inc.
10.5+ Employment Agreement, dated November 15, 1994, between
Richard A. Schell and Daleen Technologies, Inc.
10.6+ Amendment to Employment Agreement, dated January 31, 1997,
between Richard A. Schell and Daleen Technologies, Inc.
10.7+ Second Amendment to Employment Agreement, dated September 5,
1997, between Richard A. Schell and Daleen Technologies,
Inc.
10.8+ Third Amendment to Employment Agreement, effective March 1,
1999, between Richard A. Schell and Daleen Technologies,
Inc.
10.9+ Employment Agreement, dated April 28, 1999, between Stephen
M. Wagman and Daleen Technologies, Inc.
10.10+ Form of Indemnification Agreement.
10.11 Daleen Technologies, Inc. Amended and Restated Stock
Incentive Plan.
10.12+ Daleen Technologies, Inc. 1998 Incentive Stock Option Plan.
10.13+ Daleen Technologies, Inc. 1997 Incentive Stock Option Plan.
10.14+ Daleen Technologies, Inc. 1995 Incentive Stock Option Plan.
10.15+ Daleen Technologies, Inc. 1998 Employee Non-Qualified Stock
Option Plan.
10.16+ Daleen Technologies, Inc. 1996 Employee Non-Qualified Stock
Option Plan.
10.17+ Daleen Technologies, Inc. 1994 Employee Non-Qualified Stock
Option Plan.
10.18+ Lease Agreement, dated August 4, 1992, by Innovative
Selective Software, Inc., and Crow-Childress-Donner,
Limited.
10.19+ First Amendment to Lease Agreement, dated December 29, 1994,
by Daleen Technologies Inc, successor to Innovative
Selective Software, Inc., and Regent Holding Corporation,
successor to Crow-Childress-Donner.
10.20+ Lease Agreement, dated August 27, 1998, by Daleen
Technologies, Inc. and Regent Holding Corporation.
10.21+ First Amendment to Lease, dated December 2, 1998, between
Daleen Technologies, Inc. and Regent Holding Corporation.
10.22* Second Amendment to Lease, dated January 16, 1996, between
Daleen Technologies, Inc. and Regent Holding Corporation.
10.23* Warrant to Purchase Series B Preferred Stock.
</TABLE>
<PAGE> 108
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.24 Sublease Agreement, dated August 2, 1999, between W.R. Grace
& Co. and Daleen Technologies, Inc.
10.25 Employment Agreement, dated April 7, 1997, between John Z.
Yin and Daleen Technologies, Inc.
10.26 Employment Agreement, dated April 7, 1997, between Frank
Dickinson and Daleen Technologies, Inc.
10.27 Employment Agreement, dated July 22, 1998, between David
McTarnaghan and Daleen Technologies, Inc.
10.28 Employment Agreement, dated December 15, 1998, between
Timothy C. Moss and Daleen Technologies, Inc.
10.29 Employment Agreement, dated August 9, 1999, between Timothy
N. Murray and Daleen Technologies, Inc.
21.1 Subsidiaries.
23.1 Independent Auditors' Consent and Report on Financial
Statement Schedule of KPMG LLP.
23.2* Consent of Morris, Manning & Martin, LLP (included in
Exhibit 5.1).
24.1+ Powers of Attorney (included on signature page).
27.1+ Financial Data Schedule (for SEC use only).
</TABLE>
- -------------------------
+ Previously filed.
* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
DALEEN TECHNOLOGIES, INC.
The undersigned, in order to form a corporation pursuant to Sections
101 and 102 of the General Corporation Law of the State of Delaware, does hereby
certify as follows:
FIRST: The name of the corporation (the "Corporation") is: DALEEN
TECHNOLOGIES, INC.
SECOND: The address of the Corporation's registered office in the State
of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware, County of New Castle. The name of the registered agent of the
Corporation in the State of Delaware at such address is The Corporation Trust
Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock that the
Corporation shall have the authority to issue is Ninety-One Million Eight
Hundred Seventy-Seven Thousand Two Hundred Thirty-Six (91,877,236) shares, of
which Seventy Million (70,000,000) shares shall be Common Stock, having a par
value of $0.01 per share (the "Common Stock"), and Twenty-One Million Eight
Hundred Seventy-Seven Thousand Two Hundred Thirty-Six (21,877,236) shares shall
be classified as Preferred Stock, par value $0.01 per share (the "Preferred
Stock"). The Preferred Stock shall consist of 3,000,000 shares which shall be
designated as the "Series A Convertible Preferred Stock" (the "Series A
Preferred Stock"), 1,250,000 shares which shall be designated as the "Series B
Convertible Preferred Stock" (the "Series B Preferred Stock"), 1,222,222 shares
which shall be designated as the "Series C Convertible Preferred Stock" (the
"Series C Preferred Stock"), 4,221,846 shares which shall be designated as the
"Series D Convertible Preferred Stock" (the "Series D Preferred Stock"), 686,553
shares which shall be designated as the "Series D-1 Convertible Preferred Stock"
(the "Series D-1 Preferred Stock"), and 1,496,615 shares which shall be
designated as the "Series E Convertible Preferred Stock" (the "Series E
Preferred Stock"), with the remaining Preferred Stock having no designations or
preferences set forth herein. The Board of Directors is expressly authorized to
provide for the classification and reclassification of any unissued shares of
Common Stock or Preferred Stock and the issuance thereof in one or more classes
or series without the approval of the stockholders of the Corporation. The
designations, relative rights, preferences and limitations of each class of
shares of the Corporation shall be as follows:
PART A. COMMON STOCK
Section 1. Voting Rights. The holders of Common Stock shall be entitled
to one vote for each share so held with respect to all matters voted on by the
shareholders of the Corporation, subject in all cases to Part B of this Article
Fourth.
Section 2. Liquidation Rights. Subject to the prior and superior right
of the Preferred (as defined in Part B below), upon any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, the
holders of Common Stock shall be entitled to share equally in the remaining
funds to be distributed, on the basis of the number of shares held by each of
them.
<PAGE> 2
Section 3. Dividends. Dividends may be paid on the Common Stock as,
when and if declared by the Board of Directors; provided, however, no such
dividends may be declared or paid unless the holders of the Preferred (as
defined below) shall be entitled to a proportionate share of such dividends as
though the holders of the Preferred were the holders of the number of shares of
Common Stock of the Corporation into which their respective shares of Preferred
are convertible as of the record date fixed for the determination of the holders
of Common Stock of the Corporation entitled to receive such distribution.
PART B. PREFERRED STOCK
For so long as there shall be outstanding any shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series D-1 Preferred Stock or Series E Preferred Stock, any
reference to "Preferred" shall mean and refer to each and all of such series of
Preferred Stock, except in such sections of this Certificate as pertain to
voting rights, in which case the term "Preferred" shall exclude the Series C
Preferred Stock, which shall have no voting rights whatsoever except as may be
required by Delaware law.
I. SERIES A AND SERIES B CONVERTIBLE PREFERRED STOCK
Section 1. Designation. The Series A Preferred Stock shall consist of
3,000,000 shares and the Series B Preferred Stock shall consist of 1,250,000
shares. The Series A Preferred Stock and Series B Preferred Stock shall be
identical and of equal rank except as otherwise expressly provided herein.
Section 2. Liquidation Rights. See Part B(V), Section 2 of this Article
Fourth for the liquidation rights of the Series A Preferred Stock and the Series
B Preferred Stock.
Section 3. Conversion. The Series A Preferred Stock shall be
convertible as follows:
(a) Right to Convert. Each share of Series A Preferred Stock shall be
convertible, without the payment of any additional consideration by the holder
thereof and at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for the Series A Preferred Stock, into the number of fully paid and
nonassessable shares of Common Stock determined (i) in the case of Series A
Preferred Stock, by dividing $2.50 by the Series A Conversion Price, in effect
at the time of conversion and (ii) in the case of the Series B Preferred Stock,
by dividing $3.056 by the Series B Conversion Price, in effect at the time of
conversion. The Series A Conversion Price shall initially be $2.50 and the
Series B Conversion Price shall initially be $3.056, and in each case shall be
adjusted and readjusted from time to time as provided in this Section 3.
(b) Automatic Conversion. Each share of Series A Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
applicable Series A Conversion Price or Series B Conversion Price upon the
closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock for the account of the Corporation
to the public at an offering price per share of $9.00 or more and resulting in
net proceeds to the Corporation of not less than Twenty Million and No/100
Dollars ($20,000,000) (in the event of which offering, the person(s) entitled to
receive the Common Stock issuable upon such conversion of the Series A Preferred
Stock shall not be deemed to have converted such Series A Preferred Stock until
immediately prior to the closing of such offering). Each person who holds of
record Series A Preferred Stock immediately prior to such automatic conversion
shall be entitled to all dividends which have been declared but unpaid prior to
the time of the automatic conversion. Such dividends shall be paid to all such
holders within thirty (30) days of the automatic conversion.
-2-
<PAGE> 3
(c) Mechanics of Conversion. No fractional shares of Common Stock shall
be issued upon conversion of the Series A Preferred Stock or the Series B
Preferred Stock. In lieu of any fractional shares to which the holder would
otherwise be entitled, the Corporation shall pay cash equal to such fraction
multiplied by the then effective applicable Series A Conversion Price or Series
B Conversion Price. Before any holder of Series A Preferred Stock or Series B
Preferred Stock shall be entitled to convert the same into Common Stock (or, in
the case of automatic conversion of Series A Preferred Stock or Series B
Preferred Stock pursuant to Section 3(b) hereof, before any holder of such
Series A Preferred Stock or Series B Preferred Stock so converted shall be
entitled to receive a certificate or certificates evidencing the Common Stock
issuable upon such conversion), he shall surrender to the Corporation at the
office of the Corporation or of any transfer agent for the shares of Series A
Preferred Stock or Series B Preferred Stock, the certificate or certificates
representing such Series A Preferred Stock or Series B Preferred Stock,
accompanied by written notice to the Corporation that he elects to convert all
or a specified number of such shares (or, in the case of such automatic
conversion, he is surrendering the same) and stating therein his name or the
name or names of his nominees in which he wishes the certificate or certificates
for Common Stock to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of such Series A
Preferred Stock or Series B Preferred Stock, or to his nominee or nominees, a
certificate or certificates representing the number of shares of Common Stock to
which he shall be entitled as aforesaid, together with cash in lieu of any
fraction of a share and, if less than the full number of such Series A Preferred
Stock or Series B Preferred Stock evidenced by such surrendered certificates or
certificates are being converted, a new certificate or certificates, of like
tenor, for the number of such Series A Preferred Stock or Series B Preferred
Stock evidenced by such surrendered certificate less the number of such shares
being converted. Any conversion made at the election of a holder of such Series
A Preferred Stock or Series B Preferred Stock shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of such Series A Preferred Stock or Series B Preferred Stock to be
converted, and the person or persons entitled to receive the Common Stock
issuable upon conversion shall be treated for all purposes as the record holder
or holders of such Common Stock on such date. If the conversion is in connection
with an underwritten offer of securities registered pursuant to the Securities
Act of 1933, as amended, the conversion may at the option of any holder
tendering Series A Preferred Stock or Series B Preferred Stock for conversion,
be conditioned upon the closing with the underwriter of the sale of securities
pursuant to such offering, in which event the person(s) entitled to receive the
Common Stock issuable upon such conversion of the Series A Preferred Stock or
the Series B Preferred Stock shall not be deemed to have converted such Series A
Preferred Stock or Series B Preferred Stock until immediately prior to the
closing of such sale of securities.
(d) Adjustments to Conversion Price for Diluting Issues:
(i) Special Definitions. For purposes of this Section
3(d), the following definitions shall apply:
(1) "Options" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire either Additional
Shares of Common Stock or Convertible Securities.
(2) "Original Issue Date" shall mean the
date on which a share of Series A Preferred Stock was first issued.
(3) "Convertible Securities" shall mean any
evidences of indebtedness, shares (other than shares of Common Stock) or other
securities directly or indirectly convertible into or exchangeable for
Additional Shares of Common Stock.
-3-
<PAGE> 4
(4) "Additional Shares of Common Stock" shall
mean all shares of Common Stock issued (or, pursuant to Section 3(d)(iii),
deemed to be issued) by the Corporation after the Original Issue Date, other
than Common Stock issued or issuable:
(A) upon conversion of Preferred;
(B) up to 668,812 shares of Common Stock issued
to officers or employees of, or consultants to, the Corporation pursuant to a
stock purchase or option plan or other employee stock incentive program; or
(C) up to 1,865,000 shares issued upon the
exercise of the existing warrants granted by the Company prior to June 30,
1999.
(ii) No Adjustment of Conversion Price. No adjustment in the
number of shares of Common Stock into which the Series A Preferred Stock or the
Series B Preferred Stock is convertible shall be made, by adjustment in the
Conversion Price applicable to such Series A Preferred Stock or Series B
Preferred Stock, in respect of the issuance of Additional Shares of Common Stock
or otherwise, unless the consideration per share (determined pursuant to Section
3(d)(v) hereof) for an Additional Share of Common Stock issued or deemed to be
issued by the Corporation is less than the Conversion Price applicable to such
Series A Preferred Stock or Series B Preferred Stock in effect on the date of,
and immediately prior to, the issue of such Additional Shares of Common Stock.
(iii) Issue of Securities Deemed Issue of Additional Shares of
Common Stock.
(1) Options and Convertible Securities. In
the event the Corporation at any time or from time to time after the Original
Issue Date shall issue, sell, grant or assume any Options or Convertible
Securities or shall fix a record date for the determination of holders of any
class of securities entitled to receive any such Options or Convertible
Securities, then, and in each such case, the maximum number of shares of Common
Stock (as set forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue, sale, grant or assumption or, in case such a record date
shall have been fixed, as of the close of business on such record date, provided
that Additional Shares of Common Stock shall not be deemed to have been issued
for purposes of adjusting the Series A Conversion Price or the Series B
Conversion Price unless the consideration per share (determined pursuant to
Section 3(d)(v) hereof) of such Additional Shares of Common Stock would be less
than the applicable Series A Conversion Price or Series B Conversion Price in
effect on the date of and immediately prior to such issue, or such record date,
as the case may be, and provided further that in any such case in which
Additional Shares of Common Stock are deemed to be issued:
(A) no further adjustment in the Series A or
Series B Conversion Prices shall be made upon the subsequent issue of
Convertible Securities of shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible Securities;
(B) if such Options or Convertible Securities
by their terms provide, with the passage of time or otherwise, for any increase
in the consideration payable to the Corporation, or decrease in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the Series A or Series B Conversion Prices computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or
-4-
<PAGE> 5
decrease insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities which are outstanding at such time;
(C) upon the expiration of any such Options
or any rights of conversion or exchange under such Convertible Securities which
shall not have been fully exercised, the Series A or Series B Conversion Prices
computed upon the original issue, sale, grant or assumption thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed as if:
(I) in the case of such Convertible
Securities or Options for shares of Common Stock, the only Additional Shares of
Common Stock issued or sold were the shares of Common Stock, if any, actually
issued or sold upon the exercise of such Options or the conversion or exchange
of such Convertible Securities and the consideration received for such
Additional Shares of Common Stock was, in the case of Options, the consideration
actually received by the Corporation for the issue, sale, grant or assumption of
all such Options, whether or not exercised, plus the consideration actually
received by the Corporation upon such exercise, or, in the case of Convertible
Securities, the consideration actually received by the Corporation for the
issue, sale or assumption of all such Convertible Securities which were actually
converted or exchanged, plus the additional consideration, if any, actually
received by the Corporation upon such conversion or exchange, and
(II) in the case of Options for
Convertible Securities, only the Convertible Securities, if any, actually issued
or sold upon the exercise thereof were issued at the time of issue, sale, grant
or assumption of such Options, and the consideration received by the Corporation
for the Additional Shares of Common Stock deemed to have been then issued was
the consideration actually received by the Corporation for the issue, sale,
grant or assumption of all such Options, whether or not exercised, plus the
consideration deemed to have been received by the Corporation (determined
pursuant to Section 3(d)(v)) upon the issue or sale of the Convertible
Securities with respect to which such Options were actually exercised;
(D) no readjustment pursuant to clause (B) or
(C) above shall have the effect of increasing the Series A or Series B
Conversion Prices to an amount which exceeds the lower of (i) the Series A
Conversion Price or Series B Conversion Price on the original adjustment date or
(ii) the Series A Conversion Price or Series B Conversion Price that would have
resulted from any issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment date;
(E) in the case of any Options which expire
by their terms not more than 30 days after the date of issue, sale, grant or
assumption thereof, no adjustment of the Series A Conversion Price or Series B
Conversion Price shall be made until the expiration or exercise of all such
Options, whereupon such adjustment shall be made in the same manner provided in
clause (C) above; and
(F) if any such record date shall have been
fixed and such Options or Convertible Securities are not issued on the date
fixed therefor, the adjustment previously made in the Series A Conversion Price
or Series B Conversion Price which became effective on such record date shall be
canceled as of the close of business on such record date, and thereafter the
Series A Conversion Price or Series B Conversion Price shall be adjusted
pursuant to this subparagraph 3(d)(iii) as of the actual date of their issuance.
(2) Stock Dividends, Stock Distributions and Subdivision. In
the event the Corporation at any time or from time to time after the Original
Issue Date shall declare or pay any dividend or make any other distribution on
the Common Stock payable in Common Stock, or shall effect a subdivision of the
outstanding shares of Common Stock, into a greater number of shares of Common
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Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock), then and in each such event, Additional Shares of Common Stock
shall be deemed to have been issued:
(A) in the case of any such dividend or
distribution, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend or distribution, or
(B) in the case of any such subdivision, at
the close of business on the date immediately prior to the date upon which such
corporate action becomes effective.
If such record date shall have been fixed and such dividend or
distribution shall not have been paid on the date fixed therefor, the adjustment
previously made in the Series A Conversion Price or Series B Conversion Price
which became effective on such record date shall be canceled as of the close of
business on such record date, and thereafter the Series A or Series B Conversion
Prices shall be adjusted pursuant to this subparagraph 3(d)(iii) as of the time
of actual payment of such dividend or distribution.
(iv) Adjustment of Series A or Series B Conversion Price Upon
Issuance of Additional Shares of Common Stock. In the event the Corporation
shall issue or be deemed to issue Additional Shares of Common Stock (excluding
Additional Shares of Common Stock deemed to be issued pursuant to Section
3(d)(iii)(2), which event is dealt with in Section 3(d)(vi)) without
consideration or for a consideration per share less than the Series A Conversion
Price or the Series B Conversion Price in effect on the date of and immediately
prior to such issue, then and in such event, such Series A Conversion Price or
Series B Conversion Price shall be reduced, concurrently with such issue or sale
in order to increase the number of shares of Common Stock into which the Series
A Preferred Stock or the Series B Preferred Stock, as the case may be, is
convertible, to a price (calculated to the nearest cent) equal to the lowest
consideration per share for which such Additional Shares of Common Stock are
issued, provided that the Series A Conversion Price or Series B Conversion Price
shall not be so reduced to an amount less than $.01.
(v) Determination of Consideration. For purposes of this
Section 3(d), the consideration received (or deemed to be received) by the
Corporation for the issue or sale of any Additional Shares of Common Stock (or
any Additional Shares of Common Stock deemed to be issued pursuant to Section
3(d)(iii)(1)) shall be computed as follows:
(1) Cash and Property: The consideration per share received by
the Corporation for the issue or sale of Additional Shares of Common Stock
shall:
(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Corporation excluding
amounts paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other
than cash, be computed at the fair value thereof at the time of such issue or
sale, as determined in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common Stock
are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the portion of such
consideration so received, computed as provided in clauses (A) and (B) above,
allocable to such Additional Shares of Common Stock as determined in good faith
by the Board of Directors.
(2) Options and Convertible Securities. The
consideration per share deemed to be received by the Corporation for Additional
Shares of Common Stock deemed to have been issued
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pursuant to Section 3(d)(iii)(1), relating to Options and Convertible
Securities, shall be determined by dividing
(x) the total amount, if any, actually
received by the Corporation as consideration for the issue, sale, grant or
assumption of such Options or Convertible Securities, plus the minimum aggregate
amount of additional consideration (as set forth in the instruments relating to
such Options or Convertible Securities without regard to any provision contained
therein for a subsequent adjustment of such consideration) payable to the
Corporation upon the exercise in full of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible Securities, by
(y) the maximum number of Additional Shares
of Common Stock (as set forth in the instruments relating to such Options or
Convertible Securities, without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible Securities.
(vi) Adjustment for Stock Dividends, Distributions,
Subdivisions, Combinations or Consolidation of Common Stock.
(1) Stock Dividends, Distributions and
Subdivisions. In the event the Corporation shall issue Additional Shares of
Common Stock pursuant to Section 3(d)(iii)(2), relating to stock dividends,
distributions and subdivisions, the Series A Conversion Price or Series B
Conversion Price in effect immediately prior to such stock dividend,
distribution or subdivision shall, concurrently with the effectiveness of such
stock dividend, distribution or subdivision, be proportionately decreased.
(2) Combinations or Consolidation of Common
Stock. In the event the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser number of shares
of Common Stock, the Series A Conversion Price or Series B Conversion Price in
effect immediately prior to such combinations or consolidation shall,
concurrently with the effectiveness of such combinations or consolidation, be
proportionately increased.
(vii) Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, Etc. In the event the Corporation, after the Original Issue
date, (1) shall consolidate with or merge into any other corporation or entity
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (2) shall permit any other corporation or entity to
consolidate with or merge into the Corporation and the Corporation shall be the
continuing or surviving corporation but, in connection with such consolidation
or merger, the Common Stock shall be changed into or exchanged for stock or
other securities of any other person or cash or any property, or (3) shall
transfer all or substantially all of its properties or assets to any other
corporation or entity, or (4) shall effect a capital reorganization or
reclassification of the Common Stock (other than a capital reorganization or
reclassification resulting in the issue of Additional Shares of Common Stock for
which adjustment in the Series A Conversion Price or Series B Conversion Price
is provided in Section 3(d)(iv)), then, and in each such event, proper provision
shall be made so that, upon the basis and the terms and in the manner provided
in this Section 3(d)(vii), the holder of a share of Series A Preferred Stock or
Series B Preferred Stock, upon the conversion thereof at any time after the
consummation of such consolidation, merger, transfer, reorganization or
reclassification, shall be entitled to receive, in lieu of the Common Stock
issuable upon such conversion prior to such consummation, the stock and other
securities, cash and property to which such holder would have been entitled upon
such consummation if such holder had converted such shares of Series A Preferred
Stock or Series B Preferred Stock immediately prior thereto, subject to
adjustments (subsequent to such corporate action) as nearly equivalent as
possible to the
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adjustments provided for in this Section 3. Notwithstanding anything contained
herein to the contrary, the Corporation will not effect any of the transactions
described in clauses (1) through (4) above unless, prior to the consummation
thereof, each corporation (other than the Corporation) which may be required to
deliver any stock, securities, cash or property upon the conversion of a share
of Series A Preferred Stock or Series B Preferred Stock shall assume, by written
instrument delivered to each holder of a share of Series A Preferred Stock or
Series B Preferred Stock, the obligation to deliver to such holder such shares
of stock, securities, cash or property as such holder may be entitled to receive
upon such conversion, and such corporation shall have furnished to each holder
of a share of Series A Preferred Stock or Series B Preferred Stock an opinion of
counsel for such corporation, which counsel shall be reasonably satisfactory to
such holder, stating that the holder of such share of Series A Preferred Stock
or Series B Preferred Stock shall thereafter be entitled to receive, upon the
conversion of such share, the stock, securities, cash or property which such
corporation may be required to deliver pursuant to the terms hereof.
(e) No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 3 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series A Preferred Stock and the Series B Preferred Stock against impairment.
Without limiting the generality of the foregoing, the Corporation (i) will not
permit the par value of any shares of stock at the time receivable upon the
conversion of a share of Series A Preferred Stock or Series B Preferred Stock to
exceed the Conversion Price applicable to such share of Series A Preferred Stock
or Series B Preferred Stock then in effect, (ii) will take all such action as
may be necessary or appropriate in order that the Corporation may validly and
legally issue fully paid nonassessable shares of stock on the conversion of such
Series A Preferred Stock or Series B Preferred Stock, and (iii) will not take
any action which results in any adjustment of the Series A Conversion Price or
the Series B Conversion Price if the total number of shares of Common Stock
issuable after the action upon the conversion of all of such Series A Preferred
Stock or Series B Preferred Stock will exceed the total number of shares of
Common Stock then authorized by the Corporation's Certificate of Incorporation
and available for the purpose of issue upon such conversion.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series A Conversion Price or the Series B
Conversion Price pursuant to this Section 3, the Corporation at its expense
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and furnish to each holder of Series A Preferred Stock or Series B
Preferred Stock, as the case may be, a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (i) the consideration received
or to be received by the Corporation for any Additional Shares of Common Stock
issued or sold or deemed to have been issued, (ii) the number of shares of
Common Stock outstanding or deemed to be outstanding, and (iii) the Series A
Conversion Price or Series B Conversion Price in effect immediately prior to
such issue or sale and as adjusted and readjusted on account thereof. The
Corporation shall, upon the written request at any time of any holder of Series
A Preferred Stock or Series B Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (i) the applicable Series A
Conversion Price or Series B Conversion Price at the time in effect, and showing
how it was calculated, and (ii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon the
conversion of Series A Preferred Stock or Series B Preferred Stock.
(g) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to
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<PAGE> 9
receive any dividend (other than a cash dividend which is the same as cash
dividends paid in previous quarters) or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series A Preferred Stock or Series B Preferred
Stock at least ten (10) days prior to the date specified herein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend or distribution.
(h) Common Stock Reserved. The Corporation shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock
such number of shares of Common Stock as shall from time to time be sufficient
to effect conversion of the Series A Preferred Stock or Series B Preferred
Stock.
Section 4. Redemption. On September 1, 2001, the Corporation shall
redeem for cash out of any funds legally available therefor one-third of the
Series A Preferred Stock or Series B Preferred Stock held by each holder of
Series A Preferred Stock or Series B Preferred Stock on that date. On September
1, 2002, the Corporation shall redeem for cash out of any funds legally
available therefor one-third of the Series A Preferred Stock or Series B
Preferred Stock held by each holder of Series A Preferred Stock or Series B
Preferred Stock on that date. On September 1, 2003, the Corporation shall redeem
for cash out of any funds legally available therefor the remainder of the Series
A Preferred Stock or Series B Preferred Stock held by each holder of Series A
Preferred Stock or Series B Preferred Stock. Redemptions pursuant to this
Section 4 shall be made for a price of $2.50 per share of Series A Preferred
Stock and $3.056 per share of Series B Preferred Stock (in each case as
appropriately adjusted for any stock dividend, stock split, recapitalization or
consolidation) plus, in each case, an amount equal to the amount of all unpaid
dividends payable in accordance with Section 6 hereof on each share of Series A
Preferred Stock or Series B Preferred Stock to be redeemed. The Corporation need
not establish any sinking fund for the redemption of Series A Preferred Stock or
Series B Preferred Stock.
The Corporation shall give written notice at least forty-five (45) days
prior to the redemption dates as provided above, and any rescheduled redemption
dates as provided below, of its intention to redeem Series A Preferred Stock or
Series B Preferred Stock as provided herein, to each holder thereof, such notice
to be addressed to each holder at the address as it appears on the stock
transfer books of the Corporation and to specify the date of redemption and the
number of shares to be redeemed. On or after the date of redemption unless
postponed or waived as provided below, each holder of Series A Preferred Stock
or Series B Preferred Stock shall surrender a certificate or certificates
representing the number of shares of Series A Preferred Stock or Series B
Preferred Stock to be redeemed as stated in the notice provided by the
Corporation. If less than all the shares represented by such certificates are to
be redeemed, the Corporation shall forthwith issue a new certificate, of like
tenor, for the unredeemed shares.
For the purpose of determining whether funds are legally available for
redemption of Series A Preferred Stock or Series B Preferred Stock as provided
herein, the Corporation shall value its assets at the highest amount permissible
under applicable law. If on any redemption date funds of the Corporation legally
available therefor shall be insufficient to redeem all the Series A Preferred
Stock or Series B Preferred Stock required to be redeemed as provided herein,
funds to the extent legally available shall be used for such purpose and the
Corporation shall effect such redemption pro rata according to the redemption
prices of the Series A Preferred Stock or Series B Preferred Stock. The
redemption requirements provided hereby shall be continuous, so that if on any
redemption date such requirements shall not be fully discharged, without further
action by any holder of Series A Preferred Stock or Series B Preferred Stock
funds legally available shall be applied therefor until such requirements re
fully discharged.
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<PAGE> 10
Section 5. Voting Rights. The holders of Series A Preferred Stock and
Series B Preferred Stock shall be entitled, on all matters submitted for a vote
of the holders of Common Stock, whether pursuant to law or otherwise, to one
vote for each whole share of Common Stock into which each share of such Series A
Preferred Stock or Series B Preferred Stock held could be converted as of the
date of such vote, and on all such matters shall vote together as one class with
the holders of Common Stock and the holders of all other shares of stock
entitled to vote with the holders of Common Stock on such matters. In addition,
the holders of such Series A Preferred Stock or Series B Preferred Stock shall
have the voting powers provided for by law and the holders of such Series A
Preferred Stock or Series B Preferred Stock shall have the further voting powers
provided for in Part B(V), Section 5 of this Article Fourth.
Section 6. Dividends. Dividends shall be paid on the Series A
Preferred Stock or Series B Preferred Stock as, when and if declared by the
Board of Directors.
Section 7. Residual Rights. All rights accruing to the outstanding
shares of the Corporation not expressly provided to the contrary herein shall
be vested in the Common Stock.
II. SERIES C CONVERTIBLE PREFERRED STOCK
Section 1. Designation. The Series C Preferred Stock shall consist
of 1,222,222 shares.
Section 2. Liquidation Rights. See Part B(V), Section 2 of this
Article Fourth for the liquidation rights of the Series C Preferred Stock.
Section 3. Conversion. The Series C Preferred Stock shall be
convertible as follows:
(a) Right to Convert. Each share of Series C Preferred Stock shall be
convertible, without the payment of any additional consideration by the holder
thereof and at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for the Series C Preferred Stock, into the number of fully paid and
nonassessable shares of Common Stock determined (i) in the case of Series A
Preferred Stock, by dividing $2.50 by the Series A Conversion Price, in effect
at the time conversion, (ii) in the case of the Series B Preferred Stock, by
dividing $3.056 by the Series B Conversion Price, in effect at the time of
conversion, and (iii) in the case of the Series C Preferred Stock, by dividing
$4.50 by the Series C Conversion Price, in effect at the time of conversion. The
Series A Conversion Price shall initially be $2.50, the Series B Conversion
Price shall initially be $3.056, and the Series C Conversion Price shall
initially be $4.50, and in each case shall be adjusted and readjusted from time
to time as provided in this Section 3.
(b) Automatic Conversion. Each share of Series C Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Series C Conversion Price upon the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock
for the account of the Corporation to the public. Each person who holds of
record such Series C Preferred Stock immediately prior to such automatic
conversion shall be entitled to all dividends which have been declared but
unpaid prior to the time of the automatic conversion. Such dividends shall be
paid to all such holders within thirty (30) days of the automatic conversion.
(c) Mechanics of Conversion. No fractional shares of Common Stock shall
be issued upon conversion of the Series C Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Series C Conversion Price. Before any holder of the Series C Preferred
Stock shall be entitled to convert the same into Common Stock (or, in the case
of automatic conversion of the Series C Preferred
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<PAGE> 11
Stock pursuant to Section 3(b) hereof, before any holder of such Series C
Preferred Stock so converted shall be entitled to receive a certificate or
certificates evidencing the Common Stock issuable upon such conversion), he
shall surrender to the Corporation at the office of the Corporation or of any
transfer agent for the shares of Series C Preferred Stock, the certificate or
certificates representing such Series C Preferred Stock, accompanied by written
notice to the Corporation that he elects to convert all or a specified number of
such shares (or, in the case of such automatic conversion, he is surrendering
the same) and stating therein his name or the name or names of his nominees in
which he wishes the certificate or certificates for Common Stock to be issued.
The Corporation shall, as soon as practicable thereafter, issue and deliver at
such office to such holder of such Series C Preferred Stock, or to his nominee
or nominees, a certificate or certificates representing the number of shares of
Common Stock to which he shall be entitled as aforesaid, together with cash in
lieu of any fraction of a share and, if less than the full number of such Series
C Preferred Stock evidenced by such surrendered certificates or certificates are
being converted, a new certificate or certificates, of like tenor, for the
number of such Series C Preferred Stock evidenced by such surrendered
certificate less the number of such shares being converted. Any conversion made
at the election of a holder of Series C Preferred Stock shall be deemed to have
been made immediately prior to the close of business on the date of such
surrender of the shares of such Series C Preferred Stock to be converted, and
the person or persons entitled to receive the Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or holders of
such Common Stock on such date. If the conversion is in connection with an
underwritten offer of securities registered pursuant to the Securities Act of
1933, as amended, the conversion may, at the option of any holder tendering
Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock
for conversion, be conditioned upon the closing with the underwriter of the sale
of securities pursuant to such offering, in which event the person(s) entitled
to receive the Common Stock issuable upon such conversion of the Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock shall not
be deemed to have converted such Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock until immediately prior to the closing of such
sale of securities.
(d) Adjustments to Conversion Price for Diluting Issues:
(i) Special Definitions. For purposes of this Section 3
(d), the following definitions shall apply:
(1) "Options" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire either Additional
Shares of Common Stock or Convertible Securities.
(2) "Original Issue Date" shall mean the
date on which a share of Series A Preferred Stock was first issued.
(3) "Convertible Securities" shall mean any
evidences of indebtedness, shares (other than shares of Common Stock) or other
securities directly or indirectly convertible into or exchangeable for
Additional Shares of Common Stock.
(4) "Additional Shares of Common Stock" shall
mean all shares of Common Stock issued (or, pursuant to Section 3(d)(iii),
deemed to be issued) by the Corporation after the Original Issue Date, other
than Common Stock issued or issuable:
(A) upon conversion of Preferred; or
(B) up to 668,812 shares of Common Stock issued
to officers or employees of, or consultants to, the Corporation pursuant to a
stock purchase or option plan or other employee stock incentive program.
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(ii) No Adjustment of Conversion Price. No adjustment in the
number of shares of Common Stock into which the Preferred is convertible shall
be made, by adjustment in the Conversion Price applicable to such Preferred, in
respect of the issuance of Additional Shares of Common Stock or otherwise,
unless the consideration per share (determined pursuant to Section 3(d)(v)
hereof) for an Additional Share of Common Stock issued or deemed to be issued by
the Corporation is less than the Conversion Price applicable to such Preferred
in effect on the date of, and immediately prior to, the issue of such Additional
Shares of Common Stock.
(iii) Issue of Securities Deemed Issue of Additional Shares of
Common Stock.
(1) Options and Convertible Securities. In
the event the Corporation at any time or from time to time after the Original
Issue Date shall issue, sell, grant or assume any Options or Convertible
Securities or shall fix a record date for the determination of holders or any
class of securities entitled to receive any such Options or Convertible
Securities, then, and in each such case, the maximum number of shares of Common
Stock (as set forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue, sale, grant or assumption or, in case such a record date
shall have been fixed, as of the close of business on such record date, provided
that Additional Shares of Common Stock shall not be deemed to have been issued
for purposes of adjusting the applicable Conversion Price unless the
consideration per share (determined pursuant to Section 3(d)(v) hereof) of such
Additional Shares of Common Stock would be less than the Conversion Price
applicable to such Preferred to be converted under this section in effect on the
date of and immediately prior to such issue, or such record date, as the case
may be, and provided further that in any such case in which Additional Shares of
Common Stock are deemed to be issued:
(A) no further adjustment in the applicable
Conversion Prices shall be made upon the subsequent issue of Convertible
Securities of shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
(B) if such Options or Convertible Securities
by their terms provide, with the passage of time or otherwise, for any increase
in the consideration payable to the Corporation, or decrease in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the applicable Conversion Prices computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease insofar
as it effects such Options or the rights of conversion or exchange under such
Convertible Securities which are outstanding at such time;
(C) upon the expiration of any such Option
or any rights of conversion or exchange under such Convertible Securities which
shall not have been fully exercised, the applicable Conversion Prices computed
upon the original issue, sale, grant or assumption thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed as if:
(I) in the case of such Convertible
Securities or Options for shares of Common Stock, the only Additional Shares of
Common Stock issued or sold were the shares of Common Stock, if any, actually
issued or sold upon the exercise of such Options or the conversion or exchange
of such Convertible Securities and the consideration received for such
Additional Shares of Common Stock was, in the case of Options, the consideration
actually received by the Corporation for the
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issue, sale, grant or assumption of all such Options, whether or not exercised,
plus the consideration actually received by the Corporation upon such exercise,
or, in the case of Convertible Securities, the consideration actually received
by the Corporation for the issue, sale or assumption of all such Convertible
Securities which were actually converted or exchanged, plus the additional
consideration, if any, actually received by the Corporation upon such conversion
or exchange, and
(II) in the case of Options for
Convertible Securities, only the Convertible Securities, if any, actually issued
or sold upon the exercise thereof were issued at the time of issue, sale, grant
or assumption of such Options, and the consideration received by the Corporation
for the Additional Shares of Common Stock deemed to have been then issued was
the consideration actually received by the Corporation for the issue, sale,
grant or assumption of all such Options, whether or not exercised, plus the
consideration deemed to have been received by the Corporation (determined
pursuant to Section 3(d)(v)) upon the issue or sale of the Convertible
Securities with respect to which such Options were actually exercised;
(D) no readjustment pursuant to clause (B)
or (C) above shall have the effect of increasing the applicable Conversion
Prices to an amount which exceeds the lower of (i) the applicable Conversion
Prices on the original adjustment date or (ii) the applicable Conversion Price
that would have resulted from any issuance of Additional Shares of Common Stock
between the original adjustment date and such readjustment date;
(E) in the case of any Options which expire
by their terms not more than 30 days after the date of issue, sale, grant or
assumption thereof, no adjustment of the applicable Conversion Prices shall be
made until the expiration or exercise of such Options, whereupon such adjustment
shall be made in the same manner provided in clause (C) above; and
(F) if any such record date shall have been
fixed and such Options or Convertible Securities are not issued on the date
fixed therefor, the adjustment previously made in the applicable Conversion
Prices which became effective on such record date shall be canceled as of the
close of business on such record date, and thereafter the applicable Conversion
Prices shall be adjusted pursuant to this subparagraph 3(d)(iii) as of the
actual date of their issuance.
(2) Stock Dividends, Stock Distributions and Subdivision. In
the event the Corporation at any time or from time to time after the Original
Issue Date shall declare or pay any dividend or make any other distribution on
the Common Stock payable in Common Stock, or shall effect a subdivision of the
outstanding shares of Common Stock, into a greater number of shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock), then and in each such event, Additional Shares of Common Stock
shall be deemed to have been issued;
(A) in the case of any such dividend or
distribution, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend or distribution, or
(B) in the case of any such subdivision, at
the close of business on the date immediately prior to the date upon which such
corporate action becomes effective.
If such record date shall have been fixed and such dividend or
distribution shall not have been paid on the date fixed therefor, the adjustment
previously made in the applicable Conversion Prices which became effective on
such record date shall be canceled as of the close of business on such record
date, and thereafter the applicable Conversion Prices shall be adjusted pursuant
to this subparagraph 3(d)(iii) as of the time of actual payment of such dividend
or distribution.
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(iv) Adjustment of Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event the Corporation shall issue or
be deemed to issue Additional Shares of Common Stock (excluding Additional
Shares of Common Stock deemed to be issued pursuant to Section 3(d)(iii)(2),
which event is dealt with in Section 3(d)(vi)) without consideration or for a
consideration per share less than the Series A Conversion Price or Series B
Conversion Price in effect on the date of and immediately prior to such issue,
then and in such event, such Series A or Series B Conversion Price shall be
reduced, concurrently with such issue or sale in order to increase the number of
shares of Common Stock into which the Series A Preferred Stock or the Series B
Preferred Stock, as the case may be, is convertible, to a price (calculated to
the nearest cent) equal to the lowest consideration per share for which such
Additional Shares of Common Stock are issued, provided that the applicable
Conversion Price shall not be so reduced to an amount less than $.01.
(v) Determination of Consideration. For purposes of this
Section 3(d), the consideration received (or deemed to be received) by the
Corporation for the issue or sale of any Additional Shares of Common Stock (or
any Additional Shares of Common Stock deemed to be issued pursuant to Section
3(d)(iii)(1)) shall be computed as follows:
(1) Cash and Property: The consideration per share received by
the Corporation for the issue or sale of Additional Shares of Common Stock
shall:
(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Corporation excluding
amounts paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other
than cash, be computed at the fair value thereof at the time of such issue or
sale, as determined in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the portion of such
consideration so received, computed as provided in clauses (A) and (B) above,
allocable to such Additional Shares of Common Stock as determined in good faith
by the Board of Directors;
(2) Options and Convertible Securities. The consideration per
share deemed to be received by the Corporation for Additional Shares of Common
Stock deemed to have been issued pursuant to Section 3(d)(iii)(1), relating to
Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, actually
received by the Corporation as consideration for the issue, sale, grant or
assumption of such Options or Convertible Securities, plus the minimum aggregate
amount of additional consideration (as set forth in the instruments relating to
such Options or Convertible Securities without regard to any provision contained
therein for a subsequent adjustment of such consideration) payable to the
Corporation upon the exercise in full of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible Securities, by
(y) the maximum number of Additional Shares
of Common Stock (as set forth in the instruments relating to such Options or
Convertible Securities, without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible Securities.
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<PAGE> 15
(vi) Adjustment for Stock Dividends, Distributions, Subdivisions,
Combinations or Consolidation of Common Stock.
(1) Stock Dividends, Distributions and Subdivisions. In
the event the Corporation shall issue Additional Shares
of Common Stock pursuant to Section 3(d)(iii)(2),
relating to stock dividends, distributions or
subdivisions, the applicable Conversion Price in effect
immediately prior to such stock dividend, distribution
or subdivision shall, concurrently with the
effectiveness of such stock dividend, distribution or
subdivision, be proportionately decreased.
(2) Combination or Consolidation of Common Stock. In
the event the outstanding shares of Common Stock shall
be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common
Stock, the applicable Conversion Prices in effect
immediately prior to such combinations or consolidation
shall, concurrently with the effectiveness of such
combinations or consolidation, be proportionately
increased.
(vi) Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, Etc. In the event the Corporation, after the
Original Issue date, (1) shall consolidate with or merge into
any other corporation or entity and shall not be the
continuing or surviving corporation or entity of such
consolidation or merger, or (2) shall permit any other
corporation or entity to consolidate with or merge into the
Corporation and the Corporation shall be the continuing or
surviving corporation but, in connection with such
consolidation or merger, the Common Stock shall be changed
into or exchanged for stock or other securities of any other
person or cash or any property, or (3) shall transfer all or
substantially all of its properties or assets to any other
corporation or entity, or (4) shall effect a capital
reorganization or reclassification of the Common Stock (other
than a capital reorganization or reclassification resulting
in the issue of Additional Shares of Common Stock for which
adjustment in the applicable Conversion Price is provided in
Section 3(d)(iv)), then, and in each such event, proper
provision shall be made so that, upon the basis and the terms
and in the manner provided in this Section 3(d)(vii), the
holder of a share of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock, upon the
conversion thereof at any time after the consummation of such
consolidation, merger, transfer, reorganization or
reclassification, shall be entitled to receive, in lieu of
the Common Stock issuable upon such conversion prior to such
consummation, the stock and other securities, cash and
property to which such holder would have been entitled upon
such consummation if such holder had converted such shares of
such preferred stock immediately prior thereto, subject to
adjustments (subsequent to such corporate action) as nearly
equivalent as possible to the adjustments provided for in
this Section 3. Notwithstanding anything contained herein to
the contrary, the Corporation will not effect any of the
transactions described in clauses (1) through (4) above
unless, prior to the consummation thereof, each corporation
(other than the Corporation) which may be required to deliver
any stock, securities, cash or property upon the conversion
of a share of Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock shall assume, by written
instrument delivered to each holder of a share of Series A
Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, the obligation to deliver to such holder
such shares of stock, securities, cash or property as such
holder may be entitled to receive upon such conversion, and
such corporation shall have furnished to each holder of a
share of Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock an opinion of counsel for such
corporation, which counsel shall be
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<PAGE> 16
reasonably satisfactory to such holder, stating that the
holder of such share of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock shall thereafter
be entitled to receive, upon the conversion of such share, the
stock, securities, cash or property which such corporation may
be required to deliver pursuant to the terms hereof.
(e) No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the
Corporation but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in
the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the
holders of the Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock against impairment. Without
limiting the generality of the foregoing, the Corporation (i)
will not permit the par value of any shares of stock at the
time receivable upon the conversion of a share of Series A
Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock to exceed the Conversion Price applicable to
such share of Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock then in effect, (ii) will
take all such action as may be necessary or appropriate in
order that the Corporation may validly and legally issue
fully paid nonassessable shares of stock on the conversion of
the Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock, and (iii) will not take any action
which results in any adjustment of the Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock
if the total number of shares of Common Stock issuable after
the action upon the conversion of all of the Series A
Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock will exceed the total number of shares of
Common Stock then authorized by the Corporation's Certificate
of Incorporation and available for the purpose of issue upon
such conversion.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock pursuant
to this Section 3, the Corporation at its expense shall
promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to each holder
of Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock, as the case may be, a certificate
setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment
is based, including a statement of (i) the consideration
received or to be received by the Corporation for any
Additional Shares of Common Stock issued or sold or deemed to
have been issued, (ii) the number of shares of Common Stock
outstanding or deemed to be outstanding, and (iii) the
applicable Conversion Prices in effect immediately prior to
such issue or sale and as adjusted and readjusted on account
thereof. The Corporation shall, upon the written request at
any time of any holder of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting
forth (i) the applicable Conversion price at the time in
effect, and showing how it was calculated, and (ii) the
number of shares of Common Stock and the amount, if any, of
other property which at the time would be received upon the
conversion of Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock.
(g) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of
securities for the purpose of determining the holders thereof
who are entitled to receive any dividend (other than a cash
dividend which is the same as cash
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<PAGE> 17
dividends paid in previous quarters) or other distribution, or
any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or
property, or to receive any other right, the Corporation shall
mail to each holder of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock at least ten (10)
days prior to the date specified herein, a notice specifying
the date on which any such record is to be taken for the
purpose of such dividend or distribution.
(h) Common Stock Reserved. The Corporation shall at all times
reserve and keep available out of its authorized but unissued
shares of Common Stock such number of shares of Common Stock
as shall from time to time be sufficient to effect conversion
of the Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock.
Section 4. [INTENTIONALLY OMITTED]
Section 5. Voting Rights. Except as required by Delaware law, holders
of the Series C Preferred Stock will not be entitled to vote upon any matters
brought before the shareholders of the Company, including the election of
directors.
Section 6. Dividends. Dividends shall be paid on the Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock as, when and if
declared by the Board of Directors.
Section 7. Residual Rights. All rights accruing to the outstanding
shares of the Corporation not expressly provided to the contrary herein shall
be vested in the Common Stock.
III. SERIES D CONVERTIBLE PREFERRED STOCK
Section 1. Designation and Amount. The Series D Preferred Stock shall
consist of 4,221,846 shares.
Section 2. Liquidation Rights. See Part B(V), Section 2 of this
Article Fourth for the liquidation rights of the Series D Preferred Stock.
Section 3. Conversion. The Series D Preferred Stock shall be
convertible as follows:
(a) Right to Convert. Each share of Series D Preferred Stock shall be
convertible, without the payment of any additional consideration by the holder
thereof and at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for the Series D Preferred Stock, into the number of fully paid and
nonassessable shares of Common Stock determined by dividing $3.056 by the Series
D Conversion Price in effect at the time of conversion (the "Series D Conversion
Price ") which shall initially be $3.056. The Series D Conversion Price may be
adjusted and readjusted from time to time as provided in this Section 3.
(b) Automatic Conversion. Each share of Series D Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Series D Conversion Price upon the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock
for the account of the Corporation to the public at an offering price per share
of $9.00 or more and resulting in net proceeds to the Corporation of not less
than Twenty Million and No/100 Dollars ($20,000,000) (in the event of which
offering, the person(s) entitled to receive the Common Stock issuable upon such
conversion of the Series D Preferred Stock shall not be deemed to have converted
such Series D Preferred Stock until immediately prior to the closing of such
offering). Each person who holds of record Series D Preferred
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<PAGE> 18
Stock immediately prior to such automatic conversion shall be entitled to all
dividends which have been declared but unpaid prior to the time of the automatic
conversion. Such dividends shall be paid to all such holders within thirty (30)
days of the automatic conversion.
(c) Mechanics of Conversion. No fractional shares of Common Stock shall
be issued upon conversion of the Series D Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Series D Conversion Price . Before any holder of the Series D
Preferred Stock shall be entitled to convert the same into Common Stock (or, in
the case of automatic conversion of the Series D Preferred Stock pursuant to
Section 3(b) hereof, before any holder of such Series D Preferred Stock so
converted shall be entitled to receive a certificate or certificates evidencing
the Common Stock issuable upon such conversion), he shall surrender to the
Corporation at the office of the Corporation or of any transfer agent for the
shares of Series D Preferred Stock, the certificate or certificates representing
such Series D Preferred Stock, accompanied by written notice to the Corporation
that he elects to convert all or a specified number of such shares (or, in the
case of such automatic conversion, he is surrendering the same) and stating
therein his name or the name or names of his nominees in which he wishes the
certificate or certificates for Common Stock to be issued. The Corporation
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder of Series D Preferred Stock, or to his nominee or nominees, a
certificate or certificates representing the number of shares of Common Stock to
which he shall be entitled as aforesaid, together with cash in lieu of any
fraction of a share and, if less than the full number of Series D Preferred
Stock evidenced by such surrendered certificates or certificates are being
converted, a new certificate or certificates, of like tenor, for the number of
Series D Preferred Stock evidenced by such surrendered certificate less the
number of such shares being converted. Any conversion made at the election of a
holder of Series D Preferred Stock shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Series D Preferred Stock to be converted, and the person or persons entitled to
receive the Common Stock issuable upon conversion shall be treated for all
purposes as the record holder or holders of such Common Stock on such date.
(d) Adjustments to Series D Conversion Price for Diluting Issues:
(i) Special Definitions. For purposes of this Section 3(d),
the following definitions shall apply:
(1) "Options" shall mean rights, options or warrants
to subscribe for, purchase or otherwise acquire either Additional Shares of
Common Stock or Convertible Securities.
(2) "Original Issue Date" shall mean the date on
which a share of Series D Preferred Stock was first issued.
(3) "Convertible Securities" shall mean any
evidences of indebtedness, shares (other than shares of Common Stock) or other
securities directly or indirectly convertible into or exchangeable for
Additional Shares of Common Stock.
(4) "Additional Shares of Common Stock" shall
mean all shares of Common Stock issued (or, pursuant to Section 3(d)(iii)
hereof, deemed to be issued) by the Corporation after the Original Issue Date,
other than Common Stock issued or issuable:
(A) upon conversion of any series of Preferred
Stock; or
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<PAGE> 19
(B) up to 830,000 shares of Common Stock issued
to officers or employees of, or consultants to, the Corporation pursuant to a
stock purchase or option plan or other employee stock incentive program; or
(C) up to 1,865,000 shares issued upon the
exercise of the existing warrants granted by the Company prior to June 30,
1999.
(ii) No Adjustment of Conversion Price. No adjustment in the
number of shares of Common Stock into which the Series D Preferred Stock is
convertible shall be made, by adjustment in the Conversion Price applicable to
such Series D Preferred Stock, in respect of the issuance of Additional Shares
of Common Stock or otherwise, unless the consideration per share (determined
pursuant to Section 3(d)(v) hereof) for an Additional Share of Common Stock
issued or deemed to be issued by the Corporation is less than the Conversion
Price applicable to such Series D Preferred Stock in effect on the date of, and
immediately prior to, the issue of such Additional Shares of Common Stock.
(iii) Issue of Securities Deemed Issue of Additional Shares of
Common Stock.
(1) Options and Convertible Securities. In
the event the Corporation at any time or from time to time after the Original
Issue Date shall issue, sell, grant or assume any Options or Convertible
Securities or shall fix a record date for the determination of holders of any
class of securities entitled to receive any such Options or Convertible
Securities, then, and in each such case, the maximum number of shares of Common
Stock (as set forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue, sale, grant or assumption or, in case such a record date
shall have been fixed, as of the close of business on such record date, provided
that Additional Shares of Common Stock shall not be deemed to have been issued
for purposes of adjusting the Series D Conversion Price unless the consideration
per share (determined pursuant to Section 3(d)(v) hereof) of such Additional
Shares of Common Stock would be less than the Conversion Price applicable to
such Series D Preferred Stock in effect on the date of and immediately prior to
such issue, or such record date, as the case may be, and provided further that
in any such case in which Additional Shares of Common Stock are deemed to be
issued:
(A) no further adjustment in the Series D
Conversion Price shall be made upon the subsequent issue of Convertible
Securities of shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
(B) if such Options or Convertible Securities
by their terms provide, with the passage of time or otherwise, for any increase
in the consideration payable to the Corporation, or decrease in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the Series D Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease insofar
as it affects such Options or the rights of conversion or exchange under such
Convertible Securities which are outstanding at such time;
(C) upon the expiration of any such Options
or any rights of conversion or exchange under such Convertible Securities which
shall not have been fully exercised, the Series D Conversion Price computed upon
the original issue, sale, grant or assumption thereof (or upon the
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<PAGE> 20
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed as if:
(I) in the case of such Convertible
Securities or Options for shares of Common Stock, the only Additional Shares of
Common Stock issued or sold were the shares of Common Stock, if any, actually
issued or sold upon the exercise of such Options or the conversion or exchange
of such Convertible Securities and the consideration received for such
Additional Shares of Common Stock was, in the case of Options, the consideration
actually received by the Corporation for the issue, sale, grant or assumption of
all such Options, whether or not exercised, plus the consideration actually
received by the Corporation upon such exercise, or, in the case of Convertible
Securities, the consideration actually received by the Corporation for the
issue, sale or assumption of all such Convertible Securities which were actually
converted or exchanged, plus the additional consideration, if any, actually
received by the Corporation upon such conversion or exchange, and
(II) in the case of Options for
Convertible Securities, only the Convertible Securities, if any, actually issued
or sold upon the exercise thereof were issued at the time of issue, sale, grant
or assumption of such Options, and the consideration received by the Corporation
for the Additional Shares of Common Stock deemed to have been then issued was
the consideration actually received by the Corporation for the issue, sale,
grant or assumption of all such Options, whether or not exercised, plus the
consideration deemed to have been received by the Corporation (determined
pursuant to Section 3(d)(v) hereof) upon the issue or sale of the Convertible
Securities with respect to which such Options were actually exercised;
(D) no readjustment pursuant to clause (B)
or (C) above shall have the effect of increasing the Series D Conversion Price
to an amount which exceeds the lower of (i) the Series D Conversion Price on the
original adjustment date, or (ii) the Series D Conversion Price that would have
resulted from any issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment date;
(E) in the case of any Options which expire
by their terms not more than 30 days after the date of issue, sale, grant or
assumption thereof, no adjustment of the Series D Conversion Price shall be made
until the expiration or exercise of all such Options, whereupon such adjustment
shall be made in the same manner provided in clause (C) above; and
(F) if any such record date shall have been
fixed and such Options or Convertible Securities are not issued on the date
fixed therefor, the adjustment previously made in the Series D Conversion Price
which became effective on such record date shall be canceled as of the close of
business on such record date, and thereafter the Series D Conversion Price shall
be adjusted pursuant to this subparagraph 3(d)(iii) as of the actual date of
their issuance.
(2) Stock Dividends, Stock Distributions and
Subdivision. In the event the Corporation at any time or from time to time after
the Original Issue Date shall declare or pay any dividend or make any other
distribution on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock, into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock), then and in each such event, Additional
Shares of Common Stock shall be deemed to have been issued:
(A) in the case of any such dividend or
distribution, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend or distribution, or
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(B) in the case of any such subdivision, at
the close of business on the date immediately prior to the date upon which such
corporate action becomes effective.
If such record date shall have been fixed and such dividend or
distribution shall not have been paid on the date fixed therefor, the adjustment
previously made in the Series D Conversion Price which became effective on such
record date shall be canceled as of the close of business on such record date,
and thereafter the Series D Conversion Price shall be adjusted pursuant to this
subparagraph 3(d)(iii) as of the time of actual payment of such dividend or
distribution.
(iv) Adjustment of Series D Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event the Corporation shall issue or
be deemed to issue Additional Shares of Common Stock (excluding Additional
Shares of Common Stock deemed to be issued pursuant to Section 3(d)(iii)(2)
hereof; which event is dealt with in Section 3(d)(vi) hereof) without
consideration or for a consideration per share less than the Series D Conversion
Price in effect on the date of and immediately prior to such issue, then and in
such event, such Series D Conversion Price shall be reduced, concurrently with
such issue or sale in order to increase the number of shares of Common Stock
into which the Series D Preferred Stock is convertible to a price (calculated to
the nearest cent) equal to the lowest consideration per share for which such
Additional Shares of Common Stock are issued, provided that the Conversion Price
shall not be so reduced to an amount less than $.01.
(v) Determination of Consideration. For purposes of this
Section 3(d), the consideration received (or deemed to be received) by the
Corporation for the issue or sale of any Additional Shares of Common Stock (or
any Additional Shares of Common Stock deemed to be issued pursuant to Section
3(d)(iii)(1) hereof) shall be computed as follows:
(1) Cash and Property. The consideration per
share received by the Corporation for the issue or sale of Additional Shares of
Common Stock shall:
(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Corporation excluding
amounts paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other
than cash, be computed at the fair value thereof at the time of such issue or
sale, as determined in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the portion of such
consideration so received, computed as provided in clauses (A) and (B) above,
allocable to such Additional Shares of Common Stock as determined in good faith
by the Board of Directors.
(2) Options and Convertible Securities. The
consideration per share deemed to be received by the Corporation for Additional
Shares of Common Stock deemed to have been issued pursuant to Section
3(d)(iii)(1) hereof, relating to Options and Convertible Securities, shall be
determined by dividing:
(A) the total amount, if any, actually
received by the Corporation as consideration for the issue, sale, grant or
assumption of such Options or Convertible Securities, plus the minimum aggregate
amount of additional consideration (as set forth in the instruments relating to
such Options or Convertible Securities without regard to any provision contained
therein for a subsequent adjustment of such consideration) payable to the
Corporation upon the exercise in full of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for
Convertible
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<PAGE> 22
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(B) the maximum number of Additional Shares
of Common Stock (as set forth in the instruments relating to such Options or
Convertible Securities, without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible Securities.
(vi) Adjustment for Stock Dividends, Distributions,
Subdivisions, Combinations or Consolidation of Common Stock.
(1) Stock Dividends, Distributions and
Subdivisions. In the event the Corporation shall issue Additional Shares of
Common Stock pursuant to Section 3(d)(iii)(2) hereof, relating to stock
dividends, distributions and subdivisions, the Series D Conversion Price in
effect immediately prior to such stock dividend, distribution or subdivision
shall, concurrently with the effectiveness of such stock dividend, distribution
or subdivision, be proportionately decreased.
(2) Combinations or Consolidation of Common
Stock. In the event the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser number of shares
of Common Stock, the Series D Conversion Price in effect immediately prior to
such combinations or consolidation shall, concurrently with the effectiveness of
such combinations or consolidation, be proportionately increased.
(vii) Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, Etc. In the event the Corporation, after the Original Issue
Date, (1) shall consolidate with or merge into any other corporation or entity
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (2) shall permit any other corporation or entity to
consolidate with or merge into the Corporation and the Corporation shall be the
continuing or surviving corporation but, in connection with such consolidation
or merger, the Common Stock shall be changed into or exchanged for stock or
other securities of any other person or cash or any property, or (3) shall
transfer all or substantially all of its properties or assets to any other
corporation or entity, or (4) shall effect a capital reorganization or
reclassification of the Common Stock (other than a capital reorganization or
reclassification resulting in the issue of Additional Shares of Common Stock for
which adjustment in the Series D Conversion Price is provided in Section
3(d)(iv) hereof), then, and in each such event, proper provision shall be made
so that, upon the basis and the terms and in the manner provided in this Section
3(d)(vii), the holder of a share of Series D Preferred Stock, upon the
conversion thereof at any time after the consummation of such consolidation,
merger, transfer, reorganization or reclassification, shall be entitled to
receive, in lieu of the Common Stock issuable upon such conversion prior to such
consummation, the stock and other securities, cash and property to which such
holder would have been entitled upon such consummation if such holder had
converted such shares of Series D Preferred Stock immediately prior thereto,
subject to adjustments (subsequent to such corporate action) as nearly
equivalent as possible to the adjustments provided for in this Section 3.
Notwithstanding anything contained herein to the contrary, the Corporation will
not effect any of the transactions described in clauses (1) through (4) above
unless, prior to the consummation thereof, each corporation (other than the
Corporation) which may be required to deliver any stock, securities, cash or
property upon the conversion of a share of Series D Preferred Stock shall
assume, by written instrument delivered to each holder of a share of Series D
Preferred Stock, the obligation to deliver to such holder such shares of stock,
securities, cash or property as such holder may be entitled to receive upon such
conversion, and such corporation shall have furnished to each holder of a share
of Series D Preferred Stock an opinion of counsel for such corporation, which
counsel shall be reasonably satisfactory to such holder, stating that the holder
of such share of Series D Preferred Stock shall thereafter be entitled to
receive, upon the conversion of such
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<PAGE> 23
share, the stock, securities, cash or property which such corporation may be
required to deliver pursuant to the terms hereof.
(e) No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 3 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series D Preferred Stock against impairment. Without limiting the generality of
the foregoing, the Corporation (i) will not permit the par value of any shares
of stock at the time receivable upon the conversion of a share of Series D
Preferred Stock to exceed $0.01, (ii) will take all such action as may be
necessary or appropriate in order that the Corporation may validly and legally
issue fully paid nonassessable shares of stock on the conversion of the Series D
Preferred Stock, and (iii) will not take any action which results in any
adjustment of the Series D Preferred Stock if the total number of shares of
Common Stock issuable after the action upon the conversion of all of the Series
D Preferred Stock will exceed the total number of shares of Common Stock then
authorized by the Corporation's Certificate of Incorporation and available for
the purpose of issue upon such conversion.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series D Preferred Stock pursuant to this
Section 3, the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and furnish to each holder
of Series D Preferred Stock, a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (i) the consideration received
or to be received by the Corporation for any Additional Shares of Common Stock
issued or sold or deemed to have been issued, (ii) the number of shares of
Common Stock outstanding or deemed to be outstanding, and (iii) the Series D
Conversion Price in effect immediately prior to such issue or sale and as
adjusted and readjusted on account thereof. The Corporation shall, upon the
written request at any time of any holder of Series D Preferred Stock, furnish
or cause to be furnished to such holder a like certificate setting forth (i) the
applicable Series D Conversion Price at the time in effect, and showing how it
was calculated, and (ii) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon the conversion
of Series D Preferred Stock.
(g) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Corporation shall
mail to each holder of Series D Preferred Stock, at least ten (10) days prior to
the date specified herein, a notice specifying the date on which any such record
is to be taken for the purpose of such dividend or distribution.
(h) Common Stock Reserved. The Corporation shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock
such number of shares of Common Stock as shall from time to time be sufficient
to effect conversion of the Series D Preferred Stock.
Section 4. Redemption. If there is no firm commitment underwritten
public offering pursuant to Section 3(b) above, the holders of a majority of
Series D Preferred Stock shall have the right to require the Corporation to
redeem all shares of the Series D Preferred Stock as follows: On June 18, 2002,
the Series D Preferred Stock shall have the right to require the Corporation to
redeem for cash out of any funds legally available therefor one-third of Series
D Preferred Stock held by each holder of Series D
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Preferred Stock on that date. If holders of a majority of the Series D Preferred
Stock request redemption on June 18, 2002, then redemption of one-third of the
Series D-1 Preferred Stock held by each holder of Series D-1 Preferred Stock
also shall be redeemed on June 18, 2002 and written notice of such redemption
shall be given by the Corporation to each holder of Series D-1 Preferred Stock
at least twenty days prior to such redemption date. On June 18, 2003, the Series
D Preferred Stock shall have the right to require the Corporation to redeem for
cash out of any funds legally available therefor one-half of remaining Series D
Preferred Stock held by each holder of Series D Preferred Stock on that date. On
June 18, 2004, the Series D Preferred Stock shall have the right to require the
Corporation to redeem for cash out of any funds legally available therefor the
remainder of Series D Preferred Stock held by each holder of Series D Preferred
Stock on that date. Redemptions pursuant to this Section 4 shall be made for a
price of $3.056 per share of Series D Preferred Stock and Series D-1 Preferred
Stock (as appropriately adjusted for any stock dividend, stock split,
recapitalization or consolidation) plus, in each case, an amount equal to the
amount of all unpaid dividends payable in accordance with Section 6 hereof on
each share of Series D Preferred Stock and Series D-1 Preferred Stock to be
redeemed. The Corporation need not establish any sinking fund for the redemption
of Series D Preferred Stock or the Series D-1 Preferred Stock.
The Series D Preferred Stock shall give written notice to the
Corporation at least forty-five (45) days prior to the redemption dates as
provided above, and any rescheduled redemption dates as provided below, of its
intention to require the Corporation to redeem for cash the Series D Preferred
Stock held by each holder of Series D Preferred Stock on that date as provided
herein. On or after the date of redemption unless postponed or waived as
provided below, each holder of the Series D Preferred Stock and the Series D-1
Preferred Stock shall surrender a certificate or certificates representing the
number of shares of the Series D Preferred Stock and the Series D-1 Preferred
Stock to be redeemed as stated in the notice provided by the Corporation.
For the purpose of determining whether funds are legally available for
redemption of Series D Preferred Stock and the Series D-1 Preferred Stock as
provided herein, the Corporation shall value its assets at the highest amount
permissible under applicable law. If, on any redemption date, funds of the
Corporation legally available therefor shall be insufficient to redeem all the
Series D Preferred Stock and the Series D-1 Preferred Stock required to be
redeemed as provided herein, funds to the extent legally available shall be used
for such purpose and the Corporation shall effect such redemption pro rata
according to the redemption prices of the Series D Preferred Stock and the
Series D-1 Preferred Stock. The redemption requirements provided hereby shall be
continuous, so that if on any redemption date such requirements shall not be
fully discharged, without further action by any holder of Series D Preferred
Stock or the Series D-1 Preferred Stock funds legally available shall be applied
therefor until such requirements are fully discharged.
Section 5. Voting Rights. The holders of Series D Preferred Stock and
the Series D-1 Preferred Stock shall be entitled, on all matters submitted for a
vote of the holders of Common Stock, whether pursuant to law or otherwise, to
one vote for each whole share of Common Stock into which each share of Series D
Preferred Stock and the Series D-1 Preferred Stock held could be converted as of
the date of such vote, and on all such matters shall vote together as one class
with the holders of Common Stock and the holders of all other shares of stock
entitled to vote with the holders of Common Stock on such matters. In addition,
the holders of Series D Preferred Stock and the Series D-1 Preferred Stock shall
have the voting powers provided for by law and the holders of Series D Preferred
Stock and the Series D-1 Preferred Stock shall have the further voting powers
provided for in Part B(V), Section 5 of this Article Fourth.
Section 6. Dividends. Dividends shall be paid on the Series D
Preferred Stock as, when and if declared by the Board of Directors. In
addition, when and if the Board of Directors shall declare a dividend payable
with respect to the then outstanding shares of Common Stock, the holders of the
Series
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<PAGE> 25
D Preferred Stock shall be entitled to the amount of dividends per share into
which each share of the Series D Preferred Stock could then be converted into.
Section 7. Residual Rights. All rights accruing to the outstanding
shares of the Corporation not expressly provided to the contrary herein shall
be vested in the Common Stock.
IV. SERIES D-1 CONVERTIBLE PREFERRED STOCK
Section 1. Designation and Amount. The Series D-1 Preferred
Stock shall consist of 686,553 shares.
Section 2. Liquidation Rights. See Part B(V), Section 2 of
this Article Fourth for the liquidation rights of the Series D-1 Preferred
Stock.
Section 3. Conversion. The Series D-1 Preferred Stock shall be
convertible as follows:
(a) Right to Convert. Each share of Series D-1 Preferred Stock shall be
convertible, without the payment of any additional consideration by the holder
thereof and at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for the Series D-1 Preferred Stock, into the number of fully paid and
nonassessable shares of Common Stock determined by dividing $3.056 by the Series
D-1 Conversion Price in effect at the time of conversion (the "Series D-1
Conversion Price ") which shall initially be $3.056. The Series D-1 Conversion
Price may be adjusted and readjusted from time to time as provided in this
Section 3.
(b) Automatic Conversion. Each share of Series D-1 Preferred Stock
shall automatically be converted into shares of Common Stock at the then
effective Series D-1 Conversion Price upon the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock for the account of the Corporation to the public at an offering
price per share of $9.00 or more and resulting in net proceeds to the
Corporation of not less than Twenty Million and No/100 Dollars ($20,000,000) (in
the event of which offering, the person(s) entitled to receive the Common Stock
issuable upon such conversion of the Series D-1 Preferred Stock shall not be
deemed to have converted such Series D-1 Preferred Stock until immediately prior
to the closing of such offering). Each person who holds of record Series D-1
Preferred Stock immediately prior to such automatic conversion shall be entitled
to all dividends which have been declared but unpaid prior to the time of the
automatic conversion. Such dividends shall be paid to all such holders within
thirty (30) days of the automatic conversion.
(c) Mechanics of Conversion. No fractional shares of Common Stock shall
be issued upon conversion of the Series D-1 Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Series D Conversion Price . Before any holder of the Series D-1
Preferred Stock shall be entitled to convert the same into Common Stock (or, in
the case of automatic conversion of the Series D-1 Preferred Stock pursuant to
Section 3(b) hereof, before any holder of such Series D-1 Preferred Stock so
converted shall be entitled to receive a certificate or certificates evidencing
the Common Stock issuable upon such conversion), he shall surrender to the
Corporation at the office of the Corporation or of any transfer agent for the
shares of Series D-1 Preferred Stock, the certificate or certificates
representing such Series D-1 Preferred Stock, accompanied by written notice to
the Corporation that he elects to convert all or a specified number of such
shares (or, in the case of such automatic conversion, he is surrendering the
same) and stating therein his name or the name or names of his nominees in which
he wishes the certificate or certificates for Common Stock to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series D-1 Preferred Stock, or to his nominee
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<PAGE> 26
or nominees, a certificate or certificates representing the number of shares of
Common Stock to which he shall be entitled as aforesaid, together with cash in
lieu of any fraction of a share and, if less than the full number of Series D-1
Preferred Stock evidenced by such surrendered certificates or certificates are
being converted, a new certificate or certificates, of like tenor, for the
number of Series D-1 Preferred Stock evidenced by such surrendered certificate
less the number of such shares being converted. Any conversion made at the
election of a holder of Series D-1 Preferred Stock shall be deemed to have been
made immediately prior to the close of business on the date of such surrender of
the shares of Series D-1 Preferred Stock to be converted, and the person or
persons entitled to receive the Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such Common Stock on
such date.
(d) Adjustments to Series D-1 Conversion Price for Diluting
Issues:
(i) Special Definitions. For purposes of this Section
3(d), the following definitions shall apply:
(1) "Options" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire either Additional
Shares of Common Stock or Convertible Securities.
(2) "Original Issue Date" shall mean the date
on which a share of Series D-1 Preferred Stock was first issued.
(3) "Convertible Securities" shall mean any
evidences of indebtedness, shares (other than shares of Common Stock) or other
securities directly or indirectly convertible into or exchangeable for
Additional Shares of Common Stock.
(4) "Additional Shares of Common Stock" shall
mean all shares of Common Stock issued (or, pursuant to Section 3(d)(iii)
hereof, deemed to be issued) by the Corporation after the Original Issue Date,
other than Common Stock issued or issuable:
(A) upon conversion of any series of Preferred
Stock; or
(B) up to 830,000 shares of Common Stock issued
to officers or employees of, or consultants to, the Corporation pursuant to a
stock purchase or option plan or other employee stock incentive program; or
(C) up to 1,865,000 shares issued upon the
exercise of the existing warrants granted by the Company prior to June 30,
1999.
(ii) No Adjustment of Conversion Price. No adjustment in the
number of shares of Common Stock into which the Series D-1 Preferred Stock is
convertible shall be made, by adjustment in the Conversion Price applicable to
such Series D-1 Preferred Stock, in respect of the issuance of Additional Shares
of Common Stock or otherwise, unless the consideration per share (determined
pursuant to Section 3(d)(v) hereof) for an Additional Share of Common Stock
issued or deemed to be issued by the Corporation is less than the Conversion
Price applicable to such Series D-1 Preferred Stock in effect on the date of,
and immediately prior to, the issue of such Additional Shares of Common Stock.
(iii) Issue of Securities Deemed Issue of Additional Shares of
Common Stock.
(1) Options and Convertible Securities. In
the event the Corporation at any time or from time to time after the Original
Issue Date shall issue, sell, grant or assume any Options or
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Convertible Securities or shall fix a record date for the determination of
holders of any class of securities entitled to receive any such Options or
Convertible Securities, then, and in each such case, the maximum number of
shares of Common Stock (as set forth in the instrument relating thereto without
regard to any provisions contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue, sale, grant or assumption or, in case such
a record date shall have been fixed, as of the close of business on such record
date, provided that Additional Shares of Common Stock shall not be deemed to
have been issued for purposes of adjusting the Series D-1 Conversion Price
unless the consideration per share (determined pursuant to Section 3(d)(v)
hereof) of such Additional Shares of Common Stock would be less than the Series
D-1 Conversion Price applicable to such Series D-1 Preferred Stock in effect on
the date of and immediately prior to such issue, or such record date, as the
case may be, and provided further that in any such case in which Additional
Shares of Common Stock are deemed to be issued:
(A) no further adjustment in the Series D-1
Conversion Price shall be made upon the subsequent issue of Convertible
Securities of shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
(B) if such Options or Convertible Securities
by their terms provide, with the passage of time or otherwise, for any increase
in the consideration payable to the Corporation, or decrease in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the Series D-1 Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease insofar
as it affects such Options or the rights of conversion or exchange under such
Convertible Securities which are outstanding at such time;
(C) upon the expiration of any such Options
or any rights of conversion or exchange under such Convertible Securities which
shall not have been fully exercised, the Series D-1 Conversion Price computed
upon the original issue, sale, grant or assumption thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed as if:
(I) in the case of such Convertible
Securities or Options for shares of Common Stock, the only Additional Shares of
Common Stock issued or sold were the shares of Common Stock, if any, actually
issued or sold upon the exercise of such Options or the conversion or exchange
of such Convertible Securities and the consideration received for such
Additional Shares of Common Stock was, in the case of Options, the consideration
actually received by the Corporation for the issue, sale, grant or assumption of
all such Options, whether or not exercised, plus the consideration actually
received by the Corporation upon such exercise, or, in the case of Convertible
Securities, the consideration actually received by the Corporation for the
issue, sale or assumption of all such Convertible Securities which were actually
converted or exchanged, plus the additional consideration, if any, actually
received by the Corporation upon such conversion or exchange, and
(II) in the case of Options for
Convertible Securities, only the Convertible Securities, if any, actually issued
or sold upon the exercise thereof were issued at the time of issue, sale, grant
or assumption of such Options, and the consideration received by the Corporation
for the Additional Shares of Common Stock deemed to have been then issued was
the consideration actually received by the Corporation for the issue, sale,
grant or assumption of all such Options, whether or not exercised, plus the
consideration deemed to have been received by the Corporation (determined
pursuant
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to Section 3(d)(v) hereof) upon the issue or sale of the Convertible Securities
with respect to which such Options were actually exercised;
(D) no readjustment pursuant to clause (B)
or (C) above shall have the effect of increasing the Series D-1 Conversion Price
to an amount which exceeds the lower of (i) the Series D-1 Conversion Price on
the original adjustment date, or (ii) the Series D-1 Conversion Price that would
have resulted from any issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment date;
(E) in the case of any Options which expire
by their terms not more than 30 days after the date of issue, sale, grant or
assumption thereof, no adjustment of the Series D-1 Conversion Price shall be
made until the expiration or exercise of all such Options, whereupon such
adjustment shall be made in the same manner provided in clause (C) above; and
(F) if any such record date shall have been
fixed and such Options or Convertible Securities are not issued on the date
fixed therefor, the adjustment previously made in the Series D-1 Conversion
Price which became effective on such record date shall be canceled as of the
close of business on such record date, and thereafter the Series D-1 Conversion
Price shall be adjusted pursuant to this subparagraph 3(d)(iii) as of the actual
date of their issuance.
(2) Stock Dividends, Stock Distributions and
Subdivision. In the event the Corporation at any time or from time to time after
the Original Issue Date shall declare or pay any dividend or make any other
distribution on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock, into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock), then and in each such event, Additional
Shares of Common Stock shall be deemed to have been issued:
(A) in the case of any such dividend or
distribution, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend or distribution, or
(B) in the case of any such subdivision, at
the close of business on the date immediately prior to the date upon which such
corporate action becomes effective.
If such record date shall have been fixed and such dividend or
distribution shall not have been paid on the date fixed therefor, the adjustment
previously made in the Series D-1 Conversion Price which became effective on
such record date shall be canceled as of the close of business on such record
date, and thereafter the Series D-1 Conversion Price shall be adjusted pursuant
to this subparagraph 3(d)(iii) as of the time of actual payment of such dividend
or distribution.
(iv) Adjustment of Series D-1 Conversion Price Upon Issuance
of Additional Shares of Common Stock. In the event the Corporation shall issue
or be deemed to issue Additional Shares of Common Stock (excluding Additional
Shares of Common Stock deemed to be issued pursuant to Section 3(d)(iii)(2)
hereof, which event is dealt with in Section 3(d)(vi) hereof) without
consideration or for a consideration per share less than the Series D Conversion
Price in effect on the date of and immediately prior to such issue, then and in
such event, such Series D-1 Conversion Price shall be reduced, concurrently with
such issue or sale in order to increase the number of shares of Common Stock
into which the Series D-1 Preferred Stock is convertible to a price (calculated
to the nearest cent) equal to the lowest consideration per share for which such
Additional Shares of Common Stock are issued, provided that the Conversion Price
shall not be so reduced to an amount less than $.01.
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<PAGE> 29
(v) Determination of Consideration. For purposes of this
Section 3(d), the consideration received (or deemed to be received) by the
Corporation for the issue or sale of any Additional Shares of Common Stock (or
any Additional Shares of Common Stock deemed to be issued pursuant to Section
3(d)(iii)(1)) shall be computed as follows:
(1) Cash and Property. The consideration per
share received by the Corporation for the issue or sale of Additional Shares of
Common Stock shall:
(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Corporation excluding
amounts paid or payable for accrued interest or accrued dividends; (B) insofar
as it consists of property other than cash, be computed at the fair value
thereof at the time of such issue or sale, as determined in good faith by the
Board of Directors; and
(C) in the event Additional Shares of Common Stock
are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the portion of such
consideration so received, computed as provided in clauses (A) and (B) above,
allocable to such Additional Shares of Common Stock as determined in good faith
by the Board of Directors.
(2) Options and Convertible Securities. The
consideration per share deemed to be received by the Corporation for Additional
Shares of Common Stock deemed to have been issued pursuant to Section
3(d)(iii)(1), relating to Options and Convertible Securities, shall be
determined by dividing:
(A) the total amount, if any, actually
received by the Corporation as consideration for the issue, sale, grant or
assumption of such Options or Convertible Securities, plus the minimum aggregate
amount of additional consideration (as set forth in the instruments relating to
such Options or Convertible Securities without regard to any provision contained
therein for a subsequent adjustment of such consideration) payable to the
Corporation upon the exercise in full of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible Securities, by
(B) the maximum number of Additional
Shares of Common Stock (as set forth in the instruments relating to such Options
or Convertible Securities, without regard to any provision contained therein for
a subsequent adjustment of such number) issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities.
(vi) Adjustment for Stock Dividends, Distributions,
Subdivisions, Combinations or Consolidation of Common Stock.
(1) Stock Dividends, Distributions and
Subdivisions. In the event the Corporation shall issue Additional Shares of
Common Stock pursuant to Section 3(d)(iii)(2) hereof, relating to stock
dividends, distributions and subdivisions, the Series D-1 Conversion Price in
effect immediately prior to such stock dividend, distribution or subdivision
shall, concurrently with the effectiveness of such stock dividend, distribution
or subdivision, be proportionately decreased.
(2) Combinations or Consolidation of Common
Stock. In the event the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser number of shares
of Common Stock, the Series D-1 Conversion Price in effect immediately
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prior to such combinations or consolidation shall, concurrently with the
effectiveness of such combinations or consolidation, be proportionately
increased.
(vii) Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, Etc. In the event the Corporation, after the Original Issue
Date, (1) shall consolidate with or merge into any other corporation or entity
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (2) shall permit any other corporation or entity to
consolidate with or merge into the Corporation and the Corporation shall be the
continuing or surviving corporation but, in connection with such consolidation
or merger, the Common Stock shall be changed into or exchanged for stock or
other securities of any other person or cash or any property, or (3) shall
transfer all or substantially all of its properties or assets to any other
corporation or entity, or (4) shall effect a capital reorganization or
reclassification of the Common Stock (other than a capital reorganization or
reclassification resulting in the issue of Additional Shares of Common Stock for
which adjustment in the Series D-1 Conversion Price is provided in Section
3(d)(iv) hereof), then, and in each such event, proper provision shall be made
so that, upon the basis and the terms and in the manner provided in this Section
3(d)(vii), the holder of a share of Series D-1 Preferred Stock, upon the
conversion thereof at any time after the consummation of such consolidation,
merger, transfer, reorganization or reclassification, shall be entitled to
receive, in lieu of the Common Stock issuable upon such conversion prior to such
consummation, the stock and other securities, cash and property to which such
holder would have been entitled upon such consummation if such holder had
converted such shares of Series D-1 Preferred Stock immediately prior thereto,
subject to adjustments (subsequent to such corporate action) as nearly
equivalent as possible to the adjustments provided for in this Section 3.
Notwithstanding anything contained herein to the contrary, the Corporation will
not effect any of the transactions described in clauses (1) through (4) above
unless, prior to the consummation thereof, each corporation (other than the
Corporation) which may be required to deliver any stock, securities, cash or
property upon the conversion of a share of Series D-1 Preferred Stock shall
assume, by written instrument delivered to each holder of a share of Series D-1
Preferred Stock, the obligation to deliver to such holder such shares of stock,
securities, cash or property as such holder may be entitled to receive upon such
conversion, and such corporation shall have furnished to each holder of a share
of Series D-1 Preferred Stock an opinion of counsel for such corporation, which
counsel shall be reasonably satisfactory to such holder, stating that the holder
of such share of Series D-1 Preferred Stock shall thereafter be entitled to
receive, upon the conversion of such share, the stock, securities, cash or
property which such corporation may be required to deliver pursuant to the terms
hereof.
(e) No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 3 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series D-1 Preferred Stock against impairment. Without limiting the generality
of the foregoing, the Corporation (i) will not permit the par value of any
shares of stock at the time receivable upon the conversion of a share of Series
D-1 Preferred Stock to exceed $0.01, (ii) will take all such action as may be
necessary or appropriate in order that the Corporation may validly and legally
issue fully paid nonassessable shares of stock on the conversion of the Series
D-1 Preferred Stock, and (iii) will not take any action which results in any
adjustment of the Series D-1 Preferred Stock if the total number of shares of
Common Stock issuable after the action upon the conversion of all of the Series
D-1 Preferred Stock will exceed the total number of shares of Common Stock then
authorized by the Corporation's Certificate of Incorporation and available for
the purpose of issue upon such conversion.
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(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series D-1 Preferred Stock pursuant to this
Section 3, the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and furnish to each holder
of Series D-1 Preferred Stock, a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (i) the consideration received
or to be received by the Corporation for any Additional Shares of Common Stock
issued or sold or deemed to have been issued, (ii) the number of shares of
Common Stock outstanding or deemed to be outstanding, and (iii) the Series D-1
Conversion Price in effect immediately prior to such issue or sale and as
adjusted and readjusted on account thereof. The Corporation shall, upon the
written request at any time of any holder of Series D-1 Preferred Stock, furnish
or cause to be furnished to such holder a like certificate setting forth (i) the
applicable Series D-1 Conversion Price at the time in effect, and showing how it
was calculated, and (ii) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon the conversion
of Series D-1 Preferred Stock.
(g) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Corporation shall
mail to each holder of Series D-1 Preferred Stock, at least ten (10) days prior
to the date specified herein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend or distribution.
(h) Common Stock Reserved. The Corporation shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock
such number of shares of Common Stock as shall from time to time be sufficient
to effect conversion of the Series D-1 Preferred Stock.
Section 4. Redemption. If there is no firm commitment underwritten
public offering pursuant to Section 3(b) above, the holders of a majority of
Series D-1 Preferred Stock shall have the right to require the Corporation to
redeem all shares of the Series D-1 Preferred Stock as follows: On June 18,
2003, the Series D-1 Preferred Stock shall have the right to require the
Corporation to redeem for cash out of any funds legally available therefor
two-thirds of the Series D-1 Preferred Stock held by each holder of Series D-1
Preferred Stock on that date, or if one-third of the Series D-1 Preferred Stock
was redeemed in connection with the redemption of one-third of the Series D
Preferred Stock on June 18, 2002, then one-half of the Series D-1 Preferred
Stock held by each holder of Series D-1 Preferred Stock on that date. On June
18, 2004, the Series D-1 Preferred Stock shall have the right to require the
Corporation to redeem for cash out of any funds legally available therefor the
remainder of Series D-1 Preferred Stock held by each holder of Series D-1
Preferred Stock on that date. Redemptions pursuant to this Section 4 shall be
made for a price of $3.056 per share of Series D-1 Preferred Stock (as
appropriately adjusted for any stock dividend, stock split, recapitalization or
consolidation) plus, in each case, an amount equal to the amount of all unpaid
dividends payable in accordance with Section 7 hereof on each share of Series
D-1 Preferred Stock to be redeemed. The Corporation need not establish any
sinking fund for the redemption of Series D-1 Preferred Stock.
The Series D-1 Preferred Stock shall give written notice to the
Corporation at least forty-five (45) days prior to the redemption dates as
provided above, and any rescheduled redemption dates as provided below, of its
intention require the Corporation to redeem for cash the Series D-1 Preferred
Stock held by each holder of Series D-1 Preferred Stock on that date as provided
herein. On or after the date of redemption unless postponed or waived as
provided below, each holder of the Series D-1 Preferred Stock
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shall surrender a certificate or certificates representing the number of shares
of the Series D-1 Preferred Stock to be redeemed as stated in the notice
provided by the Corporation.
For the purpose of determining whether funds are legally available for
redemption of Series D-1 Preferred Stock as provided herein, the Corporation
shall value its assets at the highest amount permissible under applicable law.
If on any redemption date funds of the Corporation legally available therefor
shall be insufficient to redeem all the Series D-1 Preferred Stock required to
be redeemed as provided herein, funds to the extent legally available shall be
used for such purpose and the Corporation shall effect such redemption pro rata
according to the redemption prices of the Series D-1 Preferred Stock. The
redemption requirements provided hereby shall be continuous, so that if on any
redemption date such requirements shall not be fully discharged, without further
action by any holder of Series D-1 Preferred Stock funds legally available shall
be applied therefor until such requirements are fully discharged.
Section 5. Voting Rights. The holders of Series D-1 Preferred Stock
shall be entitled, on all matters submitted for a vote of the holders of Common
Stock, whether pursuant to law or otherwise, to one vote for each whole share of
Common Stock into which each share of Series D-1 Preferred Stock held could be
converted as of the date of such vote, and on all such matters shall vote
together as one class with the holders of Common Stock and the holders of all
other shares of stock entitled to vote with the holders of Common Stock on such
matters. In addition, the holders of Series D-1 Preferred Stock shall have the
voting powers provided for by law and the holders of Series D-1 Preferred Stock
shall have the further voting powers provided for in Part B(V), Section 5 of
this Article Fourth.
Section 6. Dividends. Dividends shall be paid on the Series D-1
Preferred Stock as, when and if declared by the Board of Directors. In addition,
when and if the Board of Directors shall declare a dividend payable with respect
to the then outstanding shares of Common Stock, the holders of the Series D-1
Preferred Stock shall be entitled to the amount of dividends per share into
which each share of the Series D-1 Preferred Stock could then be converted into.
Section 7. Residual Rights. All rights accruing to the outstanding
shares of the Corporation not expressly provided to the contrary herein shall be
vested in the Common Stock.
V. SERIES E CONVERTIBLE PREFERRED STOCK
Section 1. Designation and Amount. The Series E Preferred Stock shall
consist of 1,496,615 shares.
Section 2. Liquidation Rights. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, prior and in preference to any payment or distribution on the
Common Stock or any other class or series of stock which ranks, on liquidation
with respect to the right to receive payments upon liquidation, junior to the
Series E Preferred Stock, (a) the holders of the "Series A Convertible Preferred
Stock" (the "Series A Preferred Stock") shall be entitled to receive out of the
assets of the Corporation cash in the amount of $2.50 per share, plus a sum
equal to all declared but unpaid dividends, if any, on such Series A Preferred
Stock; (b) the holders of the "Series B Convertible Preferred Stock" (the
"Series B Preferred Stock") shall be entitled to receive out of the assets of
the Corporation, prior and in preference to any payment or distribution on the
Common Stock, cash in the amount of $3.056 per share, plus a sum equal to all
declared but unpaid dividends, if any, on such Series B Preferred Stock; (c) the
holders of the "Series C Convertible Preferred Stock" (the "Series C Preferred
Stock") shall be entitled to receive out of the assets of the Corporation cash
in the amount of $4.50 per share, plus a sum equal to all declared but unpaid
dividends, if any, on such Series C Preferred Stock; (d) the holders of the
Series D Preferred Stock shall be entitled to receive out of the assets of the
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Corporation cash in the amount equivalent to the greater of (i) the amount such
holders would be entitled to receive upon such liquidation, dissolution or
winding up of the affairs of the Corporation if immediately prior thereto such
holders held the number of shares of Common Stock into which such shares of
Series D Preferred Stock are then convertible into, or (ii) $3.056 per share,
plus a sum equal to all declared but unpaid dividends, if any, on such Series E
Preferred Stock; (e) the holders of the Series D-1 Convertible Preferred Stock
(the "Series D-1 Preferred Stock") shall be entitled to receive out of the
assets of the Corporation cash in the amount of $3.056 per share, plus a sum
equal to all declared but unpaid dividends, if any, on such Series D-1 Preferred
Stock; and (f) the holders of the Series E Convertible Preferred Stock (the
"Series E Preferred Stock") shall be entitled to receive out of the assets of
the Corporation cash in the amount of $9.00 per share, plus a sum equal to all
declared but unpaid dividends, if any, on such Series E Preferred Stock. If the
assets distributable in any such event to the holders of the Series E Preferred
Stock are insufficient to permit the payment to such holders of the full
preferential amounts to which they may be entitled, such assets shall be
distributed ratably among the holders of the Series E Preferred Stock in
proportion to the full preferential amount each such holder would otherwise be
entitled to receive.
After the payment or the setting apart for payment to the holders of
the Preferred of the preferential amounts so payable to them, the holders of the
Common Stock shall be entitled to share in all remaining assets of the
Corporation.
For purposes of this Section 2, the sale of all or substantially all of
the Corporation's property and assets or the acquisition of this Corporation by
another entity by means of merger or consolidation resulting in the exchange of
all of the outstanding shares of this Corporation for securities issued or other
consideration paid, by the acquiring corporation or any parent or subsidiary
thereof (except for a merger or consolidation after the consummation of which
the shareholders of this Corporation own in excess of 51% of the voting
securities of the surviving corporation or its parent corporation) shall be
deemed a voluntary dissolution, liquidation or winding up of the affairs of the
Corporation.
Section 3. Conversion. The Series E Preferred Stock shall be
convertible as follows:
(a) Right to Convert. Each share of Series E Preferred Stock shall be
convertible, without the payment of any additional consideration by the holder
thereof and at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for the Series E Preferred Stock, into the number of fully paid and
nonassessable shares of Common Stock determined by dividing $9.00 by the Series
E Conversion Price in effect at the time of conversion (the "Series E Conversion
Price ") which shall initially be $9.00. The Series E Conversion Price may be
adjusted and readjusted from time to time as provided in this Section 3.
(b) Automatic Conversion. Each share of Series E Preferred Stock shall
automatically be converted into shares of Common Stock determined by dividing
$9.00 by the then effective Series E Conversion Price upon the closing of a firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock for the account of the Corporation to the public at an
offering price per share of $9.00 or more and resulting in net proceeds to the
Corporation of not less than Twenty Million and No/100 Dollars ($20,000,000) (in
the event of which offering, the person(s) entitled to receive the Common Stock
issuable upon such conversion of the Series E Preferred Stock shall not be
deemed to have converted such Series E Preferred Stock until immediately prior
to the closing of such offering). Each person who holds of record Series E
Preferred Stock immediately prior to such automatic conversion shall be entitled
to all dividends which have been declared but unpaid prior to the time of the
automatic conversion. Such dividends shall be paid to all such holders within
thirty (30) days of the automatic conversion.
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(c) Mechanics of Conversion. No fractional shares of Common Stock shall
be issued upon conversion of the Series E Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Series E Conversion Price . Before any holder of the Series E
Preferred Stock shall be entitled to convert the same into Common Stock (or, in
the case of automatic conversion of the Series E Preferred Stock pursuant to
Section 3(b) hereof, before any holder of such Series E Preferred Stock so
converted shall be entitled to receive a certificate or certificates evidencing
the Common Stock issuable upon such conversion), he shall surrender to the
Corporation at the office of the Corporation or of any transfer agent for the
shares of Series E Preferred Stock, the certificate or certificates representing
such Series E Preferred Stock, accompanied by written notice to the Corporation
that he elects to convert all or a specified number of such shares (or, in the
case of such automatic conversion, he is surrendering the same) and stating
therein his name or the name or names of his nominees in which he wishes the
certificate or certificates for Common Stock to be issued. The Corporation
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder of Series E Preferred Stock, or to his nominee or nominees, a
certificate or certificates representing the number of shares of Common Stock to
which he shall be entitled as aforesaid, together with cash in lieu of any
fraction of a share and, if less than the full number of Series E Preferred
Stock evidenced by such surrendered certificates or certificates are being
converted, a new certificate or certificates, of like tenor, for the number of
Series E Preferred Stock evidenced by such surrendered certificate less the
number of such shares being converted. Any conversion made at the election of a
holder of Series E Preferred Stock shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Series E Preferred Stock to be converted, and the person or persons entitled to
receive the Common Stock issuable upon conversion shall be treated for all
purposes as the record holder or holders of such Common Stock on such date.
(d) Adjustments to Series E Conversion Price for Diluting Issues:
(i) Special Definitions. For purposes of this Section
3(d), the following definitions shall apply:
(1) "Options" shall mean rights, options or warrants
to subscribe for, purchase or otherwise acquire either Additional Shares of
Common Stock or Convertible Securities.
(2) "Original Issue Date" shall mean the date on
which a share of Series E Preferred Stock was first issued.
(3) "Convertible Securities" shall mean any evidences
of indebtedness, shares (other than shares of Common Stock) or other securities
directly or indirectly convertible into or exchangeable for Additional Shares of
Common Stock.
(4) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued (or, pursuant to Section 3(d)(iii) hereof,
deemed to be issued) by the Corporation after the
Original Issue Date, other than Common Stock issued or issuable:
(A) upon conversion of any series of Preferred Stock;
or
(B) up to 1,000,000 shares of Common Stock issued to
officers or employees of, or consultants to, the Corporation pursuant to a
stock purchase or option plan or other employee stock incentive program; or
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(C) up to 1,865,000 shares issued upon the exercise
of the existing warrants granted by the Company prior to June 30, 1999.
(ii) No Adjustment of Conversion Price. No adjustment in
the number of shares of Common Stock into which the Series E Preferred Stock is
convertible shall be made, by adjustment in the Conversion Price applicable to
such Series E Preferred Stock, in respect of the issuance of Additional Shares
of Common Stock or otherwise, unless the consideration per share (determined
pursuant to Section 3(d)(v) hereof) for an Additional Share of Common Stock
issued or deemed to be issued by the Corporation is less than the Conversion
Price applicable to such Series E Preferred Stock in effect on the date of, and
immediately prior to, the issue of such Additional Shares of Common Stock.
(iii) Issue of Securities Deemed Issue of Additional Shares
of Common Stock.
(1) Options and Convertible Securities. In
the event the Corporation at any time or from time to time after the Original
Issue Date shall issue, sell, grant or assume any Options or Convertible
Securities or shall fix a record date for the determination of holders of any
class of securities entitled to receive any such Options or Convertible
Securities, then, and in each such case, the maximum number of shares of Common
Stock (as set forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue, sale, grant or assumption or, in case such a record date
shall have been fixed, as of the close of business on such record date, provided
that Additional Shares of Common Stock shall not be deemed to have been issued
for purposes of adjusting the Series E Conversion Price unless the consideration
per share (determined pursuant to Section 3(d)(v) hereof) of such Additional
Shares of Common Stock would be less than the Conversion Price applicable to
such Series E Preferred Stock in effect on the date of and immediately prior to
such issue, or such record date, as the case may be, and provided further that
in any such case in which Additional Shares of Common Stock are deemed to be
issued:
(A) no further adjustment in the Series E
Conversion Price shall be made upon the subsequent issue of Convertible
Securities of shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
(B) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase in
the consideration payable to the Corporation, or decrease in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the Series E Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease insofar
as it affects such Options or the rights of conversion or exchange under such
Convertible Securities which are outstanding at such time;
(C) upon the expiration of any such Options or
any rights of conversion or exchange under such Convertible Securities which
shall not have been fully exercised, the Series E Conversion Price computed upon
the original issue, sale, grant or assumption thereof (or upon the occurrence of
a record date with respect thereto), and any subsequent adjustments based
thereon, shall, upon such expiration, be recomputed as if:
(I) in the case of such Convertible
Securities or Options for shares of Common Stock, the only Additional Shares of
Common Stock issued or sold were the shares of
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Common Stock, if any, actually issued or sold upon the exercise of such Options
or the conversion or exchange of such Convertible Securities and the
consideration received for such Additional Shares of Common Stock was, in the
case of Options, the consideration actually received by the Corporation for the
issue, sale, grant or assumption of all such Options, whether or not exercised,
plus the consideration actually received by the Corporation upon such exercise,
or, in the case of Convertible Securities, the consideration actually received
by the Corporation for the issue, sale or assumption of all such Convertible
Securities which were actually converted or exchanged, plus the additional
consideration, if any, actually received by the Corporation upon such conversion
or exchange, and
(II) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued or sold
upon the exercise thereof were issued at the time of issue, sale, grant or
assumption of such Options, and the consideration received by the Corporation
for the Additional Shares of Common Stock deemed to have been then issued was
the consideration actually received by the Corporation for the issue, sale,
grant or assumption of all such Options, whether or not exercised, plus the
consideration deemed to have been received by the Corporation (determined
pursuant to Section 3(d)(v) hereof) upon the issue or sale of the Convertible
Securities with respect to which such Options were actually exercised;
(D) no readjustment pursuant to clause (B) or (C)
above shall have the effect of increasing the Series E Conversion Price to an
amount which exceeds the lower of (i) the Series E Conversion Price on the
original adjustment date, or (ii) the Series E Conversion Price that would have
resulted from any issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment date;
(E) in the case of any Options which expire by their
terms not more than 30 days after the date of issue, sale, grant or assumption
thereof, no adjustment of the Series E Conversion Price shall be made until the
expiration or exercise of all such Options, whereupon such adjustment shall be
made in the same manner provided in clause (C) above; and
(F) if any such record date shall have been fixed and
such Options or Convertible Securities are not issued on the date fixed
therefor, the adjustment previously made in the Series E Conversion Price which
became effective on such record date shall be canceled as of the close of
business on such record date, and thereafter the Series E Conversion Price shall
be adjusted pursuant to this subparagraph 3(d)(iii) as of the actual date of
their issuance.
(2) Stock Dividends, Stock Distributions and
Subdivision. In the event the Corporation at any time or from time to time after
the Original Issue Date shall declare or pay any dividend or make any other
distribution on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock, into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock), then and in each such event, Additional
Shares of Common Stock shall be deemed to have been issued:
(A) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the determination
of holders of any class of securities entitled to receive such dividend or
distribution, or
(B) in the case of any such subdivision, at the close
of business on the date immediately prior to the date upon which such corporate
action becomes effective.
If such record date shall have been fixed and such dividend or
distribution shall not have been paid on the date fixed therefor, the adjustment
previously made in the Series E Conversion Price which
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became effective on such record date shall be canceled as of the close of
business on such record date, and thereafter the Series E Conversion Price shall
be adjusted pursuant to this subparagraph 3(d)(iii) as of the time of actual
payment of such dividend or distribution.
(iv) Adjustment of Series E Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event the Corporation shall issue or
be deemed to issue Additional Shares of Common Stock (excluding Additional
Shares of Common Stock deemed to be issued pursuant to Section 3(d)(iii)(2)
hereof; which event is dealt with in Section 3(d)(vi) hereof) without
consideration or for a consideration per share less than the Series E Conversion
Price in effect on the date of and immediately prior to such issue, then and in
such event, such Series E Conversion Price shall be reduced, concurrently with
such issue or sale in order to increase the number of shares of Common Stock
into which the Series E Preferred Stock is convertible to a price (calculated to
the nearest cent) equal to the lowest consideration per share for which such
Additional Shares of Common Stock are issued, provided that the Conversion Price
shall not be so reduced to an amount less than $.01.
(v) Determination of Consideration. For purposes of this
Section 3(d), the consideration received (or deemed to be received) by the
Corporation for the issue or sale of any Additional Shares of Common Stock (or
any Additional Shares of Common Stock deemed to be issued pursuant to Section
3(d)(iii)(1) hereof) shall be computed as follows:
(1) Cash and Property. The consideration per share received by
the Corporation for the issue or sale of Additional Shares of Common Stock
shall:
(A) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Corporation excluding amounts paid or
payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than cash, be
computed at the fair value thereof at the time of such issue or sale, as
determined in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common Stock are issued
together with other shares or securities or other assets of the Corporation for
consideration which covers both, be the portion of such consideration so
received, computed as provided in clauses (A) and (B) above, allocable to such
Additional Shares of Common Stock as determined in good faith by the Board of
Directors.
(2) Options and Convertible Securities. The consideration per
share deemed to be received by the Corporation for Additional Shares of Common
Stock deemed to have been issued pursuant to Section 3(d)(iii)(1) hereof,
relating to Options and Convertible Securities, shall be determined by dividing:
(A) the total amount, if any, actually received by the
Corporation as consideration for the issue, sale, grant or assumption of such
Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating to such
Options or Convertible Securities without regard to any provision contained
therein for a subsequent adjustment of such consideration) payable to the
Corporation upon the exercise in full of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible Securities, by
(B) the maximum number of Additional Shares of Common Stock
(as set forth in the instruments relating to such Options or Convertible
Securities, without regard to any
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provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(vi) Adjustment for Stock Dividends, Distributions, Subdivisions,
Combinations or Consolidation of Common Stock.
(1) Stock Dividends, Distributions and Subdivisions. In the event
the Corporation shall issue Additional Shares of Common Stock pursuant to
Section 3(d)(iii)(2) hereof, relating to stock dividends, distributions and
subdivisions, the Series E Conversion Price in effect immediately prior to such
stock dividend, distribution or subdivision shall, concurrently with the
effectiveness of such stock dividend, distribution or subdivision, be
proportionately decreased.
(2) Combinations or Consolidation of Common Stock. In the event
the outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the Series E Conversion Price in effect immediately prior to such combinations
or consolidation shall, concurrently with the effectiveness of such combinations
or consolidation, be proportionately increased.
(vii) Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, Etc. In the event the Corporation, after the Original Issue
Date, (1) shall consolidate with or merge into any other corporation or entity
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (2) shall permit any other corporation or entity to
consolidate with or merge into the Corporation and the Corporation shall be the
continuing or surviving corporation but, in connection with such consolidation
or merger, the Common Stock shall be changed into or exchanged for stock or
other securities of any other person or cash or any property, or (3) shall
transfer all or substantially all of its properties or assets to any other
corporation or entity, or (4) shall effect a capital reorganization or
reclassification of the Common Stock (other than a capital reorganization or
reclassification resulting in the issue of Additional Shares of Common Stock for
which adjustment in the Series E Conversion Price is provided in Section
3(d)(iv) hereof), then, and in each such event, proper provision shall be made
so that, upon the basis and the terms and in the manner provided in this Section
3(d)(vii), the holder of a share of Series E Preferred Stock, upon the
conversion thereof at any time after the consummation of such consolidation,
merger, transfer, reorganization or reclassification, shall be entitled to
receive, in lieu of the Common Stock issuable upon such conversion prior to such
consummation, the stock and other securities, cash and property to which such
holder would have been entitled upon such consummation if such holder had
converted such shares of Series E Preferred Stock immediately prior thereto,
subject to adjustments (subsequent to such corporate action) as nearly
equivalent as possible to the adjustments provided for in this Section 3.
Notwithstanding anything contained herein to the contrary, the Corporation will
not effect any of the transactions described in clauses (1) through (4) above
unless, prior to the consummation thereof, each corporation (other than the
Corporation) which may be required to deliver any stock, securities, cash or
property upon the conversion of a share of Series E Preferred Stock shall
assume, by written instrument delivered to each holder of a share of Series E
Preferred Stock, the obligation to deliver to such holder such shares of stock,
securities, cash or property as such holder may be entitled to receive upon such
conversion, and such corporation shall have furnished to each holder of a share
of Series E Preferred Stock an opinion of counsel for such corporation, which
counsel shall be reasonably satisfactory to such holder, stating that the holder
of such share of Series E Preferred Stock shall thereafter be entitled to
receive, upon the conversion of such share, the stock, securities, cash or
property which such corporation may be required to deliver pursuant to the terms
hereof.
(e) No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or
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sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series E Preferred Stock against
impairment. Without limiting the generality of the foregoing, the Corporation
(i) will not permit the par value of any shares of stock at the time receivable
upon the conversion of a share of Series E Preferred Stock to exceed $0.01, (ii)
will take all such action as may be necessary or appropriate in order that the
Corporation may validly and legally issue fully paid nonassessable shares of
stock on the conversion of the Series E Preferred Stock, and (iii) will not take
any action which results in any adjustment of the Series E Preferred Stock if
the total number of shares of Common Stock issuable after the action upon the
conversion of all of the Series E Preferred Stock will exceed the total number
of shares of Common Stock then authorized by the Corporation's Certificate of
Incorporation and available for the purpose of issue upon such conversion.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series E Preferred Stock pursuant to this
Section 3, the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and furnish to each holder
of Series E Preferred Stock, a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (i) the consideration received
or to be received by the Corporation for any Additional Shares of Common Stock
issued or sold or deemed to have been issued, (ii) the number of shares of
Common Stock outstanding or deemed to be outstanding, and (iii) the Series E
Conversion Price in effect immediately prior to such issue or sale and as
adjusted and readjusted on account thereof. The Corporation shall, upon the
written request at any time of any holder of Series E Preferred Stock, furnish
or cause to be furnished to such holder a like certificate setting forth (i) the
applicable Series E Conversion Price at the time in effect, and showing how it
was calculated, and (ii) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon the conversion
of Series E Preferred Stock.
(g) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Corporation shall
mail to each holder of Series E Preferred Stock, at least ten (10) days prior to
the date specified herein, a notice specifying the date on which any such record
is to be taken for the purpose of such dividend or distribution.
(h) Common Stock Reserved. The Corporation shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock
such number of shares of Common Stock as shall from time to time be sufficient
to effect conversion of the Series E Preferred Stock.
Section 4. Redemption. If there is no firm commitment underwritten
public offering pursuant to Section 3(b) above, the holders of a majority of
Series E Preferred Stock shall have the right to require the Corporation to
redeem all shares of the Series E Preferred Stock as follows: On June 18, 2002,
the Series E Preferred Stock shall have the right to require the Corporation to
redeem for cash out of any funds legally available therefor one-third of Series
E Preferred Stock held by each holder of Series E Preferred Stock on that date.
If holders of a majority of the Series E Preferred Stock request redemption on
June 18, 2002, then redemption of one-third of the Series E Preferred Stock held
by each holder of Series E Preferred Stock also shall be redeemed on June 18,
2002 and written notice of such redemption shall be given by the Corporation to
each holder of Series E Preferred Stock at least twenty days prior to such
redemption date. On June 18, 2003, the Series E Preferred Stock shall have the
right to require the
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Corporation to redeem for cash out of any funds legally available therefor
one-half of remaining Series E Preferred Stock held by each holder of Series E
Preferred Stock on that date. On June 18, 2004, the Series E Preferred Stock
shall have the right to require the Corporation to redeem for cash out of any
funds legally available therefor the remainder of Series E Preferred Stock held
by each holder of Series E Preferred Stock on that date. Redemptions pursuant to
this Section 4 shall be made for a price of $9.00 per share of Series E
Preferred Stock (as appropriately adjusted for any stock dividend, stock split,
recapitalization or consolidation) plus, in each case, an amount equal to the
amount of all unpaid dividends payable in accordance with Section 6 hereof on
each share of Series E Preferred Stock to be redeemed. The Corporation need not
establish any sinking fund for the redemption of Series E Preferred Stock.
The Series E Preferred Stock shall give written notice to the
Corporation at least forty-five (45) days prior to the redemption dates as
provided above, and any rescheduled redemption dates as provided below, of its
intention to require the Corporation to redeem for cash the Series E Preferred
Stock held by each holder of Series E Preferred Stock on that date as provided
herein. On or after the date of redemption unless postponed or waived as
provided below, each holder of the Series E Preferred Stock shall surrender a
certificate or certificates representing the number of shares of the Series E
Preferred Stock to be redeemed as stated in the notice provided by the
Corporation.
For the purpose of determining whether funds are legally available for
redemption of Series E Preferred Stock as provided herein, the Corporation shall
value its assets at the highest amount permissible under applicable law. If, on
any redemption date, funds of the Corporation legally available therefor shall
be insufficient to redeem all the Series E Preferred Stock required to be
redeemed as provided herein, funds to the extent legally available shall be used
for such purpose and the Corporation shall effect such redemption pro rata
according to the redemption prices of the Series E Preferred Stock. The
redemption requirements provided hereby shall be continuous, so that if on any
redemption date such requirements shall not be fully discharged, without further
action by any holder of Series E Preferred Stock or the Series D-1 Preferred
Stock funds legally available shall be applied therefor until such requirements
are fully discharged.
Section 5. Voting Rights. The holders of Series E Preferred Stock shall
have the voting powers provided for by law and shall be entitled, on all matters
submitted for a vote of the holders of Common Stock, whether pursuant to law or
otherwise, to one vote for each whole share of Common Stock into which each
share of Series E Preferred Stock held could be converted as of the date of such
vote, and on all such matters shall vote together as one class with the holders
of Common Stock and the holders of all other shares of stock entitled to vote
with the holders of Common Stock on such matters.
In addition to the foregoing voting rights of the Series E Preferred,
except (i) with respect to any director that may be elected or removed by a
particular class or series of the Preferred; (ii) with respect to alterations or
changes to the rights, preference or privileges of any individual class or
series of the Preferred that uniquely affects that particular series or class;
or (iii) as provided by law, no individual class or series of the Preferred
shall vote as a single voting group. The consent of the holders of not less than
sixty-six and two-thirds percent (66 2/3%) of the outstanding shares of the
Preferred, other than the Series C Preferred, which has no voting rights, voting
together as a single class, in person or by proxy, either in writing without a
meeting or, at a special or annual meeting of shareholders called for the
purpose, shall be necessary to:
(i) amend or repeal any provision of, or add any provision
to, the Corporation's Certificate of Incorporation or By-Laws;
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(ii) alter or change the rights, preference or privileges of
the Series E Preferred Stock, provided that any changes made to the
Series E Preferred Stock are the same for each class and provided that
the Series E Preferred Stock may not be redeemable prior to June 18,
2003, except pursuant to Section 4 hereof;
(iii) create or issue any other class or classes of stock or
series of preferred stock (or reclassify any shares of Common Stock
into shares) having any preference or priority as to dividends or
assets superior to or on a parity with any such preference or priority
of any of the Preferred;
(iv) increase or decrease the authorized number of shares of
any series of Preferred;
(v) sell, lease, assign or otherwise convey all or
substantially all of the Corporation's assets or effect a merger or
consolidation with another corporation (other than a wholly-owned
subsidiary) or effect any transaction or series of transactions in
which more than fifty percent of the voting power of the Corporation is
disposed of;
(vi) merge into or consolidate with any other corporation, if
at least a majority of the voting power of the Corporation, or the
surviving corporation as the case may be, would not be owned by persons
who held capital stock of the Corporation before the merger or
consolidation;
(vii) pay any dividend on or the purchase, redemption or other
acquisition of any security junior to the Series E Preferred Stock; or
(viii) modify the Corporation's Certificate of Incorporation.
Section 6. Dividends. Dividends shall be paid on the Series E Preferred
Stock as, when and if declared by the Board of Directors. In addition, when and
if the Board of Directors shall declare a dividend payable with respect to the
then outstanding shares of Common Stock, the holders of the Series E Preferred
Stock shall be entitled to the amount of dividends per share into which each
share of the Series E Preferred Stock could then be converted into.
Section 7. Residual Rights. All rights accruing to the outstanding
shares of the Corporation not expressly provided to the contrary herein shall be
vested in the Common Stock.
VI. NO SUBSEQUENT ISSUANCES OF PREFERRED
After the closing of a firm commitment underwritten public offering (as
such offering is described in Section 3(b), Part B(I), (II), (III), (IV) and
(V), respectively) and the automatic conversion of the respective series of
Preferred into Common Stock in accordance with such applicable provisions, the
Corporation shall have no further authority to issue any shares of preferred
stock comprising the Preferred.
VII. PREFERRED STOCK WITHOUT DESIGNATIONS AND PREFERENCES
Shares of preferred stock (other than preferred stock comprising the
Preferred, as defined herein) may be issued from time to time in one or more
series, without further stockholder approval. The Board of Directors of the
Corporation hereby is authorized to fix or alter the rights, preferences,
privileges and restrictions granted to or imposed upon each series of preferred
stock, and the number of shares
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constituting any such series and the designation thereof, or of any of them. The
rights, privileges, preferences and restrictions of any such additional series
may be subordinated to, pari passu with (including, without limitation,
inclusion in provisions with respect to liquidation and acquisition preferences,
redemption and/or approval of matters by vote), or senior to any of those of any
present or future class or series of preferred stock or Common Stock. The Board
of Directors also is authorized to increase or decrease the number of shares of
any series prior or subsequent to the issue of that series, but not below the
number of shares of such series then outstanding. In case the number of shares
of any series shall be so decreased, the shares constituting such decrease shall
resume the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
FIFTH: The name and mailing address of the sole incorporator is as
follows:
<TABLE>
<CAPTION>
NAME ADDRESS
<S> <C>
Stephen M. Wagman 902 Clint Moore Road
Suite 230
Boca Raton, Florida 33487
</TABLE>
SIXTH: In furtherance and not in limitation of the powers conferred by
statute and subject to Article Seventh hereof, the Board of Directors is
expressly authorized to adopt, repeal, rescind, alter or amend in any respect
the Bylaws of the Corporation (the "Bylaws").
SEVENTH: Notwithstanding Article Sixth hereof, the Bylaws may be
adopted, rescinded, altered or amended in any respect by the stockholders of the
Corporation, but only by the affirmative vote of the holders of not less than a
sixty-six and two-thirds percent (66 2/3%) majority of the voting power of all
outstanding shares of voting stock of the Corporation entitled to vote at an
election of directors.
EIGHTH: The business and affairs of the Corporation shall be managed by
and under the direction of the Board of Directors. The exact number of directors
of the Corporation shall be determined from time to time by a Bylaw or amendment
thereto provided that the number of directors shall not be reduced to less than
five (5), except that there need be only as many directors as there are
stockholders in the event that the outstanding shares are held of record by
fewer than nine (9) stockholders. Elections of directors need not be by written
ballot unless the Bylaws of the Corporation shall so provide.
Immediately upon the closing, prior to or on December 31,
1999, of a firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock for the account of the Corporation to the
public (as such offering is described in Section 3(b), Part B(I), (II), (III),
(IV) and (V), respectively), and the automatic conversion of the applicable
Preferred into Common Stock in accordance therewith, this Article Eighth shall
be deemed to have been amended in its entirety, to read as follows:
The business and affairs of the Corporation shall be managed
by and under the direction of the Board of Directors. The
exact number of directors of the Corporation shall be
determined from time to time by a Bylaw or amendment thereto
provided that the number of directors shall not be reduced to
less than five (5), except that there need be only as many
directors as there are stockholders in the event that the
outstanding shares are held of record by fewer than five (5)
stockholders. Elections of directors need not be by written
ballot unless the Bylaws of the Corporation shall so provide.
The Board of Directors shall be divided into three classes to
be known as Class I, Class II and Class III. Except in the
case of death, resignation, disqualification or removal, each
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<PAGE> 43
Director shall serve for a term ending on the date of the
third annual meeting of shareholder following the annual
meeting at which the Director was elected; provided, however,
that each initial Director in Class I shall hold office until
the 2000 annual meeting of shareholders, each initial Director
in Class II shall hold office until the 2001 annual meeting of
shareholders, and each initial Director in Class III shall
hold office until the 2002 annual meeting of shareholders. In
the event of any increase or decrease in the authorized number
of Directors, the newly created or eliminated directorships
resulting from such an increase or decrease shall be
apportioned among the tree classes of Directors; provided,
however, that there shall be no classification of additional
Directors elected by the Board of Directors until the next
meeting of shareholders called for the purposes of electing
Directors, at which meeting the terms of all such additional
Directors shall expire, and such additional Director
positions, if they are to be continued, shall be apportioned
amount the classes of Directors, and nominees therefor shall
be submitted to the shareholders for their vote.
; provided, however, that should no such firm commitment underwritten public
offering close prior to or on December 31, 1999, then the provisions of the
Article Eighth related to classification of the Corporation's Board of Directors
shall be null and void, and of no further force and effect.
NINTH: Except as may otherwise be set forth in Article Eighth above,
each director shall serve until his successor is elected and qualified or until
his death, resignation or removal; no decrease in the authorized number of
directors shall shorten the term of any incumbent director; and additional
directors shall not be included in any class, but shall serve for such term or
terms and pursuant to such other provisions as are specified in the resolution
of the Board of Directors establishing such series. Any stockholder proposals
and nominations for the election of a director by a stockholder shall be
delivered to the Corporate Secretary of the Corporation no less than ninety (90)
days nor more than one hundred twenty (120) days in advance of the first
anniversary of the Company's annual meeting held in the prior year; provided,
however, that in the event the Company shall not have had an annual meeting in
the prior year, such notice shall be delivered no less than ninety (90) days nor
more than one hundred twenty (120) days in advance of May 15 of the current
year. Such stockholder nominations must contain (a) as to each person whom the
stockholder proposes to nominate for election or re-election as a director at
the annual meeting: (w) the name, age, business address and residence address of
the proposed nominee, (x) the principal occupation or employment or the proposed
nominee, (y) the class and number of shares of capital stock of the Corporation
which are beneficially owned by the proposed nominee, and (z) any other
information relating to the proposed nominee that is required to be disclosed in
solicitations for proxies for election of directors pursuant to Rule 14a under
the Securities Exchange Act of 1934, as amended; and (b) as to the stockholder
giving notice of nominees for election at the annual meeting, (x) the name and
record address of the stockholder, and (y) the class and number of shares of
capital stock of the Corporation which are beneficially owned by the
stockholder.
TENTH: Newly created directorships resulting from any increase in the
number of directors, or any vacancies on the Board of Directors resulting from
death, resignation, removal or other causes, shall be filled solely by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been elected and qualified or until such director's death, resignation or
removal, whichever first occurs.
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ELEVENTH: Any director may be removed from office by the affirmative
vote of the holders of sixty-six and two-thirds percent (66 2/3%) of the
outstanding shares of voting stock of the Corporation entitled to vote at an
election of directors, provided that such removal is for cause.
TWELFTH: Meetings of stockholders of the Corporation may be held within
or without the State of Delaware, as the Bylaws may provide, and any action
which may be taken at a meeting of the stockholders may be taken without a
meeting if a consent in writing, setting forth the action so to be taken, is
signed by the holders of outstanding stock having not less than a minimum number
of votes that would be necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present and voted; provided,
however, that after the closing, prior to or on December 31, 1999, of a firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock for the account of the Corporation to the public (as such
offering is described in Section 3(b), Part B(I), (II), (III), (IV) and (V),
respectively), stockholders of the Corporation shall take action by meetings
held pursuant to this Certificate and the Bylaws and shall have no right to take
any action by written consent without a meeting. The books of the Corporation
may be kept (subject to any provision of applicable law) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws.
THIRTEENTH: For the purposes of this Certificate of Incorporation, the
terms "affiliate," "associate," "control," "interested stockholder," "owner,"
"person" and "voting stock" shall have the meanings set forth in Section 203(c)
of the Delaware General Corporation Law.
FOURTEENTH: The provisions set forth in this Article Fourteenth and in
Articles Fourth, Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth and
Sixteenth hereof may not be repealed, rescinded, altered or amended in any
respect, and no other provision or provisions may be adopted which impair(s) in
any respect the operation or effect of any such provision, except by the
affirmative vote of the holders of a sixty-six and two-thirds percent (66 2/3%)
majority of the voting power of all outstanding shares of voting stock of the
Corporation entitled to vote at an election of directors.
FIFTEENTH: The Corporation reserves the right to adopt, repeal,
rescind, alter or amend in any respect any provision contained in this
Certificate in the manner now or hereafter prescribed by applicable law, and all
rights conferred on stockholders herein are granted subject to this reservation.
Notwithstanding the preceding sentence, the provisions set forth in Articles
Fourth, Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth, Fifteenth and
Sixteenth may not be repealed, rescinded, altered or amended in any respect, and
no other provision or provisions may be adopted which impair(s) in any respect
the operation or effect of any such provision, unless such action is approved as
specified in Article Fourteenth hereof.
SIXTEENTH: To the fullest extent permitted by applicable law, this
Corporation is authorized to provide indemnification of (and advancement of
expenses to) directors, officers, employees and agents (and any other persons to
which Delaware law permits this Corporation to provide indemnification) through
Bylaw provisions, agreements with such agents or other persons, vote of
stockholders or disinterested directors or otherwise, in excess of the
indemnification and advancement otherwise permitted by Section 145 of the
Delaware General Corporation Law, subject only to limits created by applicable
Delaware law (statutory or non-statutory), with respect to action for breach of
duty to the Corporation, its stockholders, and others.
No director of the Corporation shall be personally liable to
the Corporation or any stockholder for monetary damages for breach of fiduciary
duty as a director, except for any matter in respect of which such director
shall be liable under Section 174 of the Delaware General Corporation Law
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<PAGE> 45
or any amendment thereto or shall be liable by reason that, in addition to any
and all other requirements for such liability, such director (1) shall have
breached the director's duty of loyalty to the Corporation or its stockholders,
(2) shall have acted in a manner involving intentional misconduct or a knowing
violation of law or, in failing to act, shall have acted in a manner involving
intentional misconduct or a knowing violation of law, or (3) shall have derived
an improper personal benefit. If the Delaware General Corporation Law hereafter
is amended to authorize the further elimination or limitation of the liability
of a director, the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended.
Each person who was or is made a party or is threatened to be
made a party to or is in any way involved in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), including any appeal therefrom, by
reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the Corporation or a direct
or indirect subsidiary of the Corporation, or is or was serving at the request
of the Corporation as a director or officer of another entity or enterprise, or
was a director or officer of a foreign or domestic corporation which was a
predecessor corporation of the Corporation or of another entity or enterprise at
the request of such predecessor corporation, shall be indemnified and held
harmless by the Corporation, and the Corporation shall advance all expenses
incurred by any such person in defense of any such proceeding prior to its final
determination, to the fullest extent authorized by the Delaware General
Corporation Law. In any proceeding against the Corporation to enforce these
rights, such person shall be presumed to be entitled to indemnification and the
Corporation shall have the burden of proving that such person has not met the
standards of conduct for permissible indemnification set forth in the Delaware
General Corporation Law. The rights to indemnification and advancement of
expenses conferred by this Article Sixteenth shall be presumed to have been
relied upon by the directors and officers of the Corporation in serving or
continuing to serve the Corporation and shall be enforceable as contract rights.
Such rights shall not be exclusive of any other rights to which those seeking
indemnification may otherwise be entitled. The Corporation may, upon written
demand presented by a director or office of the Corporation or of a direct or
indirect subsidiary of the Corporation, or by a person serving at the request of
the Corporation as a director or officer of another entity or enterprise, enter
into contracts to provide such persons with specified rights to indemnification,
which contracts may confer rights and protections to the maximum extent
permitted by the Delaware General Corporation Law, as amended and in effect from
time to time.
If a claim under this Article Sixteenth is not paid in full by
the Corporation within sixty (60) days after a written claim has been received
by the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expenses of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce the right to be advanced expenses incurred in
defending any proceeding prior to it final disposition where the required
undertaking, if any, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the claimant shall be presumed to be entitled to
indemnification and the Corporation shall have the burden of proving that the
claimant has not met the standards of conduct for permissible indemnification
set forth in the Delaware General Corporation Law.
If the Delaware General Corporation Law hereafter is amended
to permit the Corporation to provide broader indemnification rights than such
law permitted the Corporation to provide prior to such amendment, the
indemnification rights conferred by this Article Sixteenth shall be broadened to
the fullest extent permitted by the Delaware General Corporation Law, as so
amended.
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SEVENTEENTH: No contract or other transaction of the Corporation with
any other person, firm or corporation, or in which this corporation is
interested, shall be affected or invalidated by: (a) the fact that any one or
more of the directors or officers of the Corporation is interested in or is a
director or officer of such other firm or corporation; or, (b) the fact that any
director or officer of the Corporation, individually or jointly with others, may
be a party to or may be interested in any such contract or transaction, so long
as the contract or transaction is authorized, approved or ratified at a meeting
of the Board of Directors by sufficient vote thereon by directors not interested
therein, to which such fact of relationship or interest has been disclosed, or
the contract or transaction has been approved or ratified by vote or written
consent of the stockholders entitled to vote, to whom such fact of relationship
or interest has been disclosed, or so long as the contract or transaction is
fair and reasonable to the Corporation. Each person who may become a director or
officer of the Corporation is hereby relieved from any liability that might
otherwise arise by reason of his contracting with the Corporation for the
benefit of himself or any firm or corporation in which he may in any way be
interested.
IN WITNESS WHEREOF, I have hereunto signed my name and affirm, under
penalty of perjury, that this Certificate is my act and deed and that the facts
stated herein are true this 5th day of August, 1999.
/s/ Stephen M. Wagman
-----------------------------------------
Stephen M. Wagman
Sole Incorporator
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<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
DALEEN TECHNOLOGIES, INC.
(A DELAWARE CORPORATION)
The following are the Bylaws ("Bylaws") of DALEEN TECHNOLOGIES, INC., a
Delaware corporation (the "Corporation"), effective as of August 5, 1999:
ARTICLE I.
OFFICES
Section 1.1. PRINCIPAL EXECUTIVE OFFICE. The principal executive office
of the Corporation shall be located at 902 Clint Moore Road, Suite 230, Boca
Raton, Florida 33487 or at such other place as may be designated from time to
time by the Chairman of the Board or the Board of Directors of the Corporation
(the "Board of Directors").
Section 1.2. OTHER OFFICES. The Corporation may also have an office or
offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors may from time to time determine or as the
business of the Corporation may require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 2.1. ANNUAL MEETINGS. The annual meeting of stockholders of the
Corporation shall be held at a date and at such time as the Board of Directors
shall determine. At each annual meeting of stockholders, directors shall be
elected in accordance with the provisions of Section 3.3 hereof and any other
proper business may be transacted.
Section 2.2. SPECIAL MEETINGS. Special meetings of stockholders for any
purpose or purposes may be called at any time by a majority of the Board of
Directors, by the Chairman of the Board, the Chief Executive Officer, the
President or by holders of not less than twenty percent (20%) of the voting
power of all outstanding shares of voting stock regardless of class and voting
together as a single voting class; provided, however, that after the closing of
a firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock for the account of the Corporation to the
public at an offering price per share of $9.00 or more and resulting in net
proceeds to the Corporation of not less than Twenty Million and No/100 Dollars
($20,000,000), a special meeting of the stockholders, for any purpose or
purposes, may only be called by the Board, the Chairman of the Board, the Chief
Executive Officer or the President. The term "voting stock" as used in these
Bylaws shall have the meaning set forth in Section 203(c) of the Delaware
General Corporation Law.
Section 2.3. PLACE OF MEETINGS. Each annual or special meeting of
stockholders shall be held at such location as may be determined by the Board of
Directors or, if no such determination is made, at such place as may be
determined by the Chairman of the Board, the Chief Executive Officer or the
President. If no location is so determined, any annual or special meeting shall
be held at the principal executive office of the Corporation.
<PAGE> 2
Section 2.4. NOTICE OF MEETINGS. Written notice of each annual or
special meeting of stockholders stating the date and time when, and the place
where, it is to be held shall be delivered either personally or by mail to
stockholders entitled to vote at such meeting not less than ten (10) nor more
than sixty (60) days before the date of the meeting. The purpose or purposes for
which the meeting is called may, in the case of an annual meeting, and shall, in
the case of a special meeting, also be stated. If mailed, such notice shall be
directed to a stockholder at his address as it shall appear on the stock books
of the Corporation, unless he shall have filed with the Secretary of the
Corporation a written request that notices intended for him be mailed to some
other address, in which case such notice shall be mailed to the address
designated in such request.
Section 2.5. CONDUCT OF MEETINGS. All annual and special meetings of
stockholders shall be conducted in accordance with such rules and procedures as
the Board of Directors may determine subject to the requirements of applicable
law and, as to matters not governed by such rules and procedures, as the
chairman of such meeting shall determine. The chairman of any annual or special
meeting of stockholders shall be the Chairman of the Board. The Secretary, or in
the absence of the Secretary, a person designated by the Chairman of the Board,
shall act as secretary of the meeting.
Section 2.6. QUORUM. At any meeting of stockholders of the Corporation,
the presence, in person or by proxy, of the holders of record of a majority of
the shares then issued and outstanding and entitled to vote at the meeting shall
constitute a quorum for the transaction of business; provided, however, that
this Section 2.6 shall not affect any different requirement which may exist
under statute, pursuant to the rights of any authorized class or series of
stock, or under the Certificate of Incorporation of the Corporation, as amended
or restated from time to time (the "Certificate"), for the vote necessary for
the adoption of any measure governed thereby.
In the absence of a quorum, either the Chairman of the Board or the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted that might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 2.7. VOTES REQUIRED. The affirmative vote of a majority of the
shares present in person or represented by proxy at a duly called meeting of
stockholders of the Corporation, at which a quorum is present and entitled to
vote on the subject matter, shall be sufficient to take or authorize action upon
any matter which may properly come before the meeting, except that the election
of directors shall be by plurality vote, unless the vote of a greater or
different number thereof is required by statute, by the rights of any authorized
class of stock or by the Certificate.
Unless the Certificate or a resolution of the Board of Directors
adopted in connection with the issuance of shares of any class or series of
stock provides for a greater or lesser number of votes per share, or limits or
denies voting rights, each outstanding share of stock, regardless of class or
series, shall be entitled to one (l) vote on each matter submitted to a vote at
a meeting of stockholders.
Section 2.8. PROXIES. A stockholder may vote the shares owned of record
by him either in person or by proxy executed in writing (which shall include
writings sent by telex, telegraph, cable or electronic transmission, on terms
satisfactory to the Corporation) by the stockholder himself or by his duly
authorized attorney-in-fact. No proxy shall be valid after three (3) years from
its date, unless the
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proxy provides for a longer period. Each proxy shall be in writing, subscribed
by the stockholder or his duly authorized attorney-in-fact, and dated, but it
need not be sealed, witnessed or acknowledged.
Section 2.9. ACTION BY WRITTEN CONSENT. Any action that may be taken at
any annual or special meeting of stockholders may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Notice of the taking of such action shall be given
promptly to each stockholder that would have been entitled to vote thereon at a
meeting of stockholders and that did not consent thereto in writing.
Notwithstanding anything to the contrary in this Section 2.9, after the closing
of a firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock for the account of the Corporation to the
public at an offering price per share of $9.00 or more and resulting in net
proceeds to the Corporation of not less than Twenty Million and No/100 Dollars
($20,000,000), the stockholders of the Corporation may not take action by
written consent without a meeting, but must take any such actions at a duly
called annual or special meeting in accordance with these Bylaws and the
Certificate.
Section 2.10. LIST OF STOCKHOLDERS. The Secretary of the Corporation
shall prepare and make (or cause to be prepared and made), at least ten (10)
days before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order and showing the
address of, and the number of shares registered in the name of, each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten (10) days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the duration thereof, and may be inspected by any stockholder
who is present.
Section 2.11. INSPECTOR OF ELECTION. In advance of any meeting of
stockholders, the Board of Directors may appoint an Inspector of Election to act
at such meeting or at any adjournment or adjournments thereof. If such Inspector
is not so appointed or fail or refuses to act, the chairman of any such meeting
may (and, upon the demand of any stockholder or stockholder's proxy, shall) make
such an appointment. No such Inspector need be a stockholder of the Corporation.
Subject to any provisions of the Certificate of Incorporation, the
Inspector of Election shall determine the number of shares outstanding, the
voting power of each, the shares represented at the meeting, the existence of a
quorum and the authenticity, validity and effect of proxies; he shall receive
votes, ballots or consents, hear and determine all challenges and questions in
any way arising in connection with the right to vote, count and tabulate all
votes or consents, determine when the polls shall close and determine the
result; and finally, he shall do such acts as may be proper to conduct the
election or vote with fairness to all stockholders. On request, the Inspector
shall make a report in writing to the secretary of the meeting concerning any
challenge, question or other matter as may have been determined by them and
shall execute and deliver to such secretary a certificate of any fact found by
them.
Section 2.12. NOTICE OF STOCKHOLDER ACTION. Any stockholder proposal or
nomination for the election of a director by a stockholder shall be delivered to
the Corporate Secretary of the Corporation no less than ninety (90) days nor
more than one hundred twenty (120) days in advance of the first anniversary of
the Corporation's annual meeting held in the prior year; provided, however, that
in the event the Corporation shall not have had an annual meeting in the prior
year, such notice shall be delivered no less than ninety (90) days nor more than
one hundred twenty (120) days in advance of May
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15 of the current year. Such stockholder nominations must contain (a) as to each
person whom the stockholder proposes to nominate for election or re-election as
a director at the annual meeting: (w) the name, age, business address and
residence address of the proposed nominee, (x) the principal occupation or
employment or the proposed nominee, (y) the class and number of shares of
capital stock of the Corporation which are beneficially owned by the proposed
nominee, and (z) any other information relating to the proposed nominee that is
required to be disclosed in solicitations for proxies for election of directors
pursuant to Rule 14a under the Securities Exchange Act of 1934, as amended; and
(b) as to the stockholder giving notice of nominees for election at the annual
meeting, (i) the name and record address of the stockholder, and (ii) the class
and number of shares of capital stock of the Corporation which are beneficially
owned by the stockholder.
ARTICLE III.
DIRECTORS
Section 3.1. POWERS. The business and affairs of the Corporation shall
be managed by and be under the direction of the Board of Directors. The Board of
Directors shall exercise all the powers of the Corporation, except those that
are conferred upon or reserved to the stockholders by statute, the Certificate
or these Bylaws.
Section 3.2. NUMBER. The number of directors shall be fixed from time
to time by resolution of the Board of Directors but shall not be less than
three.
Section 3.3. ELECTION AND TERM OF OFFICE. Each director shall serve
until his successor is elected and qualified or until his death, resignation or
removal, no decrease in the authorized number of directors shall shorten the
term of any incumbent director, and additional directors elected in connection
with rights to elect such additional directors under specified circumstances
which may be granted to the holders of any series of Preferred Stock shall not
be included in any class, but shall serve for such term or terms and pursuant to
such other provisions as are specified in the resolution of the Board of
Directors establishing such series.
Section 3.4. ELECTION OF CHAIRMAN OF THE BOARD. At the organizational
meeting immediately following the annual meeting of stockholders, the directors
shall elect a Chairman of the Board from among the directors who shall hold
office until the corresponding meeting of the Board of Directors in the next
year and until his successor shall have been elected or until his earlier
resignation or removal. Any vacancy in such office may be filled for the
unexpired portion of the term in the same manner by the Board of Directors at
any regular or special meeting.
Section 3.5. REMOVAL. Any director may be removed from office only as
provided in the Certificate of Incorporation.
Section 3.6. VACANCIES AND ADDITIONAL DIRECTORSHIPS. Unless otherwise
provided in the Certificate, vacancies in the Board of Directors resulting from
death, resignation, disqualification, removal, increase in the number of
directorships as provided in Section 3.2 above or other cause shall be filled
solely by the affirmative vote of a majority of the remaining directors then in
office, even though less than a quorum of the Board of Directors. Any director
elected in accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified, or until such director's
earlier removal, death or resignation. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
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director. Unless otherwise provided in the Certificate, new members of the Board
of Directors shall be nominated by the Chairman of the Board and approved by the
Board of Directors.
Section 3.7. REGULAR AND SPECIAL MEETINGS. Regular meetings of the
Board of Directors may be held without notice at such time and at such place as
shall from time to time be determined by the board. Special meetings of the
board may be called by the Chairman of the Board, the Chief Executive Officer or
the President on twelve (12) hours' notice to each director by phone, fax or
electronic mail; special meetings shall be called by the Chairman of the Board,
the Chief Executive Officer, the President or the Secretary in like manner and
on like notice on the written request of a majority of the Board unless the
Board consists of only one director, in which case special meetings shall be
called by the Chairman of the Board, the Chief Executive Officer, the President
or Secretary in like manner and on like notice on the written request of the
sole director.
Section 3.8. QUORUM. At all meetings of the Board of Directors, a
majority of the fixed number of directors shall constitute a quorum for the
transaction of business, except that if the Board of Directors consists of one
(1) director, then the one director shall constitute a quorum.
In the absence of a quorum, the directors present, by majority vote and
without notice other than by announcement, may adjourn the meeting from time to
time until a quorum shall be present. At any reconvened meeting following such
an adjournment at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 3.9. VOTES REQUIRED. Except as otherwise provided by applicable
law or by the Certificate of Incorporation, the vote of a majority of the
directors present at a meeting duly held at which a quorum is present shall be
sufficient to pass any measure.
Section 3.10. PLACE AND CONDUCT OF MEETINGS.
Each regular meeting and special meeting of the Board of Directors
shall be held at a location determined as follows: The Board of Directors may
designate any place, within or without the State of Delaware, for the holding of
any meeting. If no such designation is made: (a) any meeting called by a
majority of the directors shall be held at such location, within the county of
the Corporation's principal executive office, as the directors calling the
meeting shall designate; and (b) any other meeting shall be held at such
location, within the county of the Corporation's principal executive office, as
the Chairman of the Board may designate or, in the absence of such designation,
at the Corporation's principal executive office. Subject to the requirements of
applicable law, all regular and special meetings of the Board of Directors shall
be conducted in accordance with such rules and procedures as the Board of
Directors may approve and, as to matters not governed by such rules and
procedures, as the chairman of such meeting shall determine. The chairman of any
regular or special meeting shall be the Chairman of the Board, or, in his
absence, a person designated by the Board of Directors. The Secretary, or, in
the absence of the Secretary, a person designated by the chairman of the
meeting, shall act as secretary of the meeting. Notwithstanding anything in this
Section 3.10 to the contrary, unless otherwise restricted by the Certificate or
these Bylaws, members of the Board of Directors, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
Section 3.11. FEES AND COMPENSATION. Directors shall be paid such
compensation as may be fixed from time to time by resolution of the Board of
Directors: (a) for their usual and contemplated services as directors; (b) for
their services as members of committees appointed by the
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Board of Directors, including attendance at committee meetings as well as
services which may be required when committee members must consult with
management staff; and (c) for extraordinary services as directors or as members
of committees appointed by the Board of Directors, over and above those services
for which compensation is fixed pursuant to items (a) and (b) in this Section
3.11. Compensation may be in the form of an annual retainer fee or a fee for
attendance at meetings, or both, or in such other form or on such basis as the
resolutions of the Board of Directors shall fix. Directors shall be reimbursed
for all reasonable expenses incurred by them in attending meetings of the Board
of Directors and committees appointed by the Board of Directors and in
performing compensable extraordinary services. Nothing contained herein shall be
construed to preclude any director from serving the Corporation in any other
capacity, such as an officer, agent, employee, consultant or otherwise, and
receiving compensation therefor.
Section 3.12. COMMITTEES OF THE BOARD OF DIRECTORS. To the full extent
permitted by applicable law, the Board of Directors may from time to time
establish committees, including, but not limited to, the committees set forth in
subsections (a) and (b) of this Section 3.12, standing or special committees and
an executive committee, which shall have such duties and powers as are
authorized by these Bylaws or by the Board of Directors. Committee members, and
the chairman of each committee, shall be appointed by the Board of Directors.
The Chairman of the Board, in conjunction with the several committee chairmen,
if any, shall make recommendations to the Board of Directors for its final
action concerning members to be appointed to the several committees of the Board
of Directors. Any member of any committee may be removed at any time with or
without cause by the Board of Directors. Vacancies which occur on any committee
shall be filled by a resolution of the Board of Directors. If any vacancy shall
occur in any committee by reason of death, resignation, disqualification,
removal or otherwise, the remaining members of such committee, so long as a
quorum is present, may continue to act until such vacancy is filled by the Board
of Directors. The provisions of Sections 3.7, 3.8, 3.9 and 3.10 of these Bylaws
shall apply to any such Committee of the Board of Directors.
(a) Audit Committee. The Audit Committee shall consist of at
least two non-employee directors appointed by a majority of the whole Board and
is authorized and directed to take all action necessary to safeguard corporate
assets, maintain proper accounting records, direct and monitor the internal
audit function, nominate an external auditor, and review the scope and quality
of the annual statutory audit. The Audit Committee shall present an annual
report to the Corporation's Board detailing any deficiencies or problems in the
financial reporting of the Corporation for the past fiscal year. The Audit
Committee shall also annually present to the Board a plan for the current fiscal
year which corrects any problem areas or deficiencies the Corporation discovered
during the prior fiscal year, details any planned amendments to the internal
audit function, and reviews the effectiveness of the external auditor. The Audit
Committee shall also perform any investigation or review of the financial
reporting of the Corporation that the Board instructs it to undertake from time
to time and upon completion of such investigation or review, deliver a report to
the Board detailing the Audit Committee's findings.
(b) Compensation Committee. The Compensation Committee shall
consist of at least two non-employee directors appointed by the whole Board and
is authorized and directed to take any and all action necessary to set
compensation for the Corporation's executive officers, to review officer
compensation plans and benefit programs, monitor and motivate officer
performance, and based on an annual review of executive compensation programs
and policies of the Corporation's competitors and select other companies who
compete in a labor market for the Corporation's officers, modify or adjust the
officer compensation or benefit plans so as to retain and attract the leadership
talent necessary to successfully maintain and grow the Corporation's business.
In connection with its duties and obligations, the Compensation Committee shall
receive recommendations from the Corporation's Chief Executive Officer
concerning the Corporation's executive officers (other than the Chief Executive
Officer) and may also regularly solicit compensation program design/practice
data from various compensation consultants.
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The Compensation Committee may use this information and any other information it
gathers when it establishes compensation for Corporation's executive officers.
Unless the Board of Directors establishes a separate committee to govern the
administration of the Corporation's stock incentive plans, the Compensation
Committee shall govern the foregoing activities.
ARTICLE IV.
OFFICERS
Section 4.1. DESIGNATION, ELECTION AND TERM OF OFFICE. The Corporation
shall have a Chairman of the Board, a Chief Executive Officer, a President, a
Treasurer, such Executive Vice Presidents as the Board of Directors deems
appropriate, a Secretary and such other officers as the Board of Directors may
deem appropriate. These officers shall be elected annually by the Board of
Directors at the organizational meeting immediately following the annual meeting
of stockholders, and each such officer shall hold office until the corresponding
meeting of the Board of Directors in the next year and until his successor shall
have been elected and qualified or until his earlier resignation, death or
removal. Any vacancy in any of the above offices may be filled for the unexpired
portion of the term by the Board of Directors at any regular or special meeting.
Section 4.2. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors shall preside at all meetings of the stockholders and the
Board of Directors and shall have such other powers and perform such other
duties as may from time to time be assigned by the Board. Unless otherwise
determined by the Board of Directors, the Chairman shall be the Chief Executive
Officer of the Corporation.
Section 4.3. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall
see that all orders and resolutions of the Board of Directors are carried into
effect, shall have the power to appoint, set compensation for and remove such
vice presidents, subordinate officers and agents as the business of the
Corporation may require, other than those actually appointed or elected by the
directors, shall have general management of the business of the Corporation, and
shall perform all other duties incident to the office of Chief Executive Officer
and shall have such other powers and perform such other duties as may from time
to time be assigned by the Board.
Section 4.4. PRESIDENT. The President shall be the chief operating
officer of the Corporation. Such individual shall be responsible for the active
management of the business of the Corporation, shall perform such other duties
incident to the office of Chief Executive Officer, and shall have such other
powers and perform such other duties as may from time to time be assigned by the
Chief Executive Officer or the Board. The President shall, in the absence of the
Chief Executive Officer, serve with the power and authority of that office until
such time as the Chief Executive Officer returns to his duties.
Section 4.5. SECRETARY. The Secretary shall attend the meetings of the
shareholders and the Board of Directors and keep minutes of those meetings in
suitable books kept for that purpose. Such individual shall have custody of the
stock books and stock ledgers of the Corporation, shall give, or cause to be
given, all notices as are required by law, or by the Certificate of
Incorporation, or by these Bylaws. The Secretary shall perform such other duties
as may be prescribed by the Board of Directors or by the Chief Executive
Officer, as well as the usual duties incident to the office of Secretary. Any
duty of the Secretary may be performed by the Assistant Secretary elected by the
Board.
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Section 4.6. TREASURER. The Treasurer shall be the chief financial
officer of the Corporation and shall have custody of the corporate funds and
securities and shall keep, or cause to be kept, full and accurate accounts of
receipts and disbursements in books kept for that purpose. He shall deposit all
monies, and other valuable effects, in the name and to the credit of the
Corporation, in such depository as the Board of Directors or Chief Executive
Officer shall designate. As directed by the Board of Directors or the Chief
Executive Officer, the Treasurer shall disburse monies of the Corporation,
taking proper vouchers for such disbursements and shall render to the Chief
Executive Officer and the Board of Directors an account of all his transactions
as Treasurer and of the financial condition of the Corporation. In addition, the
Treasurer shall perform all the usual duties incident to the office of
Treasurer. Any duty of the Treasurer may be performed by the Assistant Treasurer
elected by the Board.
Section 4.7. ASSISTANT OFFICERS. The Chief Executive Officer may
appoint one or more assistant secretaries and such other assistant officers as
the business of the Corporation may require, each of whom shall hold office for
such period, have such authority and perform such duties as may be specified
from time to time by the Chief Executive Officer.
Section 4.8. WHEN DUTIES OF AN OFFICER MAY BE DELEGATED. In the case of
absence or disability of an officer of the Corporation or for any other reason
that may seem sufficient to the Board of Directors, the Board of Directors or
any officer designated by it, or the Chairman, may, for the time of the absence
or disability, delegate such officer's duties and powers to any other officer of
the Corporation.
Section 4.9. OFFICERS HOLDING TWO OR MORE OFFICES. The same person may
hold any two (2) or more of the above-mentioned offices.
Section 4.10. COMPENSATION. The Board of Directors shall have the power
to fix the compensation of all officers and employees of the Corporation.
Section 4.11. RESIGNATIONS. Any officer may resign at any time by
giving written notice to the Board of Directors, to the Chief Executive Officer,
or to the Secretary of the Corporation. Any such resignation shall take effect
at the time specified therein unless otherwise determined by the Board of
Directors. The acceptance of a resignation by the Corporation shall not be
necessary to make it effective.
Section 4.12. REMOVAL. Any officer of the Corporation may be removed,
with or without cause, by the affirmative vote of a majority of the entire Board
of Directors. Any assistant officer of the Corporation may be removed, with or
without cause, by the Chief Executive Officer or by the Board of Directors.
ARTICLE V.
NOTICES
Section 5.1. NO PERSONAL NOTICE REQUIREMENT. Whenever, under the
provisions of the Delaware General Corporation Law, the Certificate or these
Bylaws, notice is required to be given to any director or stockholder, it shall
not be construed to mean personal notice (except as provided in Article III,
Section 3.7 (as it relates to special meetings of the Board of Directors only)),
but such notice may be given in writing, by mail, addressed to such director or
stockholder, at his address as it appears on the records of the Corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telephone, telegram or facsimile.
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Section 5.2. WAIVER OF NOTICE. Whenever any notice is required to be
given under the provisions of the Delaware General Corporation Law, or the
Certificate or these Bylaws, a waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE VI.
INDEMNIFICATION OF DIRECTORS, OFFICERS
EMPLOYEES AND OTHER CORPORATE AGENTS
Section 6.1. INDEMNIFICATION. The Corporation shall, subject to the
terms of the Certificate and to the fullest extent authorized under the laws of
the State of Delaware, as those laws may be amended and supplemented from time
to time, indemnify any director or officer made, or threatened to be made, a
party to an action or proceeding, whether criminal, civil, administrative or
investigative, by reason of being a director or officer of the Corporation or a
predecessor corporation or, at the Corporation's request, a director or officer
of another corporation. The Indemnification provided for in this Article VI
shall: (i) not be deemed exclusive of any other rights to which those
indemnified may be entitled under any Bylaw, agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in their official
capacities and as to action in another capacity while holding such office, (ii)
continue as to a person who has ceased to be a director or officer, and (iii)
inure to the benefit of the heirs, executors and administrators of such a
person. The Corporation's obligation to provide indemnification under this
Article VI shall be offset to the extent of any other source of indemnification
or any otherwise applicable insurance coverage under a policy maintained by the
Corporation or any other person.
Expenses incurred by a director or officer of the Corporation in
defending a civil or criminal action, suit or proceeding by reason of the fact
that he is or was a director or officer of the Corporation (or was serving at
the Corporation's request as a director or officer of another corporation) shall
be paid by the Corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation as authorized by
relevant sections of the Delaware General Corporation Law. Notwithstanding the
foregoing, the Corporation shall not be required to advance such expenses to a
director or officer who is a party to an action, suit or proceeding brought by
the Corporation and approved by a majority of the Board of Directors of the
Corporation which alleges willful misappropriation of corporate assets by such
director or officer, disclosure of confidential information in violation of the
fiduciary or contractual obligations of such director or officer to the
Corporation, or any other willful and deliberate breach in bad faith of such
duty of the director or officer to the Corporation or its stockholders.
The foregoing provisions of this Article VI shall be deemed to be a
contract between the Corporation and each director or officer who serves in such
capacity at any time while this Bylaw is in effect, and any repeal or
modification hereof shall not affect any rights or obligations then existing
with respect to any state of facts then or theretofore existing or any action,
suit or proceeding theretofore or thereafter brought based in whole or in part
upon any such state of facts.
The Board of Directors in its discretion shall have power on behalf of
the Corporation to indemnify any person, other than a director or officer, made
a party to any action, suit or proceeding by reason of the fact that he, his
testator or intestate, is or was an employee or agent of the Corporation.
To assure indemnification under this Article VI of all directors,
officers, employees and agents who are determined by the Corporation or
otherwise to be or to have been "fiduciaries" of any employee benefit plan of
the Corporation which may exist from time to time, Section 145 of the General
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Corporation Law of Delaware shall, for the purposes of this Article VI, be
interpreted as follows: an "other enterprise" shall be deemed to include such an
employee benefit plan, including without limitation, any plan of the Corporation
which is governed by the Act of Congress entitled "Employee Retirement Income
Security Act of 1974," as amended from time to time; the Corporation shall be
deemed to have requested a person to serve an employee benefit plan where the
performance by such person of his duties to the Corporation also imposes duties
on, or otherwise involves services by, such person to the plan or participants
or beneficiaries of the plan; and excise taxes assessed on a person with respect
to an employee benefit plan pursuant to such Act of Congress shall be deemed
"fines."
Section 6.2. INSURANCE. Upon resolution passed by the Board of
Directors, the Corporation may purchase and maintain insurance on behalf of any
person who is or was an Agent against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article VI.
Section 6.3. SAVINGS CLAUSE.
If this Article VI or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each director, officer, employee and agent described in
this Article VI as to expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, and whether internal
or external, including a grand jury proceeding and an action or suit brought by
or in the right of the Corporation, to the full extent permitted by any
applicable portion of this Article VI that shall not have been invalidated, or
by any other applicable law.
ARTICLE VII.
STOCK
Section 7.1. CERTIFICATES. Except as otherwise provided by law, each
stockholder shall be entitled to a certificate or certificates which shall
represent and certify the number and class (and series, if appropriate) of
shares of stock owned by him in the Corporation. Each certificate shall be
signed in the name of the Corporation by the Chairman of the Board or a
Vice-Chairman of the Board or the Chief Executive Officer, the President or a
Vice President, together with the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary. Any or all of the signatures on any
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
Section 7.2. TRANSFER OF SHARES. Shares of stock shall be transferable
on the books of the Corporation only by the holder thereof, in person or by his
duly authorized attorney, upon the surrender of the certificate representing the
shares to be transferred, properly endorsed, to the Corporation's transfer
agent, if the Corporation has a transfer agent, or to the Corporation's
registrar, if the Corporation has a registrar, or to the Secretary, if the
Corporation has neither a transfer agent nor a registrar. The Board of Directors
shall have power and authority to make such other rules and regulations
concerning the issue, transfer and registration of certificates of the
Corporation's stock as it may deem expedient.
Section 7.3. TRANSFER AGENTS AND REGISTRARS. The Corporation may have
one or more transfer agents and one or more registrars of its stock whose
respective duties the Board of Directors
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or the Secretary may, from time to time, define. No certificate of stock shall
be valid until countersigned by a transfer agent, if the Corporation has a
transfer agent, or until registered by a registrar, if the Corporation has a
registrar. The duties of transfer agent and registrar may be combined.
Section 7.4. STOCK LEDGERS. Original or duplicate stock ledgers,
containing the names and addresses of the stockholders of the Corporation and
the number of shares of each class of stock held by them, shall be kept at the
principal executive office of the Corporation or at the office of its transfer
agent or registrar.
Section 7.5. RECORD DATES. The Board of Directors may fix, in advance,
a date as the record date for the purpose of determining stockholders entitled
to notice of, or to vote at, any meeting of stockholders or any adjournment
thereof, or stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or in order to make a
determination of stockholders for any other proper purpose. Such date in any
case shall be not more than sixty (60) days, and in case of a meeting of
stockholders, not less than ten (10) days, prior to the date on which the
particular action requiring such determination of stockholders is to be taken.
Only those stockholders of record on the date so fixed shall be entitled to any
of the foregoing rights, notwithstanding the transfer of any such stock on the
books of the Corporation after any such record date fixed by the Board of
Directors.
Section 7.6. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his or her legal representative, to advertise the same in such
manner as it shall require and/or to give the Corporation a bond in such sum as
it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 7.7. REGISTERED STOCKHOLDERS. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE VIII.
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.
ARTICLE IX.
SEAL
The Board of Directors may adopt a corporate seal having inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware." The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
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ARTICLE X.
AMENDMENT
These Bylaws may be altered, amended or repealed or new bylaws may be
adopted by the affirmative vote of holders of at least 66 2/3% vote of the
outstanding voting stock of the Corporation. These Bylaws may also be altered,
amended or repealed or new bylaws may be adopted by the Board of Directors, when
such power is conferred upon the Board of Directors by the Certificate of
Incorporation. The foregoing may occur at any regular meeting of the
stockholders or of the Board of Directors or at any special meeting of the
stockholders or of the Board of Directors if notice of such alteration,
amendment, repeal or adoption of new bylaws be contained in the notice of such
special meeting. If the power to adopt, amend or repeal bylaws is conferred upon
the Board of Directors by the Certificate of Incorporation, it shall not divest
or limit the power of the stockholders to adopt, amend or repeal bylaws.
-12-
<PAGE> 1
EXHIBIT 4.2
<TABLE>
<S> <C> <C>
[BLUE BORDER DESIGN]
[FRONT OF CERTIFICATE]
NUMBER [DALEEN LOGO] SHARES
DALN DALEEN TECHNOLOGIES, INC.
COMMON STOCK SEE REVERSE FOR
$0.01 PAR VALUE INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
CUSIP 23427N 10-4
</TABLE>
THIS CERTIFIES THAT __________________________________________________[SPECIMEN]
IS THE OWNER OF ________________________________________________________________
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
DALEEN TECHNOLOGIES, INC.
transferable on the books of the Corporation in person or by duly authorized
attorney, upon the surrender of this certificate properly endorsed. This
certificate is not valid unless countersigned by the Transfer Agent and
registered by the Registrar.
Witness the facsimile signatures of its duly authorized officers and
facsimile of its corporate seal.
Dated:
<TABLE>
<S> <C> <C>
/s/ Stephen M. Wagman [DALEEN TECHNOLOGIES, INC. /s/ James Daleen
- ---------------------------- CORPORATE SEAL ------------------------------------
Secretary DELAWARE] Chairman and Chief Executive Officer
</TABLE>
COUNTERSIGNED AND REGISTERED:
SUNTRUST BANK, ATLANTA
TRANSFER AGENT AND REGISTRAR
BY
------------------------------
AUTHORIZED SIGNATURE
<PAGE> 2
[BACK OF CERTIFICATE]
DALEEN TECHNOLOGIES, INC.
The Corporation will furnish without charge to each shareholder who so
requests a statement or summary or summary of the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof which the Corporation is authorized to
issue and of the qualifications, limitations or restrictions of such preferences
and/or rights. Such request may be made to the office of the Secretary of the
Corporation or the Transfer Agent named on the face of this Certificate.
The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT -
_________ Custodian
TEN ENT - as tenants by the entireties (Cust)
(Minor)
JT TEN - as joint tenants with the right under the Uniform Gifts to
of survivorship and not as Minors Act ________________
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, ______________________________________________ hereby sell,
assign and transfer unto ______________[PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE]
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------- Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ---------------------------------------------
Attorney to transfer the said stock on the books of the within named Corporation
with the full power of substitution in the premises.
Dated
----------------- ---- --------------------------------------------
- -------------- NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:
--------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
-2-
<PAGE> 1
Exhibit 10.11
DALEEN TECHNOLOGIES, INC.
AMENDED & RESTATED
STOCK INCENTIVE PLAN
SECTION 1.
PURPOSE
The purpose of this Plan is to promote the interests of the Company by
providing the opportunity to purchase Shares or to receive compensation which is
based upon appreciation in the value of Shares to Employees and Key Persons in
order to attract and retain Employees and Key Persons by providing an incentive
to work to increase the value of Shares and a stake in the future of the Company
which corresponds to the stake of each of the Company's shareholders. The Plan
provides for the grant of Incentive Stock Options, Non-Qualified Stock Options,
Restricted Stock Awards and Stock Appreciation Rights to aid the Company in
obtaining these goals. This amended and restated plan supercedes and replaces in
its entirety the Daleen Technologies, Inc. Stock Incentive Plan previously
adopted by the Board.
SECTION 2.
DEFINITIONS
Each term set forth in this Section shall have the meaning set forth
opposite such term for purposes of this Plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular, and reference to one gender shall include the other gender.
2.1 BOARD means the Board of Directors of the Company.
2.2 CODE means the Internal Revenue Code of 1986, as amended.
2.3 COMMITTEE means the Compensation Committee of the Board.
2.4 COMMON STOCK means the common stock of the Company having a
par value of $0.01 per share.
2.5 COMPANY means Daleen Technologies, Inc., a Delaware
corporation, and any successor to such organization.
2.6 EMPLOYEE means an employee of the Company, a Subsidiary or a
Parent.
2.7 EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.
2.8 EXERCISE PRICE means the price which shall be paid to purchase
one (1) Share upon the exercise of an Option granted under this Plan.
2.9 FAIR MARKET VALUE of each Share as of a date of determination
shall mean the following:
(a) Stock Listed and Shares Traded. If Shares are listed
and traded on a national securities exchange (as such term is defined by the
1934 Act) or on The Nasdaq National Market on the date of determination, the
Fair Market Value per share shall be the closing price of a Share on said
national securities exchange or The Nasdaq National Market on the date of
determination. If
<PAGE> 2
the Shares are traded in the over-the-counter market, the Fair Market Value
per Share shall be the average of the closing bid and asked prices on the date
of determination.
(b) Stock Listed But No Shares Traded. If the Shares are
listed on a national securities exchange or on The Nasdaq National Market but no
Shares are traded on the date of determination but there were shares traded on
dates within a reasonable period before the date of determination, the Fair
Market Value shall be the closing price of the Shares on the most recent date
before the date of determination. If
the Shares are regularly traded in the over-the-counter market but no Shares are
traded on the date of determination (or if records of such trades are
unavailable or burdensome to obtain) but there were Shares traded on dated with
a reasonable period before the date of determination the Fair Market Value shall
be the average of the closing bid and asked prices of the Common Stock on the
most recent date before the date of determination.
(c) Stock Not Listed. If the Shares are not listed on a
national securities exchange or The Nasdaq National Market and are not regularly
traded in the over-the-counter market, then the Committee shall determine the
Fair Market Value of the Shares from all relevant available facts, which may
include the average of the closing bid and ask prices reflected in the
over-the-counter market on a date within a reasonable period either before or
after the date of determination or opinions of independent experts as to value
and may take into account any recent sales and purchases of such Shares to the
extent they are representative.
The Committee's determination of Fair Market Value, which shall be made pursuant
to the foregoing provisions, shall be final and binding for all purposes of this
Plan.
2.10 ISO means an option granted under this Plan to purchase Shares
which is intended by the Company to satisfy the requirements of Code ss.422 as
an incentive stock option.
2.11 KEY PERSON means (i) a member of the Board who is not an
Employee, (ii) a consultant, distributor or other person who has rendered
valuable services to the Company, a Subsidiary or a Parent, (iii) a person who
has incurred, or is willing to incur, financial risk in the form of guaranteeing
or acting as co-obligor with respect to debts or other obligations of the
Company, or (iv) a person who has extended credit to the Company. Key Persons
are not limited to individuals and, subject to the preceding definition, may
include corporations, partnerships, associations and other entities.
2.12 NON-EMPLOYEE DIRECTOR means a director who (a) is not
currently an officer of the Company or any parent or subsidiary of the Company
(any of the foregoing, a "Company Entity"), or otherwise currently employed by
any Company Entity; (b) does not receive compensation directly or indirectly
from any Company Entity except in such person's capacity as a director or that
would require disclosure under Regulation S-K promulgated by the Securities and
Exchange Commission ("Regulation S-K"); and (c) does not possess an interest in
any Company transaction and is not engaged in any business relationship that
would be required to be disclosed under Regulation S-K.
2.13 NON-ISO means an option granted under this Plan to purchase
Shares which is not intended by the Company to satisfy the requirements of Code
ss.422.
2.14 OPTION means an ISO or a Non-ISO.
2.15 OUTSIDE DIRECTOR means a director who (a) is not a current
employee of the Company; (b) is not a former employee of the Company who
receives compensation for prior services (other than benefits under a
tax-qualified retirement plan) during the taxable year; (c) has
Daleen Technologies, Inc. Amended & Restated Stock Incentive Plan
Page 2 of 11
<PAGE> 3
not been an officer of the Company; and (d) does not receive remuneration from
the Company, either directly or indirectly, in any capacity other than as a
director. The determination of whether an individual is an Outside Director
shall be made in accordance with Treas. Reg. ss.1.162-27(e)(3).
2.16 PARENT means any corporation which is a parent of the Company
(within the meaning of Code ss.424).
2.17 PARTICIPANT means an individual who receives a Stock Incentive
hereunder.
2.18 PLAN means the Daleen Technologies, Inc. Amended & Restated
Stock Incentive Plan, as amended from time to time. This Plan amends and
restates the prior Daleen Technologies, Inc. Stock Incentive Plan.
2.19 SHARE means a share of the Common Stock of the Company.
2.20 STOCK INCENTIVE means an ISO, a Non-ISO, a Restricted Stock
Award or a Stock Appreciation Right.
2.21 STOCK INCENTIVE AGREEMENT means an agreement between the
Company and a Participant evidencing an award of a Stock Incentive.
2.22 SUBSIDIARY means any corporation which is a subsidiary of the
Company (within the meaning of Code ss.424(f)).
2.23 SURRENDERED SHARES means the Shares described in Section 8.2
which (in lieu of being purchased) are surrendered for cash or Shares, or for a
combination of cash and Shares, in accordance with Section 8.
2.24 TEN PERCENT SHAREHOLDER means a person who owns (after taking
into account the attribution rules of Code ss.424(d)) more than ten percent
(10%) of the total combined voting power of all classes of shares of either the
Company, a Subsidiary or a Parent.
SECTION 3.
SHARES SUBJECT TO STOCK INCENTIVES
The total number of Shares that may be issued pursuant to Stock
Incentives under this Plan shall not exceed the sum of (i) 1,348,881 (one
million three-hundred and forty eight thousand eight hundred and eighty one)
Shares plus (ii) an annual amount for each fiscal year beginning with the fiscal
year that begins during the calendar year 2000 such that the total number of
Shares reserved for issuance under this Plan will be equal to the sum of (A) the
aggregate number of shares previously issued under this Plan; (B) the aggregate
number of Shares subject to outstanding options granted under this Plan; and (C)
5% of the aggregate number of Shares outstanding on the last day of the
preceding fiscal year; provided, however, in no event shall the increase in the
number of Shares from one fiscal year to the next exceed 800,000; all as further
adjusted pursuant to Section 11. Such Shares shall be reserved, to the extent
that the Company deems appropriate, from authorized but unissued Shares, and
from Shares which have been reacquired by the Company. Furthermore, any Shares
subject to a Stock Incentive which remain after the cancellation, expiration,
forfeiture or exchange of such Stock Incentive thereafter shall again become
available for use under this Plan, but any Surrendered Shares which remain after
the surrender of an ISO or a Non-ISO under Section 8 shall not again become
available for use under this Plan.
Daleen Technologies, Inc. Amended & Restated Stock Incentive Plan
Page 3 of 11
<PAGE> 4
SECTION 4.
EFFECTIVE DATE
The effective date of this amended and restated Plan shall be the date
it is adopted by the Board, provided the shareholders of the Company approve
this Plan within twelve (12) months after such effective date. If such effective
date comes before such shareholder approval, any Stock Incentives granted under
this Plan before the date of such approval automatically shall be granted
subject to such approval.
SECTION 5.
ADMINISTRATION
This Plan shall be administered by the Board. The Board, acting in its
absolute discretion, shall exercise such powers and take such action as
expressly called for under this Plan. The Board shall have the power to
interpret this Plan and, subject to Section 13 to take such other action in the
administration and operation of the Plan as it deems equitable under the
circumstances. The Board's actions shall be binding on the Company, on each
affected Employee or Key Person, and on each other person directly or indirectly
affected by such actions.
The Board may delegate its authority under the Plan, in whole or in
part, to a Committee appointed by the Board consisting solely of two (2) or more
individuals who are Non-Employee Directors and also Outside Directors. The
Committee (if appointed) shall act according to the policies and procedures set
forth in the Plan and to those policies and procedures established by the Board,
and the Committee shall have such powers and responsibilities as are set forth
by the Board. Reference to the Board in this Plan shall specifically include
reference to the Committee where the Board has delegated it authority to the
Committee, and any action by the Committee pursuant to a delegation of authority
by the Board shall be deemed an action by the Board under the Plan.
Notwithstanding the above, the Board may assume the powers and responsibilities
granted to the Committee at any time, in whole or in part.
SECTION 6.
ELIGIBILITY
Employees and Key Persons selected by the Committee shall be eligible
for the grant of Stock Incentives under this Plan, but no Employee or Key Person
shall have the right to be granted a Stock Incentive under this Plan merely as a
result of his or her status as an Employee or Key Person. Only Employees shall
be eligible for the grant of ISOs. Key Persons may be eligible for the grant of
Stock Incentives other than ISOs under this Plan only if the Key Person has
provided valuable services to the Company, a Subsidiary or a Parent, and the
Board gives written approval of the grant of any Stock Incentive made to the Key
Person. The total number of Shares with respect to which Stock Incentives under
this Plan may be granted to any one person in a given calendar year shall not
exceed 250,000 Shares.
SECTION 7.
TERMS OF STOCK INCENTIVES
7.1 TERMS AND CONDITIONS OF ALL STOCK INCENTIVES.
(a) The Committee, in its absolute discretion, shall
grant Stock Incentives under this Plan from time to time and shall have the
right to grant new Stock Incentives in exchange for
Daleen Technologies, Inc. Amended & Restated Stock Incentive Plan
Page 4 of 11
<PAGE> 5
outstanding Stock Incentives. Stock Incentives shall be granted to Employees or
Key Persons selected by the Committee, subject to Section 6, and the Committee
shall be under no obligation whatsoever to grant Stock Incentives to all
Employees or Key Persons, or to grant all Stock Incentives subject to the same
terms and conditions.
(b) The number of Shares as to which a Stock Incentive
shall be granted and the vesting schedule applicable thereto shall be determined
by the Committee in its sole discretion, subject to the provisions of Section 3
as to the total number of shares available for grants under the Plan.
(c) Each Stock Incentive shall be evidenced by a Stock
Incentive Agreement executed by the Company and the Participant, which shall be
in such form and contain such terms and conditions as the Committee in its
discretion may, subject to the provisions of the Plan, from time to time
determine.
(d) The date a Stock Incentive is granted shall be the
date on which the Committee has approved the terms and conditions of the Stock
Incentive Agreement and has determined the recipient of the Stock Incentive and
the number of Shares covered by the Stock Incentive and has taken all such other
action necessary to complete the grant of the Stock Incentive. Such date shall
be reflected in the Stock Incentive Agreement and shall be final and conclusive
on all parties.
7.2 TERMS AND CONDITIONS OF OPTIONS. Each grant of an Option shall
be evidenced by a Stock Incentive Agreement which shall (1) specify whether the
Option is an ISO or Non-ISO; and (2) incorporate such other terms and conditions
as the Committee, acting in its absolute discretion, deems consistent with the
terms of this Plan, including (without limitation) a restriction on the number
of Shares subject to the Option which first become exercisable or subject to
surrender during any calendar year and any restrictions on the Shares which may
be purchased thereunder which the Committee deems appropriate or necessary.
In determining Employee(s) or Key Person(s) to whom an Option
shall be granted and the number of Shares to be covered by such Option, the
Committee may take into account the recommendations of the Chief Executive
Officer of the Company and its other officers, the duties of the Employee or Key
Person, the present and potential contributions of the Employee or Key Person to
the success of the Company, the anticipated number of years of service remaining
before the attainment by the Employee of retirement age, and other factors
deemed relevant by the Committee, in its sole discretion, in connection with
accomplishing the purpose of this Plan. An Employee or Key Person who has been
granted an Option to purchase Shares, whether under this Plan or otherwise, may
be granted one or more additional Options.
If the Committee grants an ISO and a Non-ISO to an Employee on
the same date, the right of the Employee to exercise or surrender one such
Option shall not be conditioned on his or her failure to exercise or surrender
the other such Option.
(a) Exercise Price. Subject to adjustment in accordance
with Section 11 and the other provisions of this Section, the Exercise Price
shall be as set forth in the applicable Stock Incentive Agreement. With respect
to each grant of an ISO to a Participant who is not a Ten Percent Shareholder,
the Exercise Price shall not be less than the Fair Market Value on the date the
ISO is granted. With respect to each grant of an ISO to a Participant who is a
Ten Percent Shareholder, a Ten Percent Shareholder shall not be less than one
hundred ten percent (110%) of the Fair Market Value on the date the ISO is
granted. If a Stock Incentive is a Non-ISO, the
Daleen Technologies, Inc. Amended & Restated Stock Incentive Plan
Page 5 of 11
<PAGE> 6
Exercise Price for each Share shall be no less than the minimum price required
by applicable state law, or by the Company's governing instrument, or $0.01,
whichever price is greater.
(b) Option Term. Each Option granted under this Plan
shall be exercisable in whole or in part at such time or times as set forth in
the related Stock Incentive Agreement, but no Stock Incentive Agreement shall:
(i) make an Option exercisable before the date
such Option is granted; or
(ii) make an Option exercisable after the earlier
of:
(A) the date such Option is exercised
in full, or
(B) the date which is the tenth (10th)
anniversary of the date such Option is granted, if such Option is a Non-ISO or
an ISO granted to a non-Ten Percent Shareholder, or the date which is the fifth
(5th) anniversary of the date such Option is granted, if such Option is an ISO
granted to a Ten Percent Shareholder.
A Stock Incentive Agreement may provide for the exercise of an
Option after the employment of an Employee has terminated for any reason
whatsoever, including death or disability; however, in no event shall a Stock
Incentive Agreement provide for the exercise of an Option later than ninety (90)
days following a termination for employment, and in no event shall a Stock
Incentive Agreement provide for the exercise of an Option after the date of
termination of employment if such termination of employment was for "cause." For
purposes of the preceding sentence, the term "cause" shall mean any act or acts
by an Employee involving personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties or willful violation of any law, rule, regulation or
Company policy, and shall also mean, with respect to any Employee whose
employment is pursuant to a written contract with the Company which contains
provisions regarding "cause" or similar provisions, the definition stated in
such provisions, all as determined by the Committee in its sole and absolute
discretion.
(c) Payment. Payment for all shares of Stock purchased
pursuant to exercise of an Option shall be made in cash or, if the Stock
Incentive Agreement provides, by delivery to the Company of a number of Shares
which have been owned by the holder for at least six (6) months prior to the
date of exercise having an aggregate Fair Market Value of not less than the
product of the Exercise Price multiplied by the number of Shares the Participant
intends to purchase upon exercise of the Option on the date of delivery. In
addition, the Stock Incentive Agreement may provide for cashless exercise
through a brokerage transaction following registration of the Company's equity
securities under Section 12 of the Securities Exchange Act of 1934. Except as
provided in subparagraph (f) below, payment shall be made at the time that the
Option or any part thereof is exercised, and no Shares shall be issued or
delivered upon exercise of an Option until full payment has been made by the
Participant. The holder of an Option, as such, shall have none of the rights of
a stockholder.
Notwithstanding the above, and in the sole discretion of the
Committee, an Option may be exercised as to a portion or all (as determined by
the Committee) of the number of Shares specified in the Stock Incentive
Agreement by delivery to the Company of a promissory note, such promissory note
to be executed by the Participant and which shall include, with such other terms
and conditions as the Committee shall determine, provisions in a form approved
by the Committee under which: (i) the balance of the aggregate purchase price
shall be payable in equal installments
Daleen Technologies, Inc. Amended & Restated Stock Incentive Plan
Page 6 of 11
<PAGE> 7
over such period and shall bear interest at such rate (which shall not be less
than the prime bank loan rate as determined by the Committee) as the Committee
shall approve, and (ii) the Participant shall be personally liable for payment
of the unpaid principal balance and all accrued but unpaid interest.
(d) Conditions to Exercise of an Option. Each Option
granted under the Plan shall be exercisable at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Committee shall
specify in the Stock Incentive Agreement; provided, however, that subsequent to
the grant of an Option, the Committee, at any time before complete termination
of such Option, may accelerate the time or times at which such Option may be
exercised in whole or in part.
(e) Nontransferability of Options. Except as provided in
subparagraph (f) below, (i) an Option other than an ISO shall not be
transferable or assignable (1) except by will or by the laws of descent and
distribution, (2) except to the extent that the Committee gives its express
written consent to the transfer, or (3) except to the extent that the Option is
transferred to a spouse, lineal ascendant or lineal descendant of the
Participant, or to a trust whose sole beneficiaries are the Participant and/or
his or her spouse, lineal ascendant or lineal descendant, (ii) an Option which
is an ISO shall not be transferable or assignable except by will or by the laws
of descent and distribution, and (iii) an Option shall be exercisable during the
Participant's lifetime only by the Participant, or in the event of the
disability of the Participant, by the legal representative of the Participant.
(f) Special Provisions for Certain Substitute Options.
Notwithstanding anything to the contrary in this Section, any Option in
substitution for a stock option previously issued by another entity, which
substitution occurs in connection with a transaction to which Code ss.424(a) is
applicable, may provide for an exercise price computed in accordance with such
Code section and the regulations thereunder and may contain such other terms and
conditions as the Committee may prescribe to cause such substitute Option to
contain as nearly as possible the same terms and conditions (including the
applicable vesting and termination provisions) as those contained in the
previously issued stock option being replaced thereby.
7.3 TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS. A Stock
Appreciation Right may be granted in connection with all or any portion of a
previously or contemporaneously granted Option or not in connection with an
Option. A Stock Appreciation Right shall entitle the Participant to receive upon
exercise or payment the excess of: (I) the Fair Market Value of a specified
number of Shares at the time of exercise, over (II) a specified price which
shall be not less than the Exercise Price for that number of Shares in the case
of a Stock Appreciation Right granted in connection with a previously or
contemporaneously granted Option, or in the case of any other Stock Appreciation
Right not less than one hundred percent (100%) of the Fair Market Value of that
number of Shares at the time the Stock Appreciation Right was granted. A Stock
Appreciation Right granted in connection with an Option may only be exercised to
the extent that the related Option has not been exercised. The exercise of a
Stock Appreciation Right shall result in a pro rata surrender of the related
Option to the extent the Stock Appreciation Right has been exercised.
(a) Payment. Upon exercise or payment of a Stock
Appreciation Right, the Company shall pay to the Participant the appreciation in
cash or Shares (at the aggregate Fair Market Value on the date of payment or
exercise) as provided in the Stock Incentive Agreement or, in the absence of
such provision, as the Committee may determine.
(b) Conditions to Exercise. Each Stock Appreciation Right
granted under the Plan shall be exercisable at such time or times, or upon the
occurrence of such event or events, and
Daleen Technologies, Inc. Amended & Restated Stock Incentive Plan
Page 7 of 11
<PAGE> 8
in such amounts, as the Committee shall specify in the Stock Incentive
Agreement; provided, however, that subsequent to the grant of a Stock
Appreciation Right, the Committee, at any time before complete termination of
such Stock Appreciation Right, may accelerate the time or times at which such
Stock Appreciation Right may be exercised in whole or in part; provided,
however, in no event shall a Stock Incentive Agreement provide for the exercise
of a Stock Appreciation Right later than ninety (90) days following a
termination for employment, and in no event shall a Stock Incentive Agreement
provide for the exercise of a Stock Appreciation Right after the date of
termination of employment if such termination of employment was for "cause." For
purposes of the preceding sentence, the term "cause" shall mean any act or acts
by an Employee involving personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties or willful violation of any law, rule, regulation or
Company polity, and shall also mean, with respect to any Employee whose
employment is pursuant to a written contract with the Company which contains
provisions regarding "cause" or similar provisions, the definition stated in
such provisions, all as determined by the Committee in its sole and absolute
discretion
(c) Nontransferability of Stock Appreciation Right. A
Stock Appreciation Right shall not be transferable or assignable (1) except by
will or by the laws of descent and distribution, (2) except to the extent that
the Committee gives its express written consent to the transfer, or (3) except
to the extent that the Stock Appreciation Right is transferred to a spouse,
lineal ascendant or lineal descendant of the Participant, or to a trust whose
sole beneficiaries are the Participant and/or his or her spouse, lineal
ascendant or lineal descendant, and a Stock Appreciation Right shall be
exercisable during the Participant's lifetime only by the Participant, or in the
event of the disability of the Participant, by the legal representative of the
Participant.
7.4 TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS. Shares
awarded pursuant to Restricted Stock Awards shall be subject to restrictions for
periods determined by the Committee. The Committee shall have the power to
permit, in its discretion, an acceleration of the expiration of the applicable
restriction period with respect to any part or all of the Shares awarded to a
Participant. The Committee may require a cash payment from the Participant in an
amount no greater than the aggregate Fair Market Value of the Shares awarded
determined at the date of grant in exchange for the grant of a Restricted Stock
Award or may grant a Restricted Stock Award without the requirement of a cash
payment.
SECTION 8.
SURRENDER OF OPTIONS
8.1 GENERAL RULE. The Committee, acting in its absolute
discretion, may incorporate a provision in a Stock Incentive Agreement to allow
an Employee or Key Person to surrender his or Option in whole or in part in lieu
of the exercise in whole or in part of that Option on any date that:
(a) the Fair Market Value of the Shares subject to such
Option exceeds Exercise Price for such Shares, and
(b) the Option to purchase such Shares is otherwise
exercisable.
8.2 PROCEDURE. The surrender of an Option in whole or in part
shall be effected by the delivery of the Stock Incentive Agreement to the
Committee, together with a statement signed by the Participant which specifies
the number of Shares ("Surrendered Shares") as to which the Participant
surrenders his or her Option and how he or she desires payment be made for such
Surrendered Shares.
Daleen Technologies, Inc. Amended & Restated Stock Incentive Plan
Page 8 of 11
<PAGE> 9
8.3 PAYMENT. A Participant in exchange for his or her Surrendered
Shares shall receive a payment in cash or in Shares, or in a combination of cash
and Shares, equal in amount on the date such surrender is effected to the excess
of the Fair Market Value of the Surrendered Shares on such date over the
Exercise Price for the Surrendered Shares. The Committee, acting in its absolute
discretion, can approve or disapprove a Participant's request for payment in
whole or in part in cash and can make that payment in cash or in such
combination of cash and Shares as the Committee deems appropriate. A request for
payment only in Shares shall be approved and made in Shares to the extent
payment can be made in whole shares of Shares and (at the Committee's
discretion) in cash in lieu of any fractional Shares.
8.4 RESTRICTIONS. Any Stock Incentive Agreement which incorporates
a provision to allow a Participant to surrender his or her Option in whole or in
part also shall incorporate such additional restrictions on the exercise or
surrender of such Option as the Committee deems necessary to satisfy the
conditions to the exemption under Rule 16b-3 (or any successor exemption) to
Section 16(b) of the Exchange Act.
SECTION 9.
SECURITIES REGULATION
Each Stock Incentive Agreement may provide that, upon the receipt of
Shares as a result of the surrender or exercise of a Stock Incentive, the
Participant shall, if so requested by the Company, hold such Shares for
investment and not with a view of resale or distribution to the public and, if
so requested by the Company, shall deliver to the Company a written statement
satisfactory to the Company to that effect. Each Stock Incentive Agreement may
also provide that, if so requested by the Company, the Participant shall make a
written representation to the Company that he or she will not sell or offer to
sell any of such Shares unless a registration statement shall be in effect with
respect to such Shares under the Securities Act of 1933, as amended ("1933
Act"), and any applicable state securities law or, unless he or she shall have
furnished to the Company an opinion, in form and substance satisfactory to the
Company, of legal counsel acceptable to the Company, that such registration is
not required. Certificates representing the Shares transferred upon the exercise
or surrender of a Stock Incentive granted under this Plan may at the discretion
of the Company bear a legend to the effect that such Shares have not been
registered under the 1933 Act or any applicable state securities law and that
such Shares may not be sold or offered for sale in the absence of an effective
registration statement as to such Shares under the 1933 Act and any applicable
state securities law or an opinion, in form and substance satisfactory to the
Company, of legal counsel acceptable to the Company, that such registration is
not required.
SECTION 10.
LIFE OF PLAN
No Stock Incentive shall be granted under this Plan on or after the
earlier of:
(a) the tenth (10th) anniversary of the effective date of this
Plan (as determined under Section 4 of this Plan), in which event this Plan
otherwise thereafter shall continue in effect until all outstanding Stock
Incentives have been surrendered or exercised in full or no longer are
exercisable, or
(b) the date on which all of the Shares reserved under Section 3
of this Plan have (as a result of the surrender or exercise of Stock Incentives
granted under this Plan) been issued or no longer are available for use under
this Plan, in which event this Plan also shall terminate on such date.
Daleen Technologies, Inc. Amended & Restated Stock Incentive Plan
Page 9 of 11
<PAGE> 10
SECTION 11.
ADJUSTMENT
The number of Shares reserved under Section 3 of this Plan, and the
number of Shares subject to Stock Incentives granted under this Plan, and the
Exercise Price of any Options, shall be adjusted by the Committee in an
equitable manner to reflect any change in the capitalization of the Company,
including, but not limited to, such changes as stock dividends or stock splits.
Furthermore, the Committee shall have the right to adjust (in a manner which
satisfies the requirements of Code ss.424(a)) the number of Shares reserved
under Section 3, and the number of Shares subject to Stock Incentives granted
under this Plan, and the Exercise Price of any Options in the event of any
corporate transaction described in Code ss.424(a) which provides for the
substitution or assumption of such Stock Incentives. If any adjustment under
this Section creates a fractional Share or a right to acquire a fractional
Share, such fractional Share shall be disregarded, and the number of Shares
reserved under this Plan and the number subject to any Stock Incentives granted
under this Plan shall be the next lower number of Shares, rounding all fractions
downward. An adjustment made under this Section by the Committee shall be
conclusive and binding on all affected persons and, further, shall not
constitute an increase in the number of Shares reserved under Section 3.
SECTION 12.
SALE OR MERGER OF THE COMPANY
If the Company agrees to sell substantially all of its assets for cash
or property, or for a combination of cash and property, or agrees to any merger,
consolidation, reorganization, division or other transaction in which Shares are
converted into another security or into the right to receive securities or
property and such agreement does not provide for the assumption or substitution
of the Stock Incentives granted under this Plan, each Stock Incentive at the
direction and discretion of the Committee, or as is otherwise provided in the
Stock Incentive Agreements, may be canceled unilaterally by the Company in
exchange for the whole Shares (or, subject to satisfying the conditions to the
exemption under Rule 16b-3 or any successor exemption to Section 16(b) of the
Exchange Act, for the whole Shares and the cash in lieu of a fractional Share)
which each Participant otherwise would receive if he or she had the right to
surrender or exercise his or her outstanding Stock Incentive in full and he or
she exercised that right exclusively for Shares on a date fixed by the Committee
which comes before such sale or other corporate transaction.
SECTION 13.
AMENDMENT OR TERMINATION
This Plan may be amended by the Board from time to time to the extent
that the Board deems necessary or appropriate; provided, however, no such
amendment shall be made absent the approval of the shareholders of the Company:
(a) to increase the number of Shares reserved under Section 3, except as set
forth in Section 11, (b) to extend the maximum life of the Plan under Section 10
or the maximum exercise period under Section 7, (c) to decrease the minimum
Exercise Price under Section 7, or (d) to change the designation of Employees or
Key Persons eligible for Stock Incentives under Section 6. The Board also (1)
may suspend the granting of Stock Incentives under this Plan at any time, (2)
may terminate this Plan at any time, and (3) may amend any outstanding Stock
Incentive previously granted under this Plan at any time (for example, to
accelerate the vesting provisions thereof or to extend the term of a Stock
Incentive); provided, however, the Board shall not have the right to modify,
amend or cancel any Stock Incentive granted under this Plan unless: (I) the
Participant consents in writing to such modification, amendment or
Daleen Technologies, Inc. Amended & Restated Stock Incentive Plan
Page 10 of 11
<PAGE> 11
cancellation, (II) there is a dissolution or liquidation of the Company or a
transaction described in Section 11 or Section 12, or (III) the modification,
amendment or cancellation would not adversely affect, in any way, the rights of
a Participant owning such outstanding Stock Incentive without the written
consent of such Participant. To the extent that the material terms (within the
meaning of Treas. Reg. ss.1.162-27(e)(4)) of the Plan would be modified by the
Board but shareholders approval would not be required by the foregoing
provisions of this Section, the Board may, in its sole discretion, nonetheless
determine that approval of the shareholders of the Company is desired.
SECTION 14.
MISCELLANEOUS
14.1 SHAREHOLDER RIGHTS. No Participant shall have any rights as a
shareholder of the Company as a result of the grant of a Stock Incentive to him
or to her under this Plan or his or her exercise or surrender of such Stock
Incentive pending the actual delivery of Shares subject to such Stock Incentive
to such Participant.
14.2 NO GUARANTEE OF CONTINUED RELATIONSHIP. The grant of a Stock
Incentive to a Participant under this Plan shall not constitute a contract of
employment and shall not confer on a Participant any rights upon his or her
termination of employment or relationship with the Company in addition to those
rights, if any, expressly set forth in the Stock Incentive Agreement which
evidences his or her Stock Incentive.
14.3 WITHHOLDING. The exercise or surrender of any Stock Incentive
granted under this Plan shall constitute a Participant's full and complete
consent to whatever action the Committee directs to satisfy the federal and
state tax withholding requirements, if any, which the Committee in its
discretion deems applicable to such exercise or surrender.
14.4 TRANSFER. The transfer of an Employee between or among the
Company, a Subsidiary or a Parent shall not be treated as a termination of his
or her employment under this Plan. CONSTRUCTION. This Plan shall be construed
under the laws of the State of Delaware, without regard to its principles of
conflicts of law.
14.5 CONSTRUCTION. This Plan shall be construed under the laws of
the State of Delaware, without regard to its principles of conflicts of law.
Daleen Technologies, Inc. Amended & Restated Stock Incentive Plan
Page 11 of 11
<PAGE> 1
EXHIBIT 10.24
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT made as of the 2nd day of August, 1999
by and between W. R. Grace & Co.-Conn., a Connecticut corporation (having an
office at 7500 Grace Drive, Columbia, Maryland 21044 (hereinafter referred to as
"Landlord"), and Daleen Technologies, Inc., a Florida corporation, having an
office at 902 Clint Moore Road, Suite 230, Boca Raton, Florida 33487
(hereinafter referred to as "Tenant").
WITNESSETH:
WHEREAS, Landlord is the tenant under a Lease Agreement dated
as of June 1, 1998 between ADT Title Holding Company 1, a Delaware corporation,
as prime landlord (the "Prime Landlord"), and W. R. Grace & Co.-Conn., as prime
tenant (said lease, as amended, modified, assigned and/or transferred to date
being hereinafter referred to as the "Prime Lease"), a correct and complete copy
of which is attached hereto and incorporated herein as Exhibit "A"; and
WHEREAS, the Prime Lease demises the parcel of land legally
described on Schedule "A" to the Prime Lease (the "Land"), which has a street
address of 1750 Clint Moore Road, Boca Raton, Florida 33487, and all
improvements erected upon the Land, including a three (3) story office building
(the "Building") and parking areas (the "Parking Areas") (the Building, Parking
Areas and other improvements are collectively referred to hereinafter as the
"Improvements" and the Land and Improvements are hereinafter collectively
referred to as the "Demised Premises"); and
WHEREAS, Landlord and Tenant have agreed to enter into this
Sublease Agreement (this "Sublease") upon the terms and conditions set forth
herein;
NOW, THEREFORE, Landlord hereby sublets to Tenant, and Tenant
hereby hires and takes from Landlord, the Demised Premises, together with all
easements and appurtenances thereto, to be used and occupied by Tenant solely
for general office purposes and related uses incident thereto as shall be
reasonably required by Tenant in the operation of its business and as are
consistent with a first class office building in Boca Raton, Florida for a term
commencing October 1, 1999, as may be adjusted per Section 4(a) below (the
"Commencement Date") and terminating at midnight on the day preceding the last
day of the fixed term under the Prime Lease, i.e., May 30, 2008 (the "Expiration
Date"), unless extended or terminated pursuant to the provisions of this
Sublease (as the case may be, the "Term"). Tenant shall not have the benefit of
Landlord's option to renew set forth in Article 28 of the Prime Lease; however,
provided Tenant is not in default, Landlord agrees to use reasonable efforts to
assist Tenant in obtaining from Prime Landlord the right to remain in the
Demised Premises after the Expiration Date under a direct lease between Tenant
and Prime Landlord, with the obligation to exercise such efforts being
conditioned upon the release of Landlord from all liability arising after the
Expiration Date. Tenant has two options to prematurely terminate this Sublease,
as set forth in Paragraph 9 hereof.
1. Sublease Subordinate.
(a) This Sublease is expressly subject and subordinate
to the Prime Lease. Except as expressly set forth herein, all terms, covenants,
provisions and conditions of the Prime Lease are incorporated herein by this
reference with the same force and effect as if fully set forth herein and the
same shall be binding upon both parties hereto. This Paragraph shall be
self-operative and no further instrument of subordination shall be required.
(b) The following provisions of the Prime Lease, to the
extent the Prime Lease contains the same, are not incorporated by the reference
in Paragraph l(a) above: Section 17.01 regarding assignment and subletting;
initial build-out obligations of the Prime Landlord or pre-approved alterations
of the prime tenant; contingencies relating to the commencement of the Prime
Lease; provisions relating to delivery of possession by
<PAGE> 2
Prime Landlord to prime tenant; Section 4.01 regarding basic rent; procedures in
Section 22.01 for giving notice and in other Sections of the Lease, to the
extent they are in conflict with the provisions of this Sublease;
representations of the Prime Landlord; indemnification by the prime tenant;
Article 23 regarding subordination, provisions regarding holding over; waiver of
landlord's lien; Section 32.01 regarding real estate brokerage commission; all
rights of first offer; all options to renew or extend the term; all rights to
expand the Demised Premises; the right to terminate set forth in Article 38;
Article 34 regarding confidentiality; Article 39 regarding the commencement
date; and Article 40 (guaranty).
(c) As a condition to entering into this Sublease,
Landlord shall provide Tenant with a non-disturbance/consent agreement from
Prime Landlord.
2. Tenant Subrogated.
Anything contained in Paragraph 1 hereof to the contrary
notwithstanding, Landlord shall have no obligation to perform the obligations of
the Prime Landlord (or its successors or assigns) as the landlord under the
Prime Lease and, in lieu thereof, Tenant shall be subrogated to all of
Landlord's rights, as tenant under the Prime Lease, to enforce the performance
of such obligations by the Prime Landlord. In the event the Prime Landlord
refuses to recognize that Tenant is subrogated to Landlord's rights as
aforesaid, upon Tenant's request, Landlord agrees to use best efforts to enforce
its rights under the Prime Lease for Tenant's benefit including, but not limited
to, the giving of all notices, claims and demands to and on the Prime Landlord,
and Tenant agrees to reimburse Landlord for Landlord's reasonable costs incurred
in connection with the enforcement of such rights. It is understood that
Landlord shall have no obligation to commence any action at law or in equity to
obtain any relief sought by Tenant by reason of the Prime Landlord's breach of
its obligations under the Prime Lease. Landlord agrees to sign, to the extent
Landlord's signature is legally required or required under the provisions of the
Prime Lease, such demands, pleadings, and/or other papers that may be reasonably
required, and otherwise to enable Tenant to proceed in Landlord's name to
enforce the Prime Landlord's obligations under the Prime Lease, provided that
Tenant shall indemnify Landlord against, and hold Landlord harmless from, any
and all loss, cost, damage, expense or liability (including, but not limited to,
reasonable attorneys' fees and disbursements) incurred by Landlord by reason of
the prosecution by Tenant of any such proceeding or action. Tenant's obligations
herein shall survive the expiration or earlier termination of this Sublease.
Tenant hereby agrees not to make any claim against Landlord for any damage which
may arise, nor shall Tenant's obligations hereunder be impaired, by reason of
(a) the failure of the Prime Landlord to keep, observe or perform any obligation
or covenant pursuant to the prime Lease, or (b) the acts or omissions of the
Prime Landlord, its agents, employees, invitees, guests, licensees or
contractors, in either case, as long as Landlord is not contributorily
responsible for those failures, acts or omissions listed in subsections (a) or
(b) above.
3. Performance of Prime Lease Obligations.
(a) Tenant shall render the prompt performance to the
Prime Landlord, when due, of all of the terms, covenants, provisions, and
conditions of the Prime Lease that are incorporated herein by reference. Tenant
shall supply Landlord with evidence of (i) Tenant's making of each payment
required to be made by Tenant (other than rental payments and other payments
which Tenant is required to make directly to Landlord) and (ii) Tenant's
performance of all material actions required to be taken by Tenant; which
evidence and/or notice must be given in the manner hereinafter provided for the
giving of notices within five (5) business days after the event giving rise to
the need for delivery of such notice. Tenant shall not take or suffer any action
in connection with its use and enjoyment of the Demised Premises which would
constitute a default under, or be a violation of, the Prime Lease. Tenant hereby
agrees to indemnify and save Landlord harmless from any and all obligations
under the Prime Lease to be performed by the tenant thereunder, accruing from
and after the date hereof, provided Landlord is not contributorily responsible
therefor. This indemnity shall survive the expiration or sooner termination of
this Sublease. In the event of any inconsistency between the terms of the Prime
Lease incorporated herein by reference and any of the other terms, conditions or
provisions of this Sublease, other than the negotiated business terms specific
to this Sublease, the provisions of the Prime Lease shall control. Moreover, in
the event that any term and/or condition of this Sublease shall conflict or be
inconsistent with any term and/or condition of the Prime
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<PAGE> 3
Lease or, if exercised hereunder, would constitute a default under or breach of
the Prime Lease, then this Sublease shall be deemed amended to comply or be
consistent with the Prime Lease.
(b) Landlord covenants that it shall not, by its act or
omission, cause a breach or default under the Prime Lease. If Landlord were to
cause such breach or default, Landlord agrees to immediately notify Tenant in
writing thereof, citing the provision of the Prime Lease for which Landlord is
in breach or default. If Landlord is not actively curing or seeking to cure said
breach or default within the applicable time period, Landlord agrees to permit
Tenant to cure said matter in Landlord's place and stead. Any and all reasonable
fees and expenses incurred by Tenant in curing or attempting to cure said breach
or default shall be paid by Landlord to Tenant within fifteen (15) days of
Landlord's receipt of an invoice reflecting same. Landlord shall indemnify
Tenant from and against any loss, cost, claim or liability, including reasonable
attorneys' fees, resulting from or related to Landlord's breach or default of
its obligations under the Prime Lease.
(c) Provided that Tenant is not in default of any of its
obligations under this Sublease beyond any applicable cure period, Landlord will
not exercise its right under Article 38 of the Prime Lease to terminate the
Prime Lease.
4. Basic Rent and Additional Charges.
(a) Except as otherwise provided herein, Tenant shall
pay Landlord, on the first day of each month during the Term, rental ("Basic
Rent") in the amount of Sixty One Thousand Thirty One Dollars and 25/100
($61,031,25) per month, representing Basic Rent due for such month in advance
(based on 46,500 s.f. at $15.75 p.s.f.). Notwithstanding the foregoing, Basic
Rent will be abated one hundred percent (100%) for the initial two months of the
Term and fifty percent (50%) for the third and fourth months of the Term.
Additionally, if Landlord fails to vacate and deliver the Demised Premises to
Tenant by October 1, 1999, the Commencement Date will be delayed for each day of
such delay in delivery, during which time of delay no Basic Rent or Additional
Charges (and related Impositions) shall be due. Landlord and Tenant each agree
to deliver the Demised Premises to the other in "broom clean" condition on the
Commencement Date (in the case of delivery to Tenant) and on the Expiration Date
or earlier Termination Date (in the case of delivery to Landlord).
(b) Tenant shall also pay, as additional rent, all
Impositions (as defined in Section 5.01 of the Prime Lease, which section has
been incorporated herein), and all sums, costs, expenses and other payments
which Tenant under any of the provisions of this Sublease or the Prime Lease
assumes and is obligated to pay (which Impositions and all sums, costs, expenses
and other payments are herein collectively called the "Additional Charges"),
and, in the event of any nonpayment of any item of Additional Charges, Landlord
shall have, in addition to all other rights and remedies, all the rights and
remedies provided herein to the extent permitted by applicable law in the case
of nonpayment of the Basic Rent. Basic Rent and Additional Charges for any
partial calendar month shall be prorated on a per-diem basis. During the term
hereof, Landlord shall forward to Tenant promptly any and all invoices or
notices relative to Additional Charges which are Tenant's responsibility
hereunder. The parties agree that Landlord's delay or failure to provide said
invoices and/or notices shall not be deemed a default of Tenant hereunder. In
addition, Landlord will cooperate with Tenant in connection with furnishing
copies of invoices, contracts, and other information on Impositions and
Additional Charges, and upon mutual consent of Landlord and Tenant assigning
contracts related to Impositions and Additional Charges to Tenant.
(c) Commencing June 1, 2001, so long as this Sublease
remains in effect, the Basic Rent set forth above shall be increased on an
annual basis; and Tenant thereafter covenants and agrees to pay to Landlord,
during each ensuing Lease Year (as defined in the Prime Lease), such new
adjusted Basic Rent in an amount which, in each Lease Year, shall be equal to
one hundred and three percent (103%) of the Basic Rent payable at the end of the
preceding Lease Year. The resulting adjusted Base Rent shall be payable in
twelve equal monthly installments, each in advance, on the first day of each
month of the applicable Lease Year.
5. Consents.
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<PAGE> 4
Anything contained in this Sublease to the contrary
notwithstanding, whenever the consent or approval of Prime Landlord shall be
required under the Prime Lease, Tenant shall seek such consent or approval from
Landlord instead of contacting Prime Landlord directly, and Landlord's refusal
to grant such consent or approval shall be deemed reasonable if Landlord, as
tenant under Prime Lease, is required to obtain such consent or approval of the
Prime Landlord and Prime Landlord shall refuse or fail to grant such consent or
approval under the terms of the Prime Lease. All the periods set forth in the
Prime Lease applicable to the granting or denial of such approvals shall be
appropriately expanded in this Sublease to permit the processing of all requests
for the same through both Landlord and Prime Landlord. Landlord shall use its
best efforts to obtain Prime Landlord's consents and approvals when reasonably
requested by Tenant during the term hereof; however Landlord shall not be
obligated to incur expenses or additional liabilities in this regard.
6. Covenant of Quiet Enjoyment and Tenant's Indemnification.
(a) As long as Tenant shall not be in default hereunder
beyond any applicable Cure Period, Landlord covenants that Tenant shall
peaceably and quietly have, hold and enjoy the Demised Premises, subject to the
terms and conditions of this Sublease.
(b) Tenant shall indemnify Landlord against, and shall
hold Landlord harmless from, any and all losses, costs, damages, expenses,
charges or liabilities (including, but not limited to, reasonable attorneys'
fees and disbursements) incurred by Landlord by reason of, and shall defend
Landlord against all damages, claims, actions, proceedings and suits relating
to, (i) any work or thing done in, on or about the Demised premises or any part
thereof by Tenant or any agent, contractor, employee, servants, licensee,
invitee or visitor of Tenant; (ii) any use, nonuse, possession, occupation,
condition, operation, maintenance or management of the Demised Premises or any
part thereof; (iii) any negligence of Tenant or any agent, contractor, employee,
licensee (other than Landlord) or invitee of Tenant; (iv) any incident, injury
(including death at any time resulting therefrom) or damage to any person or
property occurring in, on or about the Demised Premises or any part thereof, (v)
any breach or default by Tenant in the observance or performance of the
covenants and agreements contained herein, or in the Prime Lease, as
incorporated herein, or (vi) not in limitation of the foregoing, any damages
relating to the presence or release of Hazardous Materials (as such term is
defined in the Prime Lease or the conduct of Environmental Activities (as such
term is defined in the Prime Lease) in, on or about the Demised Premises (other
than those found in typical office supplies in reasonable quantities, provided
that the same are handled properly) during the Term of this Sublease. In the
event that any action or proceeding shall be brought against Landlord by reason
of any matter covered by this Section, Tenant, upon prompt written notice from
Landlord, will at Tenant's sole cost and expense resist or defend the same.
Landlord will provide reasonable assistance to Tenant in connection therewith,
upon Tenant's reasonable request. To the extent of the proceeds received by
Landlord under any insurance furnished or supplied to Landlord by Tenant,
Tenant's obligation to indemnify and save harmless Landlord against the hazard
which is the subject of such insurance shall be deemed to have been satisfied.
(c) Landlord represents that it has complied with the
provisions of Section 13.05 of the Prime Lease, that Landlord has not conducted
any Environmental Activities at the Demised Premises, and has not provided Prime
Landlord with any notices required thereunder. Landlord agrees to comply with
said Section 13.05 up to the Commencement Date and shall copy Tenant on any
notifications due to Prime Landlord thereunder up to the Commencement Date.
Landlord agrees to indemnify and save harmless Tenant from and against any and
all liabilities, obligations, damages, penalties, claims, costs, charges and
expenses, including reasonable attorneys' fees, resulting from Landlord's breach
of the provisions of said Section 13.05.
(d) Landlord will, to the extent not covered by the
proceeds of any insurance paid, indemnify and save harmless Tenant from and
against any and all liabilities, obligations, losses, damages, penalties,
claims, costs, charges and expenses, including reasonable attorneys' fees,
resulting from or relating to death or personal injury or damage to property,
which may be imposed upon or incurred by or asserted against Tenant (except to
the extent the same arises from any act, omission or negligence of Tenant, its
contractors, licensees, agents, servants, employees, invitees or visitors, the
breach by Tenant of its representations or the breach by Tenant of its
obligations under this Sublease) resulting, directly or indirectly, from the
negligence, willful misconduct or reckless acts of Landlord, its contractors,
licensees, agents, servants, employees, invitees or visitors,
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<PAGE> 5
by reason of any of the following occurring during the term of this Sublease:
any use, nonuse, possession, occupation, condition, operation, maintenance or
management of the Demised Premises or any part thereof.
In the event that any action or proceeding shall be brought
against Tenant by reason of any matter covered by this clause (d), Landlord,
upon written notice from Tenant, will at Landlord's sole cost and expense resist
or defend same. To the extent of the proceeds received by Tenant under any
insurance furnished or supplied to Tenant by Landlord, Landlord's obligation to
indemnify and save harmless Tenant against the hazard which is the subject of
such insurance shall be deemed to be satisfied.
(e) To the extent an indemnification event were to occur
under Section 19.02 of the Prime Lease resulting in liabilities, obligations,
damages, penalties, claims, costs, charges and expenses to Tenant and Landlord
were to receive the benefits of the indemnification under said Section 19.02 of
the Prime Lease, Landlord shall allocate said benefits to Tenant. To the extent
of the proceeds received by Tenant under any insurance furnished or supplied to
Tenant by Landlord and/or Prime Landlord, Landlord's obligation to indemnify and
save harmless Tenant against the hazard which is the subject of such insurance
shall be deemed to be satisfied.
7. Condition of Demised Premises.
Prior to its execution of this Sublease, Tenant will have
completed its inspections of the Demised Premises. The Demised Premises will be
delivered to Tenant on the Commencement Date in the same condition as of the
date of this Sublease, less normal wear and tear. Accordingly, Tenant agrees to
accept the Demised Premises in "as is" condition, except that Landlord warrants
that all building systems will be in good working order and condition upon
Landlord's delivery of possession of the Demised Premises to Tenant at inception
of this Sublease. Notwithstanding the foregoing, Landlord will (i) repair or
replace the damaged lightening rods on the top of the Building and (ii) modify
the slope of the ground outside the door to the pump room to redirect the flow
of storm water drainage so that it does not flow on to the pump room floor.
Tenant may assume any of Landlord's existing building service/maintenance
agreements that are capable of being assigned and assumed, copies of which will
be provided to Tenant on or about the date hereof. Landlord hereby assigns to
Tenant all rights under Section 11.04(e) of the Prime Lease. Except as otherwise
agreed to in Section 11 (c) hereof, Landlord agrees, at its expense, prior to
delivering possession of the Demised Premises to Tenant, to remove all existing
movable furniture, partitions and its personal property from the Building and
all signage identifying the Building as the "Grace Building." Following the
Commencement Date, Tenant shall perform any alteration, fixturing, repair, or
modification ("Alteration") necessary for Tenant to use the Demised Premises.
All Alterations shall be made in accordance with the requirements of the Prime
Lease and at the sole cost and expense of Tenant, except for those alterations,
repairs or modifications which are the obligation of the Prime Landlord under
the Prime Lease, the cost and expense of which shall be the responsibility of
the Prime Landlord. Landlord shall assist Tenant to obtain Prime Landlord's
approval of Tenant's proposed Alterations when such approval is required.
8. Insurance.
Tenant agrees to name Landlord and Prime Landlord as
additional insureds under all insurance policies which Tenant is required to
carry and maintain pursuant to the provisions of the Prime Lease incorporated
herein. Tenant shall renew each of said policies not less than ten (10) days
prior to the date provided in the Prime Lease on which the tenant thereunder is
required to renew the same, and shall supply Landlord with evidence of the
coverage and payment of the premiums therefor.
9. Options to Terminate Sublease.
Subject to the terms and conditions contained herein and
provided that Tenant is not then in default under this Sublease, Tenant may
terminate this Sublease on September 11, 2006, by giving Landlord at least one
(1) year prior written notice of Tenant's intent to terminate this Sublease (the
"Termination Notice"). In the event that Tenant gives said Termination Notice,
then upon payment by Tenant of an amount equal to three (3) times the monthly
Basic Rent, as adjusted to the date of termination (9/11/06), this Sublease
shall be deemed terminated as if the Expiration Date was September 11, 2006. In
addition, subject to the terms and conditions
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<PAGE> 6
contained herein and provided that Tenant is not then in default under this
Sublease, Tenant may terminate this Sublease effective at the end of the 60th
month after Tenant commences paying full Basic Rent with no abatement, by giving
Landlord at least one (1) year Termination Notice. In the event Tenant gives
said Termination Notice, then upon payment by Tenant of an amount equal to four
(4) times the monthly Basic Rent, as adjusted to the date of termination, this
Sublease shall be deemed terminated as if the Expiration Date was the end of
said 60th month. Any such termination payment shall be deemed a termination fee
and not rent. Landlord shall have the right, upon receipt of a Termination
Notice, to commence marketing and showing the Demised Premises to prospective
tenants upon reasonable prior notice thereof to Tenant and subject to Tenant's
security regulations.
10. Assignment and Subletting.
Tenant shall not assign its interest in this Sublease and/or
the leasehold created hereby ("Tenant's Interest") and/or sublet all or any
portion of the Demised Premises, without the prior written consent of Landlord,
which consent shall not be unreasonably withheld. Tenant shall not pledge,
mortgage or hypothecate Tenant's Interest without the prior written consent of
Landlord, which consent shall not be unreasonably withheld. Tenant shall be
deemed to have assigned its interest in this Sublease if:
(a) there is any sale, lease, transfer, conveyance or
other disposition in one or a series of related transactions,
of all or substantially all of the assets of the Tenant and
its subsidiaries taken as a whole, to any entity, or
(b) Tenant consolidates with, or merges with or into,
another entity, in a transaction or series of related
transactions in which the voting stock of the Tenant is
converted into or exchanged for cash, securities or other
property, other than any transaction where (A) the outstanding
voting stock of the Tenant is converted into or exchanged for
voting stock of the surviving or transferee corporation and
(B) the beneficial owners of the outstanding voting stock of
the Tenant immediately prior to such transaction own
beneficially, directly or indirectly through one or more
subsidiaries, not less than a majority of the total
outstanding voting stock of the surviving or transferee
corporation immediately after such transaction; or
(c) the consummation of any transaction or series of any
related transactions (including, without limitation, by way of
merger or consolidation) the result of which is that any
entity becomes the beneficial owner of more than fifty percent
(50%) of the voting power of the voting stock of Tenant.
Notwithstanding the foregoing, the parties agree that the
following events shall not be deemed to constitute a change of control or an
assignment of Tenant's interests hereunder. First, the Tenant may establish a
holding company structure in which many of its operating assets, employees and
intellectual properties would be dropped into an operating company, which would
be a wholly owned subsidiary of Tenant. Second Tenant, may offer and sell
securities pursuant to a firm commitment underwritten public offering or
secondary offering(s) pursuant to effective registration statement(s) under the
Securities Act of 1933, as amended. Third, Tenant may reincorporate in Delaware
within the first ninety (90) days after the date hereof, provided that such
reincorporation does not change the relative ownership interests of Tenant's
shareholders.
Notwithstanding any assignment by Tenant of the Tenant's
Interest or Tenant's subletting of all or any portion of the Demised Premises,
Tenant shall remain primarily liable for all of the obligations required to be
performed by the tenant under this Sublease. Any rent received (net of costs
incurred in subletting, e.g. brokerage, upfitting, legal) as a result of a
sublease in excess of the rent and Tenant's other costs/expenses otherwise due
and payable hereunder shall be shared by Landlord and Tenant on a 50/0 basis. No
sublease shall be made if it results in an occupancy of more than six (6)
tenants (including Tenant) in the Demised Premises (this restriction is imposed
by the Prime Lease).
11. End of Term.
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(a) Upon the expiration or other termination of the Term
(including exercise of either of Tenant's early termination options), Tenant
shall quit and surrender the Demised Premises, with time being of the essence as
to the expiration date of the Term, in the condition and state of repair
required by the Prime Lease, free and clear of any and all lettings and rights
to occupy or use the Demised Premises or any part thereof created by Tenant or
by anyone claiming under Tenant and free and clear of liens and encumbrances
created by any act or omission on the part of the Tenant or of anyone claiming
by, through or under Tenant. Any and all installations made by Tenant which have
become part of the realty shall be surrendered by Tenant as part of the Demised
Premises upon said expiration or sooner termination of the Term, provided,
however, that Tenant may remove (and shall remove if so provided in the Prime
Lease) all of its trade fixtures, furnishings, machinery, equipment, signs and
other personalty belonging solely to Tenant and not to Landlord upon such
expiration or sooner termination and shall repair at Tenant's expense all damage
to the Demised Premises caused by such removal. Any property of Tenant not so
removed shall become the property of Landlord, which may thereafter cause such
property to be removed from the Demised Premises and disposed of, but the cost
of any such removal and disposition as well as the cost of repairing any damage
caused by such removal shall be borne by Tenant.
(b) The UPS system (serial number P23950; model name
Liebert) present at the Demised Premises on the Commencement Date belongs to
Landlord. Landlord has agreed to lease it to Tenant during the Term at no
additional charge to Tenant (as part of the Basic Rent).
(c) Landlord will leave the following furniture and
furniture systems at the Demised Premises on the Commencement Date, which
belongs to Landlord. Landlord has agreed to lease said furniture and furniture
systems to Tenant during the Term at no additional charge (as part of the Basic
Rent). Said furniture and systems includes conference room table and AV
equipment located in the third floor board room, the built-in furniture in the
executive offices area including the reception desks and work stations, as well
as all other fixtures, window treatments, and such other items as the parties
may mutually agree upon. The parties agree that for the purposes hereof, the
furniture and furniture systems does not include any office cubes located at the
Demised Premises.
(d) If this Sublease remains in effect through May 30,
2008, and Tenant is not then in default beyond any Cure Period (hereinafter
defined), Landlord will convey the UPS system described in clause (b) above and
the furniture and furniture systems described in clause (c) above to Tenant, to
the extent that said assets do not become owned by Prime Landlord pursuant to
the terms of the Prime Lease, effective May 30, 2008, and shall execute a Bill
of Sale or other instrument to confirm such conveyance. If, however, this
Sublease is terminated prior to May 30, 2008 for any reason (including exercise
of either of Tenant's options to terminate), or if Tenant is in default on May
30, 2008 beyond any applicable Cure Periods, then the UPS system and the
furniture and furniture systems shall remain the property of Landlord and shall
remain in the Demised Premises and Tenant shall tender said assets back to
Landlord in good working condition (less normal wear and tear) upon Tenant's
surrender of the Demised Premises. Tenant shall be responsible for maintaining
the UPS system and the furniture and furniture systems in a good condition and
repair, at Tenant's expense, throughout the Term.
12. Landlord's Remedies.
Landlord shall have all of the rights and remedies of landlord
specified in the Prime Lease and all of the rights and remedies by law or in
equity provided, if Tenant shall default in the payment of the Basic Rent or
Additional Charges due and payable pursuant to the terms of this Sublease by
failing to make the same before the expiration of the Cure Period, if Tenant
shall fail to perform or observe any of Tenant's obligations hereunder before
the expiration of the Cure Period, or if any other Event of Default (as defined
in the Prime Lease) shall occur as a result of Tenant's breach of its
obligations under this Sublease. The term "Cure Period" shall mean the period of
time specified in the Prime Lease, including grace periods, within which the
tenant thereunder may cure a default, less two (2) days.
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13. Modification or Termination of Prime Lease.
(a) Landlord agrees that it will not modify or amend the
Prime Lease without the prior written consent of Tenant.
(b) If for any reason whatsoever the Prime Lease should
terminate prior to the expiration of the Term hereof, then this Sublease shall
simultaneously terminate, and, except for the termination of the Prime Lease
because of a default of Landlord as tenant thereunder (as a result of Landlord's
affirmative action or inaction and not as a result of Tenant's failure to
perform the obligations of tenant under the Prime Lease which Tenant is
obligated to perform under the terms of this Sublease), Tenant shall acquire no
right or cause of action against Landlord by reason of such termination.
Landlord hereby agrees that, as long as Tenant shall not be in default under the
Sublease beyond any applicable Cure Period, Landlord will not, without the prior
written consent of Tenant, voluntarily cancel or terminate the Prime Lease or
otherwise modify or amend the same.
14. Condemnation.
Anything in this Sublease or the Prime Lease to the contrary
notwithstanding, in the event all or a portion of the Demised Premises shall be
taken by any public or quasi-public authority, Tenant shall have no right to an
abatement of rent unless Landlord is entitled to a corresponding abatement with
respect to its corresponding obligation under the Prime Lease as it relates to
the Demised Premises (and the dollar amount of such abatement shall be limited
to the amount of the abatement to which Landlord is entitled under the Prime
Lease). If, by reason of a taking, the Prime Landlord elects to terminate the
Prime Lease in accordance with the provisions of the Prime Lease then, upon such
termination of the Prime Lease, this Sublease shall be automatically terminated
as if such date of termination were the Expiration Date. In the event all or a
portion of the Demised Premises shall be taken by any public or quasi-public
authority, or upon any termination of the Prime Lease because of such taking,
Tenant shall have the right to claim and recover from the condemning authority,
but not from the Prime Landlord or Landlord, such compensation as may be
separately awarded or recoverable by Tenant in Tenant's own right on account of
any and all damage to Tenant's business by reason of the condemnation and for or
on account of any cost or loss to which Tenant might be put in removing Tenant's
merchandise, furniture, fixtures, leasehold improvements and equipment. Landlord
shall not be liable for any inconvenience or annoyance to Tenant or interference
or injury to the business of Tenant resulting from any such taking. In addition
to the foregoing, Tenant shall be entitled to participate in any condemnation or
eminent domain Proceeding to the extent Landlord is so permitted in accordance
with Section 8.01 of the Prime Lease. Landlord agrees to provide Tenant with any
and all notices related to any such actions or Proceedings.
15. Casualty.
Anything in this Sublease or the provisions of the Prime Lease
to the contrary notwithstanding: (a) in the event the Demised Premises shall be
damaged or destroyed as a result of any fire or other casualty, or in the event
the Demised Premises are rendered untenantable as described in Section 15.06 of
the Prime Lease, Tenant shall have the same right to terminate this Sublease as
Landlord, as tenant under the Prime Lease, has to terminate or otherwise cause
the term of the Prime Lease to expire or be forfeited, except that any time
period in the Prime Lease within which Landlord as tenant under the Prime Lease
shall be required to give a notice or to act, shall, for purposes of Tenant's
rights and obligations hereunder, be reduced by ten (10) days in the case of
casualty or in the case of an untenantable condition described in Section 15.06
of the Prime Lease, Tenant's right to terminate will be upon twenty-five (25)
days prior notice to Landlord; and (b) Tenant shall have no right to an
abatement of rent unless Landlord is entitled to a corresponding abatement with
respect to its corresponding obligation under the Prime Lease as it relates to
the Demised Premises (and the dollar amount of such abatement shall be limited
to the amount of the abatement to which Landlord is entitled under the Prime
Lease). If, by reason of such occurrence, the Prime Landlord elects to terminate
the Prime Lease in accordance with the provisions of the Prime Lease then, upon
such termination of the Prime Lease, this Sublease shall automatically terminate
as if such date of termination were the Expiration Date; provided, however, that
if Landlord has the option to terminate the Prime Lease as to part, but not all,
of the Demised Premises, Landlord will not, provided that Tenant is not in
default hereunder beyond any applicable Cure Period, terminate the Prime Lease
as to the Demised Premises
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<PAGE> 9
without the prior written consent of Tenant. Landlord shall not be liable for
any inconvenience or annoyance to Tenant or interference or injury to the
business of Tenant resulting from any damage by fire or other casualty or the
repair of such damage unless Landlord was responsible therefor. Landlord shall
not be required to carry insurance of any kind covering Tenant's property.
Landlord shall not be required to repair or replace any of Tenant's improvements
or Tenant's property unless Landlord was responsible for the casualty resulting
in such damage.
16. Security Deposit.
To secure the faithful performance of all of Tenant's
obligations and agreements set forth in this Sublease, Tenant shall deposit with
Landlord, on or before the Commencement Date, a security deposit in the amount
of $61,031.25 (the "Security Deposit"). Landlord may apply the Security Deposit
to cure any default that may from time to time exist hereunder, without
prejudice to any other remedy or remedies which Landlord may have on account
thereof and at such time, Landlord will provide Tenant with written notice
thereof indicating the amount so applied. Upon such application, Tenant shall
pay Landlord on demand the amount so applied, which shall be added to the
Security Deposit so the same may be restored to its original amount. If Landlord
assigns its interest under this Sublease to an assignee who assumes in writing
Landlord's obligations hereunder and Landlord delivers the Security Deposit to
its assignee (at which time Landlord will provide Tenant with written notice
thereof), Tenant hereby releases Landlord from any and all further liability
with respect to the Security Deposit and/or its application or return. Landlord
or its successor shall hold the Security Deposit as a separate fund in a
separate, interest-bearing account in Landlord's name at a Federally-insured
banking institution. If Tenant faithfully fulfills, keeps, performs and observes
all of the covenants, conditions and agreements set forth in this Sublease, the
Security Deposit shall be returned to Tenant with accrued interest promptly
after the expiration of the Term, provided Tenant has vacated the Premises and
surrendered possession thereof to Landlord in the condition required by this
Sublease.
In the event Landlord terminates this Sublease or Tenant's
right to possession by reason of an Event of Default by Tenant, Landlord may
apply the Security Deposit against damages suffered to the date of such
termination to the extent thereof, all pursuant to applicable law. In the event
any bankruptcy, insolvency, reorganization or other creditor-debtor proceedings
shall be instituted by or against Tenant, or its successors or assigns, and not
dismissed within sixty (60) days thereafter, the Security Deposit shall be
deemed to be applied first to the payment of any Basic Rent or Additional
Charges due Landlord for all periods prior to the institution of such
proceedings, and the balance, if any, of the Security Deposit may be retained or
paid to Landlord in partial liquidation of Landlord's damages.
17. Notices.
All notices given herein shall be in writing, shall be
addressed to the party to be notified at the address set forth below or at such
other address as the party may designate for itself from time to time by notice
hereunder, and shall be deemed to have been validly served, given or delivered:
(i) if mailed, on the date shown as received on the certified return receipt or
on the date on which the post office deems delivery is impossible on such return
receipt, or (ii) the date delivered by a courier service providing for overnight
delivery unless such delivery was not a business day or was after 5:00 p.m. on a
business day in which case delivery shall be deemed to have been rendered or
given on the next business day, or (iii) upon receipt of notice given by
telecopy, mailgram, telegram, telex, or personal delivery:
To Landlord:
W. R. Grace & Co.-Conn.
7500 Grace Drive
Columbia, Maryland 21044
Attn: W. Brian McGowan,
Senior Vice President
To Tenant:
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Prior to the Commencement Date
Daleen Technologies, Inc.
902 Clint Moore Road, Suite 234
Boca Raton, Florida 33487
Attn: Legal Department
After the Commencement Date, notices to Tenant shall be delivered
address of the Demised Premises.
Landlord and Tenant each hereby agrees to promptly forward to
the other all notices which each from time to time may receive from the Prime
Landlord. Landlord shall ask the Prime Landlord to give Tenant a copy of all
notices given to the tenant under the Prime Lease at the address set forth
above, in the same manner and at the same time as such notices are given to
Landlord.
17. Miscellaneous.
(a) The term "Landlord," as used in this Sublease, shall
mean W. R. Grace & Co.-Conn. and any successor in interest thereto. If this
Sublease is sold or transferred by Landlord (at which time Landlord agrees to
provide Tenant with prompt written notice thereof together with a copy of a duly
executed assignment or transfer document binding said third party to Landlord's
obligations hereunder), the seller or assignor shall be relieved of all
covenants and obligations under this Sublease thereafter occurring and it shall
be deemed without further agreement between the parties hereto and their
successors, that the purchaser or assignee has assumed and agreed to carry out
all covenants and obligations of Landlord hereunder.
(b) In the event Tenant shall remain in occupancy of the
Demised Premises for any period beyond expiration or earlier termination of the
Term (except under a direct lease with or by permission of, Landlord), Tenant
shall pay to Landlord, as and for liquidated damages, an amount per them equal
to one hundred and fifty percent (150%) of the Basic Rent per them for the last
Lease Year of the Term. Notwithstanding the foregoing, Tenant shall not be
deemed to be authorized to remain in occupancy beyond any expiration or earlier
termination of the Term.
(c) All rights and liabilities given to or imposed upon
either of the parties by this Sublease shall benefit and bind said party and its
successors and permitted assigns.
(d) The parties covenant and acknowledge that they intend
to create by this instrument, and that the legal effect of this instrument is
and shall be, a subletting of the Demised Premises by Landlord to Tenant and not
that of an assignment of the Prime Lease or any portion of thereof.
(e) Each of the parties represents and warrants to the
other that it has not dealt with any broker or finder in connection with this
Lease other than Cushman & Wakefield of Florida, Inc., representing Landlord,
and Merin, Hunter and Codman, Inc., representing Tenant. Each of the parties
indemnifies and holds the other harmless from any and all losses, liability,
costs or expenses (including reasonable attorney's fees) incurred as a result of
any alleged breach of the foregoing warranty. Landlord represents and agrees
that it shall pay the commissions due the aforesaid brokers pursuant to a
separate agreement. The execution and delivery of this Sublease by each party
shall be conclusive evidence that such party has relied upon the foregoing
representation and warranty.
(f) Any representations made by the Prime Landlord under
the Prime Lease are deemed to be the representations of the Prime Landlord and
shall in no manner be deemed the representations of Landlord.
(g) This Sublease contains all of the agreements and
conditions made between the parties hereto and may not be modified orally, or in
any manner other than by an agreement, in writing, signed by the parties hereto
or their respective successors in interest.
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(h) This Sublease may be executed in counterpart
originals.
(i) If the Prime Lease should terminate for any reason,
this Sublease shall terminate simultaneously and, except for termination of the
Prime Lease because of Landlord's default under this Sublease or a default of
Landlord as tenant thereunder in connection with a matter that Tenant has not
assumed responsibility for under this Sublease, Tenant shall acquire no right or
cause of action against Landlord by reason of such termination. As long as
Tenant shall not be in default under this Sublease beyond any applicable Cure
Period, Landlord shall not voluntarily cancel or terminate the Prime Lease
without the prior written consent of Tenant.
(j) Tenant represents that it is a corporation duly
organized and validly existing in good standing under the laws of the State of
Florida. This Sublease has been duly authorized by all necessary action on the
part of Tenant and constitutes a legal, valid and binding obligation of Tenant.
The execution and delivery of this Sublease and the consummation of the
transactions contemplated hereby do not and will not (i) violate or conflict
with the Articles of Incorporation of Tenant, (ii) violate or conflict with any
judgment, decree or order of any court applicable to or affecting Tenant, or
(iii) breach any contract, agreement, instrument or obligation to which Tenant
is a party or by which Tenant is bound.
Landlord represents that it is a corporation duly organized
and validly existing in good standing under the laws of the State of
Connecticut. This Sublease has been duly authorized by all necessary action on
the part of Landlord and constitutes a legal, valid and binding obligation of
Landlord. The execution and delivery of this Sublease and the consummation of
the transactions contemplated hereby do not and will not (i) violate or conflict
with the Articles of Incorporation of Landlord, (ii) violate or conflict with
any judgment, decree or order of any court applicable to or affecting Landlord,
or (iii) breach any contract, agreement, instrument or obligation to which
Landlord is a party or by which Landlord is bound.
Landlord further represents that: (u) the Prime Lease
(attached hereto as Exhibit A) is a correct and complete copy of the Prime Lease
and includes any and all agreements, amendments and modifications thereto
governing the use and occupancy of the Demised Premises, (v) Landlord is not
responsible for any liens and/or encumbrances on the Demised Premises which
would impact Tenant's use thereof, nor has Landlord received notice of any such
liens and/or encumbrances imposed as a result of the action or inaction of any
other party, (w) the Prime Lease is, as of the date hereof, in full force and
effect, (x) no event of default has occurred under the Prime Lease and to the
best of Landlord's knowledge and belief, no event has occurred and is continuing
which would constitute an event of default but for the requirement of giving
notice and/or expiration of the period of time to cure, (y) Landlord has
satisfied its notice requirements to Prime Landlord with respect to this
Sublease, as set forth in subsections 17.01 (a) and (b) of the Prime Lease and
the Prime Landlord elected not to exercise its rights thereunder, and (z) that
the 46,500 square feet of rentable space at the Demised Premises is correct
based upon the measurements of Prime Landlord's predecessor.
(k) If any action or proceeding arising out of this
Sublease is commenced, the prevailing party shall be entitled to recover its
reasonable attorneys' fees and disbursements in addition to any other relief to
which it may be entitled.
(l) Landlord leases the Meridian phone system (commonly
known as Option 61) that is currently installed at the Demised Premises.
Landlord shall assign the Meridian phone lease (a copy of which has been
previously forwarded to Tenant in its entirety) to Tenant on the Commencement
Date and Tenant shall assume landlord's obligations thereunder and make all
future lease payments directly to the lessor. Landlord represents that the
Meridian phone system is currently in working order. As long as this Sublease
remains in effect and Tenant is not in default hereunder beyond any Cure Period,
Landlord shall reimburse Tenant, on a monthly basis, the sum of $3,000 per month
for each month remaining on the current phone lease term (through June 30,
2003). Tenant shall have no right to extend the term of the phone lease, or to
increase the rental or any other obligation of the lessee thereunder, unless the
lessor expressly releases Landlord from all obligations thereunder.
(m) Following August 1, 1999, and upon Tenant's
reasonable requests, Landlord will permit Tenant access to the Demised Premises
during normal business hours, provided that such access does not interfere
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with Landlord's ability to conduct normal business operations from the Demised
Premises. Any and all damages attributable to Tenant's access rights hereunder
will be borne exclusively by Tenant.
(n) Landlord agrees to permit Tenant to have the rights
and obligations of the "Tenant" as set forth in Article 30 of the Prime Lease,
which rights and obligations Tenant hereby accepts.
(o) The validity of this Sublease, and the rights,
obligations and relations of the parties hereunder shall be governed by and
construed in accordance with the laws of the State of Florida. If any provision
of this Sublease is determined by a court of competent jurisdiction to be in
violation of any applicable law or otherwise invalid or unenforceable, such
provision shall to such extent as it shall be determined to be illegal, invalid
or unenforceable under such law be deemed null and void, but this Sublease shall
otherwise remain in full force. Except as otherwise expressly provided in the
Prime Lease, suit to enforce any provision of this Sublease, or any right,
remedy or other matter arising therefrom, will be brought exclusively in the
state or federal courts located in Palm Beach County, Florida. Landlord and
Tenant agree and consent to venue in Palm Beach County, Florida and to the in
personal jurisdiction of the aforementioned courts.
IN WITNESS WHEREOF, the parties hereto have executed this
Sublease, as a sealed instrument, as of the date first written above.
Tenant: Landlord:
Daleen Technologies, Inc. W. R. Grace & Co.-Conn.
a Florida corporation a Connecticut corporation
By: /s/ James Daleen By: /s/ W. B. McGowan
--------------------------------- -------------------------
Name: James Daleen Name: W. Brian McGowan
Title: CEO Title: Senior Vice President
Witnessed: Witnessed:
/s/ Eileen T. Luisi /s/ Eileen T. Luisi
- ------------------- -------------------
/s/ Elizabeth Watts /s/ Elizabeth Watts
- ------------------- -------------------
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EXHIBIT A
LEASE AGREEMENT
THIS AGREEMENT (herein referred to as "this Lease"), dated as
of June 1, 1998, between ADT TITLE HOLDING COMPANY I, a Delaware corporation,
having an address at One Tyco Park, Exeter, New Hampshire 03833-1108
(hereinafter called "Landlord"), and W. R. GRACE & CO.-CONN., a Connecticut
corporation, having a present address at One Town Center Road, Boca Raton,
Florida 33486-1010 (hereinafter called "Tenant").
WITNESSETH:
ARTICLE 1
Demise of Premises
Landlord, for and in consideration of the rents to be paid and
of the covenants and agreements hereinafter contained to be kept and performed
by Tenant, hereby demises and leases to Tenant and Tenant hereby hires and takes
from Landlord, for the term hereinafter set forth the piece or parcel of land
with a street address of 1750 Clint Moore Road, Boca Raton, Florida 33431, and
more particularly described in Schedule A annexed hereto (the "Land");
TOGETHER WITH the appurtenances, buildings and improvements
erected upon Land and any replacements thereof including the three (3) story
office building (the "Building"), and the entire parking space area (the
"Parking Area" and together with the Building, the "Improvements");
TOGETHER WITH all right, title and interest of Landlord, if
any, in and to any land lying in the bed of any street, road or avenue, open or
proposed, in front of or adjoining such Land and in and to the easements,
franchises, rights, appendages and appurtenances belonging or appertaining to
such real property (the Land and other interests therein and the Improvements
being hereinafter called the "Demised Premises");
SUBJECT, HOWEVER, to the following:
(1) the state of title existing as of the date hereof and
described in Schedule B annexed hereto; and
(2) zoning regulations, restrictions, resolutions,
ordinances and requirements, building restrictions and other laws and
regulations, now in effect to the extent not violated by the Demised Premises.
Landlord, to the best of its knowledge and belief, represents and warrants to
Tenant:
(1) on the Commencement Date, the Demised Premises will
comply in all material respects with all applicable zoning regulations,
restrictions, resolutions, ordinances and requirements, budding restrictions and
other laws so as to permit the use of the Building for general office uses and
the Parking Area for parking purposes;
(2) on the Commencement Date, the Demised Premises will
comply in all material respects with all Legal Requirements existing on the
Commencement Date; and
(3) the Demised Premises shall on the Commencement Date
be free and clear of all tenancies.
And Landlord and Tenant covenant and agree as follows:
<PAGE> 14
ARTICLE 2
Certain Definitions
Unless the context otherwise requires, the terms defined below
shall have the respective meanings set forth below:
(a) "Additional Charges" shall have the meaning given to
it in Section 4.04 of this Lease;
(b) "Arbitration Procedure" shall have the meaning given
to it in Section 8.06 of this Lease;
(c) "Affiliate" shall mean any person who or which,
directly or indirectly, controls, is controlled by, or is under common control
with, (A) Landlord (or Tenant, as the case may be), or (B) any person
comprising, directly or indirectly, Landlord (or Tenant, as the case may be), or
(C) any person having a controlling equity interest, directly or indirectly, in
Landlord (or Tenant, as the case may be). Control, as used in this definition
shall mean ownership of more than 50% of the outstanding voting stock of a
corporation or, the direct power to direct the affairs of such corporation or
other entity by reason of ownership of voting stocks or other equitable
interest, by contract or otherwise.
(d) "Base Rate" shall mean the annual interest rate which
is publicly announced from time to time by The Wall Street Journal "Money Rates
Table" as the prime rate based upon corporate loans posted by 75% of the
nation's 30 largest banks;
(e) "Basic Rent" shall have the meaning given to it in
Section 4.01 of this Lease;
(f) "Business Day" shall mean all days, excluding Sundays
and holidays;
(g) "Condemnation Restoration" shall have the meaning
given to it in Section 8.04 of this Lease;
(h) "Default" shall mean any event which would constitute
an Event of Default if any requirement in connection therewith for the giving of
notice, or the lapse of time or the happening of any further condition, event or
action, had been satisfied:
(i) "Default Rate" shall mean a fluctuating annual
interest rate which is the lesser of the rate which is 250 basis points higher
than the Base Rate and the highest rate permitted by applicable usury law;
(j) "Event of Default" shall mean any event specified as
such in Section 20.01 and which shall continue for the period of time, if any,
therein designated;
(k) "First Lease Year" means the period commencing on the
Commencement Date, as defined in Section 3.01 hereof, being for a term of (a)
twelve (12) full calendar months if the Commencement Date is the first day of a
calendar month, or (b) twelve (12) full calendar months plus the portion of the
calendar month (during which the Commencement Date, not being the first day of a
calendar month, occurs) that follows after the Commencement Date;
(l) "Imposition" and "Impositions" shall have the meaning
given to them in Section 5.01 of this Lease;
(m) "Institutional Mortgagee" shall mean any national
bank, or any commercial or savings bank, trust company, insurance company or
pension plan which shall be authorized to make loans secured by real property in
the State of Florida:
(n) "Landlord" shall, at any time, in addition to
Landlord herein named, mean any person
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who shall succeed to any of the interests of Landlord under this Lease;
(o) "Lease Year" shall mean the First Lease Year and each
successive period of twelve calendar months during the Term. The first, second,
third and fourth quarters of each Lease Year shall mean, respectively, the
periods of three calendar months commencing on the first day of the Lease Year
and on the first day of the fourth, seventh and tenth calendar months of the
Lease Year;
(p) "Legal Requirements" shall mean all Federal state,
county, municipal and other governmental statutes, laws, rules, orders, permits,
licenses, regulations, ordinances, judgments, decrees, directions and
injunctions affecting the Demised Premises or the use or occupancy thereof,
whether now or hereafter enacted or in force, ordinary or extraordinary,
foreseen or unforeseen;
(q) "Permitted Mortgage" shall mean any mortgage
hereafter made in compliance with all of the provisions and conditions of
Section 17.02 of this Lease. The term "Permitted Mortgagee" shall mean the
holder at the time in question of any Permitted Mortgage;
(r) "Proceeding" shall mean the taking of the whole or of
a part of the Demised Premises by virtue of eminent domain or for any public or
quasi-public improvement;
(s) "Restoration" shall have the meaning given to it in
Section 7.04 of this Lease;
(t) "Term" shall have the meaning given to it in Section
3.01 of this Lease; and
(u) "unavoidable delays" or words of similar import shall
mean delays due to strikes, lockouts, labor disputes, acts of God, inability to
obtain labor or materials, government restrictions, enemy action, civil
commotion, fire, unavoidable casualty or other causes beyond the reasonable
control of the party, provided that financial inability to perform shall not be
deemed an unavoidable delay and that the party affected shall use all reasonable
efforts to overcome the effect of such events.
ARTICLE 3
Term of Lease
Section 3.01. The term of this Lease shall commence on the
Commencement Date, as hereinafter defined, and shall expire at 11:59 p.m. on the
last day of the calendar month in which the tenth anniversary of the
Commencement Date occurs (the "Expiration Date") (unless this Lease shall sooner
terminate or be canceled as hereinafter provided and subject to Tenant's renewal
rights and including any Renewal Term as hereinafter provided), upon and subject
to the covenants, agreements, terms, provisions and limitations hereinafter set
forth (which term is hereinafter called the "Term"). As used herein, the
Commencement Date shall mean June 1, 1998.
ARTICLE 4
Basic Rent, Adjusted Basic Rent, and Additional Charges
Section 4.01. (a) Tenant shall pay to Landlord during the
Term, in such coin or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and private debts, a net
basic rental (hereinafter called the "Basic Rent"), together with applicable
Florida sales tax, if any, and over and above the other additional payments to
be made by Tenant as elsewhere provided in this Lease, in twelve (12) equal
monthly installments, in advance, on the first day of each and every calendar
month during the Term. Except as hereinafter provided, the Basic Rent shall be
Seven Hundred Thirty-Two Thousand Three Hundred Seventy-Five Dollars
($732,375.00) per annum with monthly payments of Sixty One Thousand Thirty One
and 25/100 Dollars ($61.031.25) [based on 46,500 square feet at $15.75] for the
period commencing on the Commencement Date and ending on the Expiration Date.
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<PAGE> 16
(b) Tenant shall pay Basic Rent and all Additional
Charges (as hereinafter defined) which is herein provided to be paid to Landlord
by good and sufficient check (subject to collection), at such place as shall be
designated by Landlord from time to time. Basic Rent and Additional Charges, if
applicable, for any partial calendar month shall be prorated on a per-diem
basis.
(c) Effective on the third anniversary of the
Commencement Date, so long as this Lease remains in effect, the Basic Rent set
forth above shall be increased on an annual basis; and Tenant thereafter
covenants and agrees to pay to Landlord, during each ensuing Lease Year, such
new adjusted Basic Rent in an amount which, in each Lease Year, shall be equal
to one hundred and three percent (103.0%) of the Basic Rent payable at the end
of the preceding Lease Year. The resulting Base Rent shall be payable in equal
monthly installments, each in advance, on the first day of each month of the
applicable Lease Year.
Section 4.02. Except as otherwise expressly provided in this
Lease, Tenant shall pay the Basic Rent and Additional Charges without notice,
demand, set-off counterclaim deduction, abatement, suspension, deferment,
diminution or reduction and, except as otherwise expressly provided in this
Lease, Tenant shall have no right to terminate this Lease or to be released,
relieved or discharged from any obligations or liabilities hereunder for any
reason whatsoever, including, without limitation: (a) any loss, damage to or
destruction or deterioration of the Demised Premises or any part thereof by fire
or other casualty, acts of God or enemy action or restriction of the use or
occupancy of the Demised Premises or any part thereof on account of any other
cause except due to a material breach of Landlord's representations; (b) any
limitation, restriction, deprivation or prevention of, or any interference with,
any use of the Demised Premises or any part thereof, (c) any taking of the
Demised Premises or any part thereof by condemnation or otherwise; or (d) any
claim as a result of any other business dealings of Landlord and Tenant. Except
as otherwise expressly provided in this Lease, Tenant will take no action to
terminate, rescind or avoid this Lease and waives all rights now or hereafter
conferred by law (i) to quit, terminate or surrender this Lease or the Demised
Premises or any part thereof, or (ii) to any abatement, suspension, deferment,
diminution or reduction of the Basic Rent on account of any such occurrence. If
any Basic Rent or Additional Charges shall be or become uncollectible, reduced,
required to be refunded or prohibited from increasing because of any Legal
Requirement applicable to both Landlord and Tenant, Tenant agrees to enter into
such agreements and take such other actions as Landlord may reasonably request
and as are legally permissible to permit Landlord, during the continuance of
such Legal Requirement, to collect the maximum rents which are legally
collectible by Landlord and to pay the maximum other Additional Charges as
Tenant may be legally required to pay (but never in excess of the amounts
reserved under this Lease). Upon the termination of such Legal Requirement, (A)
the Basic Rent and Additional Charges shall become and thereafter be payable in
accordance with this Lease and (B) Tenant shall pay to Landlord within thirty
(30) days following demand, to the fullest extent legally permitted, an amount
equal to (i) the Basic Rent and Additional Charges which would have been paid
pursuant to this Lease but for such Legal Requirement less (ii) the Basic Rent,
Additional Charges and payments in lieu of rent paid by Tenant during the period
such requirement of law was in effect.
Section 4.03. This Lease is a net lease and the Basic Rent
shall be absolutely net to Landlord, so that this Lease shall Yield, net, to
Landlord, the Basic Rent during the Term, and all costs, expenses and
obligations of every kind and nature whatsoever relating to the Demised Premises
which may arise and be attributable to the ownership, maintenance, repair,
restoration, use or occupancy of the Demised Premises during the Term, except as
otherwise expressly provided in this Lease, shall be paid by Tenant.
Section 4.04. Tenant shall also pay, as additional rent, all
Impositions, and all sums, costs, expenses and other payments which Tenant under
any of the provisions of this Lease assumes or agrees to pay (which Impositions
and all sums, costs, expenses and other payments are herein collectively called
the "Additional Charges"), and, in the event of any nonpayment of any item of
Additional Charges which is payable to Landlord, Landlord shall have (in
addition to all other rights and remedies) all the rights and remedies provided
herein or by law in the case of nonpayment of the Basic Rent.
ARTICLE 5
Payment of Taxes, Assessments, Etc.
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Section 5.01. Tenant will pay directly to the appropriate
party, before any fine, penalty, interest or cost may be added thereto for the
nonpayment thereof (except as hereinafter provided in Section 5.04) all taxes,
assessments, water and sewer rents, rates and charges, charges for public
utilities, excises, levies, license and permit fees and other governmental
charges, general and special, ordinary and extraordinary, foreseen and
unforeseen, of any kind and nature whatsoever which at any time during the Term
may be assessed, levied, confirmed, imposed upon, or grow or become due and
payable out of or in respect of, or become a lien on, the Demised Premises
thereof or any appurtenances thereto, or any use or occupation of the Demised
Premises, including any Florida sales tax due on any portion of the Additional
Charges, if applicable (which taxes, assessments, water and sewer rents, rates
and charges, charges for public utilities, excises, levies, licenses and permit
fees and other governmental charges and any other amounts which Tenant is
obliged to pay under this Section are herein referred to as "Impositions" and
any of the same is herein referred to as an "Imposition"), together with any
penalty, interest or cost which may be added for late payment thereof.
Impositions for any period falling partly within and partly outside the Term,
shall be prorated on a per diem basis.
Section 5.02. Nothing herein contained shall require Tenant to
pay any of the following assessed or levied against, imposed upon or incurred by
Landlord or any subsequent owner of the Demised Premises; income and/or excess
profits taxes, capital levy, estate, succession, inheritance, transfer,
corporate or franchise taxes levied or assessed by any governmental authority;
provided, however that, if at any time during the Term the methods of taxation
prevailing at the commencement of the Term shall be altered so that, in lieu of
the taxes, assessments, levies, impositions or charges now levied, or hereafter
assessed or imposed on, real estate and the improvements thereon, there shall be
levied, assessed and imposed wholly or partially as a capital levy, or
otherwise, on the rents received therefrom, or if as the result of the
alteration of such method, any tax, assessment, levy, imposition or charge, or
any part thereof, there shall be measured by or based, in whole or in part, upon
the Demised Premises, the Basic Rent or the Additional Charges and imposed upon
Landlord, then all such taxes, assessments, levies, impositions or charges or
the part thereof so measured or based shall be deemed to be included within the
term "Impositions" for the purposes hereof except that the amount so included
shall in no event exceed the amount which would have been so levied, assessed or
imposed if the Demised Premises were the only asset of Landlord and the interest
in Landlord of any corporation which is a partner or shareholder of Landlord
were the only asset of that corporation.
Section 5.03. Prior to delinquency of an Imposition payable by
Tenant as in this Article provided, Tenant shall furnish to Landlord for its
inspection official receipts or duplicate copies thereof of the appropriate
taxing authority, or other proof reasonably satisfactory to Landlord. Landlord
shall promptly send to Tenant all bills which it may receive for Impositions.
Section 5.04. Tenant shall have the right to contest the
amount or validity of any Imposition by appropriate proceedings. If Tenant
determines not to so contest any such Imposition, Landlord shall have the right
so to do. If Tenant shall contest the amount or validity of any such Imposition,
Tenant shall nevertheless promptly pay the Imposition in accordance with the
terms and provisions of this Lease, and nothing herein shall imply any right on
the part of Tenant to postpone or defer such payment for any such purpose,
unless such proceedings shall operate to prevent or stay the collection of the
Imposition so contested and the sale of the Demised Premises, or any part
thereof to satisfy the same. Upon the termination of such proceedings, Tenant
shall pay the amount of the Imposition, or part thereof as finally determined to
be due in such proceedings, the payment of which may have been deferred during
the prosecution of such proceedings, together with any costs, fees, interest,
penalties or other liabilities in connection therewith. Landlord shall not be
required to join in any such proceedings, except that if any Legal Requirement
hereafter in effect shall require that such proceedings be brought by or in the
name of Landlord or any owner of the Demised Premises, Landlord shall not
withhold its consent to joining in any such proceedings, or permitting the same
to be brought in its name, and shall execute any and all documents required in
connection therewith, provided the same shall be approved as to both form and
substance by Landlord's counsel, which approval Landlord agrees shall not be
unreasonably withheld, delayed or conditioned. Landlord shall not be subjected
to any liability for the payment of any costs or expenses in connection with any
such proceeding, including, but not limited to, Landlord's reasonable counsel
fees, and Tenant shall indemnify and save harmless Landlord from any such costs
or expenses. Tenant shall be entitled to any refund of the Imposition and
penalties
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or interest thereon which shall have been paid by Tenant, or, if paid by
Landlord, for which Landlord shall have been fully reimbursed by Tenant.
ARTICLE 6
Insurance
Section 6.01. Throughout the Term, Tenant shall, at Tenant's
sole cost and expense, keep the Demised Premises insured against loss or damage
by fire, lightning, windstorm, had, explosion, riot, riot attending a strike,
civil commotion, vandalism, malicious mischief damage from aircraft, vehicles
and smoke and also for such other perils as are covered by an "all risk policy"
substantially similar to the coverage provided by the "Causes of Loss - Special
Form" No. CP 1030 1185 issued by ISO Commercial Risk Services, Inc., in amounts
at all times equal to the then Full Insurable Value of the Improvements and with
such deductibles as may be reasonably adopted by Tenant as such amounts and such
deductibles may be approved by Landlord, which approval shall not be
unreasonably withheld, delayed or conditioned. The term "Full Insurable Value,"
as used herein, when applied to the Improvements, shall mean the actual
replacement cost without depreciation (excluding land, excavation costs and that
part of the foundation and footing cost which is customarily not insurable under
casualty policies), and shall be determined from time to time at reasonable
intervals at the request of Landlord by one of the insurers, or, at the option
of Tenant or Landlord, an independent appraiser or contractor selected and paid
by Tenant and reasonably acceptable to Landlord. All insurance required to be
carried by Tenant pursuant to the terms of this Lease shall be effected under
valid and enforceable policies issued by reputable and independent insurers
permitted to do business in the State of Florida, and rated in Best's Insurance
Guide, or any successor thereto (or if there be none, an organization having a
national reputation) as having a "Best's Rating" of "B" and a "Financial Size
Category" of at least "X" or if such ratings are not then in effect, the
equivalent thereof.
Section 6.02. Throughout the Term, Tenant shall, at Tenant's
sole cost and expense, maintain or cause to be maintained commercial general
liability insurance on an occurrence basis against claims for personal injury or
death and for damage to property suffered by others occurring upon, in or about
the Demised Premises, such liability insurance to afford protection to the limit
of not less than $5,000,000 combined in respect of bodily injury or death to any
one person and for property damage, and not less than $10,000,000 in respect of
bodily injury or death to any number of persons in any one occurrence. Tenant
shall also provide Workers' Compensation insurance in statutory amounts and
employees liability insurance with a per claim limit of $2,000,000.00.
Section 6.03. Throughout the Term, Tenant shall, at Tenant's
sole cost and expense, maintain for the benefit of Landlord or cause to be
maintained for the benefit of Landlord, rent, or use and occupancy or rental
value insurance in an amount at least sufficient to meet the payments for one
year of the Basic Rent and the Additional Charges, which insurance shall be
payable to Landlord in the event that the Building or any substantial portion
thereof shall be destroyed or seriously damaged. Tenant hereby assigns to
Landlord any interest of Tenant in said policies and all proceeds thereunder.
Section 6.04. Throughout the Term, Tenant shall, at Tenant's
sole cost and expense, maintain or cause to be maintained under a comprehensive
form of boiler and machinery insurance policy including repair and replacement
endorsement, covering all insurable equipment in the Building including but not
limited to, boilers, pressure vessels, air tanks, pressure piping, major air
conditioning equipment, turbines, and nonrotating electrical equipment (provided
the Building contains equipment of the nature ordinarily covered by such
insurance) with a limit of liability of $5,000,000 or such larger amount as
Landlord may reasonably require and a deductible limit of not more than $20,000.
Section 6.05. All insurance provided for in this Article shall
be effected under a valid and enforceable policy or policies issued by insurers
of recognized financial standing, licensed or authorized to do business in
Florida and reasonably satisfactory to Landlord. Certified copies of all
certificates evidencing such policies shall be deposited with Landlord by Tenant
prior to the Commencement Date. Not less than fifteen (15) days prior to the
expiration date of the expiring policies, Tenant shall deliver to Landlord
certificates of the insurers evidencing renewal thereof with insurance policies
available at Tenant's Demised Premises for review by Landlord or Landlord's
first mortgagee as soon thereafter as the same shall be obtained by Tenant.
Within ten (10)
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days after the premium on each such policy shall become due and payable and the
amount thereof shall be determined, such premium shall be paid by Tenant and
Landlord shall be furnished with evidence reasonably satisfactory to it of such
payment.
Section 6.06. Landlord shall not be required to prosecute any
claim against any insurer or to contest any settlement proposed by any insurer
but in the event of Landlord's failure to do so, Tenant shall have the right to
do so in Landlord's name at Tenant's sole cost and expense.
Section 6.07. Insurance claims by reason of damage or
destruction to any portion of the Demised Premises may be adjusted by Landlord,
but Tenant shall have the right to join with Landlord in adjusting any such
loss; provided, however, Tenant's consent in any such adjustment shall not be
unreasonably withheld, conditioned or delayed.
Section 6.08. Every insurance policy required under this
Article 6 (other than liability and workers' and employers' compensation
insurance policies) shall name Landlord and Tenant as the insureds, as their
interests may appear, and bear a standard first mortgage endorsement in favor of
a first mortgagee of Landlord, if any, whose name shall have been provided to
Tenant, and loss under any such policy shall be made payable to such first
mortgagee, but any proceeds under which policies received by such first
mortgagee shall be applied as provided in Article 7. Each such policy shall be,
if available, for a term of not less than one (1) year with all premiums paid in
advance. Every such policy shall contain an agreement by the insurer that it
will not cancel such policy except after thirty (30) days prior written notice
to Landlord and Landlord's first mortgagee, if any, and that any loss thereunder
shall be payable notwithstanding any act or negligence of Tenant or Landlord and
notwithstanding any change in title or ownership of the Demised Premises. Should
Tenant fail to effect, maintain or renew any insurance provided for in this
Article 6, or to pay the premium therefor, or to deliver to Landlord any such
certificate, if requested by Landlord, Landlord at its option may upon ten (10)
days' notice to Tenant of its intention to do so procure such insurance and any
sums expended by it to procure such insurance shall be payable as Additional
Charges hereunder and shall be repaid by Tenant within ten (10) days following
demand therefor by Landlord with interest at the Default Rate.
Section 6.09. Tenant shall not obtain or carry separate
insurance concurrent in form or contributing in the event of loss with that
required in this Article 6 to be furnished by Tenant unless Landlord is named as
an insured, with loss payable as in this Lease provided. Tenant shall
immediately notify Landlord whenever any such separate insurance is obtained and
shall deliver the certificates evidencing the same to Landlord.
Section 6.10. Landlord and Tenant hereby release each other
from any and all liability or responsibility to the other or anyone claiming
through or under them by way of subrogation or otherwise for any loss or damage
of property caused by fire or any of the extended coverage or supplementary
contract casualties, even if such fire or other casualty shall have been caused
by the fault or negligence of the other party, or anyone for whom such party may
be responsible; provided, however, that this release shall be applicable and in
force and effect only with respect to loss or damage occurring during such time
as the releasors' policies shall contain a clause or endorsement to the effect
that any such release shall not adversely affect or impair said policies or
prejudice the right of the releasor to recover thereunder. Landlord and Tenant
each agree to request its insurance carrier to include such a clause or
endorsement in its policies.
Section 6.11. Tenant assumes the risk of damage to any
fixtures which remain the property of Tenant or as to which Tenant retains the
right of removal from the Premises.
Section 6.12. If Tenant fails to maintain any insurance
required pursuant hereto, Tenant shall be liable for any loss, damages or costs
incurred by Landlord as a result thereof. This paragraph shall not be deemed to
be a waiver of any of Landlord's rights and remedies under any other paragraph
hereof Tenant and Landlord agree that the insurance required pursuant to this
Article 6 may be revised, subject to availability of such insurance at
commercially reasonable rates, so long as the insurance coverage and limitations
may be approved by Landlord, which approval shall not be unreasonably withheld,
delayed or conditioned.
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ARTICLE 7
Casualty and Restoration
Section 7.01. If during the Term all or any part of the
Demised Premises shall be damaged or destroyed by fire or other casualty, Tenant
shall promptly give notice thereof to Landlord and Landlord shall, at Landlord's
sole cost and expense subject to availability and receipt from Tenant's
insurance company(ies) of the insurance proceeds and the receipt from Tenant of
the deductible amount of such insurance, if any, [except as provided in Section
7.02 of this Lease] repair, restore, or replace the same as nearly as possible
to its value, condition and character immediately prior to such damage or
destruction. Landlord shall within thirty (30) days following notice from Tenant
of the casualty advise Tenant the amount of time such repairs are reasonably
estimated to require.
Section 7.02. If during the Term the Demised Premises shall be
substantially damaged or destroyed in any single casualty in such a manner that
such damage cannot, in Landlord's reasonable judgment, be repaired within twelve
(12) months from the date of such casualty, Landlord shall so notify Tenant
within sixty (60) days after Landlord's receipt of the notice required pursuant
to Section 7. 01 hereof and Landlord may by such notice terminate this Lease. If
Landlord shall give such notice of termination, this Lease shall terminate on
the 30th day following the date Tenant receives notice of termination from
Landlord in accordance with the provisions of this Section provided that the
Basic Rent and Additional Charges, if any, payable by Tenant hereunder shall be
abated as of the date of such casualty in proportion to the area of the Demised
Premises that Tenant is unable to occupy.
Section 7.03. If during the Term the Demised Premises shall be
damaged or destroyed in any single casualty and Landlord (if permitted to do so)
does not give notice of its intention to terminates this Lease, as provided in
Section 7.02, this Lease shall continue in force and effect, and Landlord shall
repair, restore or replace the same as provided in Section 7.01; provided,
however, if the estimated time period for repair exceeds nine (9) months or if
such statement estimating the repair time is not delivered to Tenant, Tenant may
elect to terminate this Lease by notice to Landlord not later than thirty (30)
days following receipt of such statement or, if no statement has been delivered,
not later than thirty (30) days after the expiration of the time period such
statement should have been delivered to Tenant. If Tenant makes such election,
the Term shall expire upon the thirtieth (30th) day after notice of such
election is given by Tenant to Landlord; provided, however, that Landlord shall
not be required to proceed with such repairs if (A) the repair estimate exceeds
nine (9) months if the casualty occurs within the period from the first day of
the ninth (9th) Lease Year to the last day of the tenth (10th) Lease Year, and
(B) an "Event of Default" has occurred pursuant to such mortgage which is
continuing, unless such mortgagee can reasonably approve the contractor, and
payments with respect thereto, reasonably approve the receiver for the Demised
Premises, if any, and if permitted by law, and so long as Tenant agrees to renew
the Lease for Extended Term One without the right to terminate the Lease if the
"prevailing market rate" as determined by the parties or arbitration is
unsatisfactory.
Section 7.04. All insurance proceeds received by Landlord on
account of such damage or destruction (in excess of a casualty loss where
proceeds are less than $75,000, then the proceeds are not required to be placed
in an escrow account), less the actual cost, fees and expenses, if any, incurred
in connection with adjustment of the loss, shall be retained in escrow in an
interest earning account and held by the first mortgagee of Landlord, if any,
provided such mortgagee shall be an Institutional Mortgagee or, if there be none
or if the same is not a bank, in such bank as shall be selected by Landlord and
approved by Tenant, such approval not to be unreasonably withheld, conditioned
or delayed, under the name of Landlord and Tenant and shall be paid either to
reimburse Landlord for expenditures made to repair, restore or replace any part
of the Demised Premises so damaged or destroyed (which expenditures shall
include expenditures made for temporary repairs or for the protection of
property pending the completion of permanent repairs, restorations or
replacements to the Demised Premises, or to prevent interference with the
business operated thereon, and repairs, restorations or replacements thereto
then in process insofar as actually made or constructed) or to pay contractors,
subcontractors, materialmen, engineers, architects or other persons who have
rendered services or furnished materials for said repairs, restorations or
replacements (herein called the "Restoration"), and shall be withdrawn from the
account as
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hereinafter provided from time to time as the Restoration progresses upon the
written request of Landlord to Tenant, which shall be accompanied by the
following:
(a) A certificate of the architect or engineer in charge
of the Restoration (who shall be selected by Landlord and be reasonably
satisfactory to Tenant) dated not more than thirty (30) days prior to such
request, setting forth in substance as follows:
that the sum then requested to be withdrawn either
has been paid by Landlord, or is justly due to contractors,
subcontractors, materialmen, engineers, architects or other
persons who shall have rendered services or furnished
materials for the Restoration therein specified; the names of
such persons; a brief description of such services and
materials and the several amounts so paid or due to each of
such persons and a statement that none of the cost of the
services and materials described in the certificate has been
or is being made the basis, in any previous or then pending
request, for a payment under this Section or Section 8.04, and
that the sum then requested does not exceed the value of the
services and materials described in the certificate;
that, except for the amount, if any, stated pursuant
to the foregoing paragraph (1) of subsection (a) in such
certificate to be due for services or materials, there is not
outstanding any indebtedness known to the persons signing such
certificates which is then due for labor, wages, materials,
supplies or services in connection with the Restoration which,
if unpaid, might become the basis of a vendors, mechanic's,
laborer's or materialman's lien upon the Demised Premises or
any part thereof except for the following claims and disputes:
(list same); and
that the cost and any amounts due and under dispute
under paragraph (2) of subsection (a) above, as estimated by
the persons signing such certificate, of the Restoration
required to be done subsequent to the date of such certificate
in order to complete the Restoration does not exceed the
insurance proceeds remaining in the bank account after payment
of the sum requested in such certificate.
Upon compliance with the foregoing provisions of this Section,
the first mortgagee or Landlord shall be authorized by Tenant, whose approval
shall not be unreasonably delayed, withheld or conditioned but whose approval
shall be deemed approved five (5) days after delivery of any such request, out
of such insurance proceeds to pay or cause to be paid to Landlord or to the
persons named (pursuant to paragraph (1) of subsection (a) of this Section) in
such certificate the respective amounts stated therein to have been paid by
Landlord or to be due to them, as the case may be.
Section 7.05. Subject to the provisions of Section 6.03 hereof
and the receipt by Landlord of the proceeds of the insurance required to be
provided thereunder, if the Improvements shall be partially damaged or partially
destroyed by a casualty, the Basic Rent and Additional Charges payable hereunder
shall be abated to the extent that the Improvements shall have been rendered
untenantable for the period from the date of such damage or destruction to the
date the damage shall be repaired or restored. Subject to the provisions of
Section 6.03 hereof and the receipt by Landlord of the proceeds of the insurance
required to be provided thereunder, if the Improvements or a major part thereof
shall be damaged or destroyed that it is rendered untenantable on account of a
casualty, the Basic Rent and Additional Charges shall abate as of the date of
the damage or destruction and until Landlord shall repair, restore and rebuild
the Improvements, provided, however, that should Tenant reoccupy for the conduct
of its business a portion of the Improvements during the period the Restoration
work is taking place and prior to the date that the same are made completely
tenantable, Basic Rent and Additional Charges allocable to such portion shall be
payable by Tenant from the date of such occupancy.
ARTICLE 8
Condemnation
Section 8.01. Any award, payment or compensation relating to
the Land or the Landlord's fee
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estate in the Demised Premises to which it may be or become entitled during the
Term by reason of any taking of the Demised Premises or a part thereof, in or by
condemnation or other eminent domain Proceeding pursuant to any law, general or
special, or by reason of the temporary requisition of the use or occupancy of
the Demised Premises or a part thereof, by any governmental authority, civil or
military, whether the same shall be paid or payable in respect of Tenant's
leasehold interest hereunder or otherwise (except to the extent that same is
compensation for use of or damage to Tenant's equipment or machines not demised
hereunder, leasehold improvements, moving and relocation expenses or
compensation for loss of business), provided that such award, payment or
compensation and any interest or income earned thereon shall be applied as
hereinafter provided in this Article 8. Tenant shall be entitled to participate
in any such proceedings at Tenant's cost and expense.
Section 8.02. If during the Term (A) the Demised Premises
shall be taken in its entirety in or by condemnation or other eminent domain
Proceeding pursuant to any law, general or special, or (B) a substantial portion
of the Demised Premises, which shall be sufficient in the reasonable judgment of
Landlord to make the restoration or reconstruction of the remaining portion
thereof uneconomic, shall be taken in or by any such Proceeding Landlord shall
notify Tenant of either (A) or (B), as the case may be, within sixty (60) days
of such taking and either Landlord or Tenant may terminate this Lease by giving
the other party written notice of its intention to do so at that time. If
Landlord shall give such notice of termination, this Lease shall terminate on
the thirtieth (30th) day following the date Landlord gives such notice. If
Tenant shall give such notice of termination, this Lease shall terminate on the
date set forth in Tenant's termination notice, which date shall not be less than
thirty (30) or more than ninety (90) days after the date of such notice. If
however, neither Landlord nor Tenant elects to terminate the Lease, Landlord
shall repair, restore and rebuild the Demised Premises as nearly as possible to
its value, condition and character immediately prior to such taking and in
conformity with the provision of Section 8.04 hereof.
Section 8.03. If during the Term (A) a portion of the Demised
Premises shall be taken in or by condemnation or other eminent domain Proceeding
pursuant to any law, general or special, which taking does not affect the
Building, or more than ten percent (10%) of the Parking Area (provided, however,
if a greater portion of the Parking Area is so taken and Landlord builds
substitute space in another area of the Demised Premises to Tenant's reasonable
satisfaction, this provision shall not apply), (B) the use or occupancy of the
Demised Premises or a part thereof shall be temporarily requisitioned by any
governmental authority, civil or military, or (C) in any other case where
Landlord or Tenant, having a right so to do, fails to terminate this Lease as
herein provided, then this Lease shall continue in full force and effect, and
Landlord shall, within a reasonable time after any such taking and at its cost
and expense, provided any award payable in connection with such taking shall
then have been received by Landlord for deposit as hereinafter provided, repair,
restore and rebuild the Demised Premises as nearly as possible to its value,
condition and character immediately prior to such taking, and in conformity with
the requirements of Section 8.04 of this Lease. In all other cases (including if
the Building or more than 10% of the Parking Area shall be taken such that
Tenant cannot conduct its business), Tenant shall have the right to terminate
this Lease on written notice to Landlord given within thirty (30) days after
receipt from Landlord of notice of a taking. If Tenant shall give such notice of
termination, this Lease shall terminate on the date set forth in Tenant's
termination notice, which date shall not be less than thirty (30) or more than
ninety (90) days after the date of such notice. If, however, Tenant does not
elect to terminate the Lease, Landlord shall repair, restore and rebuild the
Demised Premises as nearly as possible to its value, condition and character
immediately prior to such taking and in conformity with the Provision of Section
8.04 hereof.
Section 8.04. Any award received by Landlord on account of
such taking, less the actual cost, fees and expenses, if any, incurred in
connection with obtaining the award, shall be held in escrow in an interest
bearing account by the first mortgagee of Landlord, if any, provided such
mortgagee shall be an Institutional Mortgagee or, if there be none or if the
same is not a bank, in such bank as shall be selected by Landlord and approved
by Tenant, such approval not to be unreasonably withheld, conditioned or
delayed, under the name of Landlord and Tenant and shall be paid either to
reimburse Landlord for expenditures made to repair, restore or rebuild any part
of the Demised Premises remaining after such taking (which expenditures shall
include expenditures made for temporary repairs or for the protection of
property pending the completion of permanent repairs, restorations or rebuilding
to the Demised Premises, or to prevent interference with the business operated
thereon, and repairs, restorations or rebuilding thereto then in process insofar
as actually made or constructed) or
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to pay contractors, subcontractors, materialmen, engineers, architects or other
persons who have rendered services or furnished materials for said repairs,
restorations or rebuilding (herein called the "Condemnation Restoration"), or to
pay any other expenses or costs for which an award may be made. Payment for the
Condemnation Restoration shall be withdrawn from the account from time to time
as the Condemnation Restoration progresses upon the written request of Landlord
to Tenant, which shall be accompanied by the following:
(a) A certificate of the architect or engineer in charge
of the Condemnation Restoration (who shall be selected by Landlord and be
reasonably satisfactory to Tenant) dated not more than thirty (30) days prior to
such request, setting forth in substance as follows:
that the sum then requested to be withdrawn either
has been paid by Landlord, or is justly due to contractors,
subcontractors, materialmen, engineers, architects or other
persons who shall have rendered services or furnished
materials for the Condemnation Restoration therein specified;
the names of such persons; a brief description of such
services and materials and the several amounts to be paid or
due to each of such persons; and a statement that none of the
cost of the services and material described in the certificate
has been or is being made the basis, in any previous or then
pending request, for a payment under this Section, and that
the sum then requested does not exceed the value of the
services and materials described in the certificate:
that, except for the amount, if any, stated (pursuant
to the foregoing paragraph (1) of subsection (a)) in such
certificate to be due for services or materials, there is not
outstanding any indebtedness known to the person signing such
certificate which is then due for labor, wages, materials,
supplies or services in connection with the Condemnation
Restoration which, if unpaid, might become the basis of a
vendor's, mechanic's, laborer's or materialmen's lien upon the
Demised Premises or any part thereof except for the following
claims and disputes: (list same); and
that the cost and any amounts due and under dispute
under paragraph (2) of subsection (a) above, as estimated by
the persons signing such certificate, of the Condemnation
Restoration, does not exceed the insurance proceeds remaining
in the bank account after payment of the sum requested in such
certificate.
Upon compliance with the foregoing provisions of this Section,
the first mortgagee or Landlord shall be authorized by Tenant, whose approval
shall not be unreasonably delayed, withheld or conditioned but whose approval
shall be deemed approved five (5) days after delivery of any such request, out
of such award, to pay or cause to be paid to Landlord or to the persons named
(pursuant to paragraph (1) of subsection (a) of this Section) in such
certificate the respective amounts stated therein to have been paid by Landlord
or to be due to them, as the case may be. If such award shall be more than
sufficient to pay the entire cost of the Condemnation Restoration, the excess
shall be the property of Landlord.
Section 8.05. If during the Term any part of the Demised
Premises is taken, the Basic Rent payable hereunder shall be adjusted as of the
date of such taking pursuant to agreement to be reached between the parties
based upon the diminishment of the economic value of the Demised Premises as a
result of such taking. If the parties are unable to agree on such adjustment to
the Basic Rent, the matter shall be submitted to arbitration pursuant to the
Arbitration Procedure.
Section 8.06. If there shall be a condemnation of a part of
the Demised Premises and this Lease shall not be terminated and the parties are
unable to agree on an adjustment to the Basic Rent within 3 months of such
taking, or if Landlord and Tenant are unable to agree on the fair and reasonable
market value of the Demised Premises pursuant to Article 28 hereof, then the
determination of the fair and reasonable market rental value of the Demised
Premises shall be determined by arbitration in Boca Raton, Florida, in
accordance with the rules, regulations and procedures (except as herein
modified) of the American Arbitration Association or an organization which is
the successor thereto ("AAA"), as follows (the "Arbitration Procedure"):
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(a) The party invoking the arbitration procedure shall
give a notice (the "Arbitration Notice") to the other party stating that the
party sending the Arbitration Notice desires to meet within five (5) days to
attempt to agree on a single arbitrator to determine the matter in dispute (the
"Arbitrator"). If Landlord and Tenant have not agreed on the Arbitrator within
ten (10) days after the giving of the Arbitration Notice, then either Landlord
or Tenant, on behalf of both, may apply to the local office of the AAA for
appointment of the Arbitrator. If the AAA shall fail refuse or be unable to act
such that the Arbitrator is not appointed by the AAA within thirty (30) days
after application therefor, then either party may apply to the Circuit Court of
Palm Beach County, Florida (or any other court having jurisdiction and
exercising functions similar to those now exercised by said court) (the "Court")
for the appointment of the Arbitrator and the other party shall not raise any
question as to the Court's full power and jurisdiction to entertain the
application and make the appointment. The date on which the Arbitrator is
appointed, by the agreement of the parties, by appointment by the AAA or by
appointment by the Court, is referred to herein as the "Appointment Date." If
any Arbitrator appointed hereunder shall be unwilling or unable, for any reason,
to serve, or continue to serve, a replacement arbitrator shall be appointed in
the same manner as the original Arbitrator.
(b) The arbitration shall be conducted in accordance with
the then prevailing rules of the AAA, modified as follows:
To the extent that the laws of the State of Florida
impose requirements different than those of the AAA in order
for the decision of the Arbitrator to be enforceable in the
courts of the State of Florida, such requirements shaft be
complied with in the arbitration.
The Arbitrator shall be disinterested and impartial,
shall not be affiliated with Landlord or Tenant and, in the
case of an arbitration as to Extended Term Market Rental (as
defined in Section 28.01(a)(ii)), shall be an MAI appraiser
with at least ten (10) years' experience in the determination
of fair market rentals in comparable buildings in the Boca
Raton, Florida region.
Before hearing any testimony or receiving any
evidence, the Arbitrator shall, be sworn to hear and decide
the controversy faithfully and fairly by an officer authorized
to administer an oath and a written copy thereof shall be
delivered to Landlord and Tenant.
Within ten (10) days after the Appointment Date,
Landlord and Tenant shall deliver to the Arbitrator two (2)
copies of their respective written determinations of the
matter in dispute (each, a "Determination"), together with
such affidavits, appraisals, reports and other written
evidence relating thereto as the submitting party deems
appropriate. After the submission of any Determination, the
submitting party may not make any additions to or deletions
from, or otherwise change, such Determination or the
affidavits, appraisals, reports and other written evidence
delivered therewith. If either party fails to so deliver its
Determination within such time period, time being of the
essence with respect thereto, such party shall be deemed to
have irrevocably waived its right to deliver a Determination
and the Arbitrator, without holding a hearing, shall accept
the Determination of the submitting party as the matter in
dispute. If each party submits a Determination within the ten
(10) day period described above, the Arbitrator shall,
promptly after its receipt of the second Determination,
deliver a copy of each party's Determination to the other
party.
If the matter in dispute has not been determined
pursuant to clause (iv) of this subparagraph (b), then not
less than three (3) days nor more than fifteen (15) days after
the earlier to occur of (A) the expiration of the ten (10) day
period provided for in clause (iv) of this subparagraph (b) or
(B) the Arbitrator's receipt of both of the Determinations
from the parties (such earlier date is referred to herein as
the "Submission Date"), and upon not less than three (3) days'
notice to the parties, the Arbitrator shall hold at least one
(but may hold more) hearings with respect to the determination
of the matter. The hearings shall be held in Boca Raton,
Florida at such location and time as shall be specified by the
Arbitrator. Each of the parties shall be entitled to present
all relevant evidence and to cross-examine witnesses at the
hearings. The
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Arbitrator shall have the authority to adjourn any hearing to
such later date as the Arbitrator shall specify, provided that
in all events all hearings with respect to the determination
of the dispute shall be concluded not later than twenty (20)
days after the Submission Date.
Except as otherwise provided in clause (v) of this
subparagraph (b), where a matter in dispute involves the
determination of a liquidated amount, such as the amount of
Extended Term Market Rental, the Arbitrator shall be
instructed, and shall be empowered only, to select as the
resolution to the dispute that one of the Determinations which
the Arbitrator believes is the more accurate determination of
such amount. Without limiting the generality of the foregoing,
in rendering his or her decision, the Arbitrator shall not add
to, subtract from or otherwise modify the provisions of this
Lease or either of the Determinations.
The Arbitrator shall render his or her determination
as to the selection of a Determination in a signed and
acknowledged written instrument, original counterparts of
which shall be sent simultaneously to Landlord and Tenant,
within ten (10) days after the earlier to occur of (A) his or
her determination of the dispute pursuant to clause (iv) of
this subparagraph (b) or (B) the conclusion of the hearing(s)
required by clause (v) of this subparagraph.
(c) The arbitration decision, determined as provided in
this Article, shall be conclusive and binding on the parties, shall constitute
an "award" by the Arbitrator within the meaning of the AAA rules and applicable
law and judgment may be entered thereon in any court of competent jurisdiction.
(d) Each party shall pay its own fees and expenses
relating to the arbitration (including, without limitation, the fees and
expenses of its counsel and of experts and witnesses retained or called by it).
Each party shall pay one-half (1/2) of the fees and expenses of the AAA and of
the Arbitrator, provided that (i) the Arbitrator shall have the authority to
award such fees and expenses in favor of the prevailing party and (ii) if either
party fails to submit a Determination within the period provided therefor, such
nonsubmitting party shall pay all of such fees and expenses.
Section 8.07. In event of any temporary requisition, as
provided in (B) of Section 8.03 of this Lease, the entire net award or
compensation received by Landlord shall be paid over directly to Tenant if no
Event of Default exists under this Lease. If such taking shall be for a period
extending beyond the Term of this Lease, such award shall be allocated to the
period of taking and paid to Tenant for the part of the Term taken and the
balance paid to Landlord.
Section 8.08. All amounts paid pursuant to any agreement with
any condemning authority made in settlement of any condemnation or other eminent
domain Proceeding affecting the Demised Premises shall be deemed to constitute
an award made in such Proceeding.
ARTICLE 9
Unavoidable Delay
Section 9.01. If, by reason of unavoidable delay, Tenant shall
be unable to fit its obligations (other than its obligation to pay Basic Rent
and Additional Charges and any other monetary obligations) under this Lease or
shall be unable to supply any service or perform any act which Tenant is
obligated to supply or perform, this Lease shall in no way be affected, impaired
or excused and Tenant shall not be deemed in breach hereof except as otherwise
expressly set forth to the contrary herein.
Section 9.02. If, by reason of unavoidable delay, Landlord
shall be unable to fulfill its obligations under this Lease or shall be unable
to supply any service or perform any act which Landlord is obligated to supply
or perform, this Lease and Tenant's obligation to pay rent hereunder shall in no
way be affected, impaired or excused and Landlord shall not be deemed in breach
hereof except as otherwise expressly set forth to the contrary herein.
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ARTICLE 10
Improvements
Section 10.01. Tenant shall have no right to remove any of
the Building machinery, equipment or fixtures from the Demised Premises except
to the extent provided in Sections 10.02 and 11.05.
Section 10.02. Upon the expiration or earlier termination of
the term of this Lease, all Improvements then located on the Demised Premises
shall, with the Demised Premises, be vacated and surrendered by Tenant to
Landlord, and Tenant agrees to execute and deliver to Landlord such deeds,
assignments or other instruments of conveyance (collectively, the "Instruments
of Conveyance") as Landlord may deem reasonably necessary to evidence such
transfer of title to Landlord. The Instruments of Conveyance shall include an
assignment by Tenant of all of Tenant's right, title and interest as landlord
in and to all subleases affecting the Demised Premises. All Improvements
constructed or caused to be constructed by Tenant shall be of a quality
appropriate for first class office buildings in the Boca Raton, Florida area.
ARTICLE 11
Maintenance and Repairs, Utilities
Section 11.01. Except as otherwise expressly provided herein,
throughout the Term, Tenant shall, at its sole cost and expense, take good care
of the Demised Premises, including, without limitation, all alleyways and
passageways and the sidewalks, curbs, vaults, fences, landscaping and paved
areas constituting part of the Demised Premises, and keep the same in good
order and condition, ordinary wear and tear and obsolescence excepted, and make
all necessary repairs thereto, interior and exterior, ordinary and
extraordinary, foreseen and unforeseen. When used in this Article, the term
"repairs" shall include all necessary replacements, renewals, alterations,
additions and betterments, and any rebuilt, additional or substituted
buildings, structures, facilities and other improvements. All repairs made by
Tenant shall be equal in quality and class to the original work if an
excavation she be made upon land adjacent to or under the Improvements, or
shall be authorized to be made, Tenant shall afford to the person causing or
authorized to cause such excavation license to enter the Demised Premises for
the purpose of performing such work as said person shall deem necessary or
desirable to preserve and protect the Improvements from injury or damage and to
support the same by proper foundations, without any claim for damages or
liability against Landlord and without reducing or otherwise affecting Tenant's
obligations under this Lease.
Section 11.02. The necessity for and adequacy of repairs to
and maintenance of the Improvements pursuant to this Article shall be measured
by the standard which is appropriate for first class office buildings in the
Boca Raton, Florida area.
Section 11.03. Except as otherwise expressly provided in the
Lease, Landlord shall not be required to furnish any services, facilities or
utilities or to make any repairs or alterations in or to the Demised Premises,
Tenant hereby assuming the full and sole responsibility for the condition,
operation, repair, replacement, maintenance and management of the Demised
Premises.
Section 11.04. With respect to repair and maintenance of the
Demised Premises, Landlord and Tenant hereby agree as follows:
(a) Subject to the provisions of Article 7 of this
Lease, Landlord at its expense shall except for such
structural repairs caused or necessitated by any act (other
than normal wear and tear) or negligence of Tenant, make all
structural repairs as and when needed in or about or to the
Improvements together with the repair of any damage to the
Improvements caused by the performance of such structural
repairs. Structural repairs shall be deemed to include,
without limitation, any and all repairs required to maintain
the roof of the Building in good condition. Tenant shall
cooperate with Landlord in keeping all unauthorized persons
from gaining access to
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the roof Tenant shall not permit any activity or work that
may, directly or indirectly, penetrate the roof and the roof
membrane of the Building.
(b) Tenant agrees that Tenant shall, at Tenant's
sole cost and expense, retain and contract with an elevator
maintenance contractor approved by Landlord (which approval
shall not be unreasonably withheld, delayed or conditioned)
to maintain all the elevators in the Demised Premises in good
working order and condition. The obligations and
responsibilities to be undertaken by such elevator contractor
shall be limited to the services set forth in Schedule D
attached hereto and made a part hereof Landlord, at its
expense, shall be responsible for making any repairs to the
elevators in the Demised Premises which are not within the
services provided by Tenant's elevator contractor in
accordance with Schedule D.
(c) Tenant shall throughout the term hereof, at
Tenant's sole cost and expense, maintain the Building
heating, ventilation and air-conditioning equipment and
system (hereafter referred to as the "HVAC System") in good
working order and repair, including, without limitation, the
retention and contracting with an HVAC maintenance contractor
approved by Landlord, which approval shall not be
unreasonably withheld, delayed or conditioned, to so maintain
the HVAC System. Tenant shall, except as hereinafter in this
subsection 11.04(c) or subsection 11.04(f) provided, at
Tenant's expense, be responsible for all repairs, maintenance
and, if required, replacements of and to the HVAC System.
Notwithstanding the foregoing, Landlord shall, unless the
need therefor results from the misuse, abuse of or failure to
properly maintain (pursuant to Schedule D) the HVAC System
(or any part thereof) by Tenant or its agents, employees,
contractors or invitees, be responsible for the replacement
if any, with new comparable equipment of any compressor,
condenser, pumps, cooling tower, dehumidifier, evaporative
coolers, roof ventilation fans, electronic air cleaners,
fans, and systems control units comprising a part of the HVAC
System. All other repairs, maintenance and replacement of the
HVAC System and all repairs, maintenance and replacement of
any supplemental HVAC equipment or system installed by Tenant
or at Tenant's expense in the Demised Premised shall be
solely the responsibility of Tenant at Tenant's sole cost and
expense.
(d) Tenant shall throughout the Term, at Tenant's
sole cost and expense, retain and contract with a boiler
maintenance and repair contractor approved by Landlord, which
approval shall not be unreasonably withheld, delayed or
conditioned, to maintain the boiler serving the Building in
good working order and condition. The obligations and
responsibilities to be undertaken by such aforesaid boiler
contractor shall include, without limitation, the services
set forth on Schedule E attached hereto and made a part
hereof. Tenant shall at Tenant's expense, be responsible for
all repairs, maintenance and, if required, replacements of
and to such boiler and the equipment relating thereto, except
for such repairs or replacements during the Term as may be
necessitated by a latent defect in (i) the boiler or (ii)
Landlord's installation of the boiler, in which event the
repairs and replacements shall be made by Landlord at
Landlord's expense.
(e) Landlord shall make available for the benefit of
Tenant all guarantees and warranties that Landlord received
in connection with the construction of the Improvements, the
equipment installed therein and Landlord's Work (as such term
is defined in the Construction Agreement), and Landlord
agrees to cooperate with Tenant, at Tenant's sole cost and
expense, to obtain the benefits of such guarantees and
warranties; provided, however, that the foregoing shall in no
way relieve Landlord of its obligations set forth in this
Section 11.0.4 or elsewhere in this Lease.
Section 11.05. Tenant will not do, permit or suffer any
waste, damages, disfigurement or injury to or upon the Demised Premises or any
part thereof with the prior written approval of the Landlord, which approval
shall not be unreasonably withheld or delayed, Tenant shall have the right at
any time and from time to time to sell or dispose of any budding machinery,
equipment or fixtures subject to this Lease which may have become obsolete or
unfit for use or which is no longer useful, necessary or profitable in the
conduct of Tenant's
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business; provided, however, that Tenant shall have substituted or shall
promptly substitute for the property so removed from the Improvements other
building machinery, equipment or fixtures not necessarily of the same character
but at least of equal quality and utility in the performance of the particular
function in question as that of the property so removed unless, in Tenant's
reasonable opinion as set forth in written notice to Landlord, the property so
removed was performing an obsolete function and replacement thereof is not
necessary or appropriate to maintain the operation or character of the Demised
Premises, its use and occupancy by subtenants or its overall value without
impairment. Without the prior written approval of Landlord, Tenant may at any
time and from time to time sell or dispose of any building machinery, equipment
or fixtures subject to this Lease which may have become obsolete or unfit for
use or which is no longer useful necessary or profitable in the conduct of
Tenant's business, which machinery, equipment or fixtures do not exceed Twenty
Thousand Dollars ($20,000.00) in cost in any one year, so long as Tenant shall
have substituted the removed and/or replaced machinery, equipment or fixtures
as hereinabove provided.
Section 11.06. Tenant shall contract directly for and be
responsible for all charges for electricity, gas, water, sewer, heat, power,
telephone or other communication devices and all other utilities or services
supplied to the Demised Premises and the cost of repair, maintenance,
replacement, and reading of any meters measuring Tenant's consumption thereof
Tenant expressly agrees that Landlord shall not be responsible for the failure
of supply to Tenant, of any of the aforesaid or any other utility services.
ARTICLE 12
Alterations and Additions
Section 12.01. Tenant shall make no alterations,
installations, additions, substitutions or improvements (hereinafter sometimes
collectively referred to as "Alterations"), whether or not the same shall
constitute waste, in or to the Demised Premises without Landlord's prior
written consent, except that Landlord's consent shall not be required for
Alterations to the interior of the Improvements, provided that (i) neither the
outside appearance nor the roof facade or structural integrity of the
Improvements shall be affected and (ii) the proper functioning or basic design
of any of the mechanical, electrical, heating, ventilating or air conditioning
and other systems of the improvements shall not be adversely affected or
adversely modified. Landlord shall not unreasonably withhold or delay its
consent to Alterations (a) physically affecting any part of the Demised
Premises exclusive of the Improvements, (b) which will not adversely affect the
structural integrity of the Improvements, or (c) which do not affect the roof
of the Improvements. Prior to the commencement of any Alterations, Tenant will
give Landlord written notice thereof together with plans and specifications for
the work (if plans and specifications are customarily prepared for such work),
and will otherwise comply with the provisions of this Article 12. Tenant shall
promptly pay all costs and expenses incurred in connection with each such
addition, alteration, removal or substitution and shall discharge any and all
liens filed against the Demised Premises arising out of each thereof Tenant
shall procure and pay for all permits and licenses required in connection with
any such addition, alteration, removal or substitution. All Alterations
constructed or caused to be constructed by Tenant shall be of a quality
appropriate for first class office buildings in the Boca Raton, Florida area.
Provided, however, notwithstanding anything contained herein
to the contrary, Tenant shall have the right, prior to occupancy of the Demised
Premises, to make the alterations described on Exhibit "B" of this Lease,
without the prior written consent of the Landlord.
ARTICLE 13
Compliance with Legal Requirements, Use
Section 13.01. (a) Tenant shall during the Term, at its sole
cost and expense, promptly comply with all Legal Requirements which may be
applicable to the Demised Premises or to the manner or use or occupancy thereof
Tenant shall likewise observe and comply with the requirements of all policies
of public liability, fire and other insurance at any time in force with respect
to the Demised Premises.
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(b) Notwithstanding any language to the contrary contained
herein, in the event that Tenant's compliance with any Legal Requirements or
any direction of any public officer shall require any capital improvement, any
material capital construction improvement or structural alteration (including
without limitation any alteration relating to the facade, roof or sprinkler
system and any such improvement or alteration is hereinafter referred to as a
"Structural Alteration") of the Improvements, unless such Structural Alteration
is required by reason of a condition other than the use of the Building for
general executive and administrative offices or, with respect to the Parking
Area, for parking purposes, or is required by reason of a breach of any of
Tenant's covenants and agreements hereunder (including Tenant's failure to
maintain the Demised Premises as provided in Article 12), Landlord shall
reimburse to Tenant all of the costs of any such Structural Alteration upon
Landlord's receipt of paid invoices therefore.
(c) Notwithstanding any language to the contrary contained in
Section 13.01 (b), any Structural Alteration required by reason of a breach by
Landlord of any of its covenants and agreements hereunder shall be made by
Landlord at Landlord's sole cost and expense.
(d) In the event that Landlord shall fail to pay to Tenant
any amounts owing to Tenant pursuant to this Section 13.01 within twenty (20)
days after the date due, Tenant may offset, after five (5) Business Days'
notice by Tenant to Landlord of its intention to do so, the amount owed,
together with interest thereon computed at the Default Rate from the due date
until the date Tenant offsets such amount against the next installments of
Basic Rent or Additional Charges due hereunder.
Section 13.02. Tenant shall have the right, after prior
written notice to Landlord, to contest by appropriate legal proceedings, in the
name of Tenant or Landlord or both, at Tenant's sole cost and expense, the
validity of any Legal Requirement of the nature referred to in Section 13.01 of
this Lease. If by the terms of any such Legal Requirement compliance therewith
may legally be held in abeyance without incurring any lien, charge or liability
of any kind against the Demised Premises, and without subjecting Tenant or
Landlord to any fines, penalties or other liability (including forfeiture of
the estate of Landlord or Tenant in the Demised Premises) for failure to comply
therewith, Tenant may postpone compliance until the final determination of any
such proceedings, provided that all proceedings shall be prosecuted with due
diligence. Landlord shall also have the right to contest the validity of any
such Legal Requirement in the event Tenant elects not to do so and so long as
the aforesaid conditions shall be met.
Section 13.03. Tenant shall not cause or maintain or permit
to be caused or maintained any nuisance in or upon the Demised Premises. Tenant
shall not suffer or permit the Demised Premises, or any portion thereof, to be
used by the public, as such, in any way as would impair Landlord's title
thereto.
Section 13.04. Tenant shall use and occupy the Demised
Premises for general office uses and related uses incidental thereto as shall
be reasonably required by Tenant in the operation of its business and as are
consistent with a first class office building in Boca Raton, Florida.
Section 13.05. (a) Throughout the Term, Tenant shall not
undertake or permit any Environmental Activity (as defined below) other than
(i) in compliance with all applicable Legal Requirements, (ii) as is customary
for general office tenants in first-class office buildings in Boca Raton,
Florida and (iii) in such a manner as shall keep the Demised Premises free from
any lien imposed pursuant to any Legal Requirement in respect of such
Environmental Activity. Tenant shall implement and maintain a program to ensure
that any Environmental Activity undertaken or permitted at the Premises is
undertaken in a manner as to provide prudent safeguards against potential risks
to human health or the environment. Tenant shall notify Landlord within 24
hours of Tenant's actual knowledge of the release of any Hazardous Materials
(as hereinafter defined) from or at the Demised Premises which could form the
basis of any claim, demand or action by any party. Landlord shall have the
right from time to time, at reasonable times and upon reasonable prior notice,
to conduct an environmental audit of the Demised Premises and Tenant shall
cooperate in the conduct of such environmental audit. If Tenant shall breach
the covenants provided in this Section 13.05, then, in addition to any other
rights and remedies which may be available to Landlord under this Lease or
otherwise at law, Landlord may require Tenant to take all actions, or to
reimburse Landlord for the costs of any and all actions taken by Landlord as
are necessary or
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reasonably appropriate, to cure such breach. Tenant agrees, to the extent not
covered by the proceeds of insurance paid to Landlord, to indemnify and save
harmless Landlord from and against any and all liabilities, obligations,
damages, penalties, claims, costs, charges and expenses, including reasonable
attorneys' fees which may be imposed upon or incurred by or asserted against
Landlord with respect to any Environmental Activity of Tenant (except to the
extent the same arises from any act, omission or negligence of Landlord, its
contractors, licensees, agents, servants, employees, invitees or visitors), by
reason of any of the following occurring during the Term: (a) any work or thing
done in, on or about the Demised Premises or any part thereof by Tenant or any
agent, contractor, employee, servants, licensee, invitee or visitor of Tenant,
(b) any use, nonuse, possession, occupation, condition, operation, maintenance
or management of the Demised Premises or any part thereof; and (c) any
negligence of Tenant or any agent, contractor, employee, licensee (other than
Landlord) or invitee of Tenant. For purposes of this Section 13.05,
"Environmental Activity" means any use, storage, installation, existence,
release, threatened release, discharge, generation, abatement, remove disposal,
handling or transportation from, under, into or on the Premises of (A) any
"hazardous substance" as defined in ss. 101(14) of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. ss. 9601(14),
as amended; (B) petroleum, crude oil or any fraction thereof natural gas or
synthetic gas used for fuel; and (C) any additional substances or materials
which at such time are classified or considered to be hazardous or toxic under
the laws of the State of Florida or any other Legal Requirements (the materials
described in clauses (A) through (C) above are collectively referred to herein
as "Hazardous Materials"). The obligations of Tenant under this Section 13.05
shall survive the expiration or sooner termination of this Lease.
(b) Landlord represents that, to the best of Landlord's
knowledge, there are no Hazardous Materials present at or in the Demised
Premises the nature, concentration or condition of which violates any Legal
Requirement. If, at any time during the term of this Lease, Landlord becomes
aware that the foregoing representation was inaccurate in any material respect,
Landlord shall take all actions necessary, at its sole cost and expense, to
correct any condition or conditions the existence of which renders such
representations inaccurate. Landlord agrees, to the extent not covered by the
proceeds of any insurance paid, to indemnify and save harmless Tenant from and
against any and all liabilities, obligations, damages, penalties, claim, costs,
charges and expenses, including reasonable attorneys' fees which may be imposed
upon or incurred by or asserted against Tenant with respect to any
Environmental Activity of Landlord (except to the extent the same arises from
any act, omission or negligence of Tenant, its contractors, licensees, agents,
servants, employees, invitees or visitors), by reason of any of the following
having occurred prior to or during the Term: (a) any work or thing done in, on
or about the Demised Premises or any part thereof by Landlord or any agent,
contractor, employee, servants, licensee, invitee or visitor of Landlord, (b)
any use, nonuse, possession, occupation, condition, operation, maintenance or
management of the Demised Premises or any part thereof, and (c) any negligence
of Landlord or any agent, contractor, employee, licensee (other than Tenant) or
invitee of Landlord.
ARTICLE 14
Discharge of Liens
Section 14.01. In the event that the Demised Premises or any
part thereof or Tenant's leasehold interest therein shall, at any time during
the Term, become subject to any vendor's, mechanic's, laborer's, materialman's
or other lien, encumbrance or charge because of the negligence of or action or
nonaction of Tenant or its representatives, Tenant shall cause the same, at its
sole cost and expense, to be discharged, by payment, bonding, deposit or
otherwise, within thirty (30) days after notice thereof. Notwithstanding the
foregoing provisions of this Section 14.01, Tenant will not be required to
discharge any mechanic's, laborer's or materialmen's lien which does not
encumber Landlord's interest in the Demised Premises if Tenant is in good faith
contesting the same and has furnished a cash deposit or a security bond or
other such security satisfactory to Landlord in an amount sufficient to pay
such lien with interest and penalties.
Section 14.02. Nothing contained in this Lease shall be
deemed or construed in any way as constituting the consent or request of
Landlord, express or implied, by inference or otherwise, to any contractor,
subcontractor, laborer or materialman for the performance of any work, labor or
services or the furnishing of any materials for any mechanic's, laborer's,
materialman's or other lien, encumbrance or charge against the Demised
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Premises or any part thereof nor as giving Tenant any right power or authority
to contract for or permit the rendering of any services or the furnishing of
materials that would give rise to the filing of any lien against the Demised
Premises or any part thereof. Notice is hereby given, and Tenant will cause all
agreements it enters into for construction to provide, that Landlord will not
be liable for any work performed or to be performed at the Demised Premises for
Tenant or any subtenant or for any materials furnished or to be furnished at
the Demised Premises for any of the foregoing, and that no mechanic's or other
lien for such work or materials will attach to or affect the estate or interest
of Landlord in and to the Demised Premises or any part thereof. Landlord shall
have the right at all reasonable times to post and keep posted on the Demised
Premises any notices that may be provided by law which Landlord may deem
necessary for the protection of Landlord and the Demised Premises from such
liens.
Section 14.03. Tenant has and will have no power to do any
act or make any contract which may create or be the foundation for any lien,
mortgage or other encumbrance upon the estate or assets of Landlord or of any
interest of it in the Premises, notwithstanding anything herein to the
contrary. Tenant shall strictly comply with the provisions of Chapter 713,
Florida Statutes, and shall give each contractor performing work or providing
materials or equipment to the Demised Premises with the notices hereof.
ARTICLE 15
Right of Performance, Abatement
Section 15.01. Landlord shall have the right at any time,
after fifteen (15) days' written notice to Tenant (or with telephonic notice in
case of emergency or in case any fine, penalty, interest or cost may otherwise
be imposed or incurred), to make any payment or perform any act required by
Tenant under this Lease, and in exercising such right, to incur necessary and
incidental costs and expenses, including reasonable attorneys' fees. Nothing
herein shall imply any obligation on the part of Landlord to make any payment
or perform any act required of Tenant, and the exercise of the right so to do
shall not constitute a release of any obligation or a waiver of any default.
Section 15.02. All payments made by Landlord and all
reasonable costs and expenses incurred by Landlord, including but not limited
to reasonable counsel fees, in connection with any exercise of such right,
together with interest at the Default Rate from the respective dates of the
making of such payments or the incurring of such costs and expenses, shall be
payable to Landlord by Tenant within ten (10) days after demand.
Section 15.03. If Landlord shall default in the observance or
performance of any term or covenant on Landlord's part to be observed or
performed under or by virtue of any of the terms or provisions of this Lease,
(a) Tenant may remedy such default for the account of Landlord, immediately and
with telephonic notice in case of emergency, or in any other case only provided
that Landlord shall fail to remedy such default after Tenant shall have
notified Landlord in writing of such default and Landlord shall not have cured
such default within fifteen (15) days after such notice or in the case of a
default which cannot with due diligence be cured within a period of fifteen
(15) days if Landlord shall not within said fifteen (15) day period have
instituted steps to remedy the situation and thereafter diligently prosecuted
the same to completion; and (b) if Tenant makes any expenditures or incurs any
obligations for the payment of money in connection with such default including,
but not limited to, reasonable attorneys' fees in instituting, prosecuting or
defending any action or proceeding, such sums paid or obligations incurred,
with interest at the Default Rate from the respective dates of the making of
such payments or incurring of such costs and expenses, shall be paid by
Landlord to Tenant upon rendition of a bill to Landlord therefor within ten
(10) days. If Landlord shall fail to pay such sums to Tenant within ten (10)
days after rendition of a bill therefor, then Tenant may offset such amount
against the rent payable under this Lease. Any dispute with respect to sums
Tenant claims are owed by Landlord under this Section 15.03 (whether or not
such sums have been offset against rent) shall be resolved by arbitration in
accordance with the provisions of Section 8.06 hereof and any sums which are
determined to be owing by Landlord to Tenant in such arbitration proceeding,
shall be paid to Tenant with interest thereon calculated at the Default Rate
for the period from the due date until the date of payment thereof and any sums
which are determined to be owing by Tenant to Landlord in such arbitration
proceeding, shall be paid to Landlord with interest thereon calculated at the
Default Rate for the period from the
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date due until the date of payment thereof. All the offset rights expressly
granted to Tenant pursuant to the provisions of the Lease are hereby deemed
granted to Tenant pursuant to this Article 15.
Section 15.04. No remedy to which Tenant may resort under
this Lease shall be exclusive of any other remedies or means of redress to
which Tenant may lawfully be entitled at any time and Tenant may invoke any
remedy allowed at law or in equity except as Tenant may be specifically
restricted pursuant to the provisions of this Lease.
Section 15.05. No remedy to which Landlord may resort under
this Lease shall be exclusive of any other remedies or means of redress to
which Landlord may lawfully be entitled at any time, no election by Landlord to
pursue any remedy will prevent Landlord from simultaneously or subsequently
pursuing any other remedy, except as Landlord may be specifically restricted
pursuant to the provisions of this Lease or at law or in equity, and Landlord
may invoke any remedy allowed at law or in equity except as Landlord may be
specifically restricted pursuant to the provisions of this Lease.
Section 15.06. If the Demised Premises shall be rendered
untenantable for a period of five (5) consecutive days by reason of Landlord's
failure or inability to supply any service or perform any act which it is
obligated to supply or perform under this Lease and provided that during such
period of untenantability Tenant actually discontinues its use of five (5%)
percent or more of the rentable area of the Building for the conduct of its
business, then unless such cessation of services is caused by the negligence or
intentional or wrongful act or omission of Tenant, its agents, employees,
contractors or invitees, (a) the Basic Rent and Additional Charges payable
pursuant to this Lease shall abate for the remainder of any such period of
untenantability in an amount proportionate to the rentable area of the Building
which Tenant has discontinued using, and (b) if such period of untenantability
shall continue for twenty (20) consecutive days, Tenant shall have the right to
terminate this Lease upon fifteen (15) days prior notice to Landlord, which
notice shall be given during the thirty (30) days following the expiration of
such twenty (20) day period, and unless prior to the expiration of the fifteen
(15) day notice period Landlord shall restore such service or perform such act,
this Lease shall terminate upon the expiration of such fifteen (15) day notice
period and all further obligations of the parties hereunder shall end except
those obligations which expressly survive the expiration or termination of this
Lease.
ARTICLE 16
Entry by Landlord
Section 16.01. Subject to reasonable security regulations
generally applicable to the Tenant's use of the Demised Premises, at any time
during Tenant's regular business hours, Landlord, through its agents or
employees, shall have the right to enter the Demised Premises to inspect the
Demised Premises and to exhibit the same to prospective purchasers or
mortgagees.
ARTICLE 17
Assignment and Subletting
Section 17.01. Subject to the terms and conditions set forth
herein and Landlord's right of first offer, as hereinafter provided, Tenant may
assign its interest under this Lease, or sublet the Demised Premises or a part
thereof or grant easements, licenses, rights-of-way and other rights and
privileges in the nature of easements with respect to the Demised Premises
without Landlord's consent. No assignment or sublease shall affect or reduce
any obligations of Tenant or rights of Landlord hereunder (including Landlord's
rights under Article 20 in case of default), and all obligations of Tenant
hereunder shall continue in full force and effect as the obligations of a
principal and not of a guarantor or surety, to the same extent as though no
assignment or subletting had been made. Notwithstanding the preceding sentence,
Tenant shall be released from any further obligations and liabilities under the
Lease in connection with an assignment of the Lease if Tenant shall have
provided Landlord with financial statements of such assignee that show to
Landlord's reasonable satisfaction that such assignee has the financial ability
to meet its obligations under the Lease, taking into consideration the Basic
Rent, the
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Additional Charges and the Lease Years, remaining under the Term, such
assignment does not result in a less credit worthy tenant than W.R. Grace &
Co.-Conn, based upon commercially reasonable standards, and such assignee
agrees in writing to assume all of the obligations of Tenant under the Lease.
Tenant shall within ten ( 10) days after the execution and delivery of any such
assignment, deliver a conformed copy thereof to Landlord, and within ten (10)
days after the execution and delivery of any such sublease shall give notice to
Landlord of the existence and term of such sublease and of the name and address
of the Subleases.
Provided, however, in the event that Tenant desires to assign this Lease, or
sublease all or a portion of the Premises to another party or parties, Tenant
shall first provide to Landlord thirty (30) days advance written notice of
Tenant's bona fide intent to assign the Lease or to sublet all or any part of
the Premises. Landlord shall have the right, at its option, during said thirty
(30) day period, to (a) release Tenant from this Lease or the portion thereof
to be sublet, as the case may be, or (b) sublet all or any part of the Premises
from Tenant at the same rental Tenant is paying Landlord, with the right to
further sublease such space, provided, however, so long as the Tenant remains
liable on this Lease, any rent received as a result of a sublease in excess of
the rent otherwise due and payable hereunder shall belong to the Tenant.
Provided, further, no sublease shall be made if it results in an occupancy of
more than six (6) tenants (including the Tenant) in the Premises.
Section 17.02. During the Term neither this Lease nor the
term hereby demised shall, without Landlord's prior written consent (not to be
unreasonably withheld, delayed or conditioned), be mortgaged by Tenant, nor
shall Tenant mortgage or pledge the interest of Tenant in and to any sublease
of the Demised Premises or the rentals payable thereunder, without Landlord's
prior written consent, which shall not be unreasonably withheld, delayed or
conditioned. Any such mortgage shall be made to an institutional lender and
shall be made pursuant to the terms hereof shall be a "Permitted Mortgage."
Section 17.03. Any violation of any provision of this Lease,
whether by Act or omission, by any assignee, subtenant or undertenant, shall be
deemed a violation of such provision by the Tenant, it being the intention and
meaning of the parties hereto that the Tenant shall assume and be liable to
Landlord for any and all acts and omissions of any and all assignees,
subtenants and undertenants. If this Lease be assigned, Landlord may and is
hereby empowered to collect rent from the assignee. If the Demised Premises or
any part thereof be underlet or occupied by any person or corporation other
than Tenant, Landlord, in the event of the occurrence of an Event of Default,
may, and is hereby empowered to, collect rent from the undertenant or occupant.
In either of such events, Landlord may apply the net amount received by it to
the Basic Rent and the Additional Charges, and such collection shall not be
deemed a waiver of the covenant of Tenant against mortgaging or pledging this
Lease, or the acceptance of such assignee, undertenant or occupant as Tenant
under this Lease, or a release of Tenant from the performance of the covenants
herein contained on the part of Tenant to be performed.
ARTICLE 18
Quiet Enjoyment
Section 18.01. Landlord covenants that if, and so long as,
Tenant is not in default under this Lease beyond any applicable grace period,
Tenant shall lawfully and quietly hold, occupy and enjoy the Demised Premises
during the Term, without hindrance or molestation by Landlord or by any other
person or persons claiming under or through Landlord, subject, however, to the
exceptions, reservations and conditions of this Lease.
ARTICLE 19
Indemnification of Landlord; Indemnification of Tenant
Section 19.01. Tenant will to the extent not covered by the
proceeds of any insurance procured by Tenant for the benefit of Landlord paid,
indemnify and save harmless Landlord from and against any and all liabilities,
obligations, damages, penalties, claims, costs, charges and expenses, including
reasonable attorneys' fees, resulting from death or personal injury or damage
to property, which may be imposed upon or incurred by or asserted against
Landlord (except to the extent the same arises from any act, omission or
negligence of Landlord, its contractors, licensees, agents, servants,
employees, invitees or visitors, the breach by Landlord of its
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representations or the breach by Landlord of its obligations under this Lease)
by reason of any of the following occurring during the Term:
(a) any work or thing done in, on or about the
Demised Premises or any part thereof by Tenant or any agent,
contractor, employee, servants, licensee, invitee or visitor
of Tenant;
(b) any use, nonuse, possession, occupation,
condition, operation, maintenance or management of the
Demised Premises or any part thereof;
(c) any negligence of Tenant or any agent,
contractor, employee, licensee (other than Landlord) or
invitee of Tenant; and
(d) any incident, injury (including death at any
time resulting therefrom) or damage to any person or property
occurring in, on or about the Demised Premises or any part
thereof.
In the event that any action or proceeding shall be brought
against Landlord by reason of any matter covered by this Section, Tenant, upon
written notice from Landlord, will at Tenant's sole cost and expense resist or
defend the same. To the extent of the proceeds received by Landlord under any
insurance furnished or supplied to Landlord by Tenant, Tenant's obligation to
indemnify and save harmless Landlord against the hazard which is the subject of
such insurance shall be deemed to have been satisfied.
Section 19.02. Landlord will, to the extent not covered by
the proceeds of any insurance paid, indemnify and save harmless Tenant from and
against any and all liabilities, obligations, damages, penalties, claims,
costs, charges and expenses, including reasonable attorneys' fees, resulting
from death or personal injury or damage to property, which may be imposed upon
or incurred by or asserted against Tenant (except to the extent the same arises
from any act, omission or negligence of Tenant, its contractors, licensees,
agents, servants, employees, invitees or visitors, the breach by Tenant of its
representations or the breach by Tenant of its obligations under this Lease)
resulting, directly or indirectly, from the negligence, willful misconduct or
reckless acts of Landlord, its contractors, licensees, agents, servants,
employees, invitees or visitors, by reason of any of the following occurring
during the Term:
(a) any work or thing done in, on or about the
Demised Premises or any part thereof by Landlord or any
agent, contractor, employee, servants, licensee, invitee or
visitor of Landlord;
(b) any use, nonuse, possession, occupation,
condition, operation, maintenance or management of the
Demised Premises or any part thereof.
In the event that any action or proceeding shall be brought
against Tenant by reason of any matter covered by this Section, Landlord, upon
written notice from Tenant, will at Landlord's sole cost and expense resist or
defend the same. To the extent of the Proceeds received by Tenant under any
insurance furnished or supplied to Tenant by Landlord, Landlord's obligation to
indemnify and save harmless Tenant against the hazard which is the subject of
such insurance shall be deemed to be satisfied.
ARTICLE 20
Remedies in Case of Default
Section 20.01. If during the Term any one or more of the
following acts or occurrences (any one of such occurrences or acts being
hereinafter called an "Event of Default") shall happen:
(a) Tenant shall default in making the payment of
any installment of the Basic
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Rent or the Additional Charges or any default curable by the
payment of money, as and when the same shall become due and
payable, and such default shall continue for a period of ten
(10) days after written notice from Landlord that such
payment is due and unpaid; or
(b) Tenant shall default in the performance of or
compliance with any of the other covenants, agreements, terms
or conditions of this Lease to be performed by Tenant (other
than any default curable by payment of money), and such
default shall continue for a period of thirty (30) days after
written notice thereof from Landlord to Tenant, or, in the
case of a default which cannot with due diligence be cured
within thirty (30) days, Tenant shall fail to proceed
promptly (except for unavoidable delays) after the giving of
such notice and with all due diligence to cure such default
and thereafter to continuously prosecute the curing thereof
with all due diligence (it being intended that as to a
default not susceptible of being cured within thirty (30)
days, the time within which such default may be cured shall
be extended for such period as may be reasonably necessary to
permit the same to be cured with all due diligence); or
(c) Tenant shall file a voluntary petition in
bankruptcy or shall be adjudicated a bankrupt or insolvent or
shall file any petition or answer seeking any reorganization,
composition, readjustment or similar relief under any present
or future bankruptcy or other applicable law, or shall seek
or consent to or acquiesce in the appointment of any trustee,
receiver, or liquidate of Tenant or of all or any substantial
part of its properties or of all or any part of the Demised
Premises; or
(d) if a court of competent jurisdiction enters a
decree or order for relief with respect to Tenant under Title
11 of the United States Code as now constituted or hereafter
amended or under any other applicable federal or state
bankruptcy law or other similar law, or if such court enters
a decree or order appointing a receiver, liquidator,
assignee, trustee, sequestrator (or similar official) of
Tenant, or of any substantial part of its properties, or if
such court decrees or orders the winding up or liquidation of
the affairs of Tenant, or if Tenant files a petition or
answer or consent seeking relief under Title 11 of the United
States Code as now constituted or hereafter amended, or under
any other applicable federal or state bankruptcy law or other
similar law, or if Tenant consents to the institution or
proceeding thereunder or to the filing of any such petition,
or to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or
other similar official) of Tenant, or of any substantial part
of its respective properties, or if Tenant fails generally to
pay its respective debts as such debts become due, or if
Tenant takes any action in furtherance of any action
described in this subparagraph (d);
then, and in any such event, and during the continuance
thereof, Landlord may at its option, then and thereafter
notwithstanding the fact that Landlord may have any other
remedy hereunder or at law or in equity by notice to Tenant,
designate a date, not less than fifteen (15) days after the
giving of such written notice, on which this Lease shall
terminate; and thereupon, on such date the Term of this Lease
and the estate hereby granted shall expire and terminate upon
the date specified in such notice with the same force and
effect as if the date specified in such notice were the date
hereinbefore fixed for the expiration of the Term of this
Lease, and all rights of Tenant hereunder shall expire and
terminate, but Tenant shall remain liable as hereinafter
provided.
Section 20.02. If this Lease is terminated as provided in
Section 20.01, or as permitted by law, Tenant shall peaceably quit and
surrender the Demised Premises to Landlord, and Landlord may, without further
notice, enter upon, reenter, possess and repossess the same by summary
proceedings, ejectment or other legal proceeding, and again have, repossess and
enjoy the same as if this Lease had not been made and in any such event neither
Tenant nor any person claiming through or under Tenant by virtue of any law or
an order of any court shall be entitled to possession or to remain in
possession of the Demised Premises but shall forthwith quit and surrender the
Demised Premises, and Landlord at its option shall at any time, notwithstanding
any other provision of this lease and any other remedies available to Landlord
at law or in equity, be entitled to recover from Tenant (in lieu of all other
claims for damages on account of such termination as and for liquidated
damages) an amount equal to the excess of all rents reserved hereunder for the
unexpired portion of the Term of this Lease, less the amount
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of rents, if any, the Landlord shall receive during such period from others to
whom the Demised Premises may be rented. Nothing herein contained shall limit
or prejudice the right of Landlord, in any bankruptcy or reorganization or
insolvency proceeding, to prove for and obtain as liquidated damages by reason
of such termination an amount equal to the maximum allowed by any bankruptcy or
reorganization or insolvency proceedings, or to prove for and obtain as
liquidated damages by reason of such termination, an amount equal to the
maximum allowed by any statute or rule of law whether such amounts shall be
greater or less than the excess referred to above.
Section 20.03. Notwithstanding the foregoing provisions of
this Article, if in any bankruptcy or like proceedings, whether voluntary or
involuntary, or any other proceeding or filing of the type set forth in Section
20.01(c) hereof, no application is made and no relief is requested on behalf of
Tenant for a reformation or recasting of this Lease or for any change,
alteration, or modification of any of the agreements, terms, covenants, or
conditions of this Lease, or to relieve Tenant with respect to the payment of
Basic Rent or Additional Charges required by this Lease to be paid, or from the
performance of any of the agreements, terms, covenants and conditions of this
Lease on the part of Tenant to be performed and observed, and if any such
receiver, trustee, assignee, or other similar custodian of Tenant's property
shall pay any and all installments of Basic Rent and Additional Charges
required by this Lease to be paid, as and when due, and shall comply with and
faithfully perform all other agreements, terms, covenants, and conditions of
this Lease on the part of the Tenant to be performed, then this Lease shall not
be so terminated or otherwise affected but shall continue in full force and
effect.
Section 20.04. Anything to the contrary contained in this
Article 20 notwithstanding, in the event Tenant shall offset any moneys
(claimed to be owed to Tenant by Landlord) against the Basic Rent or Additional
Charges payable by Tenant hereunder pursuant to the provisions of this Lease,
and Landlord shall dispute Tenant's right to such offset or the amount thereof,
Tenant shall not be deemed to be in default of this Lease by reason of such
offset until such dispute is resolved and Tenant shall fail to pay any sum
determined to be payable by Tenant to Landlord in the resolution of such
dispute together with interest at the Default Rate after the expiration of ten
(10) days following such determination (whether by arbitration or otherwise).
Section 20.05. If Landlord re-enters and obtains possession
of the Demised Premises, as provided in Section 20.02 of this Lease, following
an Event of Default, Landlord shall have the right, without notice, to repair,
or alter the Demised Premises in such manner as Landlord may reasonably deem
necessary or advisable so as to put the Demised Premises in good order and to
make the same rentable and shall have the right at Landlord's option, to re-let
the Demised Premises or a part thereof, and Tenant shall pay to Landlord ten
(10) days after demand all expenses reasonably incurred by Landlord in
obtaining possession, and in altering, repairing and putting the Demised
Premises in good order and condition and in re-letting the same, including
reasonable fees of attorneys and architects, and all other reasonable expenses
or commissions, and Tenant shall pay to Landlord upon the Basic Rent payment
dates following the date of such re-entry through and including the date set
forth in Article 3 hereof for the expiration of the Term of this Lease in
effect immediately prior to such re-entry the sums of money which would have
been payable by Tenant as Basic Rent hereunder and Additional Charges on such
Basic Rent payment dates if Landlord had not re-entered and resumed possession
of the Demised Premises in addition to any past due amount of Base Rent and
Additional Charges together with interest at the Default Rate, deducting only
the net amount of rent, if any, which Landlord shall actually receive (after
deducting from the gross receipts the expenses, costs and payments of Landlord
which in accordance with the terms of this Lease would have been borne by
Tenant) in the meantime from and by any reletting of the Demised Premises, and
Tenant shall remain liable for all sums otherwise payable by Tenant under this
Lease, including but not limited to the expenses of Landlord aforesaid, as well
as for any deficiency aforesaid, and Landlord shall have the right from time to
time to begin and maintain successive actions or other legal proceedings
against Tenant for the recovery of such deficiency, expenses or damages or for
a sum equal to any installments of the Basic Rent and the Additional Charges.
In no event shall Landlord be responsible for or liable for failure to relet
all or any portion of the Demised Premises. The obligation and liability of
Tenant to pay the Basic Rent and the Additional Charges shall survive the
commencement, prosecution, termination or completion of any action to secure
possession of the Demised Premises and the termination of this Lease. Nothing
herein contained shall be deemed to require Landlord to wait to begin such
action or other legal proceedings until the date when this Lease would have
expired
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had there not been any Event of Default. No receipt of monies by Landlord from
Tenant after the termination of this Lease (or Tenant's right to possession),
or after the giving of any notice of the termination of this Lease (unless such
receipt cures the Event of Default which was the basis for the notice), will
reinstate, continue or extend the Term or affect any notice theretofore given
to Tenant, or operate as a waiver of the right of Landlord to enforce the
payment of Rent payable by Tenant hereunder or thereafter falling due, or
operate as a waiver of the right of Landlord to recover possession of the
Premises by proper remedy, except as herein otherwise expressly provided, it
being agreed that after the service of notice to terminate this Lease or the
commencement of any suit or summary proceedings, or after a final order or
judgment for the possession of the Premises, Landlord may demand, receive and
collect any monies due or thereafter falling due without in any manner
affecting such notice, proceeding, order, suit or judgment, all such monies
collected being deemed payments on account of the use and occupation of the
Premises or, at the election of Landlord, on account of Tenant's liability
hereunder.
ARTICLE 21
Additional Rights of Landlord; Waivers
Section 2l.01. No right or remedy conferred upon or reserved
to Landlord or Tenant shall be exclusive of any other right or remedy and any
right and remedy shall be cumulative and in addition to every other right or
remedy given hereunder or now or hereafter existing at law. The failure of
Landlord or Tenant to insist at any time upon the strict performance of any
covenant or agreement or to exercise any right, power or remedy contained in
this Lease shall not be construed as a waiver or relinquishment thereof and the
future receipt by Landlord of any installment of the Basic Rent or the
Additional Charges with knowledge of the breach of any covenant or agreement
contained in this Lease shall not be deemed a waiver of such breach, and no
waiver by Landlord or Tenant of any provision of this Lease shall be deemed to
have been made unless expressed in writing and signed by Landlord or Tenant, as
applicable. Landlord and Tenant shall be entitled to the extent permitted by
applicable law to injunctive relief in case of the violation, or attempted or
threatened violation, of any covenant, agreement, condition or provision of
this Lease or to a decree compelling performance of any covenant, condition or
provision of this Lease, to or to any other remedy allowed Landlord by law.
Landlord's acceptance of any partial payment by Tenant will not constitute a
waiver to enforce collection of the additional sums due it hereunder.
Section 21.02. In the case of an Event of Default during the
Term, Tenant hereby waives and surrenders for itself and all those claiming
under it (i) any right and privilege which it or any of them may have under any
present or future constitution, statute or rule of law to redeem the Demised
Premises or to have a continuance of this Lease for the Term after termination
of Tenant's right of occupancy by order or judgment of any court or by any
legal process or writ, or under the terms of this Lease, or after the
termination of the Term of this Lease as herein provided and (ii) the benefits
of any present or future constitution, statute or rule of law which exempts
property from liability for debt or for distress for rent.
Section 21.03. (a) If Tenant does not pay any Basic Rent or
Additional Charges when the same is due upon demand by Landlord, Tenant shall
pay interest on the unpaid amount(s) at the Default Rate from the due date(s)
therefor until paid in full.
(b) If Tenant shall be in default in the performance of any
of its obligations under this Lease and an action shall be brought for the
enforcement thereof in which it shall be determined that Tenant was in default,
Tenant shall pay to Landlord the expenses reasonably incurred in connection
therewith, including reasonable attorneys' fees. Otherwise in litigation
between Landlord and Tenant, the prevailing party shall be entitled to recover
its reasonable attorneys' fees and costs.
Section 21.04. Tenant hereby agrees that it will not, and
will not have the right to, interpose any counterclaim of any kind in any
action or proceeding commenced by Landlord to recover possession of the Demised
Premises unless the failure to do so would result in a waiver thereof.
Section 21.05. Tenant acknowledges that under this Lease,
Tenant has no right to withhold or refuse the payment of Basic Rent or
Additional Charges except as may be expressly provided in this Lease. If,
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nonetheless, Tenant shall refuse to pay Basic Rent or Additional Charges based
on a claim that Tenant has a defense to the obligation to pay the same as
specified herein, Tenant agrees that in the event that either party shall
institute or maintain any action or proceeding including, without limitation,
any arbitration in which it is to be determined whether or not Tenant in fact
owes such Basic Rent or Additional Charges, Tenant shall, as a condition to its
right to commence or maintain any such action or proceeding or to interpose as
a defense to a claim by Landlord for such rent, pay the amount in dispute into
the court having jurisdiction over such action or proceeding throughout the
continuance of such action or proceeding so as to assure that if Landlord
prevails in such action or proceeding the amount claimed by Landlord will be
available to be paid to Landlord. This provision is not intended to be and
shall not be deemed to be a waiver of any other right Landlord may have under
this Lease or by law by reason of Tenant's default in the payment of Basic Rent
or Additional Charges.
Section 21.06. If Tenant is in arrears in payment of Basic
Rent or Additional Charges, Tenant waives the right, if any, to designate the
items to which any payments made by Tenant are to be credited, and Tenant
agrees that Landlord may apply any payments made by Tenant to such items as
Landlord sees fit, irrespective of and notwithstanding any designation or
request by Tenant as to the items to which any such Payments shall be credited.
Section 21.07. LANDLORD AND TENANT HEREBY WAIVE TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER AGAINST THE OTHER
ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS
LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF
THE DEIMISED PREMISES, INCLUDING, WITHOUT LIMITATION, ANY CLAIM OF INJURY OR
DAMAGE, AND ANY EMERGENCY AND OTHER STATUTORY REMEDY WITH RESPECT THERETO.
ARTICLE 22
Notices
Section 22.01. Except as otherwise expressly provided
elsewhere in this Lease, any bills, statements, consents, notices, demands,
requests or other communications given or required to be given under this Lease
(other than requests for services which may be given orally, provided such oral
notice is reasonable under the circumstances) shall be in writing and shall be
deemed sufficiently given or rendered if (a) delivered by hand (against a
signed receipt), (b) sent by registered or certified mail (return receipt
requested), (c) sent by courier service providing for overnight delivery,
provided the sender shall obtain a written receipt for such delivery, or (d)
sent by facsimile transmission with receipt acknowledged on the transmission,
addressed:
In the case of Landlord:
Tyco International (US), Inc.
One Town Center Road
Boca Raton, Florida 33486
Attention: Lou Chiesa, Vice President
With copy to its General Counsel at the same address;
In the case of Tenant prior to occupancy of the Demised
Premises at the above address and thereafter at:
W.R. GRACE & CO.-CONN.
1750 Clint Moore Road
Boca Raton, Florida 33431
Attention: Secretary
With copy to its General Counsel at the same address;
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or to such other person(s) or address(es) as either Landlord or Tenant may
designate (but not to exceed three additional persons) by notice given to the
other in accordance with the provisions of this Article 22.
A copy of any notice sent by Landlord to Tenant or by Tenant
to Landlord shall also be sent to any mortgagee at the address designated by
such mortgagee by notice given by such mortgagee to Landlord and to Tenant.
Section 22.02. Any such bill, statement, consent, notice,
demand, request for other communication shall be deemed to have been rendered
or given (i) on the date when it shall have been hand delivered, unless such
delivery was not on a Business Day or was after 5:00 p.m. on a Business Day, in
which case delivery shall be deemed to have been rendered or given on the next
Business Day, (ii) if mailed, on the date shown as received on the certified
return receipt or on the date on which the post office deems delivery is
impossible on such return receipt, (iii) the date delivered by a courier
service providing for overnight delivery unless such delivery was not on a
Business Day or was after 5:00 p.m. on a Business Day, in which case delivery
shall be deemed to have been rendered or given on the next Business Day, or
(iv) the day transmitted by facsimile unless such transmission was not on a
Business Day or was after 5:00 p.m. on a Business Day, in which case delivery
shall be deemed to have been rendered or given on the next Business Day.
ARTICLE 23
Subordination
Section 23.01. (a) Landlord represents to Tenant that, as of
the date hereof, there are no Superior Leases nor any Superior Mortgages.
Simultaneously herewith, Landlord shall deliver to Tenant a Nondisturbance
Agreement (as hereinafter defined) containing substantially the terms set forth
in this Article 23, from the current mortgagee, and Tenant agrees to promptly
execute and deliver same.
(b) Any lease to which this Lease is, at the time referred
to, subject and subordinate is herein called a "Superior Lease" and the lessor
of a Superior Lease is herein called "Superior Lessor"; and any mortgage to
which this Lease is, at the time referred to, subject and subordinate is herein
called a "Superior Mortgage" and the holder of a Superior Mortgage is herein
called "Superior Mortgagee." Provided that (i) a mortgagee shall execute and
deliver to Tenant an agreement (any such agreement or any agreement of similar
import from a Superior Mortgagee or a Superior Lessor described in Section
23.01(b)(ii), as the case may be, a "Nondisturbance Agreement"), in recordable
form to the effect that as long as Tenant is not in default under this Lease
beyond any applicable grace period, (v) Superior Mortgagee shall not name
Tenant or any person claiming through or under Tenant as a party defendant to
any action for foreclosure or other enforcement of its Superior Mortgage
(unless required by law in which event no personal judgment will be taken
against Tenant or any person claiming through or under Tenant), (w) this Lease
shall not be terminated by Superior Mortgagee in connection with, or by reason
of foreclosure or other proceedings for the enforcement of its Superior
Mortgage, or by reason of a transfer of Landlord's interest under this Lease
pursuant to the taking of a deed or assignment in lieu of foreclosure (or
similar device), (x) except as set forth in Section 23.02, the leasehold
estate, possession and use of the Demised Premises in accordance with the terms
of this Lease and all other rights and benefits of Tenant (and any person
claiming through or under Tenant) under this Lease shall not be interfered with
or disturbed by Superior Mortgagee or by reason of the subordination of this
Lease to its Superior Mortgage or any foreclosure or other proceedings for the
enforcement of its Superior Mortgage or any transfer of Landlord's interest
under this Lease pursuant to the taking of a deed or assignment in lieu of
foreclosure (or similar device), (y) Tenant shall not be bound to perform any
covenant contained in this Lease to a standard greater than that set forth in
this Lease by virtue of the inclusion in the Superior Mortgage or other
agreements between Landlord and such Superior Mortgagee of any such greater
standard, and (z) such Superior Mortgagee shall not have any rights to approve,
prohibit or consent to the exercise by Tenant of any of its rights under this
Lease, except as expressly provided in this Lease, and (ii) a Superior Lessor
shall execute and deliver to Tenant an agreement to the effect that as long as
Tenant is not in default under this Lease beyond any applicable grace period,
(aa) Superior Lessor shall not name Tenant or any person claiming through or
under Tenant as a party defendant in any action to terminate or otherwise
enforce its Superior Lease (unless required by law in which event no personal
judgment will be taken
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against Tenant or any person claiming through or under Tenant), (bb) this Lease
shall not be terminated by Superior Lessor in connection with, or by reason of
termination or other proceedings for the enforcement of its Superior Lease, or
by reason of a transfer of Landlord's interest under this Lease pursuant to the
taking of a deed or assignment in lieu of termination (or similar device);
provided that in the event of the termination of this Lease as a matter of law
upon the termination of such Superior Lease by reason of a default by Landlord
as tenant thereunder, Tenant shall automatically become the tenant of Superior
Lessor upon all of the terms of this Lease except as set forth in Section
23.02, (cc) except as set forth in Section 23.02, the leasehold estate, the
possession and use of the Demised Premises in accordance with the terms of this
Lease and all other rights and benefits of Tenant (and any person claiming
through or under Tenant) under this Lease shall not be interfered with or
disturbed by Superior Lessor or by reason of the subordination of this Lease to
its Superior Lease or any proceedings for the termination or enforcement of its
Superior Lease or any transfer of Landlord's interest under this Lease pursuant
to the taking of a deed or assignment in lieu of termination (or similar
device), (dd) Tenant shall not be bound to perform any covenant contained in
this Lease to a standard greater than that set forth in this Lease by virtue of
the inclusion in the Superior Lease or other agreements between Landlord and
Superior Lessor of any such greater standard, and (ee) Superior Lessor shall
not have any rights to approve, prohibit or consent to the exercise by Tenant
of any of its rights under this Lease, except as expressly provided in this
Lease, this Lease shall be subject and subordinate to all such Superior
Mortgages and Superior Leases, and to all renewals, extensions, supplements,
amendments, modifications, consolidations and replacements thereof or thereto,
substitutions therefor, and advances made thereunder. This clause shall be
self-operative and, upon the execution and delivery of the applicable
Nondisturbance Agreement, no further instrument of subordination shall be
required to make the interest of any Superior Lessor or Superior Mortgagee
superior to the interest of Tenant hereunder, however, Tenant shall execute and
deliver promptly any certificate or instrument that Landlord or any Superior
Lessor or Superior Mortgagee may reasonably request in confirmation of such
subordination, which certificate or instrument shall be in recordable form,
provided such certificate or instrument is consistent with the terms of this
Lease and the Nondisturbance Agreement and not in derogation of the rights of
Tenant hereunder or thereunder. Any Superior Mortgagee may elect that this
Lease shall have priority over the Superior Mortgage that it holds and, upon
notification to Tenant by such Superior Mortgagee, this Lease shall be deemed
to have priority over such Superior Mortgage, whether this Lease is dated prior
to or subsequent to the date of such Superior Mortgage. If, in connection with
the financing of the Demised Premises, the Building, the Land, or the interest
of the lessee under any Superior Lease, any lending institution shall request
reasonable modifications of this Lease that do not increase Tenant's monetary
obligations under this Lease, increase (except to a de minimus extent) Tenant's
other obligations under this Lease or decrease (except to a de minimus extent)
Tenant's rights under this Lease, Tenant shall make such modifications.
(c) Tenant will accept any Nondisturbance Agreement which is
made, on the condition that, as long as such Superior Mortgagee or Superior
Lessor or anyone claiming by, through, or under such Superior Mortgagee or
Superior Lessor, as the case may be, including a purchaser at a foreclosure
sale, shall not be the then defaulting Landlord or a Landlord affiliate,
neither the Superior Mortgagee nor the Superior Lessor, as the case may be, nor
anyone claiming by, through or under such Superior Mortgagee or Superior
Lessor, as the case may be, including a purchaser at a foreclosure sale (all of
the foregoing persons, other than Landlord or Landlord's affiliate, being
collectively referred to herein as "Successor"), shall, upon becoming the
Landlord hereunder by reason of foreclosure or other proceeding for the
enforcement of its Superior Mortgage, or by reason of termination or other
proceedings for the enforcement of its Superior Lease, or by reason of a
transfer of Landlord's interest under this Lease pursuant to the taking of a
deed or assignment in lieu of foreclosure (in the case of a Superior Mortgagee)
or termination (in the case of a Superior Lessor) or similar device, be:
(i) liable for any act or omission of any prior
Landlord (including the then defaulting Landlord) except to
the extent, and in such case only to the extent, that such
act or omission constitutes a default which continues after
the Successor succeeds to the interest of Landlord hereunder,
or
(ii) bound by any amendment or modification of this
Lease (unless contemplated hereby) made (1) after notice to
Tenant of the existence of the Superior Lease or the Mortgage
in question, as the case may be, and (2) without the consent
of such Superior Mortgagee or Superior
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Lessor, or
(iii) except for any abatement, credit, offset,
setoff, defense or counterclaim specifically provided for in
this Lease, subject to any abatement, credit, offset, setoff,
defense or counterclaim which Tenant may have against any
prior Landlord (including the then defaulting Landlord), or
(iv) bound by any payment, unless consented to by
such Mortgagee, Superior Lessor or Successor, of Basic Rent
and Additional Charges which Tenant might have paid more than
one (1) month in advance of its due date to any prior
Landlord (including the then defaulting Landlord), unless
such payment is actually received by Successor or with
respect to Additional Charges, was placed in an escrow
account and is available to Successor, or
(v) bound by any obligation to perform any work or
to make improvements to the Demised Premises except for
repairs to the Demised Premises or any part thereof as a
result of damage by fire or other casualty pursuant to
Article 7 but only to the extent that such repairs can be
reasonably made from the net insurance proceeds made
available to such Successor and (z) repairs to the Demised
Premises as a result of a partial condemnation pursuant to
Article 8, but only to the extent that such repairs can be
reasonably made from the net proceeds of any award made
available to such Successor.
(d) if required by the Superior Mortgagee or the Superior
Lessor, Tenant promptly shall join in any Nondisturbance Agreement to indicate
its concurrence with the provisions thereof and its agreement set forth in
Section 23.02 to attorn to such Superior Mortgagee (in the event of a
foreclosure of its Superior Mortgage) or Superior Lessor (in the event of a
termination of its Superior Lease by reason of a default thereunder), as the
case may be, as Tenant's Landlord hereunder. Tenant shall promptly so accept,
execute and deliver any Nondisturbance Agreement proposed by any such Superior
Mortgagee or Superior Lessor which conforms with the provisions of this Article
23. Any such Nondisturbance Agreement may also contain other terms and
conditions as may otherwise be required by such Superior Mortgagee or Superior
Lessor, as the case may be, which are consistent with the terms of the
Nondisturbance Agreement required by this Article 23 and not in derogation of
the rights of Tenant thereunder and which do not increase Tenant's monetary
obligations, materially increase Tenant's other obligations, or materially and
adversely affect the rights of Tenant under this Lease.
Section 23.02. If at any time prior to the expiration of the
Term, any Superior Lease shall terminate, or be terminated, by reason of a
default by Landlord as tenant thereunder or any Superior Mortgagee or Successor
comes into possession of the Demised Premises or the Building or the estate
created by such Superior Lease, by receiver or otherwise, by reason of a
default by Landlord under a Superior Mortgage or under a Superior Lease, Tenant
agrees, upon demand of any Superior Lessor, or of any Superior Mortgagee in
possession of the Real Property or the Building or other Successor, to attorn,
from time to time, to any such Superior Lessor, Superior Mortgagee or other
Successor, upon the then executory terms and conditions of this Lease, for the
remainder of the Term; provided that such Superior Lessor, Superior Mortgagee
or Successor, as the case may be, or receiver caused to be appointed by any of
the foregoing, shall then be entitled to possession of the Premises and shall
have agreed to assume the obligations of Landlord (subject to the terms hereof)
or shall have entered into a Nondisturbance Agreement with Tenant (in which
event the terms of the Nondisturbance Agreement shall govern the terms of the
attornment); and provided, further, that such Superior Lessor, Superior
Mortgagee or Successor shall have agreed to accept such attornment on the
foregoing applicable terms. Notwithstanding the foregoing, this Lease shall not
terminate by reason of the termination of any Superior Lease without the prior
written consent of the Superior Mortgagee of the Superior Mortgage which is a
first mortgage on Landlords interest in the Real Property. The provisions of
this Section 23.02 shall inure to the benefit of any such Superior Lessor,
Superior Mortgagee or Successor, shall apply notwithstanding that, as a matter
of law, this Lease may terminate upon the termination of any such Superior
Lease, and shall be self-operative upon any such demand, and no further
instrument shall be required to give effect to said provisions. Tenant,
however, upon demand of any such Superior Lessor, Superior Mortgagee or
Successor, shall execute, from time to time, instruments in confirmation of the
foregoing provisions of this Section 23.02, reasonably satisfactory to any such
Superior Lessor, Superior Mortgagee or Successor and to
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Tenant, acknowledging such attornment; provided that such Superior Lessor,
Superior Mortgagee or Successor shall join in any such instrument and the same
shall be consistent with the terms of this Lease and not in derogation of any
rights of Tenant hereunder.
Section 23.03. As long as any Superior Lease or Superior
Mortgage shall exist of which Tenant has been given notice by Landlord, Tenant
shall not seek to terminate this Lease by reason of any act or omission of
Landlord (and failure of the Landlord to cure same during any applicable grace
period, as provided herein) (a) until Tenant shall have given written notice of
such act or omission to all Superior Lessors and Superior Mortgagees at such
addresses as shall have been furnished to Tenant by such Superior Lessors and
Superior Mortgagees and (b) if any such act or omission is susceptible of cure
by a Superior Lessor or Superior Mortgagee, and any such Superior Lessor or
Superior Mortgagee, as the case may be, shall have notified Tenant within ten
(10) Business Days following receipt of such notice of its intention to remedy
such act or omission, and the Superior Lessor or Superior Mortgagee shall fail
promptly to commence such cure and diligently prosecute same.
ARTICLE 24
No Merge
Section 24.01. There shall be no merger of this Lease or of
the leasehold estate hereby created with the fee estate in the Demised Premises
or any part thereof by reason of the fact that the same person may acquire or
hold, directly or indirectly, this Lease or the leasehold estate, as well as
the fee estate in the Demised Premises or of any interest in such fee estate.
ARTICLE 25
Surrender
Section 25.01. Upon the expiration or earlier termination of
the Term of this Lease, Tenant shall surrender the Demised Premises to Landlord
in the same condition in which the Demised Premises were originally received
from Landlord except as repaired, rebuilt, restored, altered or added to as
permitted by any provision of this Lease and except for ordinary wear and tear
and damage by fire or other casualty. Tenant shall remove from the Demised
Premises upon such expiration or earlier termination, all property situated
thereon which is owned by Tenant. Tenant, at its cost and expense, shall repair
any damage to any part of the Demised Premises caused by such removal. Any
property of Tenant not so removed shall become the property of Landlord, which
may thereafter cause such property to be removed from the Demised Premises and
disposed of but the cost of any such removal and disposition as well as the
cost of repairing any damage caused by such removal shall be borne by Tenant.
Upon the expiration or earlier termination of the Term, Tenant shall remove all
computers and computer related and peripheral equipment (other than cabling and
other related equipment that would be deemed fixtures) installed by Tenant at
the Demised Premises (collectively, "Computer Equipment Removal"), and Tenant,
at its cost and expense, shall repair any damage to any part of the Demised
Premises caused by such Computer Equipment Removal, which damage is of a nature
that exceeds that damage which would be caused by the removal of office
furniture and equipment customarily maintained by Tenant at Demised Premises.
In no event shall such Computer Equipment Removal require Landlord to make any
non-customary alterations or repairs to the Demised Premises in order to be
able to prepare or finish any portion of the Demised Premises for rental to
tenants for normal office purposes. Tenant shall reimburse Landlord for all
costs and expenses incurred by Landlord in connection with the Computer
Equipment Removal if Landlord shall reasonably deem such non-customary
alterations or repairs necessary or advisable. In no event shall Tenant be
required to pay for improvements to the Demised Premises that are being used to
prepare the space for a new tenant.
Section 25.02. Upon the expiration or earlier termination of
the Term of this Lease, Tenant shall deliver the Building to Landlord broom
clean, except in the event such surrender is due to a casualty or condemnation,
as provided herein. Copies of all then current maintenance and service
agreements and records, warranties in effect (all of which shall be assigned to
Landlord, if such agreements or warranties are assignable) and all plans and
specifications relating to alterations of the Improvements in Tenant's
possession shall
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be delivered to Landlord at such time. All keys or entrance passcards in
Tenant's possession shall be delivered to Landlord. In the event Tenant holds
over after the Expiration Date, Tenant shall, be deemed a Tenant in Sufferance
and Landlord shall be entitled to one and one-half (1-1/2) times the Basic Rent
in effect immediately prior to the Expiration Date during such hold-over
period.
ARTICLE 26
Assignment of Landlord's Interest
Section 26.01. Subject to Article 29, Landlord may at anytime
and from time to time assign to any person, firm or corporation (herein called
the "Assignee"), by way of pledge or otherwise, any or all of the rights (in
whole or in part) of Landlord under this Lease. The Assignee may enforce any
and all of the terms of this Lease, to the extent so assigned, as though the
Assignee had been a party hereto.
ARTICLE 27
Miscellaneous Provisions
Section 27.01. If any provision of this Lease or the
application thereof to any person or circumstance shall, for any reason and to
any extent, be invalid or unenforceable, the remainder of this Lease and the
application of that provision to other persons or circumstances shall not be
affected but rather shall be enforced to the extent permitted by law.
Section 27.02. Irrespective of the place of execution or
performance, this Lease shall be governed by and construed in accordance with
the laws of the State of Florida. The parties agree that venue shall be in Palm
Beach County. This Lease shall be construed without regard to any presumption
or other rule requiring construction against the party causing this Lease to be
drafted.
Section 27.03. This Lease may not be changed, modified or
discharged except by a writing signed by Landlord and Tenant. All covenants,
conditions and obligations contained in this Lease shall be binding upon and
inure to the benefit of the respective successors and assigns of Landlord and
Tenant to the same extent as if each such successor and assign were named as a
party to this Lease.
Section 27.04. Either party shall, at the request of the
other, execute and deliver a statutory form of memorandum of this Lease in form
reasonably satisfactory to Landlord and Tenant, for the purpose of recording,
but said memorandum of this Lease shall not in any circumstances be deemed to
modify or to change any of the provisions of this Lease. Either party shall
have the right to record such Memorandum of Lease.
Section 27.05. The headings of the Articles of this Lease and
the index preceding this Lease are for convenience and reference only and in no
way define, limit or describe the scope or intent of this Lease or in any way
modify, amend or change the express terms and provisions of this Lease.
Section 27.06. The following rules of construction shall be
applicable for all purposes of this Lease and all agreements supplemental
hereto, unless the context otherwise requires:
(a) The term "hereby," "hereof," "hereto,"
"herein," "hereunder" and any similar terms shall refer to
this Lease and the term "hereafter" shall mean after, and the
term "heretofore" shall mean before, the date of this Lease.
(b) Words of the masculine, feminine or neuter
gender shall mean and include the correlative words of the
other genders and words importing the singular number shall
mean and include the plural number and vice versa.
(c) The term "person" shall include firms,
associations, partnerships (including limited partnerships),
trusts, corporations and other legal entities, including
public bodies, as
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well as natural persons.
(d) The terms "included", "including" and
similar terms shall be construed as if followed by the phrase
"without being limited to."
(e) All references in this Lease to numbered
Articles and Sections and to lettered Schedules are
references to the Articles and Sections of this Lease and the
Schedules annexed to this Lease, unless expressly otherwise
designated in context.
Section 27.07. Notwithstanding anything herein to the
contrary, all amounts payable to or on behalf of Landlord, whether denominated
as Basic Rent, Impositions, Additional Rent or otherwise, shall constitute
"Rent" as defined in Section 502(b)(7) of the Bankruptcy Code; provided,
however, and to the extent applicable, Impositions and Additional Charges shall
not be construed as "Rent" for Florida sales tax purposes.
ARTICLE 28
Option to Renew
Section 28.01. (a) Tenant shall have the option (a "Renewal
Option") to extend the Term for three (3) five (5) year periods (individually,
the "Extended Term One," "Extended Term Two" or "Extended Term Three," or
referred to as an "Extended Term") following the Expiration Date of the
original ten (10) year Term, subject to the following conditions:
(i) Tenant shall exercise the Renewal Option by
giving written notice to Landlord at least six (6) months
prior to the then Expiration Date (the "Renewal Notice").
Tenant's failure to render to Landlord the Renewal Notice
within the stipulated time shall result in the automatic
extinguishment of the Renewal Option and any subsequent
option. Landlord shall be under no obligation to solicit such
notice or to remind Tenant of its obligations hereunder.
(ii) The Extended Term shall be under the same
terms and conditions contained herein, except, that the Basic
Rent for each Extended Term (the "Extended Term Market
Rental") shall be equal to the greater of (a) ninety-five
percent (95%) of the prevai1ing market rate for the Premises
based upon a fifteen year renewal lease; or (b) the Basic
Rent for the immediately preceding year. Provided, however,
if the Basic Rent for such Extended Term is based on sub-sub
paragraph (b) herein, then in such event, the Extended Term
Market Rental for such Extended Term shall not be subject to
the annual increases at the rate provided in Section 4.01 (c)
of this Lease for the first three (3) years of such Extended
Term. Except as otherwise provided herein, the Basic Rent for
each Extended Term shall be subject to annual increases at
the rate provided in Section 4.01(c) of this Lease.
(iii) Tenant shall not be in default beyond the
applicable notice and grace periods of any terms and/or
conditions of this Lease at the time of exercise of the
Renewal Option, provided such default is cured within the
earlier of (a) the applicable cure period or (b) prior to the
beginning of the applicable Extended Term, or otherwise the
Renewal Option will be extinguished as if no option shall
have been given.
(b) The "prevailing market rate" for the Premises
proposed by Landlord shall be set forth by Landlord in a notice (the "Market
Rental Notice") delivered to Tenant not later than the later of (x) sixty (60)
days following receipt by Landlord of the Renewal Notice for Extended Term One
and (y) nine (9) months prior to the expiration of the initial Term. If Tenant
shall dispute Landlord's determination of the prevailing market rate by notice
delivered to Landlord not later than sixty (60) days after delivery to Tenant
of the Market Rental Notice, the prevailing market rate shall be determined by
arbitration as provided in Section 8.06.
(c) Tenant may rescind in writing its Renewal Notice
within forty-five (45) days following
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<PAGE> 45
the rendering of a determination in arbitration that the prevailing market rate
selected by Landlord shall be the prevailing market rent; provided that the
Expiration Date shall be deemed amended to the last day of the eighteenth
(18th) month following the month in which such notice of rescission is received
by Landlord. Failure by Tenant to respond to Landlord's determination of the
Extended Term Market Rental within sixty (60) days after receipt of the Market
Rental Notice shall constitute a waiver of renewal.
(d) If arbitration concerning the prevailing market rate
shall not be concluded prior to the commencement of the Extended Term One,
Tenant shall pay Basic Rent and Additional Charges to Landlord from and after
the commencement of Extended Term One, which shall be at the then-escalated
rental rates. If the Extended Term Market Rental as determined by arbitration
is greater than or less than that specified in the Market Rental Notice, then
an adjustment required to correct the amount previously paid shall be made by
payment by the appropriate party within thirty (30) days after the arbitration
determination.
Section 28.02. The term "Term" as used in the Lease shall
include Extended Term One, Extended Term Two or Extended Term Three, as the
case may be, if each of such options are exercised, after the renewal of the
applicable Term.
ARTICLE 29
Right of First Offer
Section 29.01. Landlord hereby grants to Tenant a right of
first offer to purchase the Demised Premises until April 8, 1998.
ARTICLE 30
Building Name
Section 30.01. Tenant may, at its sole cost and expense,
subject to all applicable Legal Requirements, place signs on the facade of the
Building and elsewhere on the Demised Premises containing the name and logo of
Tenant. In the event that any such sign is so placed on the facade of the
Building as provided herein, Tenant shall be solely responsible for the repair,
maintenance and, if necessary, the replacement of such sign, and Tenant shall,
on or before the date upon which this Lease terminates, at Tenant's sole cost
and expense, remove any such sign from the Building. Any damage to the Building
resulting from either the installation, maintenance, repair, replacement or
removal of the foregoing signs shall be Tenant's responsibility, and Tenant
shall promptly repair and restore the Building as required.
Landlord, at its expense, shall remove all signage identifying
the Building as the ADT Building.
Section 30.02. Tenant shall have the right from time to time
to name the Demised Premises.
ARTICLE 31
Estoppel Certificate
Section 31.01. The parties mutually agree that at anytime and
from time to time upon written request of the other party and at the reasonable
cost and expense to the party requesting the same, Landlord or Tenant, as the
case may be, will execute, acknowledge and deliver to the other party a
certificate evidencing whether or not:
(a) the Lease is in full force and effect;
(b) said Lease has been modified or amended in any
respect, and identifying such modifications or amendments, if any; and
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<PAGE> 46
(c) there are any existing defaults thereunder to the
knowledge of the party executing the certificate, and specifying the nature of
such defaults, if any.
ARTICLE 32
Commissions
Section 32.01. Each of the parties (i) represents and
warrants to the other that it has not dealt with any broker or finder in
connection with this Lease other than Cushman & Wakefield and Prudential
Florida Realty and (ii) indemnifies and holds the other harmless from any and
all losses, liability, costs or expenses (including reasonable attorney's fees)
incurred as a result of any alleged breach of the foregoing warranty. Landlord
represents and agrees that it shall pay the commissions due the aforesaid
brokers pursuant to a separate agreement. The execution and delivery of this
Lease by each party shall be conclusive evidence that such party has relied
upon the foregoing representation and warranty.
ARTICLE 33
Radon Disclosure
Section 33.01. In accordance with the requirements of Florida
Statutes Section 404.056(8), the following notice is hereby given to Tenant:
RADON GAS: Radon is a naturally occurring radioactive gas that, when
it has accumulated in a building in sufficient quantities, may present
health risks to persons who are exposed to it over time. Levels of
radon that exceed federal and state guidelines have been found in
buildings in Florida. Additional information regarding radon and radon
testing may be obtained from your County Public Health Unit.
ARTICLE 34
Confidential
Section 34.01. This Lease and its terms and the matters set
forth herein, are strictly confidential. Except as otherwise required by law or
permitted in this Lease, each party shall make and shall cause its agents,
licensees and employees to make every effort to ensure the items hereof are
not, and the information contained herein or received pursuant hereto, is not
disclosed to any outside entity (including the press) without the consent of
the other party. Each party acknowledges that attorneys, accountants and other
consultants retained by the respect parties may have knowledge of Tenant.
Further, Landlord agrees not to disclose and to cause its agents, licensees and
employees not to disclose Tenant's name or any information relating to or
describing Tenant to any outside entity (including the press) without the prior
written consent of Tenant, which consent shall be withheld in its sole
discretion until such time as Tenant shall make a press announcement concerning
the Lease.
ARTICLE 35
Due Authorization of Tenant and Landlord
Section 35.01. Landlord represents that it is a Delaware
corporation duly formed and validly existing in good standing under the laws of
the State of Delaware and is duly authorized to transact business in the State
of Florida. This Lease has been duly authorized by all necessary action on the
part of Landlord and, upon the assumption that this Lease constitutes a legal,
valid and binding obligation of Tenant, this Agreement constitutes a legal,
valid and binding obligation of Landlord. The execution and delivery of this
Lease and consummation of the transactions contemplated hereby do not and will
not (i) violate or conflict with the partnership agreement of Landlord, (ii)
violate or conflict with any judgment, decree or order of any court applicable
to or affecting Landlord, or (iii) breach the provisions of, or constitute a
default under, any mortgage, agreement, instrument or
-35-
<PAGE> 47
obligation to which Landlord is a party or by which Landlord is bound.
Section 35.02. Tenant represents that it is a corporation
duly organized and validly existing in good standing under the laws of the
State of Connecticut. This Lease has been duly authorized by all necessary
action on the part of Tenant and, upon the assumption that this Lease
constitutes a legal, valid and binding obligation of Landlord, this Lease
constitutes a legal, valid and binding obligation of Tenant. The execution and
delivery of this Lease and the consummation of the transactions contemplated
hereby do not and will not (i) violate or conflict with the Articles of
Incorporation of Tenant, (ii) violate or conflict with any judgment, decree or
order of any court applicable to or affecting Tenant, or (iii) breach contract,
agreement, instrument or obligation to which Tenant is a party or by which
Tenant is bound.
ARTICLE 36
Landlord Liability
Section 36.01. The liability of Landlord for Landlord's
obligations under this Lease shall be limited to Landlord's interest in the
Demised Premises (including casualty and title insurance proceeds, condemnation
awards, and, in the case of a transferring Landlord in any instance in which
the transferee shall not have assumed the obligations of Landlord under this
Lease ab initio the net proceeds received by Landlord from such sale,
conveyance, assignment or transfer), and Tenant shall not look to any other
property or assets of Landlord in seeking either to enforce Landlord's
obligations under this Lease or to satisfy a judgment for Landlord's failure to
perform such obligations.
ARTICLE 37
Financial Records
Section 37.01. Tenant shall provide Landlord within a
reasonable time after the expiration of each quarter of Tenant's fiscal year,
in any event within sixty (60) days thereafter, quarterly reports prepared
showing all income and expenses of Tenant with respect to the Demised Premises
for such quarter and the current year to date, together with a listing of all
receivables and payables in excess of $5,000 with respect to the Demised
Premises as of such date, and a current subleasing rent roll, if any.
ARTICLE 38
Right to Terminate
Section 38.01. Subject to the terms and conditions contained
herein and provided that Tenant is not then in default under this Lease, Tenant
may, at any time subsequent to September 11, 2006, terminate this Lease by
giving written notice to Landlord, at least one (1) year prior written notice
of Tenant's intent to terminate this Lease (the "Termination Notice"). In the
event that Tenant gives the Termination Notice, then upon payment by Tenant of
an amount equal to three (3) times the monthly Basic Rent, as adjusted to the
date of termination, the Lease shall be deemed terminated as if the Expiration
Date were the day one (1) year following the date of delivery of the
Termination Notice.
ARTICLE 39
Commencement Date
Section 39.01. The Tenant is currently occupying certain
premises located at One Town Center Circle, Boca Raton, Florida (the "Grace
Building"). The Landlord is currently occupying the Demised Premises, and
intends to take by assignment the Tenant's interest, as lessee, in the Grace
Building, subject to the terms and conditions of an assignment and other
agreements to be made by and between Landlord and Tenant. Landlord and Tenant
agree to cooperate and use their best efforts to effect the exchange of
leasehold premises with minimal
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<PAGE> 48
disruption and interference with the businesses of both Landlord and Tenant,
and their respective subsidiaries and affiliates.
Section 39.02. The Commencement Date of this Lease shall be
the date that Tenant has substantially occupied the Demised Premises and
commenced business operations therefrom, and the date that Landlord shall have
commenced business operations from the Grace Building.
ARTICLE 40
Guaranty of W.R. GRACE & CO.
Section 40.01. W.R. GRACE & CO., a Delaware corporation, duly
authorized to transact business in the State of Florida (the "Guarantor"), does
unconditionally and absolutely, jointly and severally, guaranty to Landlord the
prompt payment, when due, of the Basic Rent and all Additional Charges payable
under this Lease and the full and faithful performance and observance of any
and all of the terms, conditions, provisions, warranties and covenants
contained in this Lease on the part of the Tenant to be performed and observed
(the "Lease Covenants"). Guarantor unconditionally and absolutely covenants to
Landlord that, if Tenant shall default at any time in the payment of rent or
other charges stipulated in the Lease or in the performance of any of the other
Lease Covenants, Guarantor shall promptly perform such Lease Covenants, and pay
the rent and other charges or arrears thereof that may remain due thereon to
Landlord.
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<PAGE> 49
IN WITNESS WHEREOF, Landlord and Tenant have duly executed and delivered this
Lease as of the day and year first above written.
LANDLORD:
ADT TITLE HOLDING COMPANY I
Illegible By: /s/ Bernard J. Dalet
- --------- ---------------------------------------
Witness for Landlord Bernard J. Dalet, Vice President
Illegible
- ---------
Witness for Landlord
TENANT:
W.R. GRACE & CO.-CONN.
Illegible By: /s/ W. B. McGowan
- --------- ---------------------------------------
Witness for Tenant W. B. McGowan, Senior Vice President
Illegible GUARANTOR:
- ---------
Witness for Tenant
Illegible By: /s/ W. B. McGowan
- --------- ---------------------------------------
Witness for Guarantor W. B. McGowan, Senior Vice President
Illegible
- ---------
Witness for Guarantor
-38-
<PAGE> 50
SCHEDULE A
TO ADT LEASE
Legal Description
A parcel of land South of Clint Moore Road in Section 1, Township 47 South, 43
East, Palm Beach County, Florida, described as follows:
COMMENCING at the Northwest corner of Section 1, Township 47 South, Range 43
West, Palm Beach County, Florida; thence South 00(degrees) 00' 35' East (for
convenience all bearing shown herein are relative to an assumed meridian) along
the West line of said Section 1, a distance of 5905.02 feet; thence South 89'
29' 20' East along the South Right-of-Way line of Clint Moore Road, being
parallel with and S95 feet South of the North line of said Section 1, a
distance of 737.46 feet of the POINT OF BEGINNING of this description; thence
continue South 83' 29' 20' East, a distance of 522.62 feet; thence South a
distance of 416.75 feet; thence West a distance of 522.60 feet; thence North a
distance of 521.41 feet to the POINT OF BEGINNING.
Said lands situate, lying and being in Palm Beach County, Florida.
Tax Assessor's No. PC# 06-42-47-01-00-000-3050-001
<PAGE> 51
SCHEDULE B
TO
ADT LEASE
Taxes for the year 1998
Covenants, restrictions, conditions, reservations, easements, liens for
assessments and other provisions set forth in restrictive covenants recorded in
Official Records Book 2873, at Page 745 and in allied instruments referred to
in said restrictions aforementioned restrictions have been amended by
instrument(s) recorded in Official Records Book 3199, Page 115, Office Records
Book 3199, Page 120, Official Records Book ___, Page 1415, Official Records
Book 3767, Page 1943, Official Records Book 3866, Page ____, Official Records
Book 3880, Page 1137 and Official Records Book 4054, Page 1768. Rights of First
Refusal has been waived.
Covenant recorded in Official Records Book(s) 2869, Page 54.
Resolution of the Lake Worth Drainage District recorded in Official Records
Book(s) 473, Page 92.
Grant of Easement recorded in Official Records Book(s) 2892. Page 1582.
Memorandum of Agreement recorded in Official Records Book(s) 2910, Page 499.
Rights of others in the enjoyment of water over that portion at the Southeast
course of the premises which is submerged as shown by survey prepared by
Caulfield & Wheeler, Inc., dated August 4, 1995, as Job No. 368-01.
<PAGE> 52
EXHIBIT"B"
TO
W.R. GRACE-CONN LEASE OF ADT BUILDING
The following Alterations to the Demised Premises have been approved by the
Landlord:
1. Removal of locker room and exercise room in the first floor
lobby area in order to construct a file room.
2. Construction of two (2) partition walls in the front of the
lobby from the front windows to the elevator banks in the
center of the Building. The two (2) added rooms will be used
for conference rooms.
3. Construction of two (2) wall from floor to ceiling in the
rear of the first floor lobby from the elevator banks to the
rear windows. These two (2) areas will be used as office
space.
4. The addition of a set of doors in the rear of the lobby in
the center of the Building.
<PAGE> 53
SCHEDULE "C"
TO ADT LEASE
NONE
<PAGE> 54
SCHEDULE D
ELEVATOR MAINTENANCE
1. Regularly examine, adjust, lubricate as required, and, if conditions
warrant, repair or replace:
a. Power Unit, Pump Motor and Controller;
b. Valve, including relief valve, pilot, lowering, leveling and
check valves, or any of the parts thereof;
c. V-belts, strainers, springs and gaskets;
d. Controller relays, solid state control components, contacts,
coils, timers, magnet frames and controller wiring, traveling
cable and components for entire operating circuit;
e. Plunger, guide bearings, packing and packing gland; and
f. Guide rails and guide shoes.
2. Furnish lubricants which are specially prepared and compounded.
3. Maintain hydraulic fluid at proper operating level.
4. Make any adjustments, repairs, and replacements which it may be
advisable to make before the next regular examination.
5. Make a hydraulic inspection and test of the pressure relief valve, at
least 4 times per year, on each elevator.
6. Examine, lubricate, adjust, and if conditions warrant, repair or
replace all accessory equipment.
<PAGE> 55
SCHEDULE E
BOILER MAINTENANCE
YEARLY MAINTENANCE
1. Clean and adjust burner.
2. Inspect and clean flue passage and smoke pipe.
3. Inspect and seal cleanouts.
4. Check draft and adjust if necessary.
5. Lubricate all motors and bearings, including pumps.
6. Check operation of safety switches and valves.
7. Set up for peak efficiency.
BI-MONTHLY MAINTENANCE
1. Check operation of low water cutoff.
2. Check boiler feed valve and pressure.
3. Check hi and low limit for manual shutdown and proper hot water
temperature.
4. Inspect burner operation.
5. Check that hot water heating pumps are not overheating
6. Lubricate bearings.
7. Alternate operation of heating pumps.
<PAGE> 1
EXHIBIT 10.25
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("this Agreement") is made and effective this
7th day of April, 1997, by and between DALEEN TECHNOLOGIES, INC., a Florida
corporation located at 902 Clint Moore Road, Suite 230, Boca Raton, 33487
("Company"), and John Z. Yin, residing at 2608 N.W. 53rd Drive, Boca Raton, FL
33496 ("Employee").
WITNESSETH:
WHEREAS, Company believes it is in Company's best interest to employ
Employee, and Employee desires to be employed by Company; and
WHEREAS, Company and Employee desire to set forth the terms and conditions
on which Employee shall be employed by and provide his services to Company;
NOW, THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby
agree as follows:
1. Employment. Company hereby employs Employee in its business as a Vice
President Technology, and Employee hereby accepts such employment, all upon the
terms and conditions hereinafter set forth.
2. Term. Unless sooner terminated pursuant to the provisions of this
Agreement, the term of employment under this Agreement shall be for as long as
Employee remains employed hereunder, with Employee acknowledging that he is an
at will employee ("Employment Period").
3. Salary and Base Compensation. Employee shall be entitled to receive
salary during the Employment Period at the rate of One Hundred Thousand and
100/00 Dollars ($100,000.00) per annum, as such may be increased pursuant to
Section 9 hereof (the "Base Salary"). In addition to the Base Salary paid to
Employee during the Employment Period, Employee shall be entitled to receive
the Benefits, Bonus Compensation, and Stock Option (as those terms are
hereinafter defined) during the Employment Period. The Base Salary shall be
payable biweekly in accordance with the current normal payroll policies of
Company, which policies may be changed by Company from time to time in its sole
discretion, and shall be subject to all appropriate withholding taxes.
4. Business Expenses and Reimbursements. Employee shall be entitled to
reimbursement by the Company for ordinary and necessary business expenses
incurred by
1
<PAGE> 2
Employee in the performance of his duties for the Company, which types of
expenditures shall be determined and approved by the Company, and further
provided that:
(a) Each such expenditure is of a nature qualifying it as a proper
deduction on the Federal and State income tax returns of Company as a business
expense and not as deductible compensation to Employee; and
(b) Employee furnishes Company with adequate records and other
documentary evidence required by federal and State statutes and regulations for
the substantiation of such expenditures as deductible business expenses of
Company and not as deductible compensation to Employee, as well as any other
documentation reasonably requested by Company.
(c) Employee agrees that, if at any time, any payment made to Employee
by Company, whether for salary or as a business expense reimbursement, shall be
disallowed in whole or in part as a deductible expense by the appropriate taxing
authorities, Employee shall reimburse Company to the full extent of such
disallowance.
5. Benefits.
(a) Employee agrees that the Base Salary, the Bonus Compensation, the
Stock Option, and the Benefits provided in accordance with this Agreement, are
the sole and exclusive compensation of Employee for his duties hereunder.
(b) Continuing throughout the Employment Period:
(i) Employee shall receive all of the employee benefits
including, without limitation, pension, disability, profit sharing and
retirement benefits, provided at any time by Company to any of its employees in
the sole and absolute discretion of the Board of Directors of the Company (the
"Board");
(ii) The Company shall provide health insurance providing
hospital, medical and dental coverage pursuant to Company plans in effect from
time to time for Employee and each of Employee's dependents at similar expense
to Employee or such dependents as charged to other employees of the Company.
6. Vacation. Employee shall be entitled to vacation in accordance with
the vacation policy of the Company in effect from time to time.
7. Profit Bonus
2
<PAGE> 3
(a) Employee shall be entitled to receive within 15 days of the end
of each full calendar quarter during the Employment Period, a bonus based upon
Employee's performance of stated objectives as described in Exhibit A (the
"Bonus Compensation").
(b) Notwithstanding anything to the contrary in this Agreement, the
Bonus Compensation shall be payable only provided Employee is in the employ of
Company on the last day of the respective quarter for which such Profits Bonus
is being calculated and further payable in accordance with and subject to the
normal payroll policies of Company with respect to similar forms of
compensation, including without limitation, being subject to all appropriate
withholding taxes.
8. Stock Option. In addition to Employee's Base Salary, Benefits and
Bonus Compensation, Employee shall be granted a non-transferable option
exercisable within five (5) years and vested over a (1) one year period to
purchase a number of shares equal to ten thousand (10,000) (the "Stock
Option"). The exercise price for such stock shall be estimated fair market
value of such stock as determined by Company's internal accounting department
and shall be final and binding, currently $3.00.
9. Compensation Review. The President or his designee shall from time to
time, no less frequently than annually, review Employee's compensation and may
(in his sole discretion) increase, but not decrease, the compensation provided
for in Section 3 hereof. Any such increase in compensation shall be valid only
if in writing, executed by the President or his designee, and such writing
shall constitute an amendment solely to the payments to be made to Employee
under this Agreement, without waiver or modification of any other provision
hereof.
10. Invention Assignment and Confidentiality Agreement. Against the
execution and delivery of this Agreement, Employee shall enter into an
agreement in the form of Exhibit "C" hereto (the "Invention Assignment and
Confidentiality Agreement").
11. Non-Competition Agreement. Against the execution and delivery of this
Agreement, Employee shall enter into a non-competition and non-solicitation
agreement (in the form of Exhibit "D" hereto) (the "Non-Competition Agreement")
which also, notwithstanding the at will nature of the employment, provides for a
severance benefit under certain circumstances.
12. No Other Compensation or Benefits. Employee agrees that the
compensation set forth in this Agreement is the sole and exclusive compensation
of Employee for his duties hereunder, and that he shall have no rights to
receive any other compensation or benefits of any nature.
13. Duties. During the Employment Period:
3
<PAGE> 4
(a) Employee shall furnish all manner of services in connection with
his position as Vice President of Technology or as otherwise designated by the
President including, without limitation, primary responsibility for such duties
as shall be deemed by the President appropriate to carry out the policies and
programs of the Board and as from time to time may be delegated or assigned to
him by the Board;
(b) Employee shall report directly to the President (or someone
appointed by the President) in the performance of all his duties herein.
(c) Employee shall comply with all Company policies for the employees
as such policies may exist from time to time.
(d) Employee shall devote his entire time, energy and skill to the
service of Company and the promotion of Company's interests, and shall use his
best efforts in the performance of his services hereunder. The parties agree
that Employee may not, during the Employment Period, be engaged in any other
business activity whether or not such activity is pursued for gain, profit, or
other pecuniary advantage including, without limitation, management or
management consulting activities; provided, however, Employee may invest his
personal assets in businesses where the form or manner of such investment will
not require services on the part of Employee conflicting with the duties of
Employee under this Agreement and in which his participation is solely that of a
passive investor. Employee agrees to abide by all rules and regulations
established from time to time by the President and/or the Board; and all
commissions, fees or other income earned and received by Employee, if any, in
furtherance of the business of Company, or its affiliates or from any other
business or financial opportunity or endeavor in which Employee is an active
participant and not a passive investor, shall be accepted by Employee for the
account of Company, and shall be remitted to Company within three (3) days of
Employee's receipt thereof.
14. Authority to Contract. Employee shall have no authority to enter into
any contracts binding upon Employer, or create any obligations on the part of
Employer, unless specifically authorized in writing by the President or the
Board.
15. Termination. The Employer may, in its sole discretion, terminate this
Agreement for any reason, subject to the severance obligation outlined in the
Non-Competition Agreement. In the event of termination of employment by either
party, subject to compliance with the Non-Competition Agreement, Employee shall
be entitled to distributions pursuant to the severance provisions more fully set
forth in the Non-Competition Agreement and to all Base Salary and fully accrued
Bonus Compensation for completed quarters.
16. Surrender of Records. Upon the termination of the Employee's employment
hereunder, for any reason whatsoever, and in addition to such other actions as
may be reasonably required by Employer, the Employee agrees to surrender to the
Employer, in good condition, any
4
<PAGE> 5
record or records kept by him containing the names, addresses, and other
information with regard to customers or potential customers of the Employer
which have been served by the Employee.
17. Entire Agreement. This Agreement represents the entire understanding
and agreement between the parties with respect to the subject matter hereof, and
supersedes all other negotiations, understandings and representations (if any)
made by and between such parties.
18. Amendments. The provisions of this Agreement may not be amended,
supplemented, waived or changed orally, but only by a writing signed by the
party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
19. Assignments. Employee shall not assign his rights and/or obligations
hereunder.
20. Binding Effect. All of the terms and provisions of this Agreement,
whether so expressed or not, shall be binding upon, inure to the benefit of, and
be enforceable by the parties and their respective administrators, executors,
legal representatives, heirs, successors and permitted assigns.
21. Severability. If any part of this Agreement or any other Agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
22. Survival. Notwithstanding anything to the contrary herein, the
provisions of Sections 12 through 29 (inclusive) shall survive and remain in
effect in accordance with their respective terms in the event the employment is
terminated.
23. Waivers. The failure or delay of Company at any time to require
performance by Employee of any provision of this Agreement, even if known, shall
not affect the right of Company to require performance of that provision or to
exercise any right, power or remedy hereunder, and any waiver by Company of any
breach of any provision of this Agreement should not be construed as a waiver of
any continuing or succeeding breach of such provision, a waiver of the provision
itself, or a waiver of any right, power or remedy under this Agreement. No
notice to or demand on Employee in any case shall, of itself, entitle such party
to any other or further notice or demand in similar or other circumstances.
24. Specific Performance. Employee acknowledges that the services to be
rendered by Employee hereunder are extraordinary and unique and are vital to the
success of the Company, and that damages at law would be an inadequate remedy
for any breach or threatened breach of this Agreement by Employee. Therefore, in
the event of a breach or threatened breach by
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<PAGE> 6
Employee of any provision of this Agreement, then Company shall be entitled, in
addition to all other rights or remedies, to injunctions restraining such
breach, without being required to show any actual damage or to post any bond or
other security.
25. Notices. All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including telex
and telegraphic communication) and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, telecommunicated,
or mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, to the addresses listed above or to such
other address as any party may designate by notice complying with the terms of
this Section. Each such notice shall be deemed delivered (a) on the date
delivered if by personal delivery, (b) on the date telecommunicated if by
telegraph, (c) on the date of transmission with confirmed answer back if by
telex or telefax, and (d) on the date upon which the return receipt is signed
or delivery is refused or the notice is designated by the postal authorities as
not deliverable, as the case may be, if mailed.
26. Jurisdiction and Venue. The parties acknowledge that a substantial
portion of negotiations, anticipated performance and execution of this
Agreement occurred or shall occur in Palm Beach County, Florida, and that,
therefore, without limiting the jurisdiction or venue of any other federal or
state courts, each of the parties irrevocably and unconditionally (a) agrees
that any suit, action or legal proceeding arising out of or relating to this
Agreement may be brought in the courts of record of the State of Florida in
Palm Beach County or the court of the United States, Southern District of
Florida; (b) consents to the jurisdiction of each such court in any such suit,
action or proceeding; (c) waives any objection which it may have to the laying
of venue of any such suit, action or proceeding in any of such courts; and (d)
agrees that service of any court paper may be effected on such party by mail,
as provided in this Agreement, or in such other manner as may be provided under
applicable laws or court rules in said state.
27. Remedies Cumulative. No remedy herein conferred upon any party is
intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. No single or partial exercise by any party of any right, power or
remedy hereunder shall preclude any other or further exercise thereof.
28. Employee Representations, Warranties, and Acknowledgments. Employee
represents and warrants to Company that he is fully empowered to enter and
perform his obligations under this Agreement and, without limitation, that he
is under no restrictive covenants to any person or entity that will be violated
by his entering into and performing this Agreement, and that this Agreement
constitutes the valid and legally binding obligation of Employee enforceable in
accordance with its terms. The execution and delivery of this Agreement by
Employee has been duly authorized by all necessary action. Employee shall
indemnify Company upon demand for and against any and all judgments, losses,
claims, damages, costs (including
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without limitation all legal fees and costs, even if incident to appeals)
incurred or suffered by any of them as a result of the breach of the
representations and warranties made in this section, or as a result of the
failure of the acknowledgment made in this section to be true and correct at all
times.
29. Governing Law. This Agreement and all transactions contemplated by
this Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the State of Florida without regard to principles of
conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
Witnesses: DALEEN TECHNOLOGIES, INC.
/s/ Anita Soto By: /s/ James Daleen
- ------------------------ --------------------------
Its President and CEO
- ------------------------
EMPLOYEE:
/s/ Anita Soto /s/ John Z. Yin
- ------------------------ -----------------------------
- ------------------------
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EXHIBIT LIST
Exhibit A - Job Title, Compensation and Other Miscellaneous Information
Exhibit B - Current Company Benefits to Which Employee is Entitled
Exhibit C - Invention Assignment and Confidentiality Agreement
Exhibit D - Non-Solicitation and Non-Compete Agreement
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EXHIBIT A TO EMPLOYMENT AGREEMENT
1. Employee Name: John Z. Yin
2. Job Title or Description: Vice President of Technology
Reporting to (Supervisor): Jim Daleen, President/CEO
3. Annual Base Salary: $100,000 annually. In addition to the base salary:
- 10,000 stock options at $3.00 exercise price per share (estimated fair
market value) will be granted at the time of employment.
- Additional stock options if any, will be granted on a discretionary basis
normally keyed to job performance.
- Employee will be eligible to receive a discretionary bonus based on
employee's performance towards meeting business objectives, provided
however, that employee must be employed at the end of a calendar quarter
or calendar year to be eligible to receive a cash or stock bonus for
that quarter and/or year.
- The bonus will range from $0 - $20,000 and be prorated based on a
calendar year.
- Additional stock options will be granted on an annual basis.
- Employee's bonus will be partially paid each quarter.
- Employee will receive 1/2 of the projected bonus of $20,000 paid
quarterly or $2,500 per quarter (prorated in the quarter that Employee
starts).
- The balance of the Employee's bonus is completely discretionary and
determined by the President/CEO and is solely based on Employee's
performance.
- The calculation of discretionary portion of Employee's bonus will be
made in January following the calendar year that the bonus is based on.
The additional bonus, if any, will be paid to employee on or before the
15th of February along with employee's stock options.
4. Employment Start Date (may be prior to Agreement date): April 7, 1997
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EXHIBIT B TO EMPLOYMENT AGREEMENT
1. Employee Name: John Z. Yin
2. Current Benefits to Which Employee is Entitled are as follows:
- - RETIREMENT PLANNING
- - HEALTH BENEFITS PROGRAM
- - DISABILITY PROTECTION PROGRAM
The RETIREMENT PLANNING program consists of a 401(k) Profit Sharing Plan which
allows employees to contribute on a tax deductible basis, up to a maximum of
15% of their income.
In addition, the employer will match 25% of the Employer 401(k) percentage
election, up to a maximum of 8% deferral made by the Employee. Also, to inspire
excellence and profitability, the Plan Document provides for a Discretionary
Matching contribution which is relative to the performance of the company.
The HEALTH BENEFITS PROGRAM AND DISABILITY PROTECTION PROGRAM are structured
under Code Section 125 of the Internal Revenue Code Providing a reduction in
cost due to the pre-tax structure of these benefit plans, offering a reduction
in both Social Security Tax and Income Tax.
The HEALTH BENEFITS PROGRAM is provided by The Prudential Insurance Company.
Employees have the opportunity to choose from two options which are the PRU
CARE PLUS or the PRU CARE H.M.O. Daleen Technologies, Inc. contributes 75% of
the premium for the employee and 50% for dependents.
The DISABILITY PROTECTION PLAN is individually designed and the employer
provides a 7% contribution to the Plan. This Plan also provides a guaranteed
cost and portability to the employee.
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EXHIBIT C TO EMPLOYMENT AGREEMENT
INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is entered into this 7th day of April 1997, by and between Daleen
Technologies, Inc. (DTI), and John Z. Yin (hereinafter referred to as
"Employee") for and in consideration of Employee's continued employment or
engagement by DTI and the compensation that Employee shall receive during
Employee's employment or engagement, the parties agree as follows:
1. Both during and after Employee's employment or engagement:
a. Employee shall not disclose to anyone outside DTI any Confidential
Information. "Confidential Information" is defined as information
which has not been made publicly available by DTI or the third party
owner of such information, and
1. Which was developed by DTI, and relates to DTI's past, present,
and future business, including but not limited to
developments (defined below, technical data, specifications,
designs, concepts, discoveries, copyrights, improvements,
product plans, research and development, personal
information, personnel information, financial information,
customer lists, leads, and/or marketing programs;
2. All documents marked as confidential and/or continuing such
information; and/or
3. All information DTI has acquired or received from a third party
in confidence.
b. Employee shall use Confidential Information only for DTI's business
purposes; and
c. Employee shall use any information received in confidence by DTI from
any third party only as permitted by written agreement between DTI and
the third party; and
d. Employee shall not be permitted to justify any disregard of the
obligations of Employee hereunder by using any of the Confidential
Information to guide a search by it of publications and other publicly
available information, selecting a series of items of knowledge from
unconnected sources and fitting them together by use of the integrated
disclosure of the information thereby to justify its disregard of the
obligations of confidence.
2. Employee shall not disclose to DTI, use in DTI's business, or cause DTI to
use any information or material which is confidential to any third party
unless DTI has a written agreement with the third party allowing DTI to
receive and use the confidential information or materials. Employee will
not incorporate into Employee's work any material which is subject to the
copyrights of any third party unless DTI has the right to copy and
incorporate such copyrighted material.
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3. When Employee is no longer employed or engaged by DTI, Employee shall
return to DTI all DTI property, and any and all third party property,
including all Confidential Information, drawings, computer programs or
copies thereof, documentation, notebooks and notes, reports and any other
materials on electronic or printed media.
4. Employee hereby grants, transfers and assigns to DTI all of his or her
rights, title and interest, if any, in any and all Developments, including
rights to translation and reproductions in all forms or formats and the
copyrights and patent rights thereto, if any, and he or she agrees that DTI
may copyright said materials in DTI's name and secure renewal, reissues and
extensions of such copyrights for such periods of time as the law may
permit. "Developments" is defined as any idea, invention, process, design,
concept, or useful article (whether the design is ornamental or otherwise),
computer program, documentation, literary work, audiovisual work and any
other work of authorship, hereafter expressed, made or conceived solely or
jointly by employee during Employee's employment or engagement, whether or
not subject to patent, copyright or other forms of protection that:
a. Are related to the actual or anticipated business, research or
Development of DTI; and/or
b. Are suggested by or result from any task assigned to Employee or
work performed by Employee for or on behalf of DTI.
Employee acknowledges that the copyrights in Developments created by
Employee in the scope of Employees' employment or engagement, belong to DTI
by operation of law, or may belong to a party engaged by DTI by operation
of law pursuant to a works for hire contract between DTI and such
contracted part. To the extent the copyrights in such works may not be
owned by DTI or such contracted party by operation of law, Employee hereby
assigns to DTI or such contracted party, as the case may be, all copyrights
(if any) Employee may have in Developments.
Items not assigned by this Section 4 are listed and described on the
attached "Schedule of Separate Works". Employee agrees not to include any
part of such items in the materials Employee prepares for DTI unless and
until such items are licensed or assigned to DTI under separate written
agreement.
At all times hereafter, Employee agrees to assist DTI at DTI's expense in
obtaining patents or copyrights on any Developments assigned to DTI that
DTI, in its sole discretion, seeks to patent or copyright. Employee also
agrees to sign all documents, and do all things necessary to obtain such
patents or copyrights, to further assign them to DTI, and to reasonably
protect them and DTI against infringement by other parties at DTI expense
with DTI prior approval.
Employee irrevocably appoints any DTI-selected designee to act, at all time
hereafter, as his or her agent and attorney-in-fact to perform all acts
necessary to obtain patents and/or
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copyrights as required by this Agreement if Employee (i) refuses to perform
those acts or (ii) is unavailable, within the meaning of the United States
Patent and Copyright laws. It is expressly intended by Employee that the
foregoing power of attorney is coupled with an interest.
Employee shall keep complete, accurate, and authentic information and
records on all Developments in the manner and form reasonably requested by
DTI. Such information and records, and all copies thereof, shall be the
property of DTI as to any Developments assigned DTI. Employee agrees to
promptly surrender such information and records at the request of DTI as to
any Developments.
5. In connection with any of the Developments assigned by Section 4, Employee
agrees:
a. To disclose them promptly to DTI, and
b. At DTI's request, to execute separate written assignments to DTI and
do all things reasonable necessary to enable DTI to secure patents,
register copyrights or obtain any other form of protection for
Developments in the United States and in other countries. If Employee
fails or is unable to do so, Employee hereby authorizes DTI to act
under power of attorney for Employee to do all things to secure such
rights. In such cases, DTI assumes the liability of possible
violations of copyright and infringement of trade marks of others.
c. To provide DTI with notice of any inadvertent disclosure of
Confidential Information related to any Development.
6. Without limitation of any other Agreement between Employee and DTI,
Employee shall not employ or engage or attempt to employ or engage the
services of any employee of DTI, either directly or through the agency of a
third party during the term of, or within six (6) months after, the
termination of Employee's employment or engagement with DTI.
7. DTI, its subsidiaries, licensees, successors or assigns, (direct or
indirect) are not required to designate Employee as author of any
Development when such Development is distributed publicly or otherwise.
Employee waives and releases, to the extent permitted by law, all
Employee's rights to such designation and any rights concerning future
modifications of such Developments.
8. Rights, assignments, and representations made or granted by Employee in
this Agreement, are assignable by DTI and are for the benefit of DTI's
successors, assigns, and parties contracted with DTI.
9. Miscellaneous Provisions.
a) Amendments. The provisions of this Agreement may not be amended,
supplemented, waived or changed orally, but only by a writing signed
by the party
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as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
b) Further Assurances. The parties hereby agree from time to time to execute
and deliver such further and other transfers, assignments and documents
and do all matters and things which may be convenient or necessary to more
effectively and completely carry out the intentions of this Agreement.
c) Brokers. Each of the parties represents and warrants that such party has
dealt with no broker or finder in connection with any of the transactions
contemplated by this Agreement, and, insofar as such party knows, no
broker or other person is entitled to any commission or finder's fee in
connection with any of these transactions. The parties each agree to
indemnify and hold harmless one another against any loss, liability,
damage, cost, claim or expense incurred by reason of any brokerage
commission or finder's fee alleged to be payable because of any act,
omission or statement of the indemnifying party.
d) Binding Effect. All of the terms and provisions of this Agreement, whether
so expressed or not, shall be binding upon, inure to the benefit of, and
be enforceable by the parties and their respective administrators,
executors, legal representatives, heirs, successors and permitted assigns.
e) Headings. The headings contained in this Agreement are for convenience of
reference only, are not to be considered a part hereof and shall not
limit or otherwise affect in any way the meaning or interpretation of
this Agreement.
f) Severability. If any provision of this Agreement or any other Agreement
entered into pursuant hereto is contrary to, prohibited by or deemed
invalid under applicable law or regulation, such provision shall be
inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and
shall be given full force and effect so far as possible. If any provision
of this Agreement may be construed in two or more ways, one of which
would render the provision invalid or otherwise voidable or unenforceable
and another of which would render the provision valid and enforceable,
such provision shall have the meaning which renders it valid and
enforceable.
g) Survival. All covenants, agreements, representations and warranties made
herein or otherwise made in writing by any party pursuant hereto shall
survive the execution and delivery of this Agreement and the termination
of employment or engagement of Employee.
h) Waivers. The failure or delay of any party at any time to require
performance by another party of any provision of this Agreement, even if
known, shall not affect the right of such party to require performance of
that provision or to exercise any
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right, power or remedy hereunder. Any waiver by any party of any breach of
any provision of this Agreement should not be construed as a waiver of any
continuing or succeeding breach of such provision, a waiver of the
provision itself, or a waiver of any right, power or remedy under this
Agreement. No notice to or demand on any party in any case shall, of
itself, entitle such party to any other or further notice or demand in
similar or other circumstances.
i) Specific Performance. Each of the parties acknowledges that the parties
will be irreparably damaged (and damages at law would be an inadequate
remedy) if this Agreement is not specifically enforced. Therefore, in the
event of a breach or threatened breach by any party of any provision of
this Agreement, then the other parties shall be entitled, in addition to
all other rights or remedies, to injunctions restraining such breach,
without being required to show any actual damage or to post any bond or
other security, and/or to a decree for specific performance of the
provisions of this Agreement.
j) Jurisdiction and Venue. The parties acknowledge that a substantial portion
of negotiations and anticipated performance and execution of this Agreement
occurred or shall occur in Palm Beach County, Florida, and that, therefore,
without limiting the jurisdiction or venue of any other federal or state
courts, each of the parties irrevocably and unconditionally (a) agrees that
any suit, action or legal proceeding arising out of or relating to this
Agreement may be brought in the courts of record of the State of Florida in
Palm Beach County or the court of the United States, Southern District of
Florida; (b) consents to the jurisdiction of each such court in any suit,
action or proceeding; (c) waives any objection which it may have to the
laying of venue of any such suit, action or proceeding in any of such
courts; and (d) agrees that service of any court paper may be effected on
such party by mail, as provided in this Agreement, or in such other manner
as may be provided under applicable laws of court rules in said state.
k) Remedies Cumulative. Except as otherwise expressly provided herein, no
remedy herein conferred upon any party is intended to be exclusive of any
other remedy, and each and every such remedy shall be cumulative and shall
be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute or otherwise. No single or
partial exercise by any party of any right, power or remedy hereunder shall
preclude any other or further exercise thereof.
l) Governing Law. This Agreement and all transactions contemplated by this
Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the State of Florida without regard to
principles of conflicts of laws.
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m) Preparation of Agreement. This Agreement shall not be construed more
strongly against any party regardless of who is responsible for its
preparation. The parties acknowledge each contributed and is equally
responsible for its preparation.
n) Entire Agreement. This Agreement represents the entire understanding
and agreement among the parties with respect to the subject matter
hereof, and supersedes all other negotiations, understandings and
representations (if any) made by and among such parties.
IN WITNESS WHEREOF, the parties have duly set their hands to this Agreement,
effective as of the date stated above.
DALEEN TECHNOLOGIES, INC. EMPLOYEE
/s/ James Daleen /s/ John Yin
- --------------------------- ---------------------------
DTI Authorized Signature Employee's Signature
4/7/97 John Yin
- --------------------------- ---------------------------
Date Employee's Printed Name
4/7/97
---------------------------
Date
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SCHEDULE OF SEPARATE WORKS
The following are works that are not assigned by Section 4 of the Invention
Assignment and Confidentiality Agreement, in which Employee has any right,
title or interest, and which were conceived or written either wholly or in part
by Employee, prior to or outside the scope of Employee's employment by DTI.
DESCRIPTION: (If none, enter the word "None")
INTELLIGENT MENU-RIZED ACTION SYSTEM AND ITS GRAPHICAL USER INTERFACE
Indicate any item listed above that has been published, registered as a
copyright, or is or has been the subject of a patent application:
INVENTION DISCLOSURE
Indicate the name of such organization or third party who also has rights in
any of the listed items (such as former employers, partners, etc.):
JOHN YIN
Plus any other inventions that have been disclosed to former employers prior to
my employment with Daleen Technologies, Inc.
The foregoing is complete and accurate to the best of Employee's knowledge.
/s/ John Z. Yin 4/7/97
- ----------------------------------------------
Employee's Signature Date
John Z. Yin
- -------------------------
Employee's Printed Name
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EXHIBIT D TO EMPLOYMENT AGREEMENT
NON-SOLICITATION AND NON-COMPETE AGREEMENT
THIS NON-SOLICITATION AND NON-COMPLETE AGREEMENT ("Agreement") made as of this
7th day of April, 1997 by and between Daleen Technologies, Inc., a Florida
corporation with its principal office at 902 Clint Moore Road, Suite 230, Boca
Raton, Florida 33487 (hereinafter called "Daleen") and John Z. Yin (hereinafter
"Employee").
WHEREAS, Employee is accepting employment with Daleen; and
WHEREAS, the parties wish to reflect their agreement as to Employee's
promises regarding Employee's solicitation and competition which have induced
Daleen to employ Employee at Employee's status with Daleen, as well as Daleen's
extension of certain severance benefits to Employee.
NOW, THEREFORE, Employee and Daleen (hereinafter sometimes referred to
collectively as the "parties" and separately as a "party") in consideration of
Employee's employment with Daleen and the covenants hereinafter set forth and
other good and valuable consideration and intending to be legally bound hereby,
agree as follows:
1. Non-solicitation. Employee will not, at any time while employed by
Daleen and for one (1) year after the termination of Employee's employment with
Daleen for any reason whatsoever, directly or indirectly (by assisting or
suggesting to another, or otherwise) solicit otherwise attempt to induce or
accept the initiative of another in such regard, alone or by combining or
conspiring with anyone, any employees, officers, directors, agents,
consultants, representatives, contractors, suppliers, distributors, customers
or other business contacts (collectively, "Business Affiliates") of Daleen to
terminate or modify its position as an employee, officer, director, agent,
consultant, representative, contractor, supplier, distributor, customer or
business contact with Daleen or to compete against Daleen.
2. Non-competition. (a) Employee shall not while employed by Daleen, and
after the termination of said employment for any reason whatsoever for the
time period after such termination described in paragraph (c) below (the
"No-Compete Period"), directly or indirectly, as owner, officer, director,
employee, agent, lender, broker, investor, consultant or representative of any
corporation or as owner of any interest in, or as an employee, agent,
consultant, partner, affiliate or in any other capacity whatsoever or
representative of any other form of business association, sole proprietorship
or partnership, conduct or be related to any business in competition with any
business of Daleen currently or in the future, including without limitation,
billing and billing related customer care software systems and related
professional services, as provided by Daleen during the period Employee is
employed by Daleen, except for businesses wherein Employee is not working
directly in billing and billing related customer care software products and
related professional services and billing, and billing related customer care
software systems and services are less than twenty-five percent (25%) of its
total revenue (herein referred to as the "Competitive Business") anywhere
within the territories, nor as to certain customers anywhere in the United
States, both listed on the "Territories and Customers" Exhibit to the
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<PAGE> 19
Agreement, made a part hereof, including without limitation, the solicitation
of any customers, who were at any time customers of Daleen and in connection
with a business which is competitive with the Competitive Business except that
such competitive activity will be permitted as to business solicitation of and
competition with Daleen as to any entity listed on an Exhibit to this Agreement
made a part hereof identified as a "No-Compete Exception", if any, subject to
paragraph (c) below.
(b) In addition to, and not in limitation of the other provisions hereof or
of any other Agreement between Employee and Daleen, Employee shall not at any
time in any manner other than in the ordinary course of good faith competition
only as permitted herein interfere with, disturb, disrupt, decrease or otherwise
jeopardize the business of Daleen or do anything which may tend to take away or
diminish the trade, business or good will of Daleen or give to any person the
benefit or advantage of Company's or Seller's methods of operation, advertising,
publicity, training, business customers or accounts, or any other information
relating or useful to Daleen's business.
(c) The No-Compete Period shall increase depending upon the duration of
Employee's employment with Daleen as follows:
i) If Employee has completed ninety (90) days of employment with Daleen
subject to the No-Compete Exception, the No-Compete Period will be
forty-five (45) days;
ii) If Employee has completed one hundred and eighty (180) days of
employment with Daleen subject to the No-Compete Exception, the
No-Compete Period will be ninety (90) days;
iii) If Employee has completed two hundred seventy (270) days of employment
with Daleen subject to the No-Compete Exception, the No-Compete Period
will be one hundred and eighty (180) days;
iv) If Employee has completed four hundred and fifty (450) days or more of
employment with Daleen, the No-Compete Period will be one (1) year.
There will be no No-Compete Period if Employee has been employed for less
than ninety (90) days. In addition, the No-Compete Exception shall not apply as
to i) and ii) above.
3. Legal Effect. The foregoing covenants of Employee shall be deemed
severable, and the invalidity of any covenant shall not affect the validity or
enforceability of any other covenant. The existence of any claim or cause of
action by Employee against Daleen predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by Daleen of these covenants.
Daleen's failure to object to any conduct in violation of this Agreement shall
not be deemed a waiver by Daleen, but Daleen may, if it wishes, specifically
waive any part or all of those covenants to the extent that such waiver is set
forth in writing duly authorized by Daleen's Board of Directors.
Employee acknowledges and confirms that the length of the term and
geographical restrictions contained herein are fair and reasonable and not the
result of overreaching, duress or coercion of any kind. Employee further
acknowledges and confirms that his or her full,
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uninhibited and faithful observance of each of the covenants contained in this
Agreement will not cause him or her any undue hardship, financial or otherwise,
and that enforcement of each of the covenants contained in this Agreement will
not impair his or her ability to obtain employment commensurate with his or her
abilities and on terms fully acceptable to him or her or otherwise to obtain
income required for the comfortable support of him or her and his or her family
and the satisfaction of the needs of his or her creditors. Employee
acknowledges and confirms that his or her special knowledge of the business of
Daleen is such as would cause Daleen serious injury and loss if he or she were
to use such ability and knowledge to the benefit of a competitor or were to
compete with Daleen.
In the event that any court shall finally hold that the time or territory
or any other provision stated in this Agreement constitutes an unreasonable
restriction upon Employee, Employee hereby expressly agrees that the provisions
of this Agreement shall not be rendered void, but shall apply as to time and
territory or to such other extent as such court may judicially determine or
indicate constitutes a reasonable restriction under the circumstances involved.
Employee hereby agrees that in the event of the violation by him or her of any
of the provisions of this Agreement, Daleen will be entitled if it so elects,
to institute and prosecute proceedings at law or in equity to obtain damages
with respect to such violation or to enforce the specific performance of this
Agreement by Employee or to enjoin Employee from engaging in any activity in
violation hereof without any requirement on the part of Daleen to post any
bond.
In the event Daleen should bring any legal action or other proceeding for
the enforcement of this Agreement, the time for calculating the No-Compete
Period or terms of any other restriction herein shall not include the period of
time commencing with the filing of legal action or other proceeding to enforce
the terms of this Agreement through the date of final judgment or final
resolution, including all appeals, if any, of such legal action or other
proceedings.
4. Severance. In further consideration of the entering into of this
Agreement by Employee, Daleen agrees to entitle Employee to a severance pay
benefit based upon base salary dependent upon the duration of Employee's
employment with Daleen, determined as follows:
a) After six (6) months of employment, Employee shall be entitled to one
(1) week's severance base pay;
b) After one (1) year of employment, Employee shall be entitled to two
(2) week's severance base pay;
c) After each additional full year of employment with Daleen, Employee
shall be entitled to an additional one (1) week of severance base pay,
up to a maximum of ten (10) weeks of base pay at the end of a full
nine (9) years of employment.
The foregoing severance benefit shall be paid by Daleen in one lump sum
within ten (10) days from the date of the termination date of Employee's
employment by Daleen if the benefit is five (5) weeks pay or less, and if more
than five (5) weeks any additional severance payment to which Employee is
entitled will be paid no later than one hundred and twenty (120) days after the
date of termination of said employment by Daleen. No credit toward entitlement
of additional weeks of severance pay shall be earned for any partial year
worked, and Employee shall not be
13
<PAGE> 21
entitled to any severance benefit if terminated by Daleen for "cause" or if
Employee voluntarily resigns from his or her employment with Daleen. As used in
this Agreement determination for "cause" shall be defined as termination of
Employee by Daleen in the event Employee has been convicted of any felony or, in
the case of other crimes, involving moral turpitude or dishonesty, or for any
breach by Employee of any agreement with Daleen or of its employment or business
policies (including without limitation theft or misuse of company property), or
for any other act or omission by Employee which does not fit into the previous
categories but which Daleen in good faith believes has occurred to its detriment
and about which Employee has received at least one (1) written warning by Daleen
and despite such prior written warning, Employee has a second occasion committed
such act or omission.
5. Miscellaneous Provisions. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a writing signed by
the party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement. All of
the terms and provisions of this Agreement, whether so expressed or not, shall
be binding upon, inure to the benefit of, and be enforceable by the parties and
their respective administrators, executors, legal representatives, heirs,
successors and permitted assigns. The headings contained in this Agreement are
for convenience of reference only, are not to be considered a part hereof and
shall not limit or otherwise affect in any way the meaning or interpretation of
this Agreement. The failure or delay of any party at any time to require
performance by another party of any provision of this Agreement, even if known,
shall not affect the right of such party to require performance of that
provision or to exercise any right, power or remedy hereunder. Any waiver by any
party of any breach of any provision of this Agreement should not be construed
as a waiver of any continuing or succeeding breach of such provision, a waiver
of the provision itself, or a waiver of any right, power or remedy under this
Agreement, No notice to or demand on any party in any case shall, of itself,
entitle such party to any other or further notice or demand in similar or other
circumstances.
The parties acknowledge that a substantial portion of negotiations,
anticipated performance and execution of this Agreement occurred or shall occur
in Palm Beach County, Florida, and that, therefore, without limiting the
jurisdiction or venue of any other federal or state courts, each of the parties
irrevocably and unconditionally (a) agrees that any suit, action or legal
proceeding arising out of or relating to this Agreement may be brought in the
courts of record of the State of Florida in Palm Beach County or the District
Court of the United States, Southern District of Florida; (b) consents to the
jurisdiction of each such court in any suit, action or proceeding; (c) waives
any objection which it may have to the laying of venue of any such suit, action
or proceeding in any of such courts; and (d) agrees that service of any court
paper may be effected on such party by mail, as provided in this Agreement, or
in such other manner as may be provided under applicable laws or court rules in
said state. Except as otherwise expressly provided herein, no remedy herein
conferred upon any party is intended to be exclusive of any other remedy, and
each and every such remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise. No single or partial exercise by any party of any
right, power or remedy hereunder shall preclude any other or further exercise
thereof. This Agreement and all transactions contemplated by this Agreement
shall be governed by, and construed and enforced in accordance
14
<PAGE> 22
with, the internal laws of the State of Florida without regard to principles of
conflicts of laws. This Agreement shall not be construed more strongly against
any party regardless of who is responsible for its preparation. The parties
acknowledge each contributed and is equally responsible for its preparation. Any
time period provided for herein which shall end on a Saturday, Sunday or legal
holiday shall extend to 5:00 p.m. of the next full business day. This Agreement
represents the entire understanding and agreement amount the parties with
respect to the subject matter hereof, and supersedes all other negotiations,
understandings and representations (if any) made by and among such parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date written above.
Daleen Technologies, Inc.
/s/ John Yin /s/ James Daleen
- ------------------------------------ ------------------------------------
Employee's Signature Its: President and CEO
John Yin James Daleen
- ------------------------------------ ------------------------------------
Printed Name Printed Name
15
<PAGE> 23
NO-COMPETE EXCEPTIONS
---------------------
Exhibit to Non-Solicitation and Non-Compete Agreement of John Z. Yin.
NONE.
- -----
16
<PAGE> 1
Exhibit 10.26
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("this Agreement") is made and effective this
7th day of April, 1997, by and between DALEEN TECHNOLOGIES, INC., a Florida
corporation located at 902 Clint Moore Road, Suite 230, Boca Raton, 33487
("Company"), and Frank Dickinson residing at 699 S W. 7th Street, Boca Raton, FL
("Employee").
WITNESSETH:
WHEREAS, Company believes it is in Company's best interest to employ
Employee, and Employee desires to be employed by Company; and
WHEREAS, Company and Employee desire to set forth the terms and conditions
on which Employee shall be employed by and provide his services to Company;
NOW, THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby agree
as follows:
1. EMPLOYMENT. Company hereby employs Employee in its business as a Vice
President of Development, and Employee hereby accepts such employment, all upon
the terms and conditions hereinafter set forth.
2. TERM. Unless sooner terminated pursuant to the provisions of this
Agreement, the term of employment under this Agreement shall be for as long as
Employee remains employed hereunder, with Employee acknowledging that he is an
at will employee ("Employment Period").
3. SALARY AND BASE COMPENSATION. Employee shall be entitled to receive
salary during the Employment Period at the rate of Eighty Five Thousand and
100/00 Dollars ($85,000.00) per annum, as such may be increased pursuant to
Section 9 hereof (the "Base Salary"). In addition to the Base Salary paid to
Employee during the Employment Period, Employee shall be entitled to receive the
Benefits, Bonus Compensation, and Stock Option (as those terms are hereinafter
defined) during the Employment Period. The Base Salary shall be payable biweekly
in accordance with the current normal payroll policies of Company, which
policies may be changed by Company from time to time in its sole discretion, and
shall be subject to all appropriate withholding taxes.
4. BUSINESS EXPENSES AND REIMBURSEMENTS. Employee shall be entitled to
reimbursement by the Company for ordinary and necessary business expenses
incurred by
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<PAGE> 2
Employee in the performance of his duties for the Company, which types of
expenditures shall be determined and approved by the Company, and further
provided that:
(a) Each such expenditure is of a nature qualifying it as a proper
deduction on the Federal and State income tax returns of Company as a business
expense and not as deductible compensation to Employee, and
(b) Employee furnishes Company with adequate records and other documentary
evidence required by federal and State statutes and regulations for the
substantiation of such expenditures as deductible business expenses of Company
and not as deductible compensation to Employee, as well as any other
documentation reasonably requested by Company.
(c) Employee agrees that, if at any time, any payment made to Employee by
Company, whether for salary or as a business expense reimbursement, shall be
disallowed in whole or in part as a deductible expense by the appropriate taxing
authorities, Employee shall reimburse Company to the full extent of such
disallowance.
5. BENEFITS.
(a) Employee agrees that the Base Salary, the Bonus Compensation, the Stock
Option, and the Benefits provided in accordance with this Agreement, are the
sole and exclusive compensation of Employee for his duties hereunder.
(b) Continuing throughout the Employment Period:
(i) Employee shall receive all of the employee benefits including,
without limitation, pension, disability, profit sharing and retirement
benefits, provided at any time by Company to any of its employees in the sole
and absolute discretion of the Board of Directors of the Company (the "Board");
(ii) The Company shall provide health insurance providing hospital,
medical and dental coverage pursuant to Company plans in effect from time to
time for Employee and each of Employee's dependents at similar expense to
Employee or such dependents as charged to other employees of the Company.
6. VACATION. Employee shall be entitled to vacation in accordance with the
vacation policy of the Company in effect from time to time.
7. PROFITS BONUS.
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<PAGE> 3
(a) Employee shall be entitled to receive within 15 days of the end of
each full calendar quarter during the Employment Period, a bonus based upon
Employees performance of stated objectives as described in Exhibit A (the
"Bonus Compensation").
(b) Notwithstanding anything to the contrary in this Agreement, the
Bonus Compensation shall be payable only provided Employee is in the employ of
Company on the last day of the respective quarter for which such Profits Bonus
is being calculated and further payable in accordance with and subject to the
normal payroll policies of Company with respect to similar forms of
compensation, including without limitation, being subject to all appropriate
withholding taxes.
8. STOCK OPTION. In addition to Employee's Base Salary, Benefits and Bonus
Compensation, Employee shall be entitled to participate in the Company's Stock
Option Program for Employees. The exercise price for such stock shall be
estimated fair market value of such stock as determined by Company's internal
accounting department and shall be final and binding.
9. COMPENSATION REVIEW. The President or his designee shall from time to
time, no less frequently than annually, review Employee's compensation and may
(in his sole discretion) increase~ but not decrease, the compensation provided
for in Section 3 hereof. Any such increase in compensation shall be valid only
if in writing, executed by the President or his designee, and such writing shall
constitute an amendment solely to the payments to be made to Employee under this
Agreement, without waiver or modification of any other provision hereof.
10. INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT. Against the
execution and delivery of this Agreement, Employee shall enter into an agreement
in the form of Exhibit "C" hereto (the "Invention Assignment and
Confidentiality Agreement").
11. NON-COMPETITION AGREEMENT. Against the execution and delivery of this
Agreement, Employee shall enter into a non-competition and non-solicitation
agreement (ut the form of Exhibit "D" hereto) (the "Non-Competition Agreement")
which also, notwithstanding the at will nature of the employment, provides for a
severance benefit under certain circumstances.
12. NO OTHER COMPENSATION OR BENEFITS. Employee agrees that the
compensation set forth in this Agreement is the sole and exclusive compensation
of Employee for his duties hereunder, and that he shall have no rights to
receive any other compensation or benefits of any nature.
13. DUTIES. During the Employment Period:
(a) Employee shall furnish all maimer of services in connection with
his position as Vice President of Development or as otherwise designated by the
President including, without limitation, primary responsibility for such duties
as shall be deemed by the President appropriate
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<PAGE> 4
to carry out the policies and programs of the Board and as from time to time may
be delegated or assigned to him by the Board;
(b) Employee shall report directly to the President (or someone
appointed by the President) in the performance of all his duties herein.
(c) Employee shall comply with all Company policies for the employees
as such policies may exist from time to time.
(d) Employee shall devote his entire time, energy and skill to the
service of Company and the promotion of Company's interests, and shall use his
best efforts in the performance of his services hereunder. The parties agree
that Employee may not, during the Employment Period, be engaged in any other
business activity whether or not such activity is pursued for gain, profit, or
other pecuniary advantage including, without limitation, management or
management consulting activities; provided, however, Employee may invest his
personal assets in businesses where the form or maimer of such investment will
not require services on the part of Employee conflicting with the duties of
Employee under this Agreement and in which his participation is solely that of a
passive investor. Employee agrees to abide by all rules and regulations
established from time to time by the President and/or the Board; and all
commissions, fees or other income earned and received by Employee, if any, in
furtherance of the business of Company, or its affiliates or from any other
business or financial opportunity or endeavor in which Employee is an active
participant and not a passive investor, shall be accepted by Employee for the
account of Company, and shall be remitted to Company within three (3) days of
Employee's receipt thereof
14. AUTHORITY TO CONTRACT. Employee shall have no authority to enter into
any contracts binding upon Employer, or to create any obligations on the part of
Employer, unless specifically authorized in writing by the President or the
Board,
15. TERMINATION. The Employer may, in its sole discretion, terminate this
Agreement for any reason, subject to the severance obligation outlined in the
Non-Competition Agreement. In the event of termination of employment by either
party, subject to compliance with the Non-Competition Agreement, Employee shall
be entitled to distributions pursuant to the severance provisions more fully set
forth in the Non-Competition Agreement and to all Base Salary and fully accrued
Bonus Compensation for completed quarters.
16. SURRENDER OF RECORDS. Upon the termination of the Employee's employment
hereunder, for any reason whatsoever, and in addition to such other actions as
may be reasonably required by Employer, the Employee agrees to surrender to the
Employer, in good condition, any record or records kept by him containing the
names, addresses, and other information with regard to customers or potential
customers of the Employer which have been served by the Employee.
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<PAGE> 5
17. ENTIRE AGREEMENT. This Agreement represents the entire understanding
and agreement between the parties with respect to the subject matter hereof, and
supersedes all other negotiations, understandings and representations (if any)
made by and between such parties.
18. AMENDMENTS. The provisions of this Agreement may not be amended,
supplemented, waived or changed orally, but only by a writing signed by the
party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference this Agreement.
19. ASSIGNMENTS. Employee shall not assign his rights and/or obligations
hereunder.
20. BINDING EFFECT. All of the terms and provisions of this Agreement,
whether so expressed or not, shall be binding upon, inure to the benefit of, and
be enforceable by the parties and their respective administrators, executors,
legal representatives, heirs, successors and permitted assigns.
21. SEVERABILITY. If any part of this Agreement or any other Agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
22. SURVIVAL. Notwithstanding anything to the contrary herein, the
provisions of Sections 12 through 29 (inclusive) shall survive and remain in
effect in accordance with their respective terms in the event the employment is
terminated.
23. WAIVERS. The failure or delay of Company at any time to require
performance by Employee of any provision of this Agreement, even if known, shall
not affect the right of Company to require performance of that provision or to
exercise any right, power or remedy hereunder, and any waiver by Company of any
breach of any provision of this Agreement should not be construed as a waiver of
any continuing or succeeding breach of such provision, a waiver of the provision
itself or a waiver of any right, power or remedy under this Agreement. No notice
to or demand on Employee in any case shall, of itself, entitle such party to any
other or further notice or demand in similar or other circumstances.
24. SPECIFIC PERFORMANCE. Employee acknowledges that the services to be
rendered by Employee hereunder are extraordinary and unique and are vital to the
success of the Company, and that damages at law would be an inadequate remedy
for any breach or threatened breach of this Agreement by Employee. Therefore, in
the event of a breach or threatened breach by Employee of any provision of this
Agreement, then Company shall be entitled, in addition to all other rights or
remedies, to injunctions restraining such breach, without being required to show
any actual damage or to post any bond or other security.
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<PAGE> 6
25. NOTICES. All notices, requests, consents and other Communications
required or permitted under this Agreement shall be in writing (including telex
and telegraphic communication) and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, telecommunicated,
or mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, to the addresses listed above or to such
other address as any party may designate by notice complying with the terms of
this Section. Each such notice shall be deemed delivered (a) on the date
delivered if by personal delivery, (b) on the date telecommunicated if by
telegraph, (c) on the date of transmission with confirmed answer back if by
telex or telefax, and (d) on the date upon which the return receipt is sired or
delivery is refused or the notice is designated by the postal authorities as not
deliverable, as the case may be, if mailed.
26. JURISDICTION AND VENUE. The parties acknowledge that a substantial
portion of negotiations, anticipated performance and execution of this Agreement
occurred or shall occur in Palm Beach County, Florida. and that, therefore,
without limiting the jurisdiction or venue of any other federal or state courts,
each of the parties irrevocably and unconditionally (a) agrees that any suit,
action or legal proceeding arising out of or relating to this Agreement may be
brought in the courts of record of the State of Florida in Palm Beach County or
the court of the United States, Southern District of Florida, (b) consents to
the jurisdiction of each such court in any such suit, action or proceeding, (c)
waives any objection which it may have to the laying of venue of any such suit,
action or proceeding in any of such courts, and (d) agrees that service of any
court paper may be effected on such party by mail, as provided in this
Agreement, or in such other manner as may be provided under applicable laws or
court rules in said state.
27. REMEDIES CUMULATIVE. No remedy herein conferred upon any party is
intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. No single or partial exercise by any party of any right, power or
remedy hereunder shall preclude any other or further exercise thereof.
28. EMPLOYEE REPRESENTATIONS, WARRANTIES, AND ACKNOWLEDGMENTS. Employee
represents and warrants to Company that he is fully empowered to enter and
perform his obligations under this Agreement and, without limitation, that he is
under no restrictive covenants to any person or entity that will be violated by
his entering into and performing this Agreement, and that this Agreement
constitutes the valid and legally binding obligation of Employee enforceable in
accordance with its terms, The execution and delivery of this Agreement by
Employee has been duly authorized by all necessary action. Employee shall
indemnify Company upon demand for and against any and all judgments, losses,
claims, damages, costs (including without limitation all legal fees and costs,
even if incident to appeals) incurred or suffered by any of them as a result of
the breach of the representations and warranties made in this section, or as a
result of the failure of the acknowledgment made in this section to be true and
correct at all times.
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<PAGE> 7
29. GOVERNING LAW. This Agreement and all transactions contemplated by
this Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the State of Florida without regard to principles of
conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Witnesses: DALEEN TECHNOLOGIES, INC.
/s/ Illegible By: /s/ James Daleen
- ------------------------------------ ------------------------------------
Its: President and CEO
- ------------------------------------
EMPLOYEE:
/s/ Illegible /s/ Illegible
- ------------------------------------ ------------------------------------
/s/ Illegible
- ------------------------------------
7
<PAGE> 8
EXHIBIT LIST
------------
Exhibit A - Job Title, Compensation and Other Miscellaneous Information
Exhibit B - Current Company Benefits to Which Employee is Entitled
Exhibit C - Invention Assignment and Confidentiality Agreement
Exhibit D - Non-Solicitation and Non-Compete Agreement
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<PAGE> 9
EXHIBIT A TO EMPLOYMENT AGREEMENT
---------------------------------
1. Employee Name: Frank Dickinson
2. Job Title or Description: Vice President of Development
Reporting to (Supervisor): Jim Daleen, President/CEO
3. Annual Base Salary: $85,000 annually. In addition to the base salary:
- Employee shall be entitled to participate in the Company's Stock Option
Program for Employees.
- Additional stock options if any, will be granted on a discretionary
basis normally keyed to job performance.
- Employee will be eligible to receive a discretionary bonus based on
employee's performance towards meeting business objectives, provided
however, that employee must be employed at the end of a calendar
quarter or calendar year to be eligible to receive a cash or stock
bonus for that quarter and/or year.
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<PAGE> 10
EXHIBIT B TO EMPLOYMENT AGREEMENT
---------------------------------
1. Employee Name: Frank Dickinson
2. Current Benefits to Which Employee is Entitled are as follows.
- RETIREMENT PLANNING
- HEALTH BENEFITS PROGRAM
- DISABILITY PROTECTION PROGRAM
The RETIREMENT PLANNING program consists of a 401 (k) Profit Sharing Plan which
allows employees to contribute on a tax deductible basis, up to a maximum of 15%
of their income.
In addition, the employer will match 25% of the Employer 401(k) percentage
election, up to a maximum of 8% deferral made by the Employee. Also, to inspire
excellence and profitability, the Plan Document provides for a Discretionary
Matching contribution which is relative to the performance of the company.
The HEALTH BENEFITS PROGRAM AND DISABILITY PROTECTION PROGRAM are structured
under Code Section 125 of the Internal Revenue Code Providing a reduction in
cost due to the pre-tax structure of these benefit plans, offering a reduction
in both Social Security Tax and Income Tax.
The Health Benefits Program is provided by The Prudential Insurance Company.
Employees have the opportunity to choose from two options which are the PRU CARE
PLUS or the PRU CARE H.M.O. Daleen Technologies, Inc. contributes 75% of the
premium for the employee and 50% for dependents.
The Disability Protection Plan is individually designed and the employer
provides a 7% contribution to the Plan. This Plan also provides a guaranteed
cost and portability to the employee.
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<PAGE> 11
EXHIBIT C TO EMPLOYMENT AGREEMENT
---------------------------------
INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT
--------------------------------------------------
THIS AGREEMENT is entered into this 6th day of August 1997, by and between
Daleen Technologies, Inc. (DTI), and Frank Dickinson (hereinafter referred to as
"Employee") for and in consideration of Employee's continued employment or
engagement by DTI and the compensation that Employee shall receive during
Employee's employment or engagement, the parties agree as follows:
1. Both during and after Employee's employment or engagement:
a. Employee shall not disclose to anyone outside DTI any Confidential
Information. "Confidential Information" is defined as information which
has not been made publicly available by DTI or the third party owner of
such information, and
1. Which was developed by DTI, and relates to DTI's past, present, and
future business, including but not limited to developments (defined
below, technical data, specifications, designs, concepts, discoveries,
copyrights, improvements, product plans, research and development,
personal information, personnel information, financial information,
customer lists, leads, and/or marketing programs;
2. All documents marked as confidential and/or continuing such
information; and/or
3. All information DTI has acquired or received from a third party in
confidence.
b. Employee shall use Confidential Information only for DTI's business
purposes; and
c. Employee shall use any information received in confidence by DTI from any
third party only as permitted by written agreement between DTI and the
third party; and
d. Employee shall not be permitted to justify any disregard of the
obligations of Employee hereunder by using any of the Confidential
Information to guide a search by it of publications and other publicly
available information, selecting a series of items of knowledge from
unconnected sources and fitting them together by use of the integrated
disclosure of the information thereby to justify its disregard of the
obligations of confidence.
2. Employee shall not disclose to DTI, use in DTI's business, or cause DTI to
use any information or material which is confidential to any third party
unless DTI has a written agreement with the third party allowing DTI to
receive and use the confidential information or materials. Employee will not
incorporate into Employee's work any material which is subject to the
copyrights of any third party unless DTI has the right to copy and
incorporate such copyrighted material.
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<PAGE> 12
3. When Employee is no longer employed or engaged by DTI, Employee shall
return to DTI all DTI property, and any and all third party property,
including all Confidential Information, drawings, computer programs or
copies thereof, documentation, notebooks and notes, reports and any
other materials on electronic or printed media.
4. Employee hereby grants, transfers and assigns to DTI all of his or her
rights, title and interest, if any, in any and all Development,
including rights co translation and reproductions in all forms or
formats and the copyrights and patent rights thereto, if any, and he or
she agrees that DTI may copyright said materials in DTI's name and
secure renewal, reissues and extensions of such copyrights for such
periods of time as the law may permit. 'Developments' is defined as any
idea, invention, process, design, concept, or useful article (whether
the design is ornamental or otherwise), computer program,
documentation, literary work, audiovisual work and any other work of
authorship, hereafter expressed, made or conceived solely or jointly by
employee during Employee's employment or engagement, whether or not
subject to patent, copyright or other forms of protection that:
a. Are related to the actual or anticipated business,
research or Development of DTI; and/or
b. Are suggested by or result from any task assigned to
Employee or work performed by Employee for or on
behalf of DTI.
Employee acknowledges that the copyrights in Developments created by
Employee in the scope of Employee's employment or engagement, belong to
DTI by operation of law, or may belong to a party engaged by DTI by
operation of law pursuant to a works for hire contract between DTI and
such contracted part. To the extent the copyrights in such works may
not be owned by DTI or such contracted party by operation of law,
Employee hereby assigns to DTI or such contracted party, as the case
may be, all copyrights (if any) Employee may have in Developments.
Items not assigned by this Section 4 are listed and described on the
attached "Schedule of Separate Works". Employee agrees not to include
any part of such items in the materials Employee prepares for DTI
unless and until such items are licensed or assigned to DTI under
separate written agreement.
At all times hereafter, Employee agrees to assist DTI at DTI's expense
in obtaining patents or copyrights on any Developments assigned to DTI
that DTI, in its sole discretion, seeks to patent or copyright.
Employee also agrees to sign all documents, and do all things
necessary to obtain such patents or copyrights, to further assign them
to DTI, and to reasonably protect them and DTI against infringement by
other parties at DTI expense with DTI prior approval.
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<PAGE> 13
Employee irrevocably appoints any DTI-selected designee to act, at
all time hereafter, as his or her agent and attorney-in-fact to perform
all acts necessary to obtain patents and/or copyrights as required by
this Agreement if Employee (i) refuses to perform those acts or (ii) is
unavailable, within the meaning of the United States Patent and
Copyright laws. It is expressly intended by Employee that the foregoing
power of attorney is coupled with an interest.
Employee shall keep complete, accurate, and authentic information and
records on all Developments in the manner and form reasonably requested
by DTI. Such information and records, and all copies thereof, shall be
the property of DTI as to any Developments assigned DTI. Employee
agrees to promptly surrender such information and records at the
request of DTI as to any Developments.
5. In connection with any of the Developments assigned by Section 4,
Employee agrees:
a. To disclose them promptly to DTI, and
b. At DTI's request, to execute separate written assignments to
DTI and do all things reasonable necessary to enable DTI to
secure patents, register copyrights or obtain any other form
of protection for Developments in the United States and in
other countries. If Employee fails or is unable to do so,
Employee hereby authorizes DTI to act under power of
attorney for Employee to do all things to secure such
rights. In such cases, DTI assumes the liability of possible
violations of copyright and infringement of trade marks of
others.
c. To provide DTI with notice of any inadvertent disclosure of
Confidential Information related to any Development.
6. Without limitation of any other Agreement between Employee and DTI,
Employee shall not employ or engage or attempt to employ or engage the
services of any employee of DTI, either directly or through the agency
of a third party during the term of, or within six (6) months after,
the termination of Employee's employment or engagement with DTI.
7. DTI, its subsidiaries, licensees, successors or assigns, (direct or
indirect) are not required to designate Employee as author of any
Development when such Development is distributed publicly or otherwise.
Employee waives and releases, to the extent permitted by law, all
Employee's rights to such designation and any rights concerning Future
modifications of such Developments.
8. Rights, assignments, and representations made or granted by Employee in
this Agreement, are assignable by DTI and are for the benefit of DTI's
successors, assigns, and parties contracted with DTI.
9. Miscellaneous Provisions.
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a) Amendments. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by
a writing signed by the party as to whom enforcement of any
such amendment, supplement, waiver or modification is sought
and making specific reference to this Agreement.
b) Further Assurances. The parties hereby agree from time to
time to execute and deliver such further and other
transfers, assignments and documents and do all matters and
things which may be convenient or necessary to more
effectively and completely carry out the intentions of this
Agreement
c) Brokers. Each of the parties represents and warrants that
such party has dealt with no broker or finder in connection
with any of the transactions contemplated by this Agreement,
and, insofar as such party knows, no broker or other person
is entitled to any commission or finder's fee in connection
with any of these transactions. The parties each agree to
indemnify and hold harmless one another against any loss,
liability, damage, cost, claim or expense incurred by reason
of any brokerage commission or finder's fee alleged to be
payable because of any act, omission or statement of the
indemnifying party.
d) Binding Effect. All of the terms and provisions of this
Agreement, whether so expressed or not, shall be binding
upon, inure to the benefit of, and be enforceable by the
parties and their respective administrators, executors,
legal representatives, heirs, successors and permitted
assigns.
e) Headings. The headings contained in this Agreement are for
convenience of reference only, are not to be considered a
part hereof and shall not limit or otherwise affect in any
way the meaning or interpretation of this Agreement.
f) Severability. If any provision of this Agreement or any
other Agreement entered into pursuant hereto is contrary to,
prohibited by or deemed invalid under applicable law or
regulation, such provision shall be inapplicable and deemed
omitted to the extent so contrary, prohibited or invalid,
but the remainder hereof shall not be invalidated thereby
and shall be given Full force and effect so far as possible.
If any provision of this Agreement may be construed in two
or more ways, one of which would render the provision
invalid or otherwise voidable or unenforceable and another
of which would render the provision valid and enforceable,
such provision shall have the meaning which renders it valid
and enforceable,
g) Survival. All covenants, agreements, representations and
warranties made herein or otherwise made in writing by any
party pursuant hereto shall survive the execution and
delivery of this Agreement and the termination of employment
or engagement of Employee.
7
<PAGE> 15
h) Waivers. The failure or delay of any party at any time to
require performance by another party of any provision of
this Agreement, even if known, shall nor affect the right of
such party to require performance of that provision or to
exercise any right, power or remedy hereunder. Any waiver by
any party of any breach of any provision of this Agreement
should not be construed as a waiver of any continuing or
succeeding breach of such provision, a waiver of the
provision itself, or a waiver of any right, power or remedy
under this Agreement. No notice to or demand on any party in
any case shall, of itself, entitle such party to any other
or further notice or demand in similar or other
circumstances.
i) Specific Performance. Each of the parties acknowledges that
the parties will be irreparably damage (and damages at law
would be an inadequate remedy) if this Agreement is not
specifically enforced. Therefore, in the event of a breach
or threatened breach by any party of any provision of this
Agreement, then the other parties shall be entitled, in
addition to all other rights or remedies, to injunctions
restraining such breach, without being required to show any
actual damage Or to post any bond or other security, and/or
to a decree for specific performance of the provisions of
this Agreement.
j) Jurisdiction and Venue. The parties acknowledge that a
substantial portion of negotiations and anticipated
performance and execution of this Agreement occurred or
shall occur in Palm Beach County, Florida, and that,
therefore, without limiting the jurisdiction or venue of any
other federal or state courts, each of the parties
irrevocably and unconditionally (a) agrees that any suit,
action or legal proceeding arising out of or relating to
this Agreement may be brought in the courts of record of the
State of Florida in Palm Beach County or the court of the
United States, Southern District of Florida, (b) consents to
the jurisdiction of each such court in any suit, action or
proceeding; (c) waives any objection which it may have to
the laying of venue of any such suit, action or proceeding
in any of such courts; and (d) agrees that service of any
court paper may be effected on such party by mail, as
provided in this Agreement, or in such other manner as may
be provided under applicable laws or court rules in said
state.
k) Remedies Cumulative. Except as otherwise expressly provided
herein, no remedy herein conferred upon any party is
intended to be exclusive of any other remedy, and each and
every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or
hereafter existing at law or in equity or by statute or
otherwise. No single or partial exercise by any party of any
right, power or remedy hereunder shall preclude any other or
further exercise thereof
l) Governing Law. This Agreement and all transactions
contemplated by this Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws
of the State of Florida without regard to principles of
conflicts of laws.
8
<PAGE> 16
m) Preparation of Agreement. This Agreement shall not be
construed more strongly against any party regardless of who
is responsible for its preparation. The parties acknowledge
each contributed and is equally responsible for its
preparation.
n) Entire Agreement. This Agreement represents the entire
understanding and agreement among the parties with respect
to the subject matter hereof, and supersedes all other
negotiations, understandings and representations (if any)
made by and among such parties.
IN WITNESS WHEREOF, the parties have duly set their hands to this Agreement,
effective as of the date stated above.
DALEEN TECHNOLOGIES, INC. EMPLOYEE
/s/ James Daleen /s/ Frank Dickinson
- ----------------------------- -----------------------------
DTI Authorized Signature Employee's Signature
8/6/97 Frank Dickinson
- ----------------------------- -----------------------------
Date Employee's Printed Name
8/6/97
-----------------------------
Date
9
<PAGE> 17
SCHEDULE OF SEPARATE WORKS
--------------------------
The following are works chat are not assigned by Section 4 of the Invention
Assignment and Confidentiality Agreement, in which Employee has any right,
title or interest, and which were conceived or written either wholly or in part
by Employee, prior to or outside the scope of Employee's employment by DTI.
DESCRIPTION: (If none, enter the word "None")
None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Indicate any item listed above that has been published, registered as a
copyright, or is or has been the subject of a patent application:
None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Indicate the name of such organization or third party who also has rights in any
of the listed items (such as former employers, partners, etc.):
None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The foregoing is complete and accurate to the best of Employee's knowledge.
/s/ Frank Dickinson 8/6/97
- ----------------------------------------------------
Employee's Signature Date
Frank Dickinson
- ---------------------------------
Employee's Printed Name
10
<PAGE> 18
Exhibit D to Employment Agreement
NON-SOLICITATION AND NON-COMPETE AGREEMENT
THIS NON-SOLICITATION AND NON-COMPETE AGREEMENT ("Agreement") made as of this
6th day of August, 1997 by and between Daleen Technologies, Inc., a Florida
corporation with its principal office at 902 Clint Moore Road, Suite 230, Boca
Raton, Florida 33487 (hereinafter called "Daleen") and Frank Dickinson
(hereinafter "Employee").
WHEREAS, Employee is accepting employment with Daleen; and
WHEREAS, the parties wish to reflect their agreement as to Employee's
promises regarding Employee's solicitation and competition which have induced
Daleen to employ Employee at Employee's status with Daleen, as well as Daleen's
extension of certain severance benefits to Employee.
NOW, THEREFORE, Employee and Daleen (hereinafter sometimes referred to
collectively as the "parties" and separately as a "party") in consideration of
Employee's employment with Daleen and the covenants hereinafter set forth and
other good and valuable consideration and intending to be legally bound hereby,
agree as follows:
1. Non-solicitation. Employee will not, at any time while employed by
Daleen and for one (1) year after the termination of Employee's employment with
Daleen for any reason whatsoever, directly or indirectly (by assisting or
suggesting to another, or otherwise) solicit otherwise attempt to induce or
accept the initiative of another in such regard, alone or by combining or
conspiring with anyone, any employees, officers, directors, agents,
consultants, representatives, contractors, suppliers, distributors, customers
or other business contacts (collectively, "Business Affiliates") of Daleen to
terminate or modify its position as an employee, officer, director, agent,
consultant, representative, contractor, supplier, distributor, customer or
business contact with Daleen or to compete against Daleen.
2. Non-competition. (a) Employee shall not while employed by Daleen, and
after the termination of said employment for any reason whatsoever for the time
period after such termination described in paragraph (c) below (the "No-Compete
Period"), directly or indirectly, as owner, officer, director, employee, agent,
lender, broker, investor, consultant or representative of any corporation or as
owner of any interest in, or as an employee, agent, consultant, partner,
affiliate or in any other capacity whatsoever or representative of any other
form of business association, sole proprietorship or partnership, conduct or be
related to any business in competition with any business of Daleen currently or
in the future, including without limitation, billing and customer care software
systems and related professional services, as provided by Daleen during the
period Employee is employed by Daleen, except for businesses wherein Employee
is not working directly in billing and customer care software products and
related professional services and billing, and customer care software systems
and services are less than twenty-five percent (25%) of its total revenue
(herein referred to as the "Competitive Business") anywhere within the
territories, nor as to certain customers anywhere in the United States, both
listed on the "Territories and Customers" Exhibit to the Agreement, made a part
hereof, including
11
<PAGE> 19
without limitation, the solicitation of any customers, who were at any time
customers of Daleen and in connection with a business which is competitive with
the Competitive Business except that such competitive activity will be
permitted as to business solicitation of and competition with Daleen as to any
entity listed on an Exhibit to this Agreement made a part hereof identified as
a "No-Compete Exception", if any, subject to paragraph (c) below.
(b) In addition to, and not in limitation of the other provisions hereof
or of any other Agreement between Employee and Daleen, Employee shall not at
any time in any manner other than in the ordinary course of good faith
competition only as permitted herein interfere with, disturb, disrupt, decrease
or otherwise jeopardize the business of Daleen or do anything which may tend to
take away or diminish the trade, business or good will of Daleen or give to any
person the benefit or advantage of Company's or Seller's methods of operation,
advertising, publicity, training, business customers or accounts, or any other
information relating or useful to Daleen's business.
(c) The No-Compete Period shall increase depending upon the duration of
Employee's employment with Daleen as follows:
i) If Employee has completed ninety (90) days of employment with Daleen
subject to the No-Compete Exception, the No-Compete Period will be
forty-five (45) days;
ii) If Employee has completed one hundred and eighty (180) days of
employment with Daleen subject to the No-Compete Exception, the
No-Compete Period will be ninety (90) days;
iii) If Employee has completed two hundred seventy (270) days of employment
with Daleen subject to the No-Compete Exception, the No-Compete Period
will be one hundred and eighty (180) days;
iv) If Employee has completed four hundred and fifty (450) days or more of
employment with Daleen, the No-Compete Period will be one (1) year.
There will be no No-Compete Period if Employee has been employed for less
than ninety (90) days. In addition, the No-Compete Exception shall not apply as
to i) and ii) above.
3. Legal Effect. The foregoing covenants of Employee shall be deemed
severable, and the invalidity of any covenant shall not affect the validity or
enforceability of any other covenant. The existence of any claim or cause of
action by Employee against Daleen predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by Daleen of these covenants.
Daleen's failure to object to any conduct in violation of this Agreement shall
not be deemed a waiver by Daleen, but Daleen may, if it wishes, specifically
waive any part or all of those covenants to the extent that such waiver is set
forth in writing duly authorized by Daleen's Board of Directors.
Employee acknowledges and confirms that the length of the term and
geographical restrictions contained herein are fair and reasonable and not the
result of overreaching, duress or coercion of any kind. Employee further
acknowledges and confirms that his or her full, uninhibited and faithful
observance of each of the covenants contained in this Agreement will not
12
<PAGE> 20
cause him or her any undue hardship, financial or otherwise, and that
enforcement of each of the covenants contained in this Agreement will not
impair his or her ability to obtain employment commensurate with his or her
abilities and on terms fully acceptable to him or her or otherwise to obtain
income required for the comfortable support of him or her and his or her family
and the satisfaction of the needs of his or her creditors. Employee
acknowledges and confirms that his or her special knowledge of the business of
Daleen is such as would cause Daleen serious injury and loss if he or she were
to use such ability and knowledge to the benefit of a competitor or were to
compete with Daleen.
In the event that any court shall finally hold that the time or territory
or any other provision stated in this Agreement constitutes an unreasonable
restriction upon Employe, Employee hereby expressly agrees that the provisions
of this Agreement shall not be rendered void, but shall apply as to time and
territory or to such other extent as such court may judicially determine or
indicate constitutes a reasonable restriction under the circumstances involved.
Employee hereby agrees that in the event of the violation by him or her of any
of the provisions of this Agreement, Daleen will be entitled if it so elects,
to institute and prosecute proceedings at law or in equity to obtain damages
with respect to such violation or to enforce the specific performance of this
Agreement by Employee or to enjoin Employee from engaging in any activity in
violation hereof without any requirement on the part of Daleen to post any bond.
In the event Daleen should bring any legal action or other proceeding for
the enforcement of this Agreement, the time for calculating the No-Compete
Period or terms of any other restriction herein shall not include the period of
time commencing with the filing of legal action or other proceeding to enforce
the terms of this Agreement through the date of final judgment or final
resolution, including all appeals, if any, of such legal action or other
proceeding.
4. Severance. In further consideration of the entering into of this
Agreement by Employee, Daleen agrees to entitle Employee to a severance pay
benefit based upon base salary dependent upon the duration of Employee's
employment with Daleen, determined as follows:
a) After six (6) months of employment, Employee shall be entitled to one
(1) week's severance base pay;
b) After one (1) year of employment, Employee shall be entitled to two (2)
week's severance base pay;
c) After each additional full year of employment with Daleen, Employee
shall be entitled to an additional one (1) week of severance base pay,
up to a maximum of ten (10) weeks of base pay at the end of a full nine
(9) years of employment.
The foregoing severance benefit shall be paid by Daleen in one lump
sum within ten (10) days from the date of the termination date of Employee's
employment by Daleen if the benefit is five (5) weeks pay or less, and if more
than five (5) weeks any additional severance payment to which Employee is
entitled will be paid no later than one hundred and twenty (120) days after the
date of termination of said employment by Daleen. No credit toward entitlement
of additional weeks of severance pay shall be earned for any partial year
worked, and Employee shall not be entitled to any severance benefit if
terminated by Daleen for "cause" or if Employee voluntarily
13
<PAGE> 21
resigns from his or her employment with Daleen. As used in this Agreement
determination for "cause" shall be defined as termination of Employee by Daleen
in the event Employee has been convicted of any felony or, in the case of other
crimes, involving moral turpitude or dishonesty, or for any breach by Employee
of any agreement with Daleen or of its employment or business policies
(including without limitation theft or misuse of company property), or for any
other act or omission by Employee which does not fit into the previous
categories but which Daleen in good faith believes has occurred to its
detriment and about which Employee has received at least one (1) written
warning by Daleen and despite such prior written warning, Employee has a second
occasion committed such act or omission.
5. Miscellaneous Provisions. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a writing signed
by the party as to whom enforcement of any such amendment, supplement, waiver
or modification is sought and making specific reference to this Agreement. All
of the terms and provisions of this Agreement, whether so expressed or not,
shall be binding upon, inure to the benefit of, and be enforceable by the
parties and their respective administrators, executors, legal representatives,
heirs, successors and permitted assigns. The headings contained in this
Agreement are for convenience of reference only, are not to be considered a
part hereof and shall not limit or otherwise affect in any way the meaning or
interpretation of this Agreement. The failure or delay of any party at any time
to require performance by another party of any provision of this Agreement,
even if known, shall not affect the right of such party to require performance
of that provision or to exercise any right, power or remedy hereunder. Any
waiver by any party of any breach of any provision of this Agreement should not
be construed as a waiver of any continuing or succeeding breach of such
provision, a waiver of the provision itself, or a waiver of any right, power or
remedy under this Agreement. No notice to or demand on any party in any case
shall, of itself, entitle such party to any other or further notice or demand
in similar or other circumstances.
The parties acknowledge that a substantial portion of negotiations,
anticipated performance and execution of this Agreement occurred or shall occur
in Palm Beach County, Florida, and that, therefore, without limiting the
jurisdiction or venue of any other federal or state courts, each of the parties
irrevocably and unconditionally (a) agrees that any suit, action or legal
proceeding arising out of or relating to this Agreement may be brought in the
courts of record of the State of Florida in Palm Beach County or the District
Court of the United States, Southern District of Florida; (b) consents to the
jurisdiction of each such court in any suit, action or proceeding; (c) waives
any objection which it may have to the laying of venue of any such suit, action
or proceeding in any of such courts; and (d) agrees that service of any court
paper may be effected on such party by mail, as provided in this Agreement, or
in such other manner as may be provided under applicable laws or court rules in
said state. Except as otherwise expressly provided herein, no remedy herein
conferred upon any party is intended to be exclusive of any other remedy, and
each and every such remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise. No single or partial exercise by any party
of any right, power or remedy hereunder shall preclude any other or further
exercise thereof. This Agreement and all transactions contemplated by this
Agreement shall be governed by, and construed and enforced in accordance with,
the internal laws of the State of Florida without regard to principles of
conflicts of laws.
14
<PAGE> 22
This Agreement shall not be construed more strongly against any party
regardless of who is responsible for its preparation. The parties acknowledge
each contributed and is equally responsible for its preparation. Any time
period provided for herein which shall end on a Saturday, Sunday or legal
holiday shall extend to 5:00 p.m. of the next full business day. This Agreement
represents the entire understanding and agreement amount the parties with
respect to the subject matter hereof, and supersedes all other negotiations,
understandings and representations (if any) made by and among such parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date written above.
Daleen Technologies, Inc.
/s/ Frank Dickinson /s/ James Daleen
- ----------------------------------- -----------------------------------
Employee's Signature Its: President and CEO
Frank Dickinson James Daleen
- ----------------------------------- -----------------------------------
Printed Name Printed Name
15
<PAGE> 23
NO-COMPETE EXCEPTIONS
Exhibit to Non-Solicitation and Non-Compete Agreement of Frank Dickinson.
NONE.
16
<PAGE> 24
TERRITORIES AND CUSTOMERS
Exhibit to Non-Solicitation and Non-Compete Agreement of Frank Dickinson.
THE UNITED STATES OF AMERICA.
17
<PAGE> 1
EXHIBIT 10.27
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("this Agreement") is made and effective this
22nd day of July, 1998 by and between DALEEN TECHNOLOGIES, INC., a Florida
corporation located at 902 Clint Moore Road, Suite 230, Boca Raton, Florida
33487 ("DTI" or "Employer"), and David McTarnaghan residing at 59 NW 45th,
Deerfield Beach, Fl. ("Employee").
WITNESSETH:
WHEREAS, DTI believes it is in DTI's best interest to employ Employee, and
Employee desires to be employed by DTI;
WHEREAS, DTI and Employee desire to set forth the terms and conditions on
which Employee shall be employed by and provide his services to DTI.
NOW, THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby agree
as follows:
1. Employment. DTI hereby employs Employee in its business, and Employee
hereby accepts such employment, all upon the terms and conditions hereinafter
set forth.
2. Term. Unless sooner terminated pursuant to the provisions of this
Agreement, the term of employment under this Agreement shall be for as long as
Employee remains employed hereunder, with Employee acknowledging that he is an
at will employee. If an Employee decides to terminate his or her employment,
DTI recommends a minimum two (2) week notice. Whenever possible, Daleen will
reciprocate with two (2) weeks notice for termination, but reserves the right to
waive this notice period at its own discretion.
3. Confidentiality & Non-Disclosure. Both during and after Employee's
employment they shall not disclose to anyone outside DTI any "Confidential &
Proprietary Information" and shall use such information only for DTI's business
purposes, and shall provide DTI with notice of any inadvertent disclosure of
such information. "Confidential & Proprietary Information" is defined as
information that has not been made publicly available by DTI or the third party
owner of such information. It includes Developments (defined in Section 5),
technical data, specifications, designs, concepts, discoveries, copyrights,
improvements, product plans, research and development, financial information,
customer lists, leads, and/or marketing programs.
Employee shall not disclose to DTI, use in DTI's business, or cause DTI
to use any information or material which is confidential to any third party
unless DTI has a written agreement with the third party allowing DTI to receive
and use the confidential information or materials. Employee will not incorporate
into Employee's work any material that is subject to the copyrights of any third
party unless DTI has the right to copy and incorporate such copyrighted
material.
4. Surrender of Records. Upon the termination of the Employee's
employment, for any reason whatsoever, the Employee agrees to surrender to DTI,
in good condition, all records pertaining to DTI's business operations and
related to any work performed for DTI, all DTI property, and any and all third
party property, including all Confidential & Proprietary Information, drawings,
computer programs or copies thereof, documentation, notebooks and notes, reports
and any other materials on electronic or printed media. Included are any
documents or media containing the names, addresses, and other information
with regard to customers or potential customers of the DTI.
5. Invention Assignment. Employee hereby grants, transfers and assigns to
DTI all of his or her rights, title and interest, if any, in any and all
Developments, including rights to translation and reproductions in all forms or
formats and the copyrights and patent rights thereto, if any, and he or she
agrees that DTI may copyright said materials in DTI's name and secure renewal,
reissues and extensions of such copyrights for such periods of time as the law
may permit. "Developments" is defined as any idea, invention, process, design,
concept, or useful article (whether the design is ornamental or otherwise),
computer program, documentation, literary work, audiovisual work and any other
work of authorship, hereafter expressed, made or conceived in the scope of
Employee's employment or
<PAGE> 2
engagement and solely or jointly by employee during Employee's employment
whether or not subject to patent, copyright or other forms of protection.
Employee acknowledges that the copyrights in Developments created by
Employee belong to DTI by operation of law, or may belong to a party engaged by
DTI by operation of law pursuant to a works for hire contract between DTI and
such contracted party. To the extent the copyrights in such works may not be
owned by DTI or such contracted party by operation of law, Employee hereby
assigns to DTI or such contracted party, as the case may be, all copyrights (if
any) Employee may have in Developments.
Items not assigned by this Section 5 are listed and described on the
attached "Schedule of Separate Works." Employee agrees not to include any party
of such items in the materials Employee prepares for DTI unless and until such
items are licensed or assigned to DTI under separate written agreement.
At all times hereafter, Employee agrees promptly to disclose to DTI
all Developments, to execute separate written assignments to DTI at DTI's
request, and to assist DTI in obtaining patents or copyrights in the U.S. and in
other countries, on any Developments assigned to DTI that DTI, in its sole
discretion, seeks to patent or copyright. Employee also agrees to sign all
documents, and do all things necessary to obtain such patents or copyrights, to
further assign them to DTI, and to reasonably protect them and DTI against
infringement by other parties at DTI expense with DTI prior approval.
Employee irrevocably appoints any DTI-selected designee to act, at all
times hereafter, as his or her agent and attorney-in-fact to perform all
reasonable acts to obtain patents and/or copyrights related to Developments as
defined and required by this Agreement if Employee (i) refuses to perform those
acts or (ii) is unavailable, within the meaning of the United States Patent and
Copyright laws. It is expressly intended by Employee that the foregoing power of
attorney be coupled with an interest.
Employee shall keep complete, accurate, and authentic information and
records on all Developments in the manner and form reasonably requested by DTI.
Such information and records, and all copies thereof, shall be the property of
DTI as to any Developments assigned to DTI. Employee agrees to promptly
surrender such information and records at the request of DTI as to any
Developments.
6. Non-Solicitation. Without limitation of any other Agreement between
Employee and DTI, Employee shall not employ or engage or attempt to employ or
engage the services of any employee of DTI, either directly or through the
agency of a third party during the term of, or within one (1) year after, the
termination of Employee's employment or engagement with DTI.
7. Non-Competition Agreement. Employee shall not while employed by DTI,
and after the termination of said employment for the time period described in
the paragraph below as the "Non-Compete Period," directly or indirectly, as
owner, officer, director, employee or agent conduct or be related to any
business in direct competition with any business of DTI now, or any business
DTI may enter into during the Employee's period of employment. An exception
will be made in the cases of competitive businesses wherein Employee is not
working directly in a competitive capacity by virtue of their position or in a
competitive operating unit and said competitive products and services are less
than twenty-five (25%) of its total revenue.
In addition to, and not in limitation of the other provisions hereof
or of any other Agreement between Employee and DTI, Employee shall not at any
time in any manner other than in the ordinary course of good faith competition
only as permitted herein interfere with, disturb, disrupt, decrease or
otherwise jeopardize the business of DTI or do or permit to be done anything
which may tend to take away or diminish the trade, business or good will of DTI
or give to any person the benefit or advantage of DTI's methods of operation,
advertising, publicity, training, business customers or accounts, or any other
information relating or useful to DTI's business.
The Non-Compete Period shall be dependent on the duration of
Employee's employment with DTI as follows:
1. If Employee has completed ninety (90) days or less of employment
with DTI there will be no Non-Compete Period;
2. If Employee has completed more than ninety (90) days of employment
with DTI the Non-Compete Period will be six (6) months.
<PAGE> 3
3. DTI may waive the Non-Compete period or any portion of it, at its sole
discretion.
The existence of any claim or cause of action by Employee against DTI
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by DTI of these covenants.
Employee acknowledges and confirms that the restrictions contained
herein are fair and reasonable and not the result of overreaching, duress, or
coercion of any kind.
8. Severance. In further consideration of the entering into of this
Agreement by Employee, DTI agrees to entitle Employee to a severance pay benefit
based upon base salary dependent upon the duration of Employee's employment with
DTI, determined as follows:
(1) If Employee has completed ninety (90) days or less of employment with
DTI there will be no severance benefit.
(2) If Employee has completed more than ninety (90) days of employment with
DTI the Employee shall be entitled to six (6) month's severance base
pay.
(3) If DTI waives the Non-Compete Period in its entirety or any portion of
it, there shall be no severance benefit paid for the period that is
waived.
The foregoing severance benefit shall be paid by Daleen in accordance
with DTI's current payroll policies. Employee shall not be entitled to any
severance benefit if terminated by Daleen for "cause" or if Employee voluntarily
resigns from his or her employment with Daleen subject to the provisions of the
Non-Compete period in Section 7. As used in this Agreement determination for
"cause" shall be defined as termination of Employee by Daleen in the event
Employee has been convicted of any felony or, in the case of other crimes,
involving moral turpitude or dishonesty, or for any breach by Employee of any
agreement with Daleen or of its employment or business policies (including
without limitation theft or misuse of company property), or for any other act or
omission by Employee which does not fit into the previous categories but which
Daleen in good faith believes has occurred to its detriment and about which
Employee has received at least one (1) written warning by Daleen and despite
such prior written warning, Employee has a second occasion committed such act or
omission.
9. Conflict of Interest. Employee agrees to devote their primary efforts
to the service of DTI and the promotion of DTI's interests. Employee further
agrees never to enter into any relationship, and to immediately sever any
existing relationship, whether such relationship is one for monetary gain, or
not, that compromises Employee's ability to act in the best interests of DTI, or
detracts from Employee's ability to perform Employee's responsibilities and
obligations. In the event that the Employee obtains secondary employment,
Employee agrees to notify the Human Resources Department of DTI prior to
commencing said employment.
10. Entire Agreement & Termination. This Agreement represents the entire
understanding and agreement between the parties with respect to the subject
matter hereof, and supersedes all other negotiations, understandings and
representations (if any) made by and between such parties. The Employer may, in
its sole discretion, terminate this Agreement for any reason, subject to any
applicable severance obligation as set forth herein.
11. Amendments. The provisions of this Agreement may not be amended,
supplemented, waived or changed orally, but only by a writing signed by the
party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
12. Jurisdiction and Venue. The parties acknowledge that a substantial
portion of negotiations, anticipated performance and execution of this Agreement
occurred or shall occur in Palm Beach County, Florida, and that, therefore,
without limiting the jurisdiction or venue of any other federal or state courts,
each of the parties irrevocably and unconditionally (a) agree that any suit,
action or legal proceeding arising out of or relating to this Agreement may be
brought in the courts of record of the State of Florida in Palm Beach County or
the court of the United States, Southern District of Florida; (b) consents to
the jurisdiction of each such court in any such suit, action or proceeding; (c)
waives any objection which it may have to the laying of venue of any such suit,
action or proceeding in any of such courts; and (d) agrees that service of any
court paper may be effected on such party by mail, as provided in this
Agreement, or in such other manner as may be provided under applicable laws or
court rules in said state.
<PAGE> 4
13. Employee Representations, Warranties and Acknowledgments. Employee
represents and warrants to DTI that he is fully empowered to enter and perform
his obligations under this Agreement and, without limitation, that he is under
No restrictive covenants to any person or entity that will be violated by his
entering into and performing this Agreement, and that this Agreement
constitutes the valid and legally binding obligation of Employee enforceable in
accordance with its terms. The execution and delivery of this Agreement by
Employee has been duly authorized by all necessary action. Employee shall
indemnify DTI upon demand for and against any and all judgments, leases,
claims, damages, costs (including without limitation all legal fees and costs,
even if incident to appeals) incurred or suffered by any of them as a result of
the breach of the representations and warranties made in this section, or as
a result of the failure of the acknowledgment made in this section to be true
and correct at all times.
14. Binding Effect. All of the terms and provisions of this Agreement,
whether so expressed or not, shall be binding upon, inure to the benefit of, and
be enforceable by the parties and their respective administrators, executors,
legal representatives, heirs, successors and permitted assigns.
15. Severability. If any part of this Agreement or any other Agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
16. Survival. Notwithstanding anything to the contrary herein, the
provisions of this Agreement shall survive and remain in effect in accordance
with their respective terms in the event the employment is terminated.
17. Waivers. The failure or delay of DTI at any time to require
performance by Employee of any provision of this Agreement, even if known, shall
not affect the right of DTI to require performance of that provision or to
exercise any right, power or remedy hereunder, and any waiver by DTI of any
breach of any provision of this Agreement should not be construed as a waiver
of any continuing or succeeding breach of such provision, a waiver of
the provision itself, or a waiver of any right, power or remedy under this
Agreement. No notice to or demand on Employee in any case shall, of itself,
entitle such party to any other or further notice or demand in similar or other
circumstances.
18. Specific Performance. Employee acknowledges that the services to be
rendered by Employee hereunder are extraordinary and unique and are vital to
the success of DTI, and that damages at law would be an inadequate remedy for
any breach or threatened breach of this Agreement by Employee. Therefore, in
the event of a breach or threatened breach by Employee of any provision of this
Agreement, then DTI shall be entitled, in addition to all other rights or
remedies, to injunctions restraining such breach.
19. Remedies Cumulative. No remedy herein conferred upon any party is
intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. No single or partial exercise by any party of any right, power or
remedy hereunder shall preclude any other or further exercise thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
DALEEN TECHNOLOGIES, INC.
By: /s/ R. Klotz Date: 6/22/98
--------------------------------- ------------------------------
Printed Name: Rick Klotz
-----------------------
EMPLOYEE: /s/ D. McTarnaghan Date: 6-22-98
--------------------------- ------------------------------
Printed Name: David McTarnaghan
-----------------------
<PAGE> 5
FORM 003 1/1/98
SCHEDULE OF SEPARATE WORKS
The following are works that are not assigned by Section 5 of the
Employment Agreement, in which Employee has any right, title or interest, and
which were conceived or written either wholly or in part by Employee, prior to
or outside the scope of Employee's employment by DTI.
DESCRIPTION: (If none, enter the word "None")
None
Indicate any item listed above that has been published, registered as a
copyright, or is or has been the subject of a patent application:
Indicate the name of such organization or third party who also has rights in any
of the listed items (such as former employers, partners, etc.):
The foregoing is complete and accurate to the best of Employee's knowledge.
Employee's Signature: /s/ David McTarnaghan Date: 6-22-98
-------------------------- ----------
Employee's Printed Name: David McTarnaghan
--------------------
<PAGE> 6
CREDIT UNION: As a Daleen employee you are eligible to join the
IBM Southeast Credit Union.
ATHLETIC CLUB DISCOUNT: At the Boca Raton Athletic Club
This letter is provided for purposes of providing compensation and benefit
information only. The employment relationship is governed by the Employment
Agreement that you will be asked to sign.
Once again, I would like to personally welcome you to Daleen Technologies. We
look forward to having you as a member of our team. We firmly believe that this
will be a mutually rewarding relationship.
Very truly yours, Accepted:
D. McTarnaghan 6/1/98
------------------------------------------
Employee Signature & Date
Rick Klotz
Director of Human Resources
David McTarnaghan
------------------------------------------
Employee Name
<PAGE> 1
Exhibit 10.28
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("this Agreement") is made and effective this
15th day of December 1998, by and between DALEEN TECHNOLOGIES, INC., a Florida
corporation located at 902 Clint Moore Road, Suite 230, Boca Raton, 33487
("Company"), and Timothy C. Moss ("Employee").
WITNESSETH:
WHEREAS, Company believes it is in Company's best interest to employ
Employee, and Employee desires to be employed by Company; and
WHEREAS, Company and Employee desire to set forth the terms and conditions
on which Employee shall be employed by and provide his services to Company;
NOW, THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby
agree as follows:
1. Employment. Company hereby employs Employee in its business as Vice
President of Professional Services, and Employee hereby accepts such
employment, all upon the terms and conditions hereinafter set forth.
2. Term. Unless sooner terminated pursuant to the provisions of this
Agreement, the term of employment under this Agreement shall be for as long as
Employee remains employed hereunder, with Employee acknowledging that he is an
at will employee ("Employment Period").
3. Salary and Base Compensation. Employee shall be entitled to receive
salary during the Employment Period at the rate of One Hundred and Fifty
Thousand ($150,000) per annum, as such may be increased pursuant to Section 9
hereof (the "Base Salary"). In addition to the Base Salary paid to Employee
during the Employment Period, Employee shall be entitled to receive Benefits,
Bonus Compensation, and Stock Option (as those terms are hereinafter defined)
during the Employment Period. The Base Salary shall be payable biweekly in
accordance with the current normal payroll policies of Company, which policies
may be changed by Company from time to time in its sole discretion, and shall
be subject to all appropriate withholding taxes.
4. Business Expenses and Reimbursements. Employee shall be entitled to
reimbursement by the Company for ordinary and necessary business expenses
incurred by Employee in the performance of his duties for the Company, which
types of expenditures shall be determined and approved by the Company, and
further provided that:
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<PAGE> 2
(a) Each such expenditure is of a nature qualifying it as a proper
deduction on the Federal and State income tax returns of Company as a business
expense and not as deductible compensation to Employee; and
(b) Employee furnishes Company with adequate records and other
documentary evidence required by federal and State statutes and regulations
for the substantiation of such expenditures as deductible business expenses of
Company and not as deductible compensation to Employee, as well as any other
documentation reasonably requested by Company.
5. Benefits. Employee shall be entitled to receive the following
Benefits during the Employment Period:
(a) Employee agrees that the Base Salary, Bonus Compensation, the
Stock Option, and the Benefits and the other compensation provided in
accordance with this Agreement and the offer letter dated December 15, 1998,
are the sole and exclusive compensation of Employee for his duties hereunder.
(b) Continuing throughout the Employment Period:
(i) Employee shall receive all of the employee benefits
including, without limitation, pension, disability, profit sharing and
retirement benefits, vacation provided at any time by Company to any of its
employees in the sole and absolute discretion of the Board of Directors of the
Company (the "Board");
(ii) The Company shall provide health insurance providing full
hospital, medical and dental coverage pursuant to Company plans in effect from
time to time for Employee and each of Employee's dependents at similar expense
to Employee or such dependents as charged to other employees of the Company.
6. Bonus Compensation. Employee shall be eligible to receive an annual
bonus that is targeted at 33% of Base Salary earnings for optimum performance
for each fiscal year during the Employment Period. The Bonus Compensation plan
will be a combination of personal MBO's as well as Company performance to its
Strategic Objectives for the fiscal year. The details of the performance
criteria of the annual Bonus Compensation plan will reviewed with the Employee
following the commencement of the Employment Period. Employee must be employed
as of December 31st of a given fiscal year in order to be eligible for that
year's Bonus Compensation. The Company, in its sole discretion may change,
alter or discontinue any or all bonus compensation plans at any time.
7. Stock Options. In addition to Employee's Base Salary, Benefits and
Bonus Compensation, Employee shall be granted a qualified incentive stock
option to purchase a number of shares equal to Fifty Thousand (50,000) at an
exercise price no greater than $3.25 per share, which options will vest over a
four-year period. The options shall be granted to Employee
2
<PAGE> 3
pursuant to an Option Agreement satisfactory as to its other terms to the
Company, and all of these grants and terms are subject to the approval of the
Board of Directors.
8. Registration Rights. In the event Company registers common stock held
by other employees of Company, then the Company shall also register a prorata
portion of the stock held by Employee.
9. Compensation Review. The President/COO and/or Board shall from time
to time, no less frequently than annually, review Employee's compensation and
may (in his sole discretion) increase, but not decrease, the compensation
provided for in Section 3 hereof. Any such increase in compensation shall be
valid only if in writing, executed by the President/COO, and such writing shall
constitute an amendment solely to the payments to be made to Employee under
this Agreement, without waiver or modification of any other provision hereof.
10. Invention Assignment and Confidentiality Agreement. Against the
execution and delivery of this Agreement, Employee shall enter into an
agreement in the form of Exhibit "A" hereto (the "Invention Assignment and
Confidentiality Agreement").
11. Non-Competition Agreement. Against the execution and delivery of this
Agreement, Employee shall enter into a non-competition and non-solicitation
agreement (in the form of Exhibit "B" hereto) (the "Non-Competition Agreement")
which also, notwithstanding the at will nature of the employment, provides for
a severance benefit under certain circumstances.
12. No Other Compensation or Benefits. Employee agrees that the
compensation set forth in this Agreement is the sole and exclusive compensation
of Employee for his duties hereunder, and that he shall have no rights to
receive any other compensation or benefits of any nature.
13. Duties. During the Employment Period:
(a) Employee shall furnish all manner of services in connection with
his position as the Vice President of Professional Services or as otherwise
designated by the President/COO including, without limitation, primary
responsibility for such duties as shall be deemed by the President/COO
appropriate to carry out the policies and programs of the Board and as from
time to time may be delegated or assigned to him/her by the Board;
(b) Employee shall report directly to the President/COO in the
performance of all his duties herein.
(c) Employee shall comply with all Company policies for the employees
as such policies may exist from time to time.
(d) Employee shall devote his entire time, energy and skill to the
service of Company and the promotion of Company's interests, and shall use his
best efforts in the
3
<PAGE> 4
performance of his/her services hereunder. The parties agree that Employee may
not, during the Employment Period, be engaged in any other business activity
whether or not such activity is pursued for gain, profit, or other pecuniary
advantage including, without limitation, management or management consulting
activities; provided, however, Employee may invest his personal assets in
businesses where the form or manner of such investment will not require
services on the part of Employee conflicting with the duties of Employee under
this Agreement and in which his participation is solely that of a passive
investor. Employee agrees to abide by all rules and regulations established
from time to time by the President/COO and/or the Board; and all commissions,
fees or other income earned and received by Employee, if any, in furtherance of
the business of Company, or its affiliates or from any other business or
financial opportunity or endeavor in which Employee is an active participant
and not a passive investor, shall be accepted by Employee for the account of
Company, and shall be remitted to Company within three (3) days of Employee's
receipt thereof.
14. Termination. The Employer may, in its sole discretion, terminate this
Agreement for any reason, subject to the severance obligation outlined in the
Non-Competition Agreement. In the event of termination of employment by either
party, subject to compliance with the Non-Competition Agreement, Employee shall
be entitled to distributions pursuant to the severance provisions more fully
set forth in the Non-Competition Agreement and to all Base Salary which is
fully accrued.
15. Surrender of Records. Upon the termination of the Employee's
employment hereunder, for any reason whatsoever, and in addition to such other
actions as may be reasonably required by Employer, the Employee agrees to
surrender to the Employer, in good condition, any record or records kept by
him/her containing the names, addresses, and other information with regard to
customers or potential customers of the Employer which have been served by the
Employee.
16. Entire Agreement. This Agreement represents the entire understanding
and agreement between the parties with respect to the subject matter hereof,
and supersedes all other negotiations, understandings and representations (if
any) made by and between such parties.
17. Amendments. The provisions of this Agreement may not be amended,
supplemented, waived or changed orally, but only by a writing signed by the
party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
18. Assignments. Employee shall not assign his rights and/or obligations
hereunder.
19. Binding Effect. All of the terms and provisions of this Agreement,
whether so expressed or not, shall be binding upon, inure to the benefit of,
and be enforceable by the parties and their respective administrators,
executors, legal representatives, heirs, successors and permitted assigns.
4
<PAGE> 5
20. Severability. If any part of this Agreement or any other Agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
21. Survival. Notwithstanding anything to the contrary herein, the
provisions of Sections 10 through 28 (inclusive) shall survive and remain in
effect in accordance with their respective terms in the event the employment is
terminated.
22. Waivers. The failure or delay of Company at any time to require
performance by Employee of any provision of this Agreement, even if known,
shall not affect the right of Company to require performance of that provision
or to exercise any right, power or remedy hereunder, and any waiver by Company
of any breach of any provision of this Agreement should not be construed as a
waiver of any continuing or succeeding breach of such provision, a waiver of
the provision itself, or a waiver of any right, power or remedy under this
Agreement. No notice to or demand on Employee in any case shall, of itself,
entitle such party to any other or further notice or demand in similar or other
circumstances.
23. Specific Performance. Employee acknowledges that the services to be
rendered by Employee hereunder are extraordinary and unique and are vital to
the success of the Company, and that damages at law would be an inadequate
remedy for any breach or threatened breach of this Agreement by Employee.
Therefore, in the event of a breach or threatened breach by Employee of any
provision of this Agreement, then Company shall be entitled, in addition to all
other rights or remedies, to injunctions restraining such breach, without being
required to show any actual damage or to post any bond or other security.
24. Notices. All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including telex
and telegraphic communication) and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, telecommunicated,
or mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, to the addresses listed above or to such
other address as any party may designate by notice complying with the terms of
this Section. Each such notice shall be deemed delivered (a) on the date
delivered if by personal delivery, (b) on the date telecommunicated if by
telegraph, (c) on the date of transmission with confirmed answer back if by
telex or telefax, and (d) on the date upon which the return receipt is signed
or delivery is refused or the notice is designated by the postal authorities as
not deliverable, as the case may be, if mailed.
25. Jurisdiction and Venue. The parties acknowledge that a substantial
portion of negotiations, anticipated performance and execution of this
Agreement occurred or shall occur in Palm Beach County, Florida, and that,
therefore, without limiting the jurisdiction or venue of any other federal or
state courts, each of the parties irrevocably and unconditionally (a) agrees
that any suit, action or legal proceeding arising out of or relating to this
Agreement may be brought in
5
<PAGE> 6
the courts of record of the State of Florida in Palm Beach County or the court
of the United States, Southern District of Florida; (b) consents to the
jurisdiction of each such court in any such suit, action or proceeding; (c)
waives any objection which it may have to the laying of venue of any such suit,
action or proceeding in any of such courts; and (d) agrees that service of any
court paper may be effected on such party by mail, as provided in this
Agreement, or in such other manner as may be provided under applicable laws or
court rules in said state.
26. Remedies Cumulative. No remedy herein conferred upon any party is
intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. No single or partial exercise by any party of any right, power or
remedy hereunder shall preclude any other or further exercise thereof.
27. Employee Representations, Warranties, and Acknowledgements. Employee
represents and warrants to Company that he/she is fully empowered to enter and
perform his/her obligations under this Agreement and, without limitation, that
she is under no restrictive covenants to any person or entity that will be
violated by his entering into and performing this Agreement, and that this
Agreement constitutes the valid and legally binding obligation of Employee
enforceable in accordance with its terms. The execution and delivery of this
Agreement by Employee has been duly authorized by all necessary action.
Employee shall indemnify Company upon demand for and against any and all
judgments, losses, claims, damages, costs (including without limitation all
legal fees and costs, even if incident to appeals) incurred or suffered by any
of them as a result of the breach of the representations and warranties made in
this section, or as a result of the failure of the acknowledgment made in this
section to be true and correct at all times.
28. Governing Law. This Agreement and all transactions contemplated by
this Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the State of Florida without regard to principles of
conflicts of laws.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
DALEEN TECHNOLOGIES, INC.
Its: President/COO: /s/ David B. Corey
---------------------
EMPLOYEE: /s/ Timothy C. Moss
-------------------
Timothy C. Moss
7
<PAGE> 8
EXHIBIT LIST
Exhibit A - Invention Assignment and Confidentiality Agreement
Exhibit B - Non-Solicitation and Non-Compete Agreement
1
<PAGE> 9
EXHIBIT A TO EMPLOYMENT AGREEMENT
INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is entered into this 15th day of December, 1998, by and between
Daleen Technologies, Inc. (DTI), and Timothy C. Moss (hereinafter referred to
as "Employee") for and in consideration of Employee's continued employment or
engagement by DTI and the compensation that Employee shall receive during
Employee's employment or engagement, the parties agree as follows:
1. Both during and after Employee's employment or engagement:
a. Employee shall not disclose to anyone outside DTI any Confidential
Information. "Confidential Information" is defined as information
which has not been made publicly available by DTI or the third party
owner of such information, and
1. Which was developed by DTI, and relates to DTI's past, present, and
future business, including but not limited to developments
(defined below, technical data, specifications, designs,
concepts, discoveries, copyrights, improvements, product
plans, research and development, personal information,
personnel information, financial information, customer
lists, leads, and/or marketing programs;
2. All documents marked as confidential and/or continuing such
information; and/or
3. All information DTI has acquired or received from a third party in
confidence.
b. Employee shall use Confidential Information only for DTI's business
purposes; and
c. Employee shall use any information received in confidence by DTI from
any third party only as permitted by written agreement between DTI and
the third party; and
d. Employee shall not be permitted to justify any disregard of the
obligations of Employee hereunder by using any of the Confidential
Information to guide a search by it of publications and other publicly
available information, selecting a series of items of knowledge from
unconnected sources and fitting them together by use of the integrated
disclosure of the information thereby to justify its disregard of the
obligations of confidence.
2. Employee shall not disclose to DTI, use in DTI's business, or cause DTI to
use any information or material which is confidential to any third party
unless DTI has a written agreement with the third party allowing DTI to
receive and use the confidential
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<PAGE> 10
information or materials. Employee will not incorporate into Employee's
work any material which is subject to the copyrights of any third party
unless DTI has the right to copy and incorporate such copyrighted material.
3. When Employee is no longer employed or engaged by DTI, Employee shall
return to DTI all DTI property, and any and all third party property,
including all Confidential Information, drawings, computer programs or
copies thereof, documentation, notebooks and notes, reports and any other
materials on electronic or printed media.
4. Employee hereby grants, transfers and assigns to DTI all of his or her
rights, title and interest, if any, in any and all Developments, including
rights to translation and reproductions in all forms or formats and the
copyrights and patent rights thereto, if any, and he or she agrees that DTI
may copyright said materials in DTI's name and secure renewal, reissues and
extensions of such copyrights for such periods of time as the law may
permit. "Developments" is defined as any idea, invention, process, design,
concept, or useful article (whether the design is ornamental or otherwise),
computer program, documentation, literary work, audiovisual work and any
other work of authorship, hereafter expressed, made or conceived solely or
jointly by employee during Employee's employment or engagement, whether or
not subject to patent, copyright or other forms of protection that:
a. Are related to the actual or anticipated business, research or
Development of DTI; and/or
b. Are suggested by or result from any task assigned to Employee or
work performed by Employee for or on behalf of DTI.
Employee acknowledges that the copyrights in Developments created by
Employee in the scope of Employee's employment or engagement, belong to DTI
by operation of law, or may belong to a party engaged by DTI by operation
of law pursuant to a works for hire contract between DTI and such
contracted part. To the extent the copyrights in such works may not be
owned by DTI or such contracted party by operation of law, Employee hereby
assigns to DTI or such contracted party, as the case may be, all copyrights
(if any) Employee may have in Developments.
Items not assigned by this Section 4 are listed and described on the
attached "Schedule of Separate Works". Employee agrees not to include any
part of such items in the materials Employee prepares for DTI unless and
until such items are licensed or assigned to DTI under separate written
agreement.
At all times hereafter, Employee agrees to assist DTI in obtaining patents
or copyrights on any Developments assigned to DTI that DTI, in its sole
discretion, seeks to patent or copyright. Employee also agrees to sign all
documents, and do all things necessary to obtain such patents or
copyrights, to further assign them to DTI, and to reasonably protect
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<PAGE> 11
them and DTI against infringement by other parties at DTI expense with DTI
prior approval.
Employee irrevocably appoints any DTI-selected designee to act, at all time
hereafter, as his or her agent and attorney-in-fact to perform all acts
necessary to obtain patents and/or copyrights as required by this Agreement
if Employee (i) refuses to perform those acts or (ii) is unavailable,
within the meaning of the United States Patent and Copyright laws. It is
expressly intended by Employee that the foregoing power of attorney is
coupled with an interest.
Employee shall keep complete, accurate, and authentic information and
records on all Developments in the manner and form reasonably requested by
DTI. Such information and records, and all copies thereof, shall be the
property of DTI as to any Developments assigned DTI. Employee agrees to
promptly surrender such information and records at the request of DTI as to
any Developments.
5. In connection with any of the Developments assigned by Section 4, Employee
agrees:
a. To disclose them promptly to DTI, and
b. At DTI's request, to execute separate written assignments to DTI and
do all things reasonable necessary to enable DTI to secure patents,
register copyrights or obtain any other form of protection for
Developments in the United States and in other countries. If Employee
fails or is unable to do so, Employee hereby authorizes DTI to act
under power of attorney for Employee to do all things to secure such
rights.
c. To provide DTI with notice of any inadvertent disclosure of
Confidential Information related to any Development.
6. Without limitation of any other Agreement between Employee and DTI,
Employee shall not employ or engage or attempt to employ or engage the
services of any employee of DTI, either directly or through the agency of a
third party during the term of, or within six (6) months after, the
termination of Employee's employment or engagement with DTI.
7. DTI, its subsidiaries, licensees, successors or assigns, (direct or
indirect) are not required to designate Employee as author of any
Development when such Development is distributed publicly or otherwise.
Employee waives and releases, to the extent permitted by law, all
Employee's rights to such designation and any rights concerning future
modifications of such Developments.
8. Rights, assignments, and representations made or granted by Employee in
this Agreement, are assignable by DTI and are for the benefit of DTI's
successors, assigns, and parties contracted with DTI.
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<PAGE> 12
9. Miscellaneous Provisions.
a) Amendments. The provisions of this Agreement may not be amended,
supplemented, waived or changed orally, but only by a writing signed
by the party as to whom enforcement of any such amendment, supplement,
waiver or modification is sought and making specific reference to this
Agreement.
b) Further Assurances. The parties hereby agree from time to time to
execute and deliver such further and other transfers, assignments and
documents and do all matters and things which may be convenient or
necessary to more effectively and completely carry out the intentions
of this Agreement.
c) Brokers. Each of the parties represents and warrants that such party
has dealt with no broker or finder in connection with any of the
transactions contemplated by this Agreement, and, insofar as such
party knows, no broker or other person is entitled to any commission
or finder's fee in connection with any of these transactions. The
parties each agree to indemnify and hold harmless one another against
any loss, liability, damage, cost, claim or expense incurred by reason
of any brokerage commission or finder's fee alleged to be payable
because of any act, omission or statement of the indemnifying party.
d) Binding Effect. All of the terms and provisions of this Agreement,
whether so expressed or not, shall be binding upon, inure to the
benefit of, and be enforceable by the parties and their respective
administrators, executors, legal representatives, heirs, successors
and permitted assigns.
e) Headings. The headings contained in this Agreement are for convenience
of reference only, are not to be considered a part hereof and shall
not limit or otherwise affect in any way the meaning or interpretation
of this Agreement.
f) Severability. If any provision of this Agreement or any other
Agreement entered into pursuant hereto is contrary to, prohibited by
or deemed invalid under applicable law or regulation, such provision
shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be
invalidated thereby and shall be given full force and effect so far as
possible. If any provision of this Agreement may be construed in two
or more ways, one of which would render the provision invalid or
otherwise voidable or unenforceable and another of which would render
the provision valid and enforceable, such provision shall have the
meaning which renders it valid and enforceable.
g) Survival. All covenants, agreements, representations and warranties
made herein or otherwise made in writing by any party pursuant hereto
shall survive the execution and delivery of this Agreement and the
termination of employment or engagement of Employee.
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<PAGE> 13
h) Waivers. The failure or delay of any party at any time to require
performance by another party of any provision of this Agreement, even
if known, shall not affect the right of such party to require
performance of that provision or to exercise any right, power or
remedy hereunder. Any waiver by any party of any breach of any
provision of this Agreement should not be construed as a waiver of any
continuing or succeeding breach of such provision, a waiver of the
provision itself, or a waiver of any right, power or remedy under this
Agreement. No notice to or demand on any party in any case shall, of
itself, entitle such party to any other or further notice or demand in
similar or other circumstances.
i) Specific Performance. Each of the parties acknowledges that the
parties will be irreparably damage (and damages at law would be an
inadequate remedy) if this Agreement is not specifically enforced.
Therefore, in the event of a breach or threatened breach by any party
of any provision of this Agreement, then the other parties shall be
entitled, in addition to all other rights or remedies, to injunctions
restraining such breach, without being required to show any actual
damage or to post any bond or other security, and/or to a decree for
specific performance of the provisions of this Agreement.
j) Jurisdiction and Venue. The parties acknowledge that a substantial
portion of negotiations and anticipated performance and execution of
this Agreement occurred or shall occur in Palm Beach County, Florida,
and that, therefore, without limiting the jurisdiction or venue of any
other federal or state courts, each of the parties irrevocably and
unconditionally (a) agrees that any suit, action or legal proceeding
arising out of or relating to this Agreement may be brought in the
courts of record of the State of Florida in Palm Beach County or the
court of the United States, Southern District of Florida; (b) consents
to the jurisdiction of each such court in any suit, action or
proceeding; (c) waives any objection which it may have to the laying
of venue of any such suit, action or proceeding in any of such courts;
and (d) agrees that service of any court paper may be effected on such
party by mail, as provided in this Agreement, or in such other manner
as may be provided under applicable laws or court rules in said state.
k) Remedies Cumulative. Except as otherwise expressly provided herein, no
remedy herein conferred upon any party is intended to be exclusive of
any other remedy, and each and every such remedy shall be cumulative
and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise.
No single or partial exercise by any party of any right, power or
remedy hereunder shall preclude any other or further exercise thereof.
l) Governing Law. This Agreement and all transactions contemplated by
this Agreement shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of Florida without
regard to principles of conflicts of laws.
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<PAGE> 14
m) Confidentiality Under Legal Requirement Protection. In the event that
Employee is requested or required (by oral questions, interrogatories,
requests for information or documents in legal proceedings, subpoena,
civil investigative demand or other similar process) to disclose any
of the Confidential Information, Employee shall provide the Company
with prompt written notice of such request or requirement so that the
Company may seek a protective order or other remedy and/or waive the
compliance with the provisions of this agreement. If, in the absence
of a protective order or other remedy or the receipt of a waiver by
the Company, Employee is nonetheless, in the written opinion of
counsel, legally compelled to disclose Confidential Information to any
tribunal or else stand liable for contempt or suffer other censure or
penalty, Employee may, without liability hereunder, disclose to such
tribunal only that portion of the Confidential Information which such
counsel advises Employee is legally required to be disclosed, provided
the Employee exercises his/her best efforts to preserve the
confidentiality of the Confidential Information, including, without
limitation, reliable assurance that the confidential treatment will be
accorded the Confidential Information by such tribunal.
n) Entire Agreement. This Agreement represents the entire understanding
and agreement among the parties with respect to the subject matter
hereof, and supersedes all other negotiations, understandings and
representations (if any) made by and among such parties.
IN WITNESS WHEREOF, the parties have duly set their hands to this Agreement,
effective as of the date stated above.
DALEEN TECHNOLOGIES, INC. EMPLOYEE
/s/ David B. Corey /s/ Timothy C. Moss
- ------------------------- ---------------------------
DTI Authorized Signature Employee's Signature
1/8/99 Timothy C. Moss
- ------------------------- ---------------------------
Date Employee's Printed Name
12-30-98
---------------------------
Date
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<PAGE> 15
SCHEDULE OF SEPARATE WORKS
The following are works that are not assigned by Section 4 of the Invention
Assignment and Confidentiality Agreement, in which Employee has any right,
title or interest, and which were conceived or written either wholly or in part
by Employee, prior to or outside the scope of Employee's employment with DTI.
DESCRIPTION: (If none, enter the word "None")
_______________________________________________________________________________
_______________________________________________________________________________
___________________________________________________________________
Indicate any item listed above that has been published, registered as a
copyright, or is or has been the subject of a patent application:
_______________________________________________________________________________
_______________________________________________________________________________
___________________________________________________________________
Indicate the name of such organization or third party who also has rights in
any of the listed items (such as former employers, partners, etc.):
_______________________________________________________________________________
_______________________________________________________________________________
___________________________________________________________________
The foregoing is complete and accurate to the best of Employee's knowledge.
/s/ Timothy C. Moss 12-30-98
- -------------------------------------------
Employee's Signature Date
Timothy C. Moss
- -------------------------
Employee's Printed Name
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<PAGE> 16
EXHIBIT B TO EMPLOYMENT AGREEMENT
NON-SOLICITATION AND NON-COMPETE AGREEMENT
THIS NON-SOLICITATION AND NON-COMPETE AGREEMENT ("Agreement") made as of this
15th day of December, 1998 by and between Daleen Technologies, Inc., a Florida
corporation with its principal office at 902 Clint Moore Road, Suite 230, Boca
Raton, Florida 33487 (hereinafter called "Daleen") and Timothy C. Moss
(hereinafter "Employee").
WHEREAS, Employee is accepting employment with Daleen; and
WHEREAS, the parties wish to reflect their agreement as to Employee's
promises regarding Employee's solicitation and competition which have induced
Daleen to employ Employee at Employee's status with Daleen, as well as Daleen's
extension of certain severance benefits to Employee.
NOW, THEREFORE, Employee and Daleen (hereinafter sometimes referred to
collectively as the "parties" and separately as a "party") in consideration of
Employee's employment with Daleen and the covenants hereinafter set forth and
other good and valuable consideration and intending to be legally bound hereby,
agree as follows:
1. Non-solicitation. Employee will not, at any time while employed by
Daleen and for one (1) year after the termination of Employee's employment with
Daleen for any reason whatsoever, directly or indirectly (by assisting or
suggesting to another, or otherwise) solicit otherwise attempt to induce or
accept the initiative of another in such regard, alone or by combining or
conspiring with anyone, any employees, officers, directors, agents,
consultants, representatives, contractors, suppliers, distributors, customers
or other business contacts (collectively, "Business Affiliates") of Daleen to
terminate or modify its position as an employee, officer, director, agent,
consultant, representative, contractor, supplier, distributor, customer or
business contact with Daleen or to compete against Daleen.
2. Non-competition. (a) Employee shall not while employed by Daleen, and
after the termination of said employment for any reason whatsoever for the time
period after such termination described in paragraph (c) below (the "No-Compete
Period"), directly or indirectly, as owner, officer, director, employee, agent,
lender, broker, investor, consultant or representative of any corporation or as
owner of any interest in, or as an employee, agent, consultant, partner,
affiliate or in any other capacity whatsoever or representative of any other
form of business association, sole proprietorship or partnership, conduct or be
related to any business in competition with any business of Daleen now or in
the future, including without limitation, in the Billing and Customer Care
industry (herein referred to as the "Competitive Business") anywhere within the
territories, nor as to certain customers anywhere in the United States, both
listed on the "Territories and Customers" Exhibit to the Agreement, made a
part hereof, including without limitation, the solicitation of any customers,
who were at any time customers of Daleen and in connection with a business
which is competitive with the Competitive Business except that such competitive
activity will be permitted as to business solicitation of and competition with
Daleen
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<PAGE> 17
as to any entity listed on an Exhibit to this Agreement made a part hereof
identified as a "No-Compete Exception", if any, subject to paragraph (c) below.
(b) In addition to, and not in limitation of the other provisions hereof
or of any other Agreement between Employee and Daleen, Employee shall not at
any time in any manner other than in the ordinary course of good faith
competition only as permitted herein interfere with, disturb, disrupt, decrease
or otherwise jeopardize the business of Daleen or do or permit to be done
anything which may tend to take away or diminish the trade, business or good
will of Daleen or give to any person the benefit or advantage of Company's or
Seller's methods of operation, advertising, publicity, training, business
customers or accounts, or any other information relating or useful to Daleen's
business.
(c) The No-Compete Period shall increase depending upon the duration of
Employee's employment with Daleen as follows:
i) If Employee has completed one hundred eighty (180) days or less of
employment there will be a six (6) month No-Compete Period;
ii) If Employee has completed more than one hundred eighty (180) days of
employment the No-Compete Period will be one (1) year;
DTI reserves the right to waive the Non-Compete Period at its option in
return for the payment of the severance benefit described in Section 4.
3. Legal Effect. The foregoing covenants of Employee shall be deemed
severable, and the invalidity of any covenant shall not affect the validity or
enforceability of any other covenant. The existence of any claim or cause of
action by Employee against Daleen predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by Daleen of these covenants.
Daleen's failure to object to any conduct in violation of this Agreement shall
not be deemed a waiver by Daleen, but Daleen may, if it wishes, specifically
waive any part or all of those covenants to the extent that such waiver is set
forth in writing duly authorized by Daleen's Board of Directors.
Employee acknowledges and confirms that the length of the term and
geographical restrictions contained herein are fair and reasonable and not the
result of overreaching, duress or coercion of any kind. Employee further
acknowledges and confirms that his or her full, uninhibited and faithful
observance of each of the covenants contained in this Agreement will not cause
him or her any undue hardship, financial or otherwise, and that enforcement of
each of the covenants contained in this Agreement will not impair his or her
ability to obtain employment commensurate with his or her abilities and on
terms fully acceptable to him or her or otherwise to obtain income required for
the comfortable support of him or her and his or her family and the
satisfaction of the needs of his or her creditors. Employee acknowledges and
confirms that his or her special knowledge of the business of Daleen is such as
would cause Daleen serious injury and loss if he or she were to use such
ability and knowledge to the benefit of a competitor or were to compete with
Daleen.
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<PAGE> 18
In the event that any court shall finally hold that the time or territory
or any other provision stated in this Agreement constitutes an unreasonable
restriction upon Employee, Employee hereby expressly agrees that the provisions
of this Agreement shall not be rendered void, but shall apply as to time and
territory or to such other extent as such court may judicially determine or
indicate constitutes a reasonable restriction under the circumstances involved.
Employee hereby agrees that in the event of the violation by him or her of any
of the provisions of this Agreement, Daleen will be entitled if it so elects,
to institute and prosecute proceedings at law or in equity to obtain damages
with respect to such violation or to enforce the specific performance of this
Agreement by Employee or to enjoin Employee from engaging in any activity in
violation hereof without any requirement on the part of Daleen to post any bond.
In the event Daleen should bring any legal action or other proceeding for
the enforcement of this Agreement, the time for calculating the No-Compete
Period or terms of any other restriction herein shall not include the period of
time commencing with the filing of legal action or other proceeding to enforce
the terms of this Agreement through the date of final judgment or final
resolution, including all appeals, if any, of such legal action or other
proceeding.
4. Severance. In further consideration of the entering into of this
Agreement by Employee, Daleen agrees to entitle Employee to a severance pay
benefit based upon base salary dependent upon the duration of Employee's
employment with Daleen, determined as follows:
a) One hundred and eighty days (180) or less of employment will result
in a severance benefit equal to six (6) months salary subject to a
six (6) month Non-Compete period;
b) Employment beyond one hundred and eighty days (180) of employment
will result in a severance benefit equal to twelve (12) months salary
subject to a twelve (12) month Non-Compete period;
c) The Company reserves the right to waive the Non-Compete period. If
DTI waives the Non-Compete Period in its entirety or any portion of
it, there shall be no severance benefit paid for the period that has
been waived.
Daleen shall pay the foregoing severance benefit in accordance with payroll
policies in effect at the time of separation. Employee shall not be entitled to
any severance benefit if terminated by Daleen "for cause" or if Employee
voluntarily resigns from his or her employment with Daleen subject to the
provisions of the Non-Compete period in Section 2(c). As used in this Agreement
determination "for cause" shall be defined as termination of Employee by Daleen
in the event Employee has been convicted of any felony or, in the case of other
crimes, involving moral turpitude or dishonesty, or for any breach by Employee
of any agreement with Daleen or of its employment or business policies
(including without limitation theft or misuse of company property), or for any
other act or omission by Employee which does not fit into the previous
categories but which Daleen in good faith believes has occurred to its detriment
and about which Employee has received at least one (1) written warning by Daleen
and despite such prior written warning, employee has a second occasion committed
such act or omission.
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<PAGE> 19
5. Miscellaneous Provisions.
The provisions of this Agreement may not be amended, supplemented, waived
or changed orally, but only by a writing signed by the party as to whom
enforcement of any such amendment, supplement, waiver or modification is sought
and making specific reference to this Agreement. All of the terms and provisions
of this Agreement, whether so expressed or not, shall be binding upon, inure to
the benefit of, and be enforceable by the parties and their respective
administrators, executors, legal representatives, heirs, successors and
permitted assigns. The headings contained in this Agreement are for convenience
of reference only, are not to be considered a part hereof and shall not limit or
otherwise affect in any way the meaning or interpretation of this Agreement. The
failure or delay of any party at any time to require performance by another
party of any provision of this Agreement, even if known, shall not affect the
right of such party to require performance of that provision or to exercise any
right, power or remedy hereunder. Any waiver by any party of any breach of any
provision of this Agreement should not be construed as a waiver of any
continuing or succeeding breach of such provision, a waiver of the provision
itself, or a waiver of any right, power or remedy under this Agreement. No
notice to or demand on any party in any case shall, of itself, entitle such
party to any other or further notice or demand in similar or other
circumstances.
The parties acknowledge that a substantial portion of negotiations,
anticipated performance and execution of this Agreement occurred or shall occur
in Palm Beach County, Florida, and that, therefore, without limiting the
jurisdiction or venue of any other federal or state courts, each of the parties
irrevocably and unconditionally (a) agrees that any suit, action or legal
proceeding arising out of or relating to this Agreement may be brought in the
courts of record of the State of Florida in Palm Beach County or the District
Court of the United States, Southern District of Florida; (b) consents to the
jurisdiction of each such court in any suit, action or proceeding; (c) waives
any objection which it may have to the laying of venue of any such suit, action
or proceeding in any of such courts; and (d) agrees that service of any court
paper may be effected on such party by mail, as provided in this Agreement, or
in such other manner as may be provided under applicable laws or court rules in
said state. Except as otherwise expressly provided herein, no remedy herein
conferred upon any party is intended to be exclusive of any other remedy, and
each and every such remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise. No single or partial exercise by any party of any
right, power or remedy hereunder shall preclude any other or further exercise
thereof. This Agreement and all transactions contemplated by this Agreement
shall be governed by, and construed and enforced in accordance with, the
internal laws of the State of Florida without regard to principles of conflicts
of laws. Any time period provided for herein which shall end on a Saturday,
Sunday or legal holiday shall extend to 5:00 p.m. of the next full business day.
This Agreement represents the entire understanding and agreement amount the
parties with respect to the subject matter hereof, and supersedes all other
negotiations, understandings and representations (if any) made by and among such
parties.
12
<PAGE> 20
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
written above.
Daleen Technologies, Inc.
/s/ Timothy C. Moss /s/ D.B. Corey
- -------------------- -------------------------
Employee's Signature Its: President/COO
/s/ Timothy C. Moss /s/ David Corey
- -------------------- --------------------
Printed Name Printed Name
13
<PAGE> 21
NO-COMPETE EXCEPTIONS
Exhibit to Non-Solicitation and Non-Compete Agreement of Timothy C. Moss.
NONE.
14
<PAGE> 22
TERRITORIES AND CUSTOMERS
Exhibit to Non-Solicitation and Non-Compete Agreement of Timothy C. Moss.
THE UNITED STATES.
15
<PAGE> 1
EXHIBIT 10.29
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("this Agreement") is made and effective this
9th day of August, 1999, by and between DALEEN TECHNOLOGIES, INC., located at
902 Clint Moore Road, Suite 230, Boca Raton, 33487 ("Company"), and Timothy N.
Murray residing at 5660 Leitner Drive West, Coral Springs, FL 33067
("Employee").
WITNESSETH:
WHEREAS, Company believes it is in Company's best interest to employ
Employee, and Employee desires to be employed by Company; and
WHEREAS, Company and Employee desire to set forth the terms and
conditions on which Employee shall be employed by and provide his services to
Company;
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby agree
as follows:
1. Employment. Company hereby employs Employee in its business as
Vice President of Product Management & Marketing, and Employee hereby accepts
such employment, all upon the terms and conditions hereinafter set forth
2. Term. Unless sooner terminated pursuant to the provisions of
this Agreement, the term of employment under this Agreement shall be for as long
as Employee remains employed hereunder, with Employee acknowledging that he is
an at will employee ("Employment Period").
3. Salary and Base Compensation. Employee shall be entitled to
receive salary during the Employment Period at the rate of One Hundred Forty
Thousand and 00/100 Dollars ($140,000.00) per annum, as such may be increased
pursuant to Section 9 hereof (the "Base Salary"). In addition to the Base Salary
paid to Employee during the Employment Period, Employee shall be entitled to
receive the Benefits, Bonus Compensation, and Stock Option (as those terms are
hereinafter defined) during the Employment Period. The Base Salary shall be
payable biweekly in accordance with the current normal payroll policies of
Company, which policies may be changed by Company from time to time in its sole
discretion, and shall be subject to all appropriate withholding taxes. The
annual discretionary Bonus Compensation will be targeted at 25% of Base Salary
earnings which shall be for optimal performance to Company and personal
objectives as designated and determined solely by the President/COO.
Additionally you will have the opportunity to earn an initial performance bonus
based on your contributions during the first six months.
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<PAGE> 2
4. Business Expenses and Reimbursements. Employee shall be
entitled to reimbursement by the Company for ordinary and necessary business
expenses incurred by Employee in the performance of his duties for the Company,
which types of expenditures shall be determined and approved by the Company, and
further provided that:
(a) Each such expenditure is of a nature qualifying it as
a proper deduction on the Federal and State income tax returns of Company as a
business expense and not as deductible compensation to Employee; and
(b) Employee furnishes Company with adequate records and
other documentary evidence required by Federal and State statutes and
regulations for the substantiation of such expenditures as deductible business
expenses of Company and not as deductible compensation to Employee, as well as
any other documentation reasonably requested by Company.
5. Benefits. Employee shall be entitled to receive the following
Benefits during the entire Employment Period:
(a) Employee agrees that the Base Salary, Bonus
Compensation, the Stock Option, and the Benefits and the other compensation
provided in accordance with this Agreement and, if applicable, the Relocation
Agreement, are the sole and exclusive compensation and benefits provided to the
Employee for his duties hereunder.
(b) Continuing throughout the Employment Period:
(i) Employee shall be eligible for participation
in all of the employee benefits including, without limitation, life insurance/AD
& D, supplemental life insurance, disability, profit sharing and retirement
benefits in accordance with established procedures and provided at any time by
the Company to any of its employees in the sole and absolute discretion of the
Board of Directors of the Company (the "Board");
(ii) The Company shall make available health and
dental insurance providing full hospital, medical and dental coverage pursuant
to Company plans in effect from time to time for Employee and each of Employee's
dependents at similar expense to Employee or such dependents as charged to other
employees of the Company.
(iii) The Company will provide a discounted
membership at the Boca Raton Athletic Club. Initiation fees and monthly dues
will be subsidized by the Company.
6. Personal Time. Employee shall be entitled to Personal Time
(e.g. vacation) in accordance with the Personal Time policy of the Company in
effect from time to time.
7. Stock Options. In addition to Employee's Base Salary, Benefits
and Bonus Compensation, Employee shall be granted a stock option to purchase a
number of shares of common stock equal to Forty Thousand (40,000) at an exercise
price equal to fair market value
2
<PAGE> 3
at time of grant, which options will vest over a four-year period in accordance
with the standard vesting schedule approved by the Board of Directors. The
options shall be granted to Employee pursuant to an Option Agreement
satisfactory as to its other terms to the Company, shall be incentive option
stock options to the extent permitted by law, and all of these grants and terms
are subject to the approval of the Board of Directors.
8. Registration Rights. After the declaration of effectiveness by
the SEC of the initial public offering of securities of the Company, in the
event the Company registers common stock held by other then-current employees of
Company, then the Company shall also register a prorata portion of the common
stock then held by Employee, excluding registration on Form S-8 or any other
registration of an employee benefit plan available to a class of employees, and
subject to standard underwriter cutback rights based on market conditions. The
Company shall not be required to register any share of Employee to the extent
such shares are eligible for sale (subject to volume limitations) under Rule 144
or any successor provision.
9. Compensation Review. The Chief Operating Officer ("COO") shall
from time to time, no less frequently than annually, review Employee's
compensation and may (in the COO's sole discretion) increase the compensation
provided for in Section 3 hereof. Any such increase in compensation shall be
valid only if in writing, executed by the COO, and such writing shall constitute
an amendment solely to the payments to be made to Employee under this Agreement,
without waiver or modification of any other provision hereof.
10. Invention Assignment and Confidentiality Agreement. Against
the execution and delivery of this Agreement, Employee shall enter into an
agreement in the form of Exhibit "A" hereto (the "Invention Assignment and
Confidentiality Agreement").
11. Non-Competition Agreement. Against the execution and delivery
of this Agreement, Employee shall enter into a non-competition and
non-solicitation agreement (in the form of Exhibit "B" hereto) (the
"Non-Competition Agreement") which also, notwithstanding the at will nature of
the employment, provides for a severance benefit under certain circumstances.
Notwithstanding the foregoing, the parties agree and acknowledge that this
Section 11 and the Non-Competition Agreement shall be enforceable in all
respects, except with regard to any restriction on Employee's ability to
practice the profession of law in the State of Florida to the extent that such a
restriction violates any law or regulation that is applicable to the Company.
12. No Other Compensation or Benefits. Employee agrees that the
compensation set forth in this Agreement is the sole and exclusive compensation
of Employee for his duties hereunder, and that he shall have no rights to
receive any other compensation or benefits of any nature.
13. Duties. During the Employment Period:
(a) Employee shall furnish all manner of
services in connection with his or her position or as otherwise designated by
the COO including, without limitation, primary
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<PAGE> 4
responsibility for such duties as shall be deemed by the COO appropriate to
carry out the policies and programs of the Board and as from time to time may be
delegated or assigned to him/her by the Board;
(b) Employee shall report directly to the COO in
the performance of all his duties herein.
(c) Employee shall comply with all Company
policies for the employees as such policies may exist from time to time.
(d) Employee shall devote his entire
professional working time, energy and skill to the service of Company and the
promotion of Company's interests, and shall use his best efforts in the
performance of his/her services hereunder. The parties agree that Employee may
not, during the Employment Period, be engaged in any other business activity
whether or not such activity is pursued for gain, profit, or other pecuniary
advantage including, without limitation, management or management consulting
activities; provided, however, Employee may invest his personal assets in
businesses where the form or manner of such investment will not require services
on the part of Employee conflicting with the duties of Employee under this
Agreement and in which his participation is solely that of a passive investor.
Employee agrees to abide by all rules and regulations established from time to
time by the CEO and/or the Board; and all commissions, fees or other income
earned and received by Employee, if any, in furtherance of the business of
Company, or its affiliates or from any other business or financial opportunity
or endeavor in which Employee is an active participant and not a passive
investor, shall be accepted by Employee for the account of Company, and shall be
remitted to Company within three (3) days of Employee's receipt thereof.
14. Termination. The Company may, in its sole discretion,
terminate this Agreement for any reason or for no reason, with or without cause,
subject to the severance obligation outlined in the Non-Competition Agreement.
In the event of termination of employment by either party, subject to compliance
with the Non-Competition Agreement, Employee shall be entitled to distributions
pursuant to the severance provisions more fully set forth in the Non-Competition
Agreement and to all Base Salary which is fully accrued.
15. Surrender of Records. Upon the termination of the Employee's
employment hereunder, for any reason whatsoever, and in addition to such other
actions as may be reasonably required by the Company, Employee agrees to
surrender to the Company, in good condition, any record or records kept by him
containing the names, addresses, and other information with regard to customers
or potential customers of the Company which have been served by Employee.
16. Entire Agreement. This Agreement and, as applicable, the
Relocation Agreement, represents the entire understanding and agreement between
the parties with respect to the subject matter hereof, and supersedes all other
negotiations, understandings and representations (if any) made by and between
such parties, including the offer letter dated August 9, 1999 from the Company
to Employee.
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<PAGE> 5
17. Amendments. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a writing signed by
the party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
18. Assignments. Employee shall not assign his rights and/or
obligations hereunder.
19. Binding Effect. All of the terms and provisions of this
Agreement, whether so expressed or not, shall be binding upon, inure to the
benefit of, and be enforceable by the parties and their respective
administrators, executors, legal representatives, heirs, successors and
permitted assigns.
20. Severability. If any part of this Agreement or any other
Agreement entered into pursuant hereto is contrary to, prohibited by or deemed
invalid under applicable law or regulation, such provision shall be inapplicable
and deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
21. Survival. Notwithstanding anything to the contrary herein, the
provisions of Sections 10 through 28 (inclusive, except Section 13) shall
survive and remain in effect in accordance with their respective terms in the
event the employment is terminated.
22. Waivers. The failure or delay of Company at any time to
require performance by Employee of any provision of this Agreement, even if
known, shall not affect the right of Company to require performance of that
provision or to exercise any right, power or remedy hereunder, and any waiver by
Company of any breach of any provision of this Agreement should not be construed
as a waiver of any continuing or succeeding breach of such provision, a waiver
of the provision itself, or a waiver of any right, power or remedy under this
Agreement. No notice to or demand on Employee in any case shall, of itself,
entitle such party to any other or further notice or demand in similar or other
circumstances.
23. Specific Performance. Employee acknowledges that the services
to be rendered by Employee hereunder are extraordinary and unique and are vital
to the success of the Company, and that damages at law would be an inadequate
remedy for any breach or threatened breach of this Agreement by Employee.
Therefore, in the event of a breach or threatened breach by Employee of any
provision of this Agreement, then the Company shall be entitled, in addition to
all other rights or remedies, to injunctions restraining such breach, without
being required to show any actual damage or to post any bond or other security.
24. Notices. All notices, requests, consents and other
communications required or permitted under this Agreement shall be in writing
(including telex and telegraphic communication) and shall be (as elected by the
person giving such notice) hand delivered by messenger or courier service,
telecommunicated, or mailed (airmail if international) by registered
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<PAGE> 6
or certified mail (postage prepaid), return receipt requested, to the addresses
listed above or to such other address as any party may designate by notice
complying with the terms of this Section. Each such notice shall be deemed
delivered (a) on the date delivered if by personal delivery, (b) on the date
telecommunicated if by telegraph, (c) on the date of transmission with confirmed
answer back if by telex or telefax, and (d) on the date upon which the return
receipt is signed or delivery is refused or the notice is designated by the
postal authorities as not deliverable, as the case may be, if mailed.
25. Jurisdiction and Venue. The parties acknowledge that a
substantial portion of negotiations, anticipated performance and execution of
this Agreement occurred or shall occur in Palm Beach County, Florida, and that,
therefore, without limiting the jurisdiction or venue of any other federal or
state courts, each of the parties irrevocably and unconditionally (a) agrees
that any suit, action or legal proceeding arising out of or relating to this
Agreement may be brought in the courts of record of the State of Florida in Palm
Beach County or the court of the United States, Southern District of Florida;
(b) consents to the jurisdiction of each such court in any such suit, action or
proceeding; (c) waives any objection which it may have to the laying of venue of
any such suit, action or proceeding in any of such courts; and (d) agrees that
service of any court paper may be effected on such party by mail, as provided in
this Agreement, or in such other manner as may be provided under applicable laws
or court rules in said state.
26. Remedies Cumulative. No remedy herein conferred upon any party
is intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. No single or partial exercise by any party of any right, power or
remedy hereunder shall preclude any other or further exercise thereof.
27. Employee Representations, Warranties, and Acknowledgments.
Employee represents and warrants to Company that he is fully empowered to enter
and perform his obligations under this Agreement and, without limitation, that
he is under no restrictive covenants to any person or entity that will be
violated by his entering into and performing this Agreement, and that this
Agreement constitutes the valid and legally binding obligation of Employee
enforceable in accordance with its terms. The execution and delivery of this
Agreement by Employee has been duly authorized by all necessary action. Employee
shall indemnify Company upon demand for and against any and all judgments,
losses, claims, damages, costs (including without limitation all legal fees and
costs, even if incident to appeals) incurred or suffered by any of them as a
result of the breach of the representations and warranties made in this section,
or as a result of the failure of the acknowledgment made in this section to be
true and correct at all times.
28. Governing Law. This Agreement and all transactions
contemplated by this Agreement shall be governed by, and construed and enforced
in accordance with, the internal laws of the State of Florida without regard to
principles of conflicts of laws.
7
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
DALEEN TECHNOLOGIES, INC.
Its: COO: /s/ David B. Corey
-----------------------------
EMPLOYEE: /s/ Timothy N. Murray
-----------------------------
8
<PAGE> 8
EXHIBIT LIST
Exhibit A -Invention Assignment and Confidentiality Agreement
Exhibit B -Non-Solicitation and Non-Compete Agreement
1
<PAGE> 9
EXHIBIT A TO EMPLOYMENT AGREEMENT
INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is entered into this 9th day of August, by and between Daleen
Technologies, Inc. (DTI), and Timothy N. Murray(hereinafter referred to as
"Employee") for and in consideration of Employee's continued employment or
engagement by DTI and the compensation that Employee shall receive during
Employee's employment or engagement, the parties agree as follows:
1. Both during and after Employee's employment or engagement:
a. Employee shall not disclose to anyone outside DTI any
Confidential Information. "Confidential Information" is
defined as information which has not been made publicly
available by DTI or the third party owner of such
information, and
1.Which was developed by DTI, and relates to DTI's past,
present, and future business, including but not limited to
developments (defined below, technical data,
specifications, designs, concepts, discoveries, copyrights,
improvements, product plans, research and development,
personal information, personnel information, financial
information, customer lists, leads, and/or marketing
programs;
2.All documents marked as confidential and/or continuing such
information; and/or
3.All information DTI has acquired or received from a third
party in confidence.
b. Employee shall use Confidential Information only for DTI's
business purposes; and
c. Employee shall use any information received in confidence by
DTI from any third party only as permitted by written
agreement between DTI and the third party; and
d. Employee shall not be permitted to justify any disregard of
the obligations of Employee hereunder by using any of the
Confidential Information to guide a search by it of
publications and other publicly available information,
selecting a series of items of knowledge from unconnected
sources and fitting them together by use of the integrated
disclosure of the information thereby to justify its
disregard of the obligations of confidence.
2. Employee shall not disclose to DTI, use in DTI's business, or cause
DTI to use any information or material which is confidential to any
third party unless DTI has a written agreement with the third party
allowing DTI to receive and use the confidential
2
<PAGE> 10
information or materials. Employee will not incorporate into
Employee's work any material which is subject to the copyrights of any
third party unless DTI has the right to copy and incorporate such
copyrighted material.
3. When Employee is no longer employed or engaged by DTI, Employee shall
return to DTI all DTI property, and any and all third party property,
including all Confidential Information, drawings, computer programs or
copies thereof, documentation, notebooks and notes, reports and any
other materials on electronic or printed media.
4. Employee hereby grants, transfers and assigns to DTI all of his or her
rights, title and interest, if any, in any and all Developments,
including rights to translation and reproductions in all forms or
formats and the copyrights and patent rights thereto, if any, and he
or she agrees that DTI may copyright said materials in DTI's name and
secure renewal, reissues and extensions of such copyrights for such
periods of time as the law may permit. "Developments" is defined as
any idea, invention, process, design, concept, or useful article
(whether the design is ornamental or otherwise), computer program,
documentation, literary work, audiovisual work and any other work of
authorship, hereafter expressed, made or conceived solely or jointly
by employee during Employee's employment or engagement, whether or not
subject to patent, copyright or other forms of protection that:
a.Are related to the actual or anticipated business, research
or Development of DTI; and/or
b.Are suggested by or result from any task assigned to
Employee or work performed by Employee for or on behalf of
DTI.
Employee acknowledges that the copyrights in Developments created by
Employee in the scope of Employee's employment or engagement, belong
to DTI by operation of law, or may belong to a party engaged by DTI by
operation of law pursuant to a works for hire contract between DTI and
such contracted part. To the extent the copyrights in such works may
not be owned by DTI or such contracted party by operation of law,
Employee hereby assigns to DTI or such contracted party, as the case
may be , all copyrights (if any) Employee may have in Developments.
Items not assigned by this Section 4 are listed and described on the
attached "Schedule of Separate Works". Employee agrees not to include
any part of such items in the materials Employee prepares for DTI
unless and until such items are licensed or assigned to DTI under
separate written agreement.
At all times hereafter, Employee agrees to assist DTI in obtaining
patents or copyrights on any Developments assigned to DTI that DTI, in
its sole discretion, seeks to patent or copyright. Employee also
agrees to sign all documents, and do all things necessary to obtain
such patents or copyrights, to further assign them to DTI, and to
reasonably protect
3
<PAGE> 11
them and DTI against infringement by other parties at DTI expense with
DTI prior approval.
Employee irrevocably appoints any DTI-selected designee to act, at all
time hereafter, as his or her agent and attorney-in-fact to perform
all acts necessary to obtain patents and/or copyrights as required by
this Agreement if Employee (i) refuses to perform those acts or (ii)
is unavailable, within the meaning of the United States Patent and
Copyright laws. It is expressly intended by Employee that the
foregoing power of attorney is coupled with an interest.
Employee shall keep complete, accurate, and authentic information and
records on all Developments in the manner and form reasonably
requested by DTI. Such information and records, and all copies
thereof, shall be the property of DTI as to any Developments assigned
DTI. Employee agrees to promptly surrender such information and
records at the request of DTI as to any Developments.
5. In connection with any of the Developments assigned by Section 4,
Employee agrees:
a. To disclose them promptly to DTI, and
b. At DTI's request, to execute separate written assignments to
DTI and do all things reasonable necessary to enable DTI to
secure patents, register copyrights or obtain any other form
of protection for Developments in the United States and in
other countries. If Employee fails or is unable to do so,
Employee hereby authorizes DTI to act under power of attorney
for Employee to do all things to secure such rights.
c. To provide DTI with notice of any inadvertent disclosure of
Confidential Information related to any Development.
6. Without limitation of any other Agreement between Employee and DTI,
Employee shall not employ or engage or attempt to employ or engage the
services of any employee of DTI, either directly or through the agency
of a third party during the term of, or within six (6) months after,
the termination of Employee's employment or engagement with DTI.
7. DTI, its subsidiaries, licensees, successors or assigns, (direct or
indirect) are not required to designate Employee as author of any
Development when such Development is distributed publicly or
otherwise. Employee waives and releases, to the extent permitted by
law, all Employee's rights to such designation and any rights
concerning future modifications of such Developments.
8. Rights, assignments, and representations made or granted by Employee
in this Agreement, are assignable by DTI and are for the benefit of
DTI's successors, assigns, and parties contracted with DTI.
4
<PAGE> 12
9. Miscellaneous Provisions.
a) Amendments. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by
a writing signed by the party as to whom enforcement of any
such amendment, supplement, waiver or modification is sought
and making specific reference to this Agreement.
b) Further Assurances. The parties hereby agree from time to
time to execute and deliver such further and other transfers,
assignments and documents and do all matters and things which
may be convenient or necessary to more effectively and
completely carry out the intentions of this Agreement.
c) Brokers. Each of the parties represents and warrants that
such party has dealt with no broker or finder in connection
with any of the transactions contemplated by this Agreement,
and, insofar as such party knows, no broker or other person
is entitled to any commission or finder's fee in connection
with any of these transactions. The parties each agree to
indemnify and hold harmless one another against any loss,
liability, damage, cost, claim or expense incurred by reason
of any brokerage commission or finder's fee alleged to be
payable because of any act, omission or statement of the
indemnifying party.
d) Binding Effect. All of the terms and provisions of this
Agreement, whether so expressed or not, shall be binding
upon, inure to the benefit of, and be enforceable by the
parties and their respective administrators, executors, legal
representatives, heirs, successors and permitted assigns.
e) Headings. The headings contained in this Agreement are for
convenience of reference only, are not to be considered a
part hereof and shall not limit or otherwise affect in any
way the meaning or interpretation of this Agreement.
f) Severability. If any provision of this Agreement or any other
Agreement entered into pursuant hereto is contrary to,
prohibited by or deemed invalid under applicable law or
regulation, such provision shall be inapplicable and deemed
omitted to the extent so contrary, prohibited or invalid, but
the remainder hereof shall not be invalidated thereby and
shall be given full force and effect so far as possible. If
any provision of this Agreement may be construed in two or
more ways, one of which would render the provision invalid or
otherwise voidable or unenforceable and another of which
would render the provision valid and enforceable, such
provision shall have the meaning which renders it valid and
enforceable.
g) Survival. All covenants, agreements, representations and
warranties made herein or otherwise made in writing by any
party pursuant hereto shall survive the execution and
delivery of this Agreement and the termination of employment
or engagement of Employee.
5
<PAGE> 13
h) Waivers. The failure or delay of any party at any time to
require performance by another party of any provision of this
Agreement, even if known, shall not affect the right of such
party to require performance of that provision or to exercise
any right, power or remedy hereunder. Any waiver by any party
of any breach of any provision of this Agreement should not
be construed as a waiver of any continuing or succeeding
breach of such provision, a waiver of the provision itself,
or a waiver of any right, power or remedy under this
Agreement. No notice to or demand on any party in any case
shall, of itself, entitle such party to any other or further
notice or demand in similar or other circumstances.
i) Specific Performance. Each of the parties acknowledges that
the parties will be irreparably damage (and damages at law
would be an inadequate remedy) if this Agreement is not
specifically enforced. Therefore, in the event of a breach or
threatened breach by any party of any provision of this
Agreement, then the other parties shall be entitled, in
addition to all other rights or remedies, to injunctions
restraining such breach, without being required to show any
actual damage or to post any bond or other security, and/or
to a decree for specific performance of the provisions of
this Agreement.
j) Jurisdiction and Venue. The parties acknowledge that a
substantial portion of negotiations and anticipated
performance and execution of this Agreement occurred or shall
occur in Palm Beach County, Florida, and that, therefore,
without limiting the jurisdiction or venue of any other
federal or state courts, each of the parties irrevocably and
unconditionally (a) agrees that any suit, action or legal
proceeding arising out of or relating to this Agreement may
be brought in the courts of record of the State of Florida in
Palm Beach County or the court of the United States, Southern
District of Florida; (b) consents to the jurisdiction of each
such court in any suit, action or proceeding; (c) waives any
objection which it may have to the laying of venue of any
such suit, action or proceeding in any of such courts; and
(d) agrees that service of any court paper may be effected on
such party by mail, as provided in this Agreement, or in such
other manner as may be provided under applicable laws or
court rules in said state.
k) Remedies Cumulative. Except as otherwise expressly provided
herein, no remedy herein conferred upon any party is intended
to be exclusive of any other remedy, and each and every such
remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or otherwise. No single or
partial exercise by any party of any right, power or remedy
hereunder shall preclude any other or further exercise
thereof.
l) Governing Law. This Agreement and all transactions
contemplated by this Agreement shall be governed by, and
construed and enforced in accordance with,
6
<PAGE> 14
the internal laws of the State of Florida without regard to
principles of conflicts of laws.
m) Preparation of Agreement. This Agreement shall not be
construed more strongly against any party regardless of who
is responsible for its preparation. The parties acknowledge
each contributed and is equally responsible for its
preparation.
n) Entire Agreement. This Agreement represents the entire
understanding and agreement among the parties with respect to
the subject matter hereof, and supersedes all other
negotiations, understandings and representations (if any)
made by and among such parties.
IN WITNESS WHEREOF, the parties have duly set their hands to this Agreement,
effective as of the date stated above.
DALEEN TECHNOLOGIES, INC. EMPLOYEE
/s/ James Daleen /s/ Timothy N. Murray
- -------------------------- ----------------------------
DTI Authorized Signature Employee's Signature
8/9/99 Timothy N. Murray
- -------------------------- ----------------------------
Date Employee's Printed Name
8/9/99
----------------------------
Date
7
<PAGE> 15
SCHEDULE OF SEPARATE WORKS
The following are works that are not assigned by Section 4 of the Invention
Assignment and Confidentiality Agreement, in which Employee has any right,
title or interest, and which were conceived or written either wholly or in part
by Employee, prior to or outside the scope of Employee's employment by DTI.
DESCRIPTION: (If none, enter the word "None")
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -----------------------------------------------------------------------
Indicate any item listed above that has been published, registered as a
copyright, or is or has been the subject of a patent application:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -----------------------------------------------------------------------
Indicate the name of such organization or third party who also has rights in
any of the listed items (such as former employers, partners, etc.):
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -----------------------------------------------------------------------
The foregoing is complete and accurate to the best of Employee's knowledge.
/s/ Timothy N. Murray 8/9/99
- -----------------------------------------------------------
Employee's Signature Date
Timothy N. Murray
- -----------------------------
Employee's Printed Name
8
<PAGE> 16
EXHIBIT B TO EMPLOYMENT AGREEMENT
NON-SOLICITATION AND NON-COMPETE AGREEMENT
THIS NON-SOLICITATION AND NON-COMPETE AGREEMENT ("Agreement") made as of this
9th day of August, 1999, by and between Daleen Technologies, Inc, with its
principal office at 902 Clint Moore Road, Suite 230, Boca Raton, Florida 33487
(hereinafter called "Daleen") and Timothy N. Murray (hereinafter "Employee").
WHEREAS, Employee is accepting employment with Daleen; and
WHEREAS, the parties wish to reflect their agreement as to Employee's
promises regarding Employee's solicitation and competition which have induced
Daleen to employ Employee at Employee's status with Daleen, as well as Daleen's
extension of certain severance benefits to Employee.
NOW, THEREFORE, Employee and Daleen (hereinafter sometimes referred to
collectively as the "parties" and separately as a "party") in consideration of
Employee's employment with Daleen and the covenants hereinafter set forth and
other good and valuable consideration and intending to be legally bound hereby,
agree as follows:
1. Non-solicitation. Employee will not, at any time while
employed by Daleen and for one (1) year after the termination of Employee's
employment with Daleen for any reason whatsoever, directly or indirectly (by
assisting or suggesting to another, or otherwise) solicit otherwise attempt to
induce or accept the initiative of another in such regard, alone or by
combining or conspiring with anyone, any employees, officers, directors,
agents, consultants, representatives, contractors, suppliers, distributors,
customers or other business contacts (collectively, "Business Affiliates") of
Daleen to terminate or modify its position as an employee, officer, director,
agent, consultant, representative, contractor, supplier, distributor, customer
or business contact with Daleen or to compete against Daleen.
2. Non-competition. (a) Employee shall not while employed by
Daleen, and after the termination of said employment for any reason whatsoever
for the time period after such termination described in paragraph (c) below
(the "No-Compete Period"), directly or indirectly, as owner, officer, director,
employee, agent, lender, broker, investor, consultant or representative of any
corporation or as owner of any interest in, or as an employee, agent,
consultant, partner, affiliate or in any other capacity whatsoever or
representative of any other form of business association, sole proprietorship
or partnership, conduct or be related to any business in competition with any
business of Daleen now or in the future, including without limitation, in the
Billing and Customer Care industry (herein referred to as the "Competitive
Business") anywhere within the territories, nor as to certain customers
anywhere in the United States, both listed on the "Territories and Customers"
Exhibit to the Agreement, made a part hereof, including without limitation, the
solicitation of any customers, who were at any time customers of Daleen and in
connection with a business which is competitive with the Competitive Business
except that such competitive activity will be permitted as to business
solicitation of and competition with Daleen
9
<PAGE> 17
as to any entity listed on an Exhibit to this Agreement made a part hereof
identified as a "No-Compete Exception", if any, subject to paragraph (c) below.
(b) In addition to, and not in limitation of the other provisions
hereof or of any other Agreement between Employee and Daleen, Employee shall
not at any time in any manner other than in the ordinary course of good faith
competition only as permitted herein interfere with, disturb, disrupt, decrease
or otherwise jeopardize the business of Daleen or do or permit to be done
anything which may tend to take away or diminish the trade, business or good
will of Daleen or give to any person the benefit or advantage of Company's or
Seller's methods of operation, advertising, publicity, training, business
customers or accounts, or any other information relating or useful to Daleen's
business.
(c) The Non-Compete Period shall increase depending upon the duration
of Employee's employment with Daleen as follows:
i) If Employee has completed ninety (90) days of less of
employment there will be no Non-Compete Period;
ii) If Employee has completed more than ninety (90), but less
than one hundred eighty (180) days of employment, there will
be a six (6) month Non-Compete Period;
iii) If Employee has completed more than one hundred eighty (180)
days of employment the Non-Compete Period will be one (1)
year;
DTI reserves the right to waive the Non-Compete Period at its option
in return for the payment of the severance benefit described in Section 4.
3. Legal Effect. The foregoing covenants of Employee shall be
deemed severable, and the invalidity of any covenant shall not affect the
validity or enforceability of any other covenant. The existence of any claim or
cause of action by Employee against Daleen predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Daleen of these
covenants. Daleen's failure to object to any conduct in violation of this
Agreement shall not be deemed a waiver by Daleen, but Daleen may, if it wishes,
specifically waive any part or all of those covenants to the extent that such
waiver is set forth in writing duly authorized by Daleen's Board of Directors.
Employee acknowledges and confirms that the length of the term and
geographical restrictions contained herein are fair and reasonable and not the
result of overreaching, duress or coercion of any kind. Employee further
acknowledges and confirms that his or her full, uninhibited and faithful
observance of each of the covenants contained in this Agreement will not cause
him or her any undue hardship, financial or otherwise, and that enforcement of
each of the covenants contained in this Agreement will not impair his or her
ability to obtain employment commensurate with his or her abilities and on
terms fully acceptable to him or her or otherwise to obtain income required for
the comfortable support of him or her and his or her family and the
satisfaction of the needs of his or her creditors. Employee acknowledges and
confirms that his or her special knowledge of the business of Daleen is such as
would cause Daleen serious injury
10
<PAGE> 18
and loss if he or she were to use such ability and knowledge to the benefit of
a competitor or were to compete with Daleen.
In the event that any court shall finally hold that the time or
territory or any other provision stated in this Agreement constitutes an
unreasonable restriction upon Employee, Employee hereby expressly agrees that
the provisions of this Agreement shall not be rendered void, but shall apply as
to time and territory or to such other extent as such court may judicially
determine or indicate constitutes a reasonable restriction under the
circumstances involved. Employee hereby agrees that in the event of the
violation by him or her of any of the provisions of this Agreement, Daleen will
be entitled if it so elects, to institute and prosecute proceedings at law or
in equity to obtain damages with respect to such violation or to enforce the
specific performance of this Agreement by Employee or to enjoin Employee from
engaging in any activity in violation hereof without any requirement on the
part of Daleen to post any bond.
In the event Daleen should bring any legal action or other proceeding
for the enforcement of this Agreement, the time for calculating the No-Compete
Period or terms of any other restriction herein shall not include the period of
time commencing with the filing of legal action or other proceeding to enforce
the terms of this Agreement through the date of final judgment or final
resolution, including all appeals, if any, of such legal action or other
proceeding.
4. Severance. In further consideration of the entering into of
this Agreement by Employee, Daleen agrees to entitle Employee to a severance
pay benefit based upon base salary dependent upon the duration of Employee's
employment with Daleen, determined as follows:
a) Ninety days (90) days or less of employment will result in no
severance benefit;
b) Beyond ninety (90) days of employment, the severance benefit
will be equal to the length of the Non-Compete Period.
c) If a Non-Compete Period is applicable and DTI waives the
Non-Compete Period or any portion of it, there shall be no
severance benefit paid for that period waived subject to a
six (6) month minimum severance.
The foregoing severance benefit shall be paid by Daleen in accordance
with DTI's current payroll policies. Employee shall not be entitled to any
severance benefit if terminated by Daleen for "cause" or if Employee
voluntarily resigns from his or her employment with Daleen subject to the
provisions of the Non-Compete period in Section 2(c). As used in this Agreement
determination for "cause" shall be defined as termination of Employee by Daleen
in the event Employee has been convicted of any felony or, in the case of other
crimes, involving moral turpitude or dishonesty, or for any breach by Employee
of any agreement with Daleen or of its employment or business policies
(including without limitation, theft or misuse of company property).
5. Miscellaneous Provisions.
The provisions of this Agreement may not be amended, supplemented,
waived or changed orally, but only by a writing signed by the party as to whom
enforcement of any such
11
<PAGE> 19
amendment, supplement, waiver or modification is sought and making specific
reference to this Agreement. All of the terms and provisions of this Agreement,
whether so expressed or not, shall be binding upon, inure to the benefit of,
and be enforceable by the parties and their respective administrators,
executors, legal representatives, heirs, successors and permitted assigns. The
headings contained in this Agreement are for convenience of reference only, are
not to be considered a part hereof and shall not limit or otherwise affect in
any way the meaning or interpretation of this Agreement. The failure or delay
of any party at any time to require performance by another party of any
provision of this Agreement, even if known, shall not affect the right of such
party to require performance of that provision or to exercise any right, power
or remedy hereunder. Any waiver by any party of any breach of any provision of
this Agreement should not be construed as a waiver of any continuing or
succeeding breach of such provision, a waiver of the provision itself, or a
waiver of any right, power or remedy under this Agreement, No notice to or
demand on any party in any case shall, of itself, entitle such party to any
other or further notice or demand in similar or other circumstances.
The parties acknowledge that a substantial portion of negotiations,
anticipated performance and execution of this Agreement occurred or shall occur
in Palm Beach County, Florida, and that, therefore, without limiting the
jurisdiction or venue of any other federal or state courts, each of the parties
irrevocably and unconditionally (a) agrees that any suit, action or legal
proceeding arising out of or relating to this Agreement may be brought in the
courts of record of the State of Florida in Palm Beach County or the District
Court of the United States, Southern District of Florida; (b) consents to the
jurisdiction of each such court in any suit, action or proceeding; (c) waives
any objection which it may have to the laying of venue of any such suit, action
or proceeding in any of such courts; and (d) agrees that service of any court
paper may be effected on such party by mail, as provided in this Agreement, or
in such other manner as may be provided under applicable laws or court rules in
said state. Except as otherwise expressly provided herein, no remedy herein
conferred upon any party is intended to be exclusive of any other remedy, and
each and every such remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise. No single or partial exercise by any party
of any right, power or remedy hereunder shall preclude any other or further
exercise thereof. This Agreement and all transactions contemplated by this
Agreement shall be governed by, and construed and enforced in accordance with,
the internal laws of the State of Florida without regard to principles of
conflicts of laws. This Agreement shall not be construed more strongly against
any party regardless of who is responsible for its preparation. The parties
acknowledge each contributed and is equally responsible for its preparation.
Any time period provided for herein which shall end on a Saturday, Sunday or
legal holiday shall extend to 5:00 p.m. of the next full business day. This
Agreement represents the entire understanding and agreement amount the parties
with respect to the subject matter hereof, and supersedes all other
negotiations, understandings and representations (if any) made by and among
such parties.
12
<PAGE> 20
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
written above.
Daleen Technologies, Inc.
/s/ Timothy N. Murray /s/ David B. Corey
- --------------------------- -----------------------------
Employee's Signature Its: COO
Timothy N. Murray David B. Corey
- --------------------------- -----------------------------
Printed Name Printed Name
13
<PAGE> 21
NO-COMPETE EXCEPTIONS
Exhibit to Non-Solicitation and Non-Compete Agreement of Timothy N. Murray
NONE.
14
<PAGE> 22
TERRITORIES AND CUSTOMERS
Exhibit to Non-Solicitation and Non-Compete Agreement of Timothy N. Murray.
THE WORLD.
15
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES
Daleen International, Inc., a foreign sales company organized under the laws
of the United States Virgin Islands.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT AND
REPORT ON FINANCIAL STATEMENT SCHEDULE
The Board of Directors
Daleen Technologies, Inc.
The audits referred to in our report dated May 10, 1999 except as to note 2
and the third paragraph of note 9 which are as of June 30, 1999 and the last
paragraph of note 1(m) which is as of August 16, 1999, included the related
financial statement schedule for each of the years in the three-year period
ended December 31, 1998, included in the registration statement. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
We consent to the use of our reports included herein and to the references to
our firm under the headings "Experts" and "Selected Consolidated Financial Data"
in the prospectus.
KPMG LLP
Miami, Florida
August 17, 1999
