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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K
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FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
COMMISSION FILE NUMBER: 0-27491
DALEEN TECHNOLOGIES, INC.
(Exact name of registrant as specified in Its charter)
DELAWARE 65-0944514
(State or other Jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1750 CLINT MOORE ROAD
BOCA RATON, FLORIDA 33487
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (561) 999-8000
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Securities registered pursuant to Section 12(b) of the Act:
None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
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The aggregate market value of the voting stock held by non-affiliates
of the Registrant, based upon the average of the closing bid and ask quotations
for the Common Stock on March 21, 2000 as reported by The Nasdaq National
Market, was approximately $273 million. The shares of Common Stock held by each
officer and director and by each person known to the Registrant who owns 5% or
more of the outstanding Common Stock have been excluded in that such persons may
be deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes. As of March 21, 2000,
Registrant had outstanding 21,477,733 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held June 6, 2000 is incorporated by reference in Part III
of this Form 10-K to the extent stated herein.
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FORWARD-LOOKING STATEMENTS
CERTAIN MATTERS DISCUSSED IN THIS ANNUAL REPORT ON FORM 10-K MAY BE CONSIDERED
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE SECURITIES ACT OF 1933
AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED BY THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. THOSE STATEMENTS INCLUDE STATEMENTS REGARDING THE
INTENT, BELIEF OR CURRENT EXPECTATIONS OF DALEEN TECHNOLOGIES, INC. AND ITS
SUBSIDIARIES AND MEMBERS OF ITS MANAGEMENT AS WELL AS THE ASSUMPTIONS ON WHICH
SUCH STATEMENTS ARE BASED. PROSPECTIVE INVESTORS ARE CAUTIONED THAT ANY SUCH
FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE
RISKS AND UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS
CURRENTLY KNOWN TO MANAGEMENT THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE IN FORWARD-LOOKING STATEMENTS INCLUDE INTEGRATION OF
RECENTLY ACQUIRED BUSINESSES AND ADVERSE DEVELOPMENTS WITH RESPECT TO THE
COMPANY'S OPERATIONS. THESE AND ADDITIONAL IMPORTANT FACTORS TO BE CONSIDERED
ARE SET FORTH UNDER "ITEM 1. BUSINESS - CERTAIN RISK FACTORS AND INVESTMENT
CONSIDERATIONS," "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND IN THE OTHER SECTIONS OF THIS ANNUAL
REPORT ON FORM 10-K. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE
FORWARD-LOOKING STATEMENTS TO REFLECT CHANGED ASSUMPTIONS, THE OCCURRENCE OF
UNANTICIPATED EVENTS OR CHANGES TO FUTURE OPERATING RESULTS.
PART I
ITEM 1. BUSINESS
OVERVIEW
We are a leading provider of eBusiness software solutions for integrated
communications providers, or ICPs. We offer several product lines to our target
markets to meet their needs for customer management and billing, partner
management and service activation. Our products, BillPlex, eCare, SwitchFlow,
Voyager, RequestFlow and PicWare, enable our customers to provide comprehensive,
Internet-enabled billing, provisioning, and customer and partner management for
a wide array of communications services that include local, long distance and
wireless voice, Internet access and other data services, and application
hosting. Our products are designed to enable providers of multiple
communications services to compete more effectively while lowering the total
costs of their strategic eBusiness services. The bundling by communications
providers of multiple service offerings is referred to in the industry as
convergence. Our products' innovative software architectures give service
providers the ability to rapidly and cost-effectively launch convergent service
offerings and provide their customers with a single, unified invoice and a
single point of contact for customer management across all services.
In December 1999, we acquired all of the issued and outstanding capital
shares of Inlogic Software Inc., a Nova Scotia corporation ("Inlogic"). Since
its inception in early 1997, Inlogic developed, maintained and licensed
eBusiness software solutions for customer and partner relationship management,
including Web-enabled customer self-care and electronic bill presentment and
payment (EBPP), as well as business-to-business gateway solutions that support
streamlined workflows and automated processes between trading partners. The
Inlogic acquisition has enabled us to further develop and offer eCare, Voyager,
SwitchFlow, RequestFlow and PicWare in conjunction with BillPlex. eCare is
designed to provide a personalized Internet portal that allows a provider's
customers, partners and suppliers to engage in online purchasing, ordering,
status tracking and other business through the Internet. Voyager, SwitchFlow,
RequestFlow and PicWare are designed to facilitate the transfer and activation
of services.
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:
o traditional voice services, such as local exchange and long
distance;
o wireless services, such as cellular, paging, personal
communication services, or PCS, and satellite communications;
o data services, such as Internet access and digital subscriber
lines;
o video services, such as cable television and pay-per-view
services;
o new voice services, such as voice over internet protocol, or
Internet telephony; and
o 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 a commodity in
this highly competitive market. As customers seek the lowest
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priced communications services, the rate of customer turnover among providers,
or churn, has increased dramatically. As a result, service providers must find
new ways to distinguish themselves from their competitors to win new customers
and retain their existing customers. Service providers are seeking to acquire
new customers by focusing on rapid new service deployment, increased marketing
activities, attractive new rate programs and creative discounting. These service
providers also are trying to attract new customers as well as retain existing
customers by providing superior customer care. In addition, many service
providers increasingly have 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 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, 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. This may
impair its competitiveness and financial performance.
Customer management and billing, partner management and service
activation solutions are among the key components of a service provider's
information systems, because they enable the provider to better manage its
customers and revenues; to dynamically change and grow service offerings,
marketing programs and rate plans; and to automate and streamline processes,
transactions and interactions between trading partners. In today's intensely
competitive communications market, we believe customer and partner management
systems can provide a competitive advantage as service providers attempt to
differentiate themselves by providing superior features such as bundled service
offerings, cross-discounting, Web-enabled and one-call customer service,
automated service activation and a single bill for multiple services.
Many software systems currently in use were created before the
emergence of today's competitive market. Service providers have been forced to
repeatedly modify these legacy systems over time as they have introduced new
offerings, marketing promotions and rate plans in response to intense
competition. As a result, many existing service providers maintain an extremely
complex information systems environment consisting of numerous proprietary
systems. These systems have only 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, were designed to
support a single communications service, and are not Web-enabled. 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 SYSTEM REQUIREMENTS
Over the past decade, a first-generation of third-party customer
management and billing (CM&B) vendors emerged as service providers began to
replace their older software. While several sizable and profitable CM&B vendors
have emerged, we believe the first-generation CM&B systems still have not
delivered the performance and functionality that service providers demand. In
general, first-generation CM&B 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. In
addition, we believe that service providers will move their current business
processes and software systems to an Internet-enabled eBusiness model in order
to attract and retain customers, as well as lower their labor and other
operating costs.
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Customer management and billing, partner management and service
activation 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 solutions that are designed to:
o support multiple, convergent communications services and the
rapid deployment of new services and pricing programs;
o provide Internet-based access and process automation for both
customers and business partners;
o interoperate with other components of the service provider's
information system; and
o enable easy modification and maintenance without a costly
information technology staff.
THE DALEEN SOLUTION
We are a leading provider of next-generation, Internet-enabled customer
management and billing, partner management and service activation software that
can serve as the core of an enterprise solution for integrated communications
providers. Our products, BillPlex, eCare, SwitchFlow, Voyager, RequestFlow and
PicWare, enable our customers to provide comprehensive, Internet-enabled
billing, provisioning, and customer and partner management for a wide array of
communications services that include local, long distance and wireless voice;
Internet access and other data services; and application hosting. Our products
play 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 customer and partner management services. They are designed to enable
service providers to capture the key business benefits of:
INCREASED REVENUE AND MARKET SHARE. BillPlex and eCare have been
designed as next-generation, convergent software solutions to provide billing
and customer care for companies seeking to provide multiple communications
services. Their innovative architectures have the inherent flexibility to enable
the offering of new communications services and marketing programs and to
respond rapidly to dynamic market conditions. BillPlex and eCare enable a
service provider to increase revenue and market share by:
o shortening the time required for a new market entrant to
launch its business or for an existing provider to offer new
promotions and services;
o promoting its products and services and attracting new
customers through an Internet-enabled multimedia catalog, with
online ordering and service activation;
o allowing a provider to immediately activate services when a
subscriber is added to the system;
o enabling a provider to offer targeted marketing programs and
service bundles that are optimized for maximum revenue and
market penetration; and
o generating real-time bills that are accurate and easy to
understand, reducing fraud, disputed charges and uncollected
revenue.
A PRE-CONFIGURED, WHOLE-PRODUCT SOLUTION. Our eBusiness solutions are
complete, Web-enabled customer management and billing, partner management and
service activation solutions, providing a comprehensive suite of functions and
the ability to offer multiple, convergent communications services under a
single, unified invoice and a single, uniform customer interface. In addition,
BillPlex is available in pre-configured market packages, which enable providers
to enter specific markets and rapidly launch customized services with minimal
system implementation costs. We currently offer packages for competitive local
exchange carriers, or CLECs, ICPs, application service providers, or ASPs, and
providers of Internet access and data services. We are developing packages for
other market segments.
IMPROVED CUSTOMER SERVICE AND CUSTOMER RETENTION. BillPlex and eCare
enable 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, and residential customers through 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
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and responsiveness through real-time access to all necessary subscriber account
information. eCare allows subscribers to view and manage their own accounts, add
and change services, view bills and conduct usage analysis, and interact with
their service provider 24 hours per day, seven days per week over the Internet.
ENTERPRISE INTEGRATION AND INTEROPERABILITY. Our products are designed
for seamless integration with other applications in a service provider's
enterprise operations environment. Our industry standards-based, open
application programming interfaces, or APIs, allow our products to interoperate
with other software programs without writing custom interfaces. Our open APIs
lower the cost of installation and allow customers to upgrade our products and
their enterprise applications independently, reducing the lifetime costs of
system operation and maintenance.
FLEXIBILITY, SCALABILITY AND RELIABILITY. Our products 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. Under our pricing model, customers have the ability to purchase
additional licenses and products as needed. In addition, our products' flexible
architectures enable 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. Our products
also enable service providers to streamline and automate business processes,
resulting in increased productivity and lower 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 that integrates with other applications in a
service provider's environment. Additions and modifications to service
offerings, rate plans, and subscribers do not require changes to core BillPlex
software, and our toolkit allows our customers to perform all functions
necessary to adapt, extend, maintain and update their system, providing lower
maintenance costs in comparison with first-generation systems. eCare reduces or
eliminates the need for large call centers staffed with customer service
representatives. Finally, our partner management and service activation
products, Voyager, PicWare, RequestFlow and SwitchFlow, provide automated data
exchange and process integration between software systems and trading partners,
eliminating manual labor costs, errors and time delays in establishing new
services for customers.
STRATEGY
Our goal is to become the leading provider of eBusiness software
solutions to ICPs by:
AGGRESSIVELY TARGETING ICPS. We believe our products are well suited
for the ICP market. BillPlex has been designed from inception as a truly
convergent, rapid time-to-market solution, providing a comprehensive product
solution for customer management and billing that a communications service
provider needs to be competitive. eCare meets their requirements for Web-enabled
product catalogs, electronic bill presentment and customer self-care, and our
partner management and service activation products provide trading partner
integration that is essential for the fast response times and lower operating
costs required in this intensely competitive environment. We believe that our
innovative solutions provide 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 solutions provide 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, Ernst & Young and Unisys, and with providers of
complementary information system components, such as Eftia, MetaSolv, Oracle,
Vertex and Vitria. 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 pricing model is targeted to attract and retain customers through
all phases of their
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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, Canada 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 products provide Web-enabled integration of a comprehensive
enterprise solution, allowing communications service providers to perform
complex, mission-critical functions such as marketing; online purchasing,
ordering and status tracking; subscriber account creation, service provisioning
and management; rating, billing and payment processing; local number
portability; and automated processing of orders for subscribers who are
selecting or changing their long-distance carriers. Our product designs give
service providers the ability to rapidly and cost effectively deploy a
convergent service offering -- including multiple, usage-based services, a
single, unified invoice, trading partner integration and a single point for
customer relationship management. Our flexible, distributed architectures
support the Windows NT and/or Unix operating systems. Our industry-standard open
APIs allow rapid integration with a variety of operational and business support
systems. eCare provides a web interface that allows subscribers to view their
account status and perform other self-care functions at any time over the
Internet. Most of the Inlogic products have been recently released or are still
in development.
BILLING SOLUTIONS. BillPlex is our flagship billing product. It is a
comprehensive customer management and billing solution that is designed to serve
as the core of an enterprise solution for providers of communications and
information services. Its key features include account and service provisioning,
subscriber management, usage processing, billing and payment processing, and
reporting.
BillPlex is available in several market-based packages, which are
specifically configured to meet the requirements of the segments they serve. Our
current market packages, and those under development, are designed to provide a
complete, service-ready rating and billing system that includes:
o 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;
o the ability to easily work with third-party applications, such
as taxation and address validation, for a particular market;
and
o standardized set-up, configuration and testing 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 CM&B 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.
We currently have market packages for the CLEC, ICP, Data Services and
ASP markets. These packages are complete, service-ready CM&B systems that enable
the providers in each segment to bill for the services that are appropriate in
that segment, which may include residential and business local and long distance
services; calling card services; wholesale service offerings; residential and
business dial-up, digital subscriber line, or DSL, and dedicated Internet
access; and web, application and content hosting. We are currently planning to
release a market package for the wireless market some time in 2000.
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ECARE. eCare is an innovative, early stage Web-based product suite that
presents customers, partners and suppliers with an engaging, personalized and
intuitive environment for performing comprehensive and personalized self-care.
eCare establishes a unified, personalized, media-rich portal that enables users
to explore and research products and services; engage in online purchasing,
ordering and status tracking; receive service outage notifications and reports;
resolve service problems; view bills; and perform bill usage analysis. All users
have the ability to conduct business directly and receive immediate interactive
assistance, 24 hours per day, seven days per week, while at all times being
insulated from the complexities of a service provider's operations. eCare
utilizes leading-edge authentication and encryption technologies to secure all
information exchanged. Its key features include business process integration,
flexible electronic bonding, workflow process integration with existing business
support systems (BSSs) and operational support systems (OSSs) through an open
OSS mediation layer, a scalable distributed architecture, and the ability to
deliver personalized multimedia content.
SERVICE ACTIVATION SOLUTIONS. SwitchFlow is our flagship service
activation product. It performs automated flow-through service activation and
network provisioning for voice and data services. Key features of SwitchFlow
include the ability to rapidly define the services and features in use by the
service provider, spanning multiple network devices and network domains; the
ability to interface with design and assign and order manage systems to automate
network and service provisioning, and to perform the dynamic and intelligent
translation from the business services to underlying network technology
commands; a full audit trail of decomposition, vendor commands and device
responses for tracing and debugging; full recoverability in case of system
failure; support for the definition and management of the inventory of
provisionable network devices; modular plug-and-play service drivers for each of
the specific classes of vendor devices, incorporating interface, protocol and
authentication requirements; definable network access windows; and rapid
integration with existing order management systems and new network devices
through external system interfaces.
PARTNER MANAGEMENT SOLUTIONS. We offer three complementary products
that are foundational elements for a comprehensive, automated and integrated
approach to partner management. These products are Voyager, RequestFlow and
PicWare.
Voyager is a local number portability (LNP) provisioning solution which
allows service providers to offer local telephone service to customers without
requiring them to change their existing telephone number. Voyager allows
competitive service providers to manage multiple ranges of telephone numbers
under one single order and to keep track of non-contiguous ranges that fall in
the same order, resulting in better organization of orders, easier
reconciliation and fewer conflict resolution calls to other service providers.
It also allows them to quickly correct any discrepancies between their databases
and the Number Portability Administration Center (NPAC), as well as view, manage
and acknowledge NPAC notifications, including events pertaining to changes in
subscription versions, conflicts, and service provider and network data changes.
It maintains subscription histories, as well as provides numerous functions that
ease the administration requirements for LNP, including the initiation of audits
through the NPAC of information contained in other service providers' systems,
the ability to manage area code splits, automatic update of network data at the
beginning and expiration of the permissive dialing period, and query and report
management tools.
RequestFlow is a complete interconnection solution for Local Service
Requests (LSRs) and Access Service Requests (ASRs), automating the composition
and exchange of LSRs and ASRs between service providers. Key features of
RequestFlow include: service request management for composing, revising and
managing requests for services to be fulfilled by trading partners; the ability
to rapidly define and manage the processing, validation and transmission
characteristics of individual trading partners; transmission management
services, which allow competitive service providers to view and manage all
inbound and outbound transmission activity with trading partners, and to
initiate action in the event of transmission or processing failures; mapping and
transformation of data to the specific format required for a given trading
partner, such as EDI, fax, flat file, CORBA or another format; and rapid
integration with existing order management, local number portability or other
provisioning systems.
PicWare is a Primary Inter-Exchange Carrier/Customer Account Record
Exchange (PIC/CARE) solution, which provides access providers with fully
automated processing of orders for subscribers who are selecting or changing
their long-distance carrier. Key features of PicWare include: a feature-rich
user interface which supports order entry of transactions, customer account
management, billing telephone number management, switch reconciliation
management, transmission management, trading partner profile maintenance and
system static table maintenance, supporting all core industry PIC/CARE
processes; the ability to communicate with multiple trading partners through
configurable transmission, routing and processing rules for inbound and outbound
transmissions; the ability to process and validate transactions according to
industry rules, automatically taking the appropriate provisioning action and
preparing the necessary response for the trading partner; interaction with
switch provisioning systems in order to perform automated
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provisioning; rapid and seamless integration with existing order management,
local number portability or other provisioning systems; and a suite of standard
reports for service level agreements (SLAs), customer winbacks and billable
usage, as well as the ability to create ad-hoc reports using a standard
reporting tool.
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 our products and market-based packages. We work with customers
to establish business models and processes that utilize our products 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 online
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 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 ours, such as QMS address validation
software; and tools that support development and reporting, like Crystal Reports
or Borland's development toolkit software.
TECHNOLOGY
Our products were developed using open architectures with industry
standards-based application programming interfaces, or APIs, which enable them
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:
o increased system price/performance, reliability, scalability
and manageability;
o a modular environment in which applications can be integrated
rapidly and upgraded independently;
o simplified, lower-cost application development and maintenance
efforts;
o the ability to easily extend and adapt their functionality to
a customer's operational support system, or OSS, and business
support system, or BSS; and
o interoperability with a large number of applications and
systems.
BillPlex's 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
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 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.
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ENTERPRISE APPLICATION FRAMEWORK. This three-layer framework consists
of business process objects, business rule objects, and business data objects.
Business process objects encapsulate processes such as service order creation.
Business rule objects enforce rules required by customers and the underlying
data model. 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, this application can be a customer
service representative using BillPlex's graphical user interface client, an
eCare user browsing for self-care, a sales agent using eCare or a customer
relationship management application to sell services to customers or a network
administrator using an operational support system application to manage network
inventory.
eCare's performance and scalability are achieved through a
multi-threaded, multi-process distributed object architecture, designed with
advanced Web and transaction server technologies. It uses an open,
cross-platform architecture that reaches external gateways to communicate with
partners and suppliers to complete provisioning requests. eCare customer
applications are supported by the following two architectural layers:
ECARE APPLICATIONS FRAMEWORK. This framework supports the eCare
applications utilizing state-of-the-art Internet and e-commerce technologies,
including: XML, intelligent Java beans and supporting servlets and applets, and
platform independent Internet scripting languages such as Java Server Pages. The
multi-threading and multi-process architecture provides the capability to
support the high traffic volumes typically associated with Internet portals.
EBUSINESS FRAMEWORK. The eBusiness Framework facilitates the seamless
integration of electronic business applications into operational environments,
supporting both legacy and emerging technologies. This CORBA-based framework
enables the service provider to graphically define the complex business
processes that are typically required by advanced e-commerce activities
including, but not limited to, self-service ordering and customer
self-registration. It provides the flexibility required to natively support
additional business applications such as ERP, order management systems (OMS),
billing and customer care, OSSs, or to support these interface requirements via
pre-packaged enterprise application interface (EAI) vendor plug-ins or
connectors.
SwitchFlow offers a scalable, distributed architecture based upon a
persistent queue-based transaction processing technology, which allows the
recovery of all transactions in the event of a system failure. Its application
integration framework and standards-based CORBA application program interfaces
allow SwitchFlow to be rapidly integrated with existing order management and
provisioning systems.
Voyager is based upon a highly configurable, event-based paradigm. Its
persistent queue-based transaction processing technology enables Voyager to
ensure transaction integrity and distribution to NPACs and other integrated
systems. Voyager is built according to a multi-threaded, multi-process,
distributed topology that allows multiple service providers to access multiple
NPAC interfaces and accommodates increasing volumes of ported numbers.
Scalability is provided through configurable and tunable factors, and redundancy
is supported with full recovery ability through process auto-recycling and
automatic failover. System watchdogs monitor overall system health and are
capable of handling planned and unplanned NPAC outages.
RequestFlow is built on a flexible and scalable multi-tier architecture
that provides a generic framework for managing different business objects such
as LSRs, ASRs and 911 transactions, with plug-in modules that contain the
specific business functions and business rules required for individual trading
partners. Its applications integration framework and standards-based CORBA
application programming interfaces allow it to be seamlessly integrated with
existing order management, local number portability, billing and other
provisioning systems.
PicWare contains a multi-tier architecture with configurable and
tunable factors that enable service providers to maximize performance and
throughput and handle ever-increasing transaction volumes. The heart of the
architecture is the Provisioning Subsystem, a multi-threaded processing engine
which oversees all system interactions with trading partners
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and external systems, managing the operation of all PIC/CARE provisioning
processes in real-time. It utilizes an applications integration framework and
standards-based CORBA application programming interfaces that allow it to be
seamlessly integrated with existing order management, local number portability
and other provisioning systems.
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 our products' design for multiple, convergent
services, as well as scalability and flexibility. We also believe our customers
value our comprehensive design, rapid installation time, ease and speed of
downstream changes, pre-integration with other enterprise applications and low
operating costs.
As of December 31, 1999, we had 40 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: AT&T Canada Corporation; CAIS Internet, Inc.; DSL.net, Inc.;
Gabriel Communications; Network Access Solutions Corp.; PaeTec Corporation; and
TriVergent Communications, Inc.
For the twelve months ended December 31, 1999, no customer 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 and our existing customers who want to expand their
customer-support functions. 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 products. 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:
o supporting our strategic marketing alliances;
o conducting seminars, trade shows and special events;
o creating and placing advertisements;
o creating direct mail and direct response programs;
o conducting ongoing public and press relations programs;
o creating, managing and maintaining our web site;
o participating in industry consortia and partnership programs
with key influencers; and
o establishing and maintaining close relationships with
recognized industry analysts.
STRATEGIC MARKETING ALLIANCES
We have developed strategic marketing alliances that expand the
coverage of our direct sales organization and provide implementation and
customization services for our products. These alliances enable us to focus our
resources on product
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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:
o Our business alliances are primarily with systems integrators
that can sell, implement and customize our products, and
include: BusinessEdge; CAP Gemini America, LLC; Ernst & Young,
LLP; 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.
o 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, MetaSolv, Vertex, Inc., and Vitria Technologies, 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, eCare and
related products and services. We have invested heavily in software development
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, $6.7 million for 1998 and $9.3 million
in 1999. As of February 29, 2000, approximately 170 employees were engaged in
research and development activities.
COMPETITION
The markets in which we compete are relatively new, intensely
competitive, highly fragmented and rapidly changing. We expect this competition
to increase in the future. Our products compete on the basis of performance,
scalability, extensibility, ease of integration and cost of ownership. The
principal competitive factors in our market include responsiveness to the needs
of our customers, product features, timeliness of implementation, quality and
reliability of products, price, project management capability and technical
expertise. We believe that our product features and our pricing strategy offer
competitive advantages.
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:
o Kenan Systems Corporation, a wholly-owned subsidiary of Lucent
Technologies Inc.;
o Saville Systems, PLC , a business unit of ADC
Telecommunications, Inc.;
o Portal Software, Inc.;
o LHS Group, Inc.;
o Cygent, Inc.; and
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o DSET 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 functionality such as those provided by our products
in-house rather than buying 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 customer management and
billing, partner management and service activation software markets, 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 and marketing resources, and
greater name recognition than we do.
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 six
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 place the source code for our products into escrow. These 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 our products.
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EMPLOYEES
As of February 29, 2000, we had 391 full-time employees, of whom 93
were in product implementation and support, 67 in sales and marketing, 170 in
research and product development and 59 in administration. We have never had a
work stoppage and none of our employees are represented under collective
bargaining agreements. We consider our relations with our employees to be good.
CERTAIN RISK FACTORS AND INVESTMENT CONSIDERATIONS.
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 $15.3 million for the year
ended December 31, 1999, $12.2 million in 1998, and $8.0 million in 1997. As of
December 31, 1999, we had an accumulated deficit of approximately $38.0 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 product
development, sales and marketing, and administrative expenses. Additionally, as
result of our recent acquisition of Inlogic, we will amortize goodwill and
other intangibles in the amount of $14.6 million per year, over a four year
period. 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 December 31, 1999, we had signed
contracts with only 40 customers and, of these, only 19 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. In connection with our
acquisition of Inlogic, we are engaged in additional development activities on
Inlogic's early stage suite of products. Prior to the acquisition, Inlogic did
not generate significant revenue from its products. Changing our business as
well as integrating Inlogic's operations into ours 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:
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/bullet/ variations in demand for our products and services;
/bullet/ our ability to develop and attain market acceptance of
enhancements to BillPlex, eCare and the other products of
Inlogic and any new products and services;
/bullet/ the pace of product implementation and the timing of customer
acceptance;
/bullet/ changes in our pricing policies or the pricing policies of our
competitors; and
/bullet/ the mix of sales channels through which our products and
services are sold.
The timing of booked transactions is difficult to predict. 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. Further, our customer
contract bookings tend to occur predominantly in the third month of a quarter.
As a result, our quarterly results of operations are difficult to predict and
the deferral of even a small number of contract bookings or delays associated
with delivery of products and services in a particular quarter could
significantly reduce our revenue and net income, 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 ACQUISITION OF INLOGIC AND POTENTIAL ACQUISITIONS OF OTHER 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.
We acquired Inlogic in December 1999 and 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.
We will be required to assimilate the acquired businesses and may be unable to
maintain uniform standards, controls, procedures and policies if we fail to do
so effectively. Integration of the Inlogic business may also disrupt our
operations and divert management's attention from the day-to-day operation of
our business. In addition, the Inlogic products may not function as designed, or
we could fail to integrate the Inlogic products with ours, all of 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.
OUR BUSINESS IS HIGHLY DEPENDENT ON A LIMITED NUMBER OF CUSTOMERS.
All of our revenue is currently derived from a 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
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revenue in 1998, and no customers accounted for greater than 10% of 40 of our
total revenue in 1999. Most of our major customers typically pay us up-front
license fees and they typically do not have any obligation to pay additional
licenses fees until their gross billings exceed a predetermined amount. There
can be no assurance these customers gross billings will increase to levels that
would obligate them to pay additional license fees or continue with our
maintenance programs.
WE FACE SIGNIFICANT COMPETITION FROM COMPANIES THAT MAY HAVE GREATER RESOURCES
THAN WE DO.
The internet enabled communications billing and customer care systems
business is very competitive. We expect competition to increase in the future.
Our principal competitors include other internet enabled billing and customer
care system providers, operation support system providers, systems integrators
and service bureaus, and the internal information technology departments of
larger communications companies, which may elect to develop functionalities
similar to 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:
/bullet/ longer operating histories;
/bullet/ larger customer bases;
/bullet/ substantially greater financial, technical, sales and
marketing resources;
/bullet/ a lead in expanding their business internationally;
/bullet/ greater name recognition; and
/bullet/ 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 internal
growth and our acquisitions. We continue to increase the scope of our
operations, have grown our employee headcount substantially, and 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 and to $20.7 million in 1999. Continued
growth or new acquisitions could place a significant strain on our management
systems and resources. 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 workforce.
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OUR LENGTHY SALES CYCLE MAKES IT DIFFICULT TO ANTICIPATE THE TIMING OF SALES,
AND REVENUE MAY VARY FROM PERIOD TO PERIOD.
The sales cycle associated with the purchase of our products is
lengthy, and the time between the initial proposal to a prospective customer and
the signing of a license agreement can be as long as one year. Our products
involve a commitment of capital which may be significant to the customer, with
attendant delays frequently associated with large capital expenditures and
implementation procedures within an organization. These delays may reduce our
revenue in a particular period without a corresponding reduction in our costs,
which could hurt our results of operations for that period.
THE SKILLED EMPLOYEES THAT WE NEED MAY BE DIFFICULT AND EXPENSIVE TO HIRE AND
RETAIN IN TODAY'S TIGHT LABOR MARKET.
Our success depends in large part on our ability to attract, train,
motivate and retain highly-skilled information technology professionals,
software programmers and 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 qualified
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 and
implementation of our products. To achieve our goals, 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, we may
acquire a company that changes the dynamics of our relationship with our
strategic alliance partners. 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 affect 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.
Prior to our acquisition of Inlogic, substantially all of our revenue
has been attributable to BillPlex. Although we have expanded the number of
products we offer as a result of the Inlogic acquisition, we expect to continue
to be heavily dependent on BillPlex as the Inlogic products are in the early
stages of their release and are under going further development and integration
with BillPlex. 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 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
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to other options such as service bureaus, which would hurt our business. In
addition, our customers' ability to generate revenues or otherwise obtain
capital could adversely impact on their ability to, purchase additional products
or renew maintenance and support agreements with us. Also, the company will at
times provide financing arrangements for customers and their ability to make
payments to us may impact our collections on previously booked revenue.
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 devote significant resources to refining and expanding
our software products, developing additional pre-configured market-based
packages and investigating complimentary products and technologies. As with the
acquisition of Inlogic, we are willing to make strategic acquisitions of
companies with complimentary products. We believe our products currently meet
customer requirements regarding scalability and throughput, and we are working
to improve our system performance. However, the requirements of our customers
may change and 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.
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 and employee and third-party agreements to protect our
proprietary rights. These steps may not be adequate, and we do not know if they
will prevent misappropriation of our intellectual property,
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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.
Third parties could claim that our current or future products or
technology infringe their proprietary rights. An infringement claim against us
could be costly even if the claim is invalid, and could distract our management
from the operation of our business. Furthermore, a judgment against us could
require us to pay substantial damages and could also include an injunction or
other court order that could prevent us from selling our product offering. If we
faced a claim relating to proprietary technology or information, we might seek
to license technology or information, or develop our own, but we might not be
able to do so. 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.
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.
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:
/bullet/ dependence on sales efforts of third party distributors;
/bullet/ difficulties in localizing products and supporting customers
in foreign countries;
/bullet/ greater difficulty in collecting accounts receivable; and
/bullet/ legal uncertainties inherent in transnational operations such
as export and import regulations, taxation issues, tariffs and
trade barriers.
-19-
<PAGE>
ITEM 2. PROPERTIES.
Our headquarters are located in a three-story professional office
building in Boca Raton where we recently subleased approximately 46,500 square
feet. We occupy this space under a sublease which expires on May 30, 2008. Also,
our technical facilities are located in 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 also lease approximately 32,000 square feet of office space in
Atlanta, Georgia. The Atlanta lease expires on August 31, 2004. We lease
approximately 23,000 square feet in two separate offices in Toronto. The leases
for these offices expire in December 2002, December 2004, December 2005 and one
is on a month-to-month basis.
We also have United States sales offices in the metropolitan areas of
Boston, Chicago, Dallas, Denver, Orlando, Philadelphia, Tampa and Washington,
D.D. and our European sales office in leased office space in London, England.
ITEM 3. LEGAL PROCEEDINGS.
Daleen is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
As of December 31, 1999, the names, ages and current positions of
Daleen's executive officers will be listed below in accordance with General
Instruction G(3) of Form 10-K and Instruction 3 of Item 401(b) of Regulation
S-K. Unless otherwise stated, each executive officer has held their position for
at least the last five years. All officers are elected for one year terms or
until their respective successors are chosen. There are no family relationships
among the executive officers nor is there any agreement or understanding between
any officer and any other person pursuant to which the officer was elected.
JAMES DALEEN, 40, our founder, has served as chairman of the board and
chief executive officer of Daleen 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, 40, has served as president and chief operating officer
of Daleen since February 1998 and as a director since June 1998. Before joining
Daleen, 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, 49, has served as chief financial officer of Daleen
since November 1994 and was a director from December 1995 until December 1999.
Mr. Schell was also elected secretary and treasurer of Daleen 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,
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<PAGE>
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, 39, joined Daleen in June 1999 as executive vice
president of corporate development. Mr. Wagman was appointed secretary of Daleen
in June 1999. Before joining Daleen, 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. Before
that, Mr. Wagman served as vice president, treasurer and secretary for
International Data Matrix, Inc., a bar code and machine vision technology
company, from July 1988 until August 1995.
MOHAMMAD AAMIR, 37, joined Daleen as an executive vice president in
December 1999 and a director in January 2000 following our acquisition of
Inlogic. Before joining Daleen, Mr. Aamir was the chief executive officer of
Inlogic Software since he founded the company in February 1997. Mr. Aamir was a
managing partner of Objectel from February 1995 until February 1997, now a part
of Architel Corporation. From January 1993 until February 1995, Mr. Aamir was a
manager, service provisioning of Unitel Communications.
MANUEL J. M. ANDRADE, 45, has served as vice president of international
business development and managing director of Caribbean and Latin America
regions since September 7, 1999. Before joining Daleen, Mr. Andrade served in
various capacities from August 1993 to August 1999 for Westell Technologies,
Inc., a telecommunications equipment company, last serving as vice president and
general manager for international and channel sales.
PHILLIP R. DAVIS, 33, joined us as vice president of human resources in
June 1999. Before joining Daleen, he served as the senior vice president of
human resources for HomeBanc Mortgage Corporation from December 1997 to June
1999. Before 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, 31, has served as chief operating officer - Canada
since December 1999 and was vice president of development from December 1996
until December 1999. 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, 38, has served as vice president of global sales
of Daleen since June 1998. Before 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, 34, has served as vice president of operations of
Daleen since January 1999 and was promoted to chief operating officer - United
States in March 2000. Before joining us, Mr. Moss was employed by Carolina PCS,
a wireless communications company, as executive vice president of operations
from April 1998 to December 1998. From June 1995 to January 1998, Mr. Moss was
vice president of information technology for Powertel, Inc., a wireless
communications company, and from January 1994 to June 1995, director of
information systems and customer support for InterCel, a cellular communications
company.
JOHN Z. YIN, 41, joined Daleen as director of technology in April 1997,
was promoted to vice president of technology in June 1997 and was promoted to
chief technology officer in March 2000. Before joining Daleen, 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.
-21-
<PAGE>
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.
GEORGE TIMMES, 52, joined Daleen as vice president of product
management & marketing in December 1999 upon our acquisition of Inlogic. Before
joining Daleen, Mr. Timmes was the senior vice president of worldwide sales and
Marketing of Inlogic from August 1999 until December 1999. Mr. Timmes was a
senior vice president of worldwide sales of DSET Corporation from August 1998
until August 1999. Mr. Timmes is a Co-Founder and executive vice president of
Worldwide Field Operations of ObjectSwitch, now called Softwire Corporation from
April 1996 until April 1997. Mr. Timmes was a senior director of sales for the
Worldwide Telecommunication Industry for Oracle from January 1994 through May
1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
Daleen Technologies, Inc.'s Common Stock has been traded on the Nasdaq
National Market under the symbol "DALN" since October 1, 1999. Prior to that
time there was no established market for the shares. The price per share
reflected in the table below represents the range of low and high closing sale
prices for Daleen's Common Stock as reported by the Nasdaq Stock Market for the
quarter since October 1, 1999, the commencement of trading:
QUARTER ENDED HIGH PRICE LOW PRICE
------------------ ---------- ---------
June 30, 1999 N/A N/A
September 30, 1999 N/A N/A
December 31, 1999 $ 55.00 $ 13.50
The closing sale price of Daleen's Common Stock as reported by the
Nasdaq National Market on March 21, 2000 was $20.50.
The number of shareholders of record of Daleen's Common Stock as of
March 21, 2000, was approximately 255.
Daleen has never paid cash dividends on its capital stock. The Company
currently intends to retain any earnings for use in the business and does not
anticipate paying any cash dividends in the foreseeable future.
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<PAGE>
ISSUANCE OF COMMON STOCK IN ACQUISITION OF INLOGIC
Effective December 16, 1999, we acquired all of the issued and
outstanding capital shares of Inlogic Software Inc., a Nova Scotia corporation
("Inlogic"). We acquired the capital shares of Inlogic in exchange for an
aggregate of 2,160,239 exchangeable shares (the "Exchangeable Shares") and
57,435 shares of our Common Stock. The Exchangeable Shares were issued by our
wholly owned subsidiary, Daleen Canada Corporation, but are exchangeable at any
time into shares of our Common Stock on a one-for-one basis. As of March 21,
2000, an aggregate of 2,145,471 Exchangeable Shares had been converted into
shares of our Common Stock. We also issued options to acquire an aggregate of
167,361 shares of our Common Stock in exchange for all of the outstanding
options to acquire capital shares of Inlogic. The terms of the transaction are
set forth in a Share Purchase Agreement as well as certain other transaction
documents which are filed as Exhibits to our Current Report on Form 8-K filed on
December 30, 1999.
USE OF PROCEEDS OF INITIAL PUBLIC OFFERING
The effective date of the Company's first registration statement, filed
on Form S-1 under the Securities Act of 1933 (No. 333-82487) relating to our
initial public offering of its Common Stock, was September 30, 1999. A total of
4,100,000 shares of Company's Common Stock were sold at a price of $12.00 per
share to an underwriting syndicate led by Robertson Stephens, Donaldson, Lufkin
& Jenrette Securities Corporation, and Hambrecht & Quist (now Chase H&Q). The
offering commenced on September 30, 1999 and closed on October 6, 1999. The
initial public offering resulted in gross proceeds to us of $49.2 million, $3.4
million of which was applied toward the underwriting discount. An additional
615,000 shares of Common stock were sold on our behalf of and the selling
stockholders as part of the over-allotment option exercised by the underwriters
in the same offering. Gross proceeds to us in the over-allotment option were
$5.2 million. Our expenses related to the offering totaled approximately $1.6
million. The aggregate net proceeds to the Company were $49.0 million. From the
time of receipt through December 31, 1999, the proceeds were applied toward
purchases of property and equipment of $2.3 million. The remaining proceeds are
being used as working capital and are included within cash, cash equivalents and
short-term investments.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data set forth below should be read in
conjunction with the financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in Item 7 of this Form 10-K. The following selected
financial data concerning Daleen as of and for each of the years in
the five year period ended December 31, 1999 are derived from the audited
consolidated financial statements of Daleen. The selected financial data is
qualified in its entirety by the more detailed information and financial
statements, including the notes thereto, included elsewhere in this report. The
audited consolidated financial statements of Daleen as of December 31, 1999 and
1998 and for each of the years in the three year period ended December 31, 1999,
and the report of KPMG LLP thereon, are included elsewhere in this report.
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------
1995 1996 1997 1998 1999
------ ------ ------ -------- -------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenue:
License fees $ 0 0 0 1,879 12,404
Professional services and other 4,324 2,550 156 3,352 8,321
------ ------ ------ -------- -------
Total revenue 4,324 2,550 156 5,231 20,725
------ ------ ------ -------- -------
Cost of revenue:
License fees 0 0 0 3 64
Professional services and other 2,437 1,396 293 4,239 7,721
------ ------ ------ -------- -------
Total cost of revenue 2,437 1,396 293 4,242 7,785
------ ------ ------ -------- -------
Gross profit 1,887 1,154 (137) 989 12,940
Operating expenses:
Sales and marketing 359 450 962 2,435 4,342
Research and development 0 1,067 1,669 6,653 9,348
Purchased in process research
and development 0 0 0 0 6,347
General and administrative 1,767 2,446 3,704 4,824 9,572
------ ------ ------ -------- -------
Total operating expenses 2,126 3,963 6,335 13,912 29,609
------ ------ ------ -------- -------
Operating loss (239) (2,809) (6,472) (12,923) (16,669)
Nonoperating (expense) income: (154) 1,283 (1,512) 754 1,329
------ ------ ------ -------- -------
Net loss (393) (1,526) (7,984) (12,169) (15,340)
------ ------ ------ -------- -------
Accretion of preferred stock 0 0 0 (65) (122)
------ ------ ------ -------- -------
Net loss applicable to common stockholders $ (393) (1,526) (7,984) (12,234) (15,462)
====== ====== ====== ======== =======
Net loss applicable to common stockholders
per share--basic and diluted $(0.21) (0.81) (3.48) (3.78) (1.06)
====== ====== ====== ======== =======
Weighted average shares--basic and diluted 1,879 1,879 2,295 3,240 14,548
====== ====== ====== ======== =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------
1995 1996 1997 1998 1999
------ ------ ------ -------- -------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents 105 813 5,030 723 52,852
Total Assets 833 2,065 8,516 11,025 133,881
Notes payable 271 3,200 1,618 0 0
Current portion of long-term debt and
obligations under capital leases 151 146 0 0 0
Long-term debt and obligations under
capital leases, less current portion 204 77 0 0 0
Stockholders' (deficit) equity (556) (1,914) (1,946) (13,897) 119,457
</TABLE>
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING CONSOLIDATED
FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO INCLUDED ELSEWHERE THEREIN.
OVERVIEW
We are a leading provider of eBusiness software solutions for
integrated communications providers, or ICPs. 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.
In December, 1999, we acquired all of the issued and outstanding
capital shares of Inlogic Software Inc., a Nova Scotia corporation ("Inlogic").
Inlogic provides eBusiness software solutions for customer and partner
relationship management, including Web-enabled customer self-care and electronic
bill presentment and payment (EBPP), as well as business-to-business gateway
solutions that support streamlined workflows and automated processes between
trading partners.
The acquisition resulted in a one-time charge of $6.3 million related
to the write-off of purchased in-process research and development. This related
to the development of numerous Inlogic products which provide web interface and
other operational support system products. The Inlogic products are in the early
stages of their development and are undergoing further development and
integration with BillPlex. The value assigned to in-process research and
development was determined based on management's estimates of the percentage of
completion of the underlying development effort, resulting net cash flows from
Inlogic produts and the discounting of such cash flows back to their present
value.
In projecting net cash flows resulting from Inlogic products, the
Company estimates revenues, cost of sales, research and development, sales and
marketing and general and administrative expenses for each product. Economic
rents for the use of other contributory assets were then deducted from the net
operating profit. These include charges for workforce (2.9%), working capital
(4.2%) and fixed assets (0.3%). These estimates were based on the following
assumptions:
/arrow/ The estimated revenues were projected to increase by an average annual
growth rate of 90%. Additionally, the estimates used show revenue
growth slowing to 50% and 25% in 2005 and 2006. Projections of revenue
growth were based on management's estimates of market size and growth,
supported by independent market data for the communication software and
services industry and the nature and timing of the development of
product enhancements and new products by the Company and its
competitors.
/arrow/ The estimated gross margins were expected to climb from 74 percent to a
peak of 80 percent in 2003 and 2004, with margins declining in 2005 and
2006.
/arrow/ The estimated total operating expenses were expected to increase as a
percentage of revenue from 121% in 2000 to 50% in 2004 as the Company
achieves economies of scale.
The projected net cash flows for Inlogic products were discounted using
a 25% weighted average cost of capital ("WACC"). The 25% rate was based upon the
weighted average cost of equity and long-term debt. The WACC calculation
produces the average required rate of return of an investment in an operating
enterprise. In determining the appropriate WACC, the Company used a higher WACC
for the in-process technology (35%) due to the risks inherent in the development
process.
No assurances can be given that the underlying assumptions used to
estimate projected net cash flows will transpire as estimated. Operating results
are subject to uncertain market events and risks which are beyond the Company's
control, such as trends in technology, government regulations, market size and
growth, and product introductions or other actions by competitors. For these
reasons actual results may vary from the projected results.
We derive our revenue primarily from license sales of our software
products 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 40 communications service providers through December 31, 1999, 28
of which were signed in 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 generally based on the size of the
authorized system, such as numbers of users and computer processors, revenue
billed through the system, or other factors. We receive license fees from our
customers upon initial license, and we expect to receive additional license fees
as our customers grow and add additional processors or users, or increase their
revenue billed through the system. We also derive license fee revenue from
existing customers who purchase additional products from us to increase the
functionality of their current system. We have also entered into arrangements
with service bureau providers and application service providers that will
utilize our products to service their customers. We expect to receive recurring
license and maintenance fees from these activities in the future.
The nature of each licensing arrangement determines how we recognize
revenue:
/bullet/ 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.
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<PAGE>
/bullet/ 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.
/bullet/ 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 if we have an obligation under the contract to be
available to assist the third-party integrator throughout the
implementation process.
Since late 1998, we have been investing heavily in our professional
services organization, including opening our Atlanta office, the acquisition of
Inlogic 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 sales of product licenses and expanding our business. We anticipate
the profit margin from our professional services organization to continue to
improve in future quarters as the number of our product sales and
implementations increase and more customers subscribe to our maintenance and
support. We recognize revenue from professional services associated with core
product 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, as we enter new geographical
markets and offer additional products.
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 December 31, 1999. To enhance our product offering and
market position, we believe that it will be essential for us to continue to make
significant investments in research and development. 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 U.S. and state
income tax purposes in excess of $34.5 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.
RESULTS OF OPERATIONS
The following table presents statement of operations data expressed as
a percentage of total revenue for the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1997 1998 1999
-------- ------ -----
<S> <C> <C> <C>
AS A PERCENTAGE OF TOTAL REVENUES
Revenues, net:
License fees 0.0% 35.9% 59.9
Professional Services and Other 100.0 64.1 40.1
-------- ------ -----
Total Revenues 100.0 100.0 100.0
Cost of Revenues:
License fees 0.0 0.1 0.3
Professional Services and Other 187.8 81.0 37.3
-------- ------ -----
Total Cost of Revenues 187.8 81.1 37.6
-------- ------ -----
Gross Profit (87.8) 18.9 62.4
Operating Expenses:
Sales and marketing 617.4 46.6 21.0
Research and development 1,069.8 127.2 45.1
Purchased in process research and development 0.0 0.0 30.6
General and administrative 2,374.5 92.2 46.2
-------- ------ -----
Total Operating Expenses 4,061.7 266.0 142.9
-------- ------ -----
Operating loss (4,149.5) (247.1) (80.5)
Nonoperating (expense) income (968.9) 14.4 6.4
-------- ------ -----
Net Loss (5,118.4)% (232.7)% (74.1)
======== ====== =====
</TABLE>
-25-
<PAGE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
REVENUE
Total revenue increased $15.5 million to $20.7 million in 1999 from
$5.2 million in 1998. Revenue increases from both license fees and professional
services accounted for this increase due to a significant increase in the number
of contracts and related implementations of our software products compared to
1998.
LICENSE FEES. License fees increased $10.5 million to $12.4 million in
1999 from $1.9 million in 1998. License fees increased to 59.9% of total revenue
in 1999 from 35.9% in 1998. These increases were due to the increase in the
number of contracts in 1999 compared to 1998, as well as the result of our
software-based business model strategy, in which license fees will account for
an increasing percentage of our total revenue.
PROFESSIONAL SERVICES AND OTHER. Professional services and other
revenue increased $5.0 million to $8.3 million in 1999 from $3.4 million in
1998. This increase was due to increased implementation services directly
related to increased license fees for our software products. Professional
services and other revenue decreased to 40.1% of total revenue in 1999 from
64.1% in 1998.
COST OF REVENUE
Total cost of revenue increased $3.5 million to $7.8 million in 1999
from $4.2 million in 1998. Total cost of revenue as a percentage of total
revenue decreased to 37.6% in 1999 from 81.1% in 1998.
COST OF LICENSE FEES. Cost of license fees includes direct cost of
labor, benefits and packaging material for fulfillment and shipment of our
software products and related documentation, which is typically an insignificant
component of total cost of license fees. Cost of license fees increased to
$64,000 in 1999 from $7,000 in 1998 due to the increased number of software
contracts in 1999.
COST OF PROFESSIONAL SERVICES AND OTHER. Cost of professional services
and other 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 $3.5 million to $7.7 million in 1999
from $4.2 million in 1998. These costs increased as we deployed more resources
to support the greater number of implementations that we performed during 1999.
Cost of professional services and other decreased to 92.8% of professional
services and other revenue in 1999 compared to 126.5% in 1998.
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 $1.9
million, or 78.3%, to $4.3 million in 1999 from $2.4 million in 1998. 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 21.0% in 1999 from 46.6% in 1998.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of salaries and benefits for software developers, management and
quality assurance personnel and related corporate overhead costs. Our research
and development expenses increased $2.7 million, or 40.5%, to $9.3 million in
1999 from $6.7 million for 1998. The increase in these expenses was due to the
significantly
-26-
<PAGE>
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 45.1% in 1999 from
127.2% in 1998.
PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT. The purchase of Inlogic
during December 1999 resulted in a one-time charge of $6.3 million related to
the write-off of purchased in-process research and development expense for
Inlogic.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries and benefits for our executive, finance, administrative,
human resources and information systems personnel, and related corporate
overhead costs. Our general and administrative expenses increased $4.7 million,
or 98.4%, to $9.6 million in 1999 from $4.8 million for 1998. 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 46.2% in 1999 from 92.2% in 1998.
NONOPERATING INCOME (EXPENSE)
Nonoperating income increased $575,000, or 76.3%, to $1.3 million in
1999 from $754,000 for 1998. The increase of nonoperating income for 1999 over
1998 was primarily attributable to the investment earnings of the proceeds of
our initial public offering received during 1999.
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
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<PAGE>
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.
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.
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<PAGE>
SEASONALITY
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. Factors that can contribute to
variations include delays in completing contract negotiations with large
contracts without an offset by a corresponding reduction in fixed costs. Also,
quarterly fluctuations can occur as a result of delays in completing contracts
with customers where 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.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
On October 6, 1999 we sold 4.1 million shares of our common stock in an
initial public offering ("IPO"). We received proceeds of approximately $44.2
million after payment of underwriter discounts and commissions and payment of
IPO expenses. On October 28, 1999 the underwriters of the IPO exercised their
option to purchase 431,000 additional shares of our common stock from which we
received proceeds of $4.8 million.
On December 16, 1999, we acquired Inlogic. All of Inlogic's shares and
options were exchanged for 2.385 million newly issued shares and options of
Daleen, valued at approximately $67.5 million.
Since inception, we have funded our operations primarily through sales
of equity securities and, to a lesser degree, through notes payable. Through
December 31, 1999, we have raised approximately $92.1 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 December 31,
1999. From 1996 through December 31, 1999, we have invested $7 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 December 31, 1999 consisted principally of cash and cash
equivalents and securities available for sale of $62.4 million.
Net cash used in operating activities was $9.0 million for the year
ended December 31, 1999, $11.2 million in 1998, and $5.9 million in 1997. The
principal use of cash for all periods was to fund our losses from operations.
Net cash used in investing activities was $7.1 million in 1999, $6.0
million in 1998, and $2.9 million in 1997.
Net cash provided by financing activities was $68.0 million for the
year ended December 31, 1999, $12.9 million in 1998, and $13.0 million in 1997.
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 our initial public offering in
October, 1999, 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, the financing will be obtainable on
terms favorable to us or that any additional financing would not be dilutive.
Year 2000 Compliance
We have reviewed our internal support systems and, to the extent
possible, its vendor systems to confirm Year 2000 compliance and have either
confirmed that these systems are Year 2000 compliant or obtained Year 2000
compliance statements from the respective vendor. Any failure on our part or our
suppliers or clients to be Year 2000 compliant, however, could result in a
material adverse effect on our business, financial condition and result of
operations. Subsequent to December 31, 1999, we have has not experienced any
Year 2000 issues internally or with our customers or vendors.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). 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
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<PAGE>
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,
2001. The Company expects this pronouncement to have no material impact on its
financial statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our financial instruments consist of cash that is invested in
institutional money market accounts. At December 31, 1999, the carrying value of
our financial instruments approximated their fair values based on current market
prices and rates. We do not use derivative financial instruments in our
operations or investments and do not have significant operations subject to
fluctuations in commodities prices or foreign currency exchange rates.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Our consolidated financial statements are submitted as a separate
section of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
In accordance with General Instruction G(3) of the Form 10-K, the
information relating to the directors of Daleen, including directors who are
executive officers of Daleen, is set forth in Daleen's Proxy Statement for the
2000 Annual Meeting of Shareholders (the "Proxy Statement") and is incorporated
herein by reference. Pursuant to Instruction 3 of Item 401(b) of Regulation S-K
and General Instruction G(3) of Form 10-K, information relating to the executive
officers of Daleen is set forth under the caption "Executive Officers of the
Registrant" in Part I, Item 4A of this report.
Compliance with Section 16(a) of the Securities Exchange Act of 1934:
Section 16(a) of the Securities Exchange of 1934, as amended, and regulations of
the Securities and Exchange Commission thereunder require Daleen's directors and
executive officers and any persons who own more than 10% of Daleen's Common
Stock, as well as certain affiliates of such persons, to file reports with the
Securities and Exchange Commission and the National Association of Securities
Dealers, Inc. with respect to their ownership of Daleen's Common Stock.
Directors, executive officers and persons owning more than 10%
-31-
<PAGE>
of Daleen's Common Stock are required by Securities and Exchange Commission
regulations to furnish Daleen with copies of all Section 16(a) reports they
file. Based solely on its review of the copies of such reports received by it
and written representations that no other reports were required of those
persons, Daleen believes that during fiscal 1999, all filing requirements
applicable to its directors and executive officers were complied with in a
timely manner. Daleen is not aware of any other persons other than directors and
executive officers and their affiliates who own more than 10% of Daleen's Common
Stock.
ITEM 11. EXECUTIVE COMPENSATION.
In accordance with General Instruction G(3) of Form 10-K, the
information relating to executive compensation is set forth in the Proxy
Statement and is incorporated herein by reference; provided, such incorporation
by reference shall not be deemed to include or incorporate by reference the
information referred to in Item 402 (a)(8) of Regulation S-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
In accordance with General Instruction G(3) of Form 10-K, the
information relating to security ownership by certain persons is set forth in
the Proxy Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In accordance with General Instruction G(3) of Form 10-K, the
information relating to certain relationships and related transactions is set
forth under the caption "Related Party Transactions" in the Proxy Statement and
is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
1. Financial Statements
The financial statements are submitted as a separate section
of this report, beginning on page 1.
2. Financial Statement Schedule
Schedule II Valuation and Qualifying Accounts.
(b) Reports on Form 8-K. The Company filed the following reports
on Form 8-K during the quarter ended December 31, 1999.
1. Form 8-K dated December 30, 1999, with respect to
Daleen's acquisition of Inlogic Software Inc.
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<PAGE>
(c) Exhibits. The following exhibits are filed as part of, or are
incorporated by reference into, this report on Form 10-K:
EXHIBIT LIST
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 Share Purchase Agreement dated December 16, 1999, between the
Registrant, Daleen Canada Corporation, Inlogic Software Inc., the
shareholders of Inlogic Software Inc., and Atevent.com Inc.
(Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K
(File No. 333-82487) filed on December 30, 1999).
3.1+ Certificate of Incorporation of Daleen Technologies, Inc.
(Incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-1 (File No. 333-82487) filed on
September 30, 1999).
3.2+ Bylaws of Daleen Technologies, Inc. (Incorporated by reference to
Exhibit 3.2 to the Company's Registration Statement on Form S-1 (File
No. 333-82487) filed on September 30, 1999). (Incorporated by
reference to Exhibit 3.2 to the Company's Registration Statement on
Form S-1 (File No. 333-82487) filed on September 30, 1999).
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.
(Incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-1 (File No. 333-82487) filed on
September 30, 1999).
4.2+ Specimen stock certificate (Incorporated by reference to Exhibit 4.2
to the Company's Registration Statement on Form S-1 (File No.
333-82487) filed on September 30, 1999).
10.1+ Employment Agreement, dated December 1, 1994, between James Daleen and
Daleen Technologies, Inc. (Incorporated by reference to Exhibit 10.1
to the Company's Registration Statement on Form S-1 (File No.
333-82487) filed on September 30, 1999).
10.2+ Amendment to Employment Agreement, dated September 5, 1997, between
James Daleen and Daleen Technologies, Inc. (Incorporated by reference
to Exhibit 10.2 to the Company's Registration Statement on Form S-1
(File No. 333-82487) filed on September 30, 1999).
10.3+ Third Amendment to the Employment Agreement, effective March 1, 1999,
between James Daleen and Daleen Technologies, Inc. (Incorporated by
reference to Exhibit 10.3 to the Company's Registration Statement on
Form S-1 (File No. 333-82487) filed on September 30, 1999).
10.4+ Employment Agreement, dated, January 31, 1998, between David B. Corey
and Daleen Technologies, Inc. (Incorporated by reference to Exhibit
10.4 to the Company's Registration Statement on Form S-1 (File No.
333-82487) filed on September 30, 1999).
10.5+ Employment Agreement, dated November 15, 1994, between Richard A.
Schell and Daleen Technologies, Inc. (Incorporated by reference to
Exhibit 10.5 to the Company's Registration Statement on Form S-1 (File
No. 333-82487) filed on September 30, 1999).
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<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.6+ Amendment to Employment Agreement, dated January 31, 1997, between
Richard A. Schell and Daleen Technologies, Inc. (Incorporated by
reference to Exhibit 10.6 to the Company's Registration Statement on
Form S-1 (File No. 333-82487) filed on September 30, 1999).
10.7+ Second Amendment to Employment Agreement, dated September 5, 1997,
between Richard A. Schell and Daleen Technologies, Inc. (Incorporated
by reference to Exhibit 10.7 to the Company's Registration Statement
on Form S-1 (File No. 333-82487) filed on September 30, 1999).
10.8+ Third Amendment to Employment Agreement, effective March 1, 1999,
between Richard A. Schell and Daleen Technologies, Inc. (Incorporated
by reference to Exhibit 10.8 to the Company's Registration Statement
on Form S-1 (File No. 333-82487) filed on September 30, 1999).
10.9+ Employment Agreement, dated April 28, 1999, between Stephen M. Wagman
and Daleen Technologies, Inc. (Incorporated by reference to Exhibit
10.9 to the Company's Registration Statement on Form S-1 (File No.
333-82487) filed on September 30, 1999).
10.10+ Form of Indemnification Agreement (Incorporated by reference to
Exhibit 10.10 to the Company's Registration Statement on Form S-1
(File No. 333-82487) filed on September 30, 1999).
10.11+ Daleen Technologies, Inc. Amended and Restated Stock Incentive Plan
(Incorporated by reference to Exhibit 10.11 to the Company's
Registration Statement on Form S-1 (File No. 333-82487) filed on
September 30, 1999).
10.12+ Daleen Technologies, Inc. 1998 Incentive Stock Option Plan
(Incorporated by reference to Exhibit 10.12 to the Company's
Registration Statement on Form S-1 (File No. 333-82487) filed on
September 30, 1999).
10.13+ Daleen Technologies, Inc. 1997 Incentive Stock Option Plan
(Incorporated by reference to Exhibit 10.13 to the Company's
Registration Statement on Form S-1 (File No. 333-82487) filed on
September 30, 1999).
10.14+ Daleen Technologies, Inc. 1995 Incentive Stock Option Plan
(Incorporated by reference to Exhibit 10.14 to the Company's
Registration Statement on Form S-1 (File No. 333-82487) filed on
September 30, 1999).
10.15+ Daleen Technologies, Inc. 1998 Employee Non-Qualified Stock Option
Plan (Incorporated by reference to Exhibit 10.15 to the Company's
Registration Statement on Form S-1 (File No. 333-82487) filed on
September 30, 1999).
10.16+ Daleen Technologies, Inc. 1996 Employee Non-Qualified Stock Option
Plan (Incorporated by reference to Exhibit 10.16 to the Company's
Registration Statement on Form S-1 (File No. 333-82487) filed on
September 30, 1999).
10.17+ Daleen Technologies, Inc. 1994 Employee Non-Qualified Stock Option
Plan (Incorporated by reference to Exhibit 10.17 to the Company's
Registration Statement on Form S-1 (File No. 333-82487) filed on
September 30, 1999).
10.18+ Lease Agreement, dated August 4, 1992, by Innovative Selective
Software, Inc., and Crow-Childress-Donner, Limited (Incorporated by
reference to Exhibit 10.18 to the Company's Registration Statement on
Form S-1 (File No. 333-82487) filed on September 30, 1999).
-34-
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
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
(Incorporated by reference to Exhibit 10.19 to the Company's
Registration Statement on Form S-1 (File No. 333-82487) filed on
September 30, 1999).
10.20+ Lease Agreement, dated August 27, 1998, by Daleen Technologies, Inc.
and Regent Holding Corporation (Incorporated by reference to Exhibit
10.20 to the Company's Registration Statement on Form S-1 (File No.
333-82487) filed on September 30, 1999).
10.21+ First Amendment to Lease, dated December 2, 1998, between Daleen
Technologies, Inc. and Regent Holding Corporation (Incorporated by
reference to Exhibit 10.21 to the Company's Registration Statement on
Form S-1 (File No. 333-82487) filed on September 30, 1999).
10.22+ Second Amendment to Lease, dated January 16, 1996, between Daleen
Technologies, Inc. and Regent Holding Corporation (Incorporated by
reference to Exhibit 10.22 to the Company's Registration Statement on
Form S-1 (File No. 333-82487) filed on September 30, 1999).
10.24+ Sublease Agreement, dated August 2, 1999, between W.R. Grace & Co. and
Daleen Technologies, Inc. (Incorporated by reference to Exhibit 10.24
to the Company's Registration Statement on Form S-1 (File No.
333-82487) filed on September 30, 1999).
10.25+ Employment Agreement, dated April 7, 1997, between John Z. Yin and
Daleen Technologies, Inc. (Incorporated by reference to Exhibit 10.25
to the Company's Registration Statement on Form S-1 (File No.
333-82487) filed on September 30, 1999).
10.26+ Employment Agreement, dated April 7, 1997, between Frank Dickinson and
Daleen Technologies, Inc. (Incorporated by reference to Exhibit 10.26
to the Company's Registration Statement on Form S-1 (File No.
333-82487) filed on September 30, 1999).
10.27+ Employment Agreement, dated July 22, 1998, between David McTarnaghan
and Daleen Technologies, Inc. (Incorporated by reference to Exhibit
10.27 to the Company's Registration Statement on Form S-1 (File No.
333-82487) filed on September 30, 1999).
10.28+ Employment Agreement, dated December 15, 1998, between Timothy C. Moss
and Daleen Technologies, Inc. (Incorporated by reference to Exhibit
10.28 to the Company's Registration Statement on Form S-1 (File No.
333-82487) filed on September 30, 1999).
10.29 Employment Agreement, dated September 7, 1999, between Manuel J.M.
Andrade and Daleen Technologies, Inc. (Incorporated by reference to
Exhibit 10.30 to the Company's Registration Statement on Form S-1
(File No. 333-82487) filed on September 30, 1999).
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<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.30 Employment Agreement, effective as of December 16, 1999 between
Mohammad Aamir and Inlogic Software, Inc.
10.31 Employment Agreement, effective as of December 16, 1999 between George
Timmes and Inlogic Software, Inc.
10.32 Indemnity Escrow Agreement dated December 16, 1999, between the
Registrant, Daleen Canada Corporation, Inlogic Software Inc., the
shareholders of Inlogic Software Inc., and Montreal Trust Company of
Canada, as escrow agent (Incorporated by reference to Exhibit 10.1 to
the Company's Form 8-K (File No. 333-82487) filed on December 30,
1999).
10.33 Employee/Shareholder Escrow Agreement dated December 16, 1999, between
the Registrant, Daleen Canada Corporation, Inlogic Software Inc., the
employee shareholders of Inlogic Software Inc., and Montreal Trust
Company of Canada, as escrow agent (Incorporated by reference to
Exhibit 10.2 to the Company's Form 8-K (File No. 333-82487) filed on
December 30, 1999).
10.34 Support Agreement dated December 16, 1999, between the Registrant,
Daleen Canada Corporation, Daleen Callco Corporation, and the
shareholders of Inlogic Software Inc. (Incorporated by reference to
Exhibit 10.3 to the Company's Form 8-K (File No. 333-82487) filed on
December 30, 1999).
10.35 Exchange Trust Agreement dated December 16, 1999, between the
Registrant, Daleen Canada Corporation, Daleen Callco Corporation, the
shareholders of Inlogic Software Inc., and Montreal Trust Company of
Canada, as trustee (Incorporated by reference to Exhibit 10.4 to the
Company's Form 8-K (File No. 333-82487) filed on December 30, 1999).
10.36 Registration Rights Agreement dated December 16, 1999, between the
Registrant and the shareholders of Inlogic Software Inc. (Incorporated
by reference to Exhibit 10.5 to the Company's Form 8-K (File No.
333-82487) filed on December 30, 1999).
10.37 Daleen Technologies, Inc. Amended & Restated 1999 Stock Incentive Plan
21.1 Subsidiaries.
23.1 Independent Auditors' Consent.
27.1 Financial Data Schedule (for SEC use only).
- ------------------
+ Previously filed.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 30 day of March,
2000.
Daleen Technologies, Inc.
By: /s/ JAMES DALEEN
-------------------------------------------------
James Daleen
Chairman of the Board and Chief
Executive Officer (Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ JAMES DALEEN Chairman of the Board and Chief March 30, 2000
- ------------------------- Executive Officer (Principal
James Daleen Executive Officer
/s/ DAVID B. COREY President, Chief Operating March 30, 2000
- ------------------------- Officer and Director
David B. Corey
/s/ RICHARD A. SCHELL Chief Financial Officer March 30, 2000
- ------------------------- (Principal Financial and
Richard A. Schell Accounting Officer)
/s/ PAUL G. CATAFORD Director March 30, 2000
- -------------------------
Paul G. Cataford
/s/ NEIL E. COX Director March 30, 2000
- -------------------------
Neil E. Cox
/s/ DANIEL J. FOREMAN Director March 30, 2000
- -------------------------
Daniel J. Foreman
/s/ STEPHEN J. GETSY Director March 30, 2000
- -------------------------
Stephen J. Getsy
/s/ OFER NEMIROVSKY Director March 30, 2000
- -------------------------
Ofer Nemirovsky
/s/ WILLIAM A. ROPER, JR. Director March 30, 2000
- -------------------------
William A. Roper, Jr.
/s/ MOHAMMAD AAMIR Director March 30, 2000
- -------------------------
Mohammad Aamir
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<PAGE>
TABLE OF CONTENTS
PAGE
----
Independent Auditors' Report .............................................. 1
Consolidated Balance Sheets as of December 31, 1998 and 1999 .............. 2
Consolidated Statements of Operations for each of the years in
the three-year period ended December 31, 1999 .......................... 3
Consolidated Statements of Redeemable Preferred Stock and
Stockholders' (Deficit) Equity for each of the years in the
three-year period ended December 31, 1999............................... 4-5
Consolidated Statements of Cash Flows for each of the years in
the three-year period ended December 31, 1999 .......................... 6
Notes to Consolidated Financial Statements ................................ 7
Valuation and Qualifying Accounts for each of the years in
the three-year period ended December 31, 1999 .......................... 27
<PAGE>
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 Subsidiaries as of December 31, 1998 and 1999, and the
related consolidated statements of operations, redeemable preferred stock and
stockholders' (deficit) equity and cash flows for each of the years in the
three-year period ended December 31, 1999. In connection with our audits of the
consolidated financial statements, we have also audited the financial statement
schedule for each of the years in the three-year period ended December 31, 1999,
in item 14(a)2 of the Company's 1999 Annual Report on Form 10-K. 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 Subsidiaries as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1999, in conformity with generally accepted accounting
principles. Also, in our opinion, the related 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.
/s/ KPMG LLP
Fort Lauderdale, Florida
January 24, 2000
1
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share and per share data)
December 31, 1998 and 1999
<TABLE>
<CAPTION>
ASSETS 1998 1999
-------- -------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 723 52,852
Restricted cash -- 124
Securities available for sale 5,753 9,385
Accounts receivable, less allowance for doubtful accounts of $9 at
December 31, 1998 and $707 at December 31, 1999 1,202 3,673
Costs in excess of billings 503 3,514
Unbilled revenue -- 136
Other current assets 176 941
-------- -------
Total current assets 8,357 70,625
Notes receivable -- 159
Property and equipment, net 2,516 4,845
Goodwill, net of accumulated amortization of $581 -- 55,211
Other intangible asset, net of accumulated amortization of $26 -- 2,474
Other assets 152 567
-------- -------
Total assets $ 11,025 133,881
======== =======
LIABILITIES, REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Accounts payable $ 459 1,099
Accrued payroll and other accrued expenses 2,237 12,240
Billings in excess of costs 429 769
Other current liabilities -- 316
-------- -------
Total current liabilities 3,125 14,424
-------- -------
Redeemable preferred stock:
Mandatorily redeemable convertible Series A Preferred Stock - 3,000,000 shares authorized,
issued and outstanding ($7,500 liquidation value) as of December 31, 1998; none authorized,
issued and outstanding as of December 31, 1999 7,500 --
Mandatorily redeemable convertible Series D and D-1 Preferred Stock - 4,908,379 shares
authorized, issued and outstanding at December 31, 1998 ($15,000 liquidation value);
none authorized, issued and outstanding as of December 31, 1999 14,297 --
Mandatorily redeemable convertible Series E Preferred Stock -
1,496,615 authorized; none issued and outstanding at December 31, 1998 and none
authorized, issued and outstanding as of December 31, 1999 -- --
Commitments and contingencies
Stockholders' (deficit) equity:
Series C Convertible Preferred stock - $.01 par value. Authorized 1,222,222 shares;
1,213,584 shares issued and outstanding as of December 31, 1998 ($4.50 per share
liquidation value); none authorized, issued and outstanding as of December 31, 1999 5,301 --
Preferred stock - $.01 par value. Authorized 10,000,000 shares; none issued or outstanding -- --
Common stock - $.01 par value. Authorized 70,000,000 shares; issued and outstanding
3,240,020 shares at December 31, 1998 and 21,408,246 shares at December 31, 1999 32 214
Stockholders notes receivable -- (202)
Deferred stock compensation -- (3,031)
Additional paid-in capital 3,278 160,446
Accumulated deficit (22,508) (37,970)
-------- -------
Total stockholders' (deficit) equity (13,897) 119,457
-------- -------
Total liabilities, redeemable preferred stock and stockholders' (deficit) equity $ 11,025 133,881
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1997 1998 1999
--------- --------- --------
<S> <C> <C> <C>
Revenue:
License fees $ -- 1,879 12,404
Professional services and other 156 3,352 8,321
--------- --------- --------
Total revenue 156 5,231 20,725
--------- --------- --------
Cost of revenue:
License fees -- 3 64
Professional services and other 293 4,239 7,721
--------- --------- --------
Total cost of revenue 293 4,242 7,785
--------- --------- --------
Gross profit (137) 989 12,940
Operating expenses:
Sales and marketing 962 2,435 4,342
Research and development 1,669 6,653 9,348
Purchased in process research and development -- -- 6,347
General and administrative 3,704 4,824 9,572
--------- --------- --------
Total operating expenses 6,335 13,912 29,609
--------- --------- --------
Operating loss (6,472) (12,923) (16,669)
--------- --------- --------
Nonoperating (expense) income:
Interest (expense) income, net (1,570) 249 961
Other income 58 505 368
--------- --------- --------
Total nonoperating (expense) income (1,512) 754 1,329
--------- --------- --------
Net loss (7,984) (12,169) (15,340)
Accretion of preferred stock -- (65) (122)
--------- --------- --------
Net loss applicable to common stockholders $ (7,984) (12,234) (15,462)
========= ========= ========
Net loss per share -
basic and diluted $ (3.48) (3.78) (1.06)
========= ========= ========
Weighted average shares - basic and diluted 2,295 3,240 14,548
========= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Redeemable Preferred Stock
and Stockholders' (Deficit) Equity
(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, 1996 -- $ -- -- $ -- -- $ -- $ --
Warrants issued on bridge loan -- -- -- -- -- -- --
Warrants issued as part of
inducement on bridge loan -- -- -- -- -- -- --
Exercise of bridge loan warrants -- -- -- -- -- -- --
Stock issued for convertible deb -- -- -- -- -- -- --
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
related to Series C issuance -- -- -- -- -- -- --
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
Deferred stock compensation -- -- -- -- -- -- --
Non-cash stock compensation
expense -- -- -- -- -- -- --
Issuance of preferred stock -
Series E, net -- -- -- -- 1,496,615 13,404 13,404
Accretion of preferred stock -- -- -- 119 -- 3 122
Exercise of stock options and
warrants -- -- -- -- -- -- --
Payment of stockholder note
receivable -- -- -- -- -- -- --
Issuance of common stock for
initial public offering, net of -- -- -- -- -- -- --
expenses
Conversion of mandatorily
redeemable preferred stock (3,000,000) (7,500) (4,908,379) (14,416) (1,496,615) (13,407) (35,323)
issuance of IPO
Acquisition of Inlogic Software, Inc.
plus expenses -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- --
---------- ----------- ---------- ----------- ---------- ----------- -----------
Balance, December 31, 1999 -- $ -- -- $ -- -- $ -- $ --
========== =========== ========== =========== ========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
SERIES C
PREFERRED STOCK COMMON STOCK
---------------------- -------------------- STOCKHOLDERS DEFERRED ADDITIONAL
NUMBER NUMBER PAR NOTES STOCK PAID-IN ACCUMULATED
OF SHARES AMOUNT OF SHARES VALUE RECEIVABLE COMPENSATION CAPITAL DEFICIT TOTAL
--------- ---------- ---------- ------- ------ --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- -- 1,879,153 $ 19 -- -- $ 357 $(2,290) $(1,914)
-- -- -- -- -- -- 120 -- 120
-- -- -- -- -- -- 375 -- 375
-- -- 619,080 6 -- -- 613 -- 619
-- -- 688,264 7 -- -- 1,714 -- 1,721
-- -- -- -- -- -- -- -- --
1,150,493 5,092 -- -- -- -- -- -- 5,092
-- -- -- -- -- -- 25 -- 25
-- -- 23,490 -- -- -- -- -- --
-- -- -- -- -- -- -- (7,984) (7,984)
--------- ---------- ---------- ------- ------ --------- --------- ------- -------
1,150,493 5,092 3,209,987 32 -- -- 3,204 (10,274) (1,946)
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- (65) (65)
63,091 279 -- -- -- -- -- -- 279
-- (70) 21,600 -- -- -- 70 -- --
-- -- -- -- -- -- (4) -- (4)
-- -- 8,433 -- -- -- 8 -- 8
-- -- -- -- -- -- -- (12,169) (12,169)
--------- ---------- ---------- ------- ------ --------- --------- ------- -------
1,213,584 5,301 3,240,020 32 -- -- 3,278 (22,508) (13,897)
-- -- -- -- (3,110) 3,110 -- --
-- -- -- -- -- 79 -- -- 79
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- (122) (122)
-- -- 800,574 8 (574) -- 1,817 -- 1,251
-- -- -- -- 372 -- -- -- 372
-- -- 4,531,400 46 -- -- 48,940 -- 48,986
(1,213,584) (5,301) 10,618,578 106 -- -- 40,517 -- 35,322
-- -- 2,217,674 22 -- -- 62,784 -- 62,806
-- -- -- -- -- -- -- (15,340) (15,340)
--------- ---------- ---------- ------- ------ --------- --------- ------- -------
-- -- 21,408,246 $ 214 $ (202) $ (3,031) $ 160,446 (37,970) 119,457
========= ========== ========== ======= ====== ========= ========= ======= =======
</TABLE>
5
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1997 1998 1999
--------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (7,984) (12,169) (15,340)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 352 918 2,198
Stock compensation 26 -- 79
Amortization of financing costs and warrants issued on bridge loan 413 -- --
Warrants issued as inducement for bridge loan 375 -- --
Bad debt expense 167 247 435
Interest income on shareholder loans -- -- (139)
Purchased in-process research and development -- -- 6,347
Changes in assets and liabilities:
Restricted cash 36 -- (124)
Accounts receivable 1 (1,431) (2,315)
Costs in excess of billings -- (503) (3,147)
Other current assets (193) 53 (25)
Other assets (2) (63) (204)
Notes receivable -- -- (159)
Accounts payable 161 166 (194)
Accrued payroll and other accrued expenses 627 1,332 2,934
Billing in excess of costs -- 429 390
Other current liabilities 103 (147) 256
--------- -------- --------
Net cash used in operating activities (5,918) (11,168) (9,008)
--------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of notes payable 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 --
Proceeds from sale of mandatorily redeemable convertible
preferred stock - Series D and D-1, net -- 14,232 --
Proceeds from sale of preferred stock - Series E, net -- -- 13,404
Proceeds from exercise of stock options and bridge warrants 619 8 1,825
Proceeds from initial public offering -- -- 48,986
Principal payments on notes payable and capital lease obligations (1,347) (1,618) --
Issuance of notes receivable - shareholders -- -- (435)
Repayment of notes receivable -- -- 372
Acquisition of cash from Inlogic -- -- 3,874
Redemption of bridge warrants -- (4) --
--------- -------- --------
Net cash provided by financing activities 13,024 12,897 68,026
--------- -------- --------
Cash flows from investing activities:
Purchase of securities available for sale (1,770) (48,697) (53,750)
Sales and maturities of securities available for sale -- 44,715 50,117
Investment in joint venture 30 -- --
Capital expenditures (1,113) (2,054) (3,507)
--------- -------- --------
Net cash used in investing activities (2,853) (6,036) (7,140)
--------- -------- --------
Effect of exchange rates on cash and cash equivalents -- -- 251
--------- -------- --------
Net increase (decrease) in cash and cash equivalents 4,253 (4,307) 52,129
Cash and cash equivalents at beginning of year 777 5,030 723
--------- -------- --------
Cash and cash equivalents at end of year $ 5,030 723 52,852
========= ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 640 142 1
========= ======== ========
Non-cash investing and financing activities (in thousands):
Notes payable and accrued interest converted to common stock $ 1,721 -- --
========= ======== ========
Issuance of common stock and stock options for acquisition of Inlogic
Software, Inc. $ -- -- 65,319
========= ======== ========
Accrued acquisition cost $ -- -- 2,210
========= ======== ========
Deferred compensation $ -- -- 3,110
========= ======== ========
Preferred stock converted to common stock upon initial public offering $ -- -- 35,201
========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1999
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BUSINESS
Daleen Technologies, Inc. (the "Company") is a leading provider of
eBusiness software solutions for integrated communications
providers. The Company provides several products to its target
markets, the most important of which are BillPlex and eCare. The
Company's products are designed to enable providers of multiple
communications services, such as voice, data, internet access,
video and application hosting to perform account and service
provisioning, subscriber care and management, rating, billing and
payment processing.
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, 1999.
In December 1999, the Company completed its acquisition of a
wholly owned subsidiary, Inlogic Software, Inc. ("Inlogic") a Nova
Scotia corporation. See note 2 for description of this acquisition
and nature of business.
(b) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts and
operations of the Company and its wholly owned subsidiaries. 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 excess of
costs," whereas revenue recognized in excess of amounts billed are
classified as "Costs in
7 (Continued)
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1999
excess of billings" in the accompanying consolidated balance
sheets.
In 1997, the American Institute of Certified Public Accountants
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. An arrangement fee is generally not presumed to be fixed
or determinable if payment of a significant portion of the
licensing fee is not due until after expiration of the license or
more than 12 months after delivery. Revenue related to
arrangements containing extended payment terms where the fees are
not considered fixed and determinable is deferred until payments
are due.
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 is recognized as services
are performed.
For license fees 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 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"). 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
8 (Continued)
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1999
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 the Company's results of operations.
(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) NOTES RECEIVABLE
Notes receivable are recorded at cost, less the related allowance
for impaired notes receivable. Management, considering current
information and events regarding the borrowers' ability to repay
their obligations, considers a note to be impaired when it is
probable that the Company will be unable to collect all amounts
due according to the contractual terms of the note agreement. When
a note is considered to be impaired, the amount of the impairment
is measured based on the present value of expected future cash
flows discounted at the note's effective interest rate. Notes
receivable at December 31, 1999 are not considered to be impaired.
(f) SECURITIES AVAILABLE FOR SALE
Securities available for sale are recorded at fair value. 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.
(g) 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.
(h) 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 are insignificant and,
9 (Continued)
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1999
as a result, the Company has not capitalized any software
development costs.
(i) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE
DISPOSED OF
Pursuant to Statement of Financial Accounting Standards No. 121
("SFAS No. 121"), ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS AND FOR 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. There are no
impaired long-lived assets at December 31, 1999.
(j) INCOME TAXES
The Company uses the asset and liability method of accounting for
income taxes. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates
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 as a change in expense in the period that
includes the enactment date.
(k) 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 loss and pro forma net loss 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.
10 (Continued)
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1999
(l) 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, restricted cash, accounts receivable, securities
available for sale 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.
(m) 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.
(n) GOODWILL AND OTHER INTANGIBLE ASSET
Goodwill represents the excess of the cost to acquire Inlogic
over the fair value of the net tangible assets, other
intangible and purchased in-process research and development
acquired (see note 2). Goodwill is being amortized on a
straight-line basis over 4 years - the expected period to be
benefited.
Other intangible represents the fair value of the employee work
force and is also being amortized over 4 years.
The Company assesses the recoverability of these intangible assets
by determining whether the amortization of the goodwill and other
intangible asset balances over their remaining lives can be
recovered through undiscounted future operating cash flows of the
entity acquired over the remaining amortization period. The
Company's carrying value of goodwill and other intangible assets
would be reduced by the estimated shortfall of discounted cash
flows. To date, no such reductions in goodwill and other
intangible assets have been recorded.
(o) BASIC AND DILUTED NET LOSS PER SHARE
Basic and diluted net loss per share was computed by dividing net
loss applicable to common stockholders by the weighted-average
number of shares of common stock outstanding for each period
presented. Potentially dilutive securities were not considered for
each of the years in the three-year period ended December 31, 1999
since their effect would be antidilutive. Net loss applicable to
common stockholders differs from net loss in the years ended
December 31, 1998 and 1999 due to accretion on the preferred
stock.
11 (Continued)
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1999
(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,
1999.
12 (Continued)
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1999
(q) FOREIGN CURRENCY TRANSLATION
The functional currency of the Company's foreign subsidiary is the
respective local currency. The translation of the foreign currency
into U.S. dollars is performed for balance sheet accounts using
the current exchange rate in effect at the balance sheet date and
for revenue and expense accounts using average rates prevailing
during the year. The adjustment resulting from the translation of
foreign currency financial statements for the year ended December
31, 1999 was immaterial and was recorded in the consolidated
statement of operations. The Company had no foreign operations for
the years ended December 31, 1997 and 1998.
The Company enters into transactions based on the Company's local
currency which results in limited foreign currency risk. The
Company does not utilize hedging instruments.
(r) SEGMENT INFORMATION
Effective January 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 131, DISCLOSURE 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.
(s) START-UP COSTS
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. The Company has no start-up costs
capitalized at December 31, 1999.
13 (Continued)
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1999
(2) ACQUISITION
On December 16, 1999 ("the acquisition date"), the Company acquired the
accounts of Inlogic in a purchase business combination. This transaction
expanded Daleen's customer management and billing product through the
addition of Web-enabled customer care and electronic bill presentment and
payment, together with business-to-business gateway solutions. All of
Inlogic's shares and options were exchanged for the following:
/bullet/ 2,217,674 shares of common stock valued at $60.7 million. The
valuation of the common stock was determined by the stock
price two days before and two days after December 16, 1999
which was the date the acquisition was announced and terms
were agreed.
/bullet/ Issuance of 167,361 stock options to Inlogic employees valued
at $4.6 million. Valuation was determined using the Black-
Scholes option pricing model on the date of the acquisition.
In addition, the Company incurred direct acquisition costs of
approximately $2.2 million.
The transaction resulted in a one-time charge of $6.3 million related to
the write-off of purchased in-process research and development expense.
The Company employed an outside valuation consultant to value the
purchased in-process research and development. In process research and
development relates to the development of numerous Inlogic products which
provide web interfaces and other operational support system products.
The Inlogic products are in the early stages of their development and are
undergoing further development and integration with BillPlex. The value
assigned to in-process research and development was determined based on
management's estimates of the percentage of completion of the underlying
development effort, resulting net cash flows from Inlogic products and
the discounting of such cash flows back to their present value.
The acquisition was accounted for as a purchase transaction and,
accordingly, the acquisition price was allocated to the acquired assets
and assumed liabilities based on their estimated fair values as of the
acquisition date. Other intangible represents the purchased employee work
force of Inlogic. The excess of the consideration paid over the estimated
fair value of net assets, other intangible and purchased in-process
research and development acquired was recorded as goodwill which is being
amortized over four years.
The consolidated statement of operations for the year ended December 31,
1999 includes the operating results of Inlogic from the date of
acquisition. The purchase price was allocated as follows:
(IN THOUSANDS)
Purchased in process research and development $ 6,347
Net hard assets 360
Deferred compensation 2,530
Employee work force 2,500
Goodwill 55,792
-------
$67,529
=======
14 (Continued)
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1999
The following unaudited pro forma results of operations of the Company
for the years ended December 31, 1999 and 1998 assume the acquisition
occurred as of the beginning of 1998 and 1999. The pro forma results give
effect to certain adjustments, which include depreciation and
amortization of intangible assets. The costs associated with the
in-process research and development were not included in the proforma
results since they are considered to be a one-time non-recurring charge.
The pro forma results have been prepared for comparative purposes only
and do not purport to indicate the results of operations which would
actually have occurred had the combinations been in effect on the dates
indicated, or which may occur in the future.
(IN THOUSANDS EXCEPT PER
SHARE DATA)
-----------------------
1998 1999
---------- -------
Total revenue $ 6,899 22,577
========== =======
Net loss applicable to common stockholders $ (27,695) (27,517)
========== =======
Net loss per share
- basic and diluted $ (5.07) (1.64)
========== =======
(3) INITIAL PUBLIC OFFERING
On October 6, 1999 the Company sold 4.1 million shares of its common
stock in an initial public offering ("IPO") from which the Company
received proceeds of approximately $44.2 million after payment of
underwriter discounts and commissions and payment of IPO costs.
Concurrently, the outstanding preferred stock described in note 9 was
automatically converted to common stock.
On October 28, 1999 the underwriters of the Company's IPO exercised their
option to purchase 615,000 additional shares of the Company's common
stock, 431,000 shares from the Company and 184,000 shares from certain
selling shareholders. The Company received proceeds of $4.8 million.
15 (Continued)
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1999
(4) PROPERTY AND EQUIPMENT, NET
Property and equipment, net consist of the following at December 31:
<TABLE>
<CAPTION>
(IN THOUSANDS)
ESTIMATED
1998 1999 USEFUL LIFE
------- ------- -----------
<S> <C> <C> <C>
Computer hardware $ 2,093 3,943 3-5 years
Purchased computer software 472 1,055 3-5
Office furniture and equipment 755 1,614 5-7
Transportation equipment 43 43 5
Leasehold improvements 757 932 lease term
Construction in progress 8 682 --
------- ------
4,128 8,269
Less accumulated depreciation and amortization (1,612) (3,424)
------- ------
Property and equipment, net $ 2,516 4,845
======= ======
</TABLE>
(5) INCOME TAXES
The Company did not have income tax expense for any of the years in the
three year period ended December 31, 1999. This differed from an income
tax benefit computed by applying the Federal income tax rate of 34
percent to pretax losses as a result of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Computed "expected" tax benefit $ 2,715 4,137 5,216
Increase (reduction) in income taxes resulting from:
State income taxes (net of federal benefit)
594 439 515
Increase in the valuation allowance for
deferred tax assets (3,016) (4,360) (6,146)
Other items (293) (216) 415
------- ------- -------
$ -- -- --
======= ======= =======
</TABLE>
16 (Continued)
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1999
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at December 31, 1998 and 1999 are
presented below:
(IN THOUSANDS)
1998 1999
------- -------
Deferred tax assets:
Net operating loss carryforwards $ 7,979 15,139
Depreciation and amortization 106 200
Inlogic goodwill -- 2,487
Allowance for doubtful accounts 3 267
Research and experimentation
credit carryforwards -- 749
Accrued expenses 274 242
Other -- 107
------- -------
Gross deferred tax assets 8,362 19,191
Less valuation allowance (8,174) (18,124)
------- -------
Total deferred tax asset $ 188 1,067
Deferred tax liabilities:
Costs in excess of billings 188 1,067
------- -------
Net deferred tax asset $ -- --
======= =======
Realization of deferred tax assets associated with net operating loss and
research and experimentation 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 research and experimentation credit carryforwards may expire unused
and has established a valuation allowance for the entire deferred tax
assets.
Net operating loss carryforwards for U.S. and State income tax purposes
amount to approximately $34,528,000 and expire through year 2019. Of the
total net operating loss carry forward, the future utilization of
approximately $14,824,000 will be subject to an annual limitation
prescribed by the tax law as a result of changes in the ownership of the
Company which has occurred over the past several years. Total net
operating loss carryforwards include approximately $1,386,000 of tax
benefits from the exercise of employee stock options that expire in 2019
and will be credited to additional paid-in capital if they are realized.
In addition, the Company has net operating loss carryforwards for Canada
of approximately $4,811,000 which expire through year 2006.
17 (Continued)
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1999
(6) ACCRUED PAYROLL AND OTHER ACCRUED EXPENSES
Accrued payroll and other accrued expenses consist of the following at
December 31:
(IN THOUSANDS)
1998 1999
------- -------
Accrued payroll and related expenses $ 249 788
Due to subcontractors 760 800
Accrued bonuses 953 2,856
Acquisition costs -- 2,067
Dividend payable to former Inlogic shareholders -- 4,800
Other accrued expenses 275 929
------- -------
$ 2,237 12,240
======= =======
(7) COMMITMENTS
(a) LEASES
The Company entered into agreements to lease office facilities in
Boca Raton and Atlanta under operating lease agreements commencing
November 1999 and June 1999 and expiring May 2008 and June 2004,
respectively. The Company also leases space in Toronto, Canada.
The leases for these offices expire on various dates through
December 2005. Generally accepted accounting principles require
that the full costs of a lease be recognized ratably over the term
of the lease. Accordingly, the Company has recorded deferred
credits as of December 31, 1999 of $142,692 to reflect the excess
of rent expense over cash payments related to these two leases.
These credits are included as part of other accrued expenses in
the consolidated balance sheet.
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:
(IN THOUSANDS)
2000 $1,901
2001 1,715
2002 1,705
2003 1,717
2004 1,795
2005 and thereafter 1,086
------
Total minimum lease payments $9,919
======
18 (Continued)
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1999
Total rent expense for operating leases was $279,708, $370,919 and
$648,324, for the years ended December 31, 1997, 1998 and 1999,
respectively.
(b) 401(K) PROFIT SHARING & TRUST
The Daleen Technologies, Inc. 401(k) Profit Sharing & Trust plan
("the Plan") covers substantially all of its employees. The
Company matches 25 percent of the employees' contribution, up to a
maximum of 8 percent deferral made by the employees. In addition,
the Plan allows discretionary contributions from the Company. The
total expense associated with this plan for 1997, 1998 and 1999
was $36,277, $71,923 and $237,995, respectively.
On January 1, 2000, the Company terminated the above plan and
adopted the Daleen Technologies, Inc. 401(k) Profit Sharing Plan.
The Company matches 35 percent of the employees' contribution up
to maximum of 8 percent deferral made by the employees.
(c) EMPLOYMENT AGREEMENTS
The Company has employment agreements 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 $537,625.
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.
19 (Continued)
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1999
(8) STOCKHOLDERS' (DEFICIT) EQUITY
(a) STOCK OPTIONS
The Company has seven 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"), the 1998 Qualified Employee Incentive Stock Option
Plan ("the 1998 ISO Plan"), and the 1999 Employee Non-Qualified
Stock Option Plan ("the 1999 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>
ORIGINAL
SHARES
AUTHORIZED CONTRACTUAL
FOR ISSUANCE 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 1/3 each year beginning 5 years from grant
on year from grant
1998 Plan 500,000 23% to 50% beginning 5 years from grant
one year from grant
1998 ISO Plan 1,600,000 25% each year beginning 5 years from grant
one year from grant
1999 Plan 1,349,000 25% each year beginning 10 years from grant
one year from grant
</TABLE>
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 an annual
increase of 5,000,000 shares subject to a maximum of 20% of the
fully-diluted shares outstanding at the time. The Company
authorized an increase of 4.3 million shares in 2000.
20 (Continued)
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1999
A summary of the status of the Company's stock option plans, as of
December 31, 1997, 1998 and 1999, and changes during the years
then ended, is presented below:
<TABLE>
<CAPTION>
1997 1998 1999
---------------------- ---------------------- ------------------------
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 520,303 $ 1.73 1,476,498 $ 2.67 2,363,697 2.89
Granted 988,732 3.18 1,012,600 3.25 2,250,613 15.98
Exercised (23,490) 3.00 (8,433) 3.13 (800,574) 2.04
Forfeited (9,047) 3.00 (116,968) 3.13 (19,480) 4.74
--------- --------- ---------
Outstanding at end of year 1,476,498 $ 2.67 2,363,697 $ 2.89 3,794,256 10.58
========= ========= =========
Options exercisable at end of year 503,885 957,814 742,930
Weighted average fair value of
options exercisable during the year $ 0.38 $ 0.61 $ 2.87
</TABLE>
The following table summarizes information about stock options
outstanding and exercisable at December 31, 1999:
<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>
$0.06 to $1.00 175,828 9.03 $ 0.12 80,791 $ 0.18
$2.50 to $3.00 336,434 2.28 2.88 208,494 3.00
$3.25 to $4.00 1,432,036 3.79 3.26 452,031 3.25
$6.00 to $9.00 627,750 9.60 7.63 -- 0.00
$12.65 to $21.38 701,458 9.99 21.21 1,614 12.65
$22.50 to $27.19 394,500 9.96 26.98 -- 0.00
$28.00 to $33.75 105,750 9.89 31.68 -- 0.00
$38.81 to $46.94 18,500 9.88 39.25 -- 0.00
$50.00 to $52.69 2,000 9.90 52.69 -- 0.00
--------- ------
3,794,256 6.85 10.58 742,930 2.87
========= =======
</TABLE>
21 (Continued)
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1999
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 Option Pricing model with the following
assumptions:
1997 1998 1999
------- ------- -------
Expected life 5 years 4-5 years 5 years
Dividends None None None
Risk-free interest rate 4.34% 5.39% 5.65%
Expected volatility 0% 0% 116.8%
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 1997 1998 1999
- ------------------------------------------------------ --------- --------- ---------
<S> <C> <C> <C>
Net loss:
As reported $ (7,984) (12,169) (15,340)
Pro forma (8,342) (12,444) (16,569)
Net loss per share:
As reported (3.48) (3.78) (1.06)
Pro forma (3.64) (3.84) (1.15)
</TABLE>
(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 was
convertible at the option of the holder to common stock on a
one-to-one basis. 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. 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. The Series C
Preferred Stock automatically converted to common stock upon the
completion of an IPO. The Company completed its initial public
offering in October 1999. At that time, all Series C Preferred
Stock was converted to common stock on a one-to-one basis.
In January 1998, the Company issued 21,600 shares of common stock
to certain individuals for consulting services at a fair value of
$70,200.
22 (Continued)
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1999
(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 was convertible on a
one-to-one basis into the Company's common stock at the option of the
holder, until an IPO occurred, at which time the Series A Preferred Stock
was automatically converted. 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 were repriced to $3.056. The Series B
Preferred Stock was also convertible to common stock on a one to one
basis and had the same automatic conversion 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 was convertible on a one to
one basis into the Company's common stock at the option of the holder and
was automatically convertible to common stock when the IPO was
consummated. The fair market value was equal to the conversion price per
share at the date of issuance. The Company was 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 was 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.
In June, 1999 the Company completed a sale of mandatorily redeemable
convertible Series E Preferred Stock ("Series E Preferred Stock") to a
private company. The Company issued 1,496,615 shares of Series E
Preferred Stock at $9.00 per share for total proceeds of $13.5 million.
The Series E Preferred Stock was convertible on a one to one basis into
the Company's common stock at the option of the holder, until an IPO
occurred, at which time the Series E Preferred Stock was automatically
converted.
The Company completed its initial public offering in October 1999. At,
that time, all Redeemable Preferred Stock was converted to common stock
based on the above features.
23 (Continued)
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1999
(10) BUSINESS AND CREDIT CONCENTRATIONS
A greater percentage of business is now being performed with customers
located in different areas of the United States, Canada, Latin America
and Europe, and the Company has focused on customers in the
communications industry. Foreign revenue was 19 percent of total revenue
for the year ended December 31, 1999 and was less than 10 percent for the
years ended December 31, 1998 and 1997.
During the years ended December 31, 1997 and 1998, 100 percent and 98
percent, respectively, of the Company's total revenue was attributed to
two and five customers, respectively. Sales to the two customers in 1997
accounted for 74 percent and 26 percent of total sales. Sales to five
customers in 1998 accounted for 19 percent, 22 percent, 27 percent, 15
percent and 15 percent. There were no sales in 1999 to any customers
which represented greater than 10% of total revenue. In addition, there
were accounts receivable from one customer and three customers at
December 31, 1998 and 1999, respectively, each of which exceeded 10
percent of total accounts receivable and aggregated approximately
$1,130,000 and $1,597,640, respectively. These amounts were collected
subsequent to December 31, 1998 and 1999, 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 affect the Company's estimate of
its bad debts.
(11) 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 Telcordia. Danet is a customer of the Company and a distributor
of its products.
24 (Continued)
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1999
Sales to Danet for the years ended December 31, 1997, 1998 and 1999
amounted to $0, $334,794 and $1,031,350. The Company paid Danet, in its
capacity as distributor of its products, $0, $2.2 million and $99,468 for
the years ended December 31, 1997, 1998 and 1999. The Company had a
strategic alliance relationship with Telcordia. No revenue was received
and no payments were made in connection with this relationship for each
of the years in the three-year period ended December 31, 1999.
In June 1999 the Company offered loans to three executive officers and
other employees for an aggregate amount of approximately $435,000 for the
purposes of providing funds for the exercise of vested, non-qualified
stock options and payment of tax obligations resulting from the exercise
of those options. The loans bear interest at a rate of 8.75 percent per
annum. 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 options as security for
his loan. As of December 31, 1999, approximately $372,000 of these loans
has been repaid.
The Company loaned executive officers and other employees an amount to
pay the income tax related to the exercise of stock options. The total
amount of loans were approximately $498,000 of which $389,000 was repaid
as of December 31, 1999.
The Company loaned an executive $50,000 in November 1999 in accordance
with this executives employment agreement. This amount remains
outstanding at December 31, 1999.
25 (Continued)
<PAGE>
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998 and 1999
(12) NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133"). 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, 2001.
The Company expects this pronouncement to have no material impact on its
financial statements.
26
<PAGE>
SCHEDULE II
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
For each of the years in the three-year period
ended December 31, 1999
<TABLE>
<CAPTION>
BALANCE AT (B) BALANCE
BEGINNING OF (A) INLOGIC (C) AT END
YEAR CHARGES ACQUISITION DEDUCTIONS OF YEAR
-------- ------- --------- --------- ------
<S> <C> <C> <C> <C> <C>
Description:
Reserves and allowances deducted from
asset accounts
1997
Allowance for doubtful accounts $ 15,186 166,803 -- (165,408) 16,581
======== ======= ========= ========= ======
Description:
Reserves and allowances deducted from
asset accounts
1998
Allowance for doubtful accounts $ 16,581 247,052 -- (254,588) 9,045
======== ======= ========= ========= ======
Description:
Reserves and allowances deducted from
asset accounts
1999
Allowance for doubtful accounts $ 9,045 761,936 30,000 (94,046) 706,935
======== ======= ========= ========= ======
(a) Charges to the reserve account represent increase in reserve levels and
establishment of specific reserves charged to expense.
(b) Amount acquired in Inlogic acquisition.
(c) Deductions to the reserve account represent write-offs net of
recoveries which occurred during the year.
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.30 Employment Agreement, effective as of December 16, 1999 between
Mohammad Aamir and Inlogic Software, Inc.
10.31 Employment Agreement, effective as of December 16, 1999 between George
Timmes and Inlogic Software, Inc.
10.38 Daleen Technologies, Inc. Amended & Restated 1999 Stock Incentive Plan.
21.1 Subsidiaries
23.1 Independent Auditors' Consent.
27.1 Financial Data Schedule (for SEC use only.)
EXHIBIT 10.30
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("this Agreement") is made as of the Effective Date
(as defined herein).
BETWEEN:
INLOGIC SOFTWARE, INC., a Nova Scotia corporation ("Employer"),
and
MOHAMMAD AAMIR ("Executive").
WITNESSETH:
WHEREAS, Employer is the successor of Inlogic Software Inc., an Ontario company
("Inlogic Ontario"), Executive was employed by Inlogic Ontario, and Inlogic
Ontario has continued into Nova Scotia and is now a Nova Scotia Corporation;
AND WHEREAS Employer believes it is in Employer's best interest to continue to
employ Executive, and Executive desires to continue to be employed by Employer;
AND WHEREAS Employer and Executive agree that this Agreement and the employment
on the terms hereunder contemplated hereunder is conditional upon the completion
of the transaction contemplated by the Share Purchase Agreement between Daleen
Technologies, Inc., Inlogic Acquisition, Inc. (the "Purchaser") and the Holders
of all of the Shares of Inlogic Software, Inc. (the "Transaction"), and the
effective date of this Agreement shall be the closing date of the Transaction
(the "Effective Date");
AND WHEREAS Employer and Executive desire to set forth the terms and conditions
on which Executive shall be employed by and provide his or her services to
Employer;
AND WHEREAS the execution and delivery of this Agreement by the Executive is a
material inducement to the Purchaser's agreement to consummate the Transaction
and is a condition precedent to the Transaction;
AND WHEREAS, the execution and delivery of this Agreement by the Employer is a
material inducement to the Executive's agreement hereunder which, as described
above, is a condition precedent to the Transaction;
AND WHEREAS the Executive will benefit personally from the Transaction.
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. DEFINITIONS.
<PAGE>
For the purpose of this Agreement, unless the context otherwise
requires, the following words and expressions that shall have the following
meanings:
"AFFILIATE" shall have the meaning set forth in the Business Corporations Act
(Ontario), as amended.
"CAUSE" shall be limited to,
(i) the failure or wilful refusal of the Executive to
substantially perform his or her material duties and
responsibilities as outlined on Schedule "A" in
accordance with the provisions of this Agreement,
except as such results from the Disability of the
Executive that is not cured by Executive, within
reasonable period of written notification thereof to
Executive by Employer;
(ii) any fraudulent activity on the part of the Executive
materially adversely affecting the Employer;
(iii) the conviction of the Executive for any crime
involving fraud, misrepresentation or breach of
trust;
(iv) excessive use of alcohol or illegal drugs by the
Executive which interferes in a material way with the
performance of his or her obligations under this
Agreement;
(v) any wilful and intentional act on the part of the
Executive having the effect of materially injuring
the reputation, business or business relationships of
the Employer, or
(vi) any material breach of this Agreement by the
Executive which has not been remedied within a
reasonable period of days following written notice of
such breach from the Employer.
"COMPETITIVE BUSINESS" means any business which is substantially similar to or
in competition with any of the businesses carried on by Employer or any of its
Affiliates at any time in which the non-competition and non-solicitation
provisions of this Agreement are relevant to the Executive, which business is
without limitation, the development and sale of (i) billing and customer
management software for the telecommunication, internet, utilities and cable
industries; (ii) e-commerce billing and customer management solutions for the
internet, telecommunication, utilities and cable industries.
"CONFIDENTIAL INFORMATION" has the meaning set out in section 7.
"DISABILITY" means the Executive's physical or mental inability to substantially
fulfil his or her duties on behalf of the Employer as a result of illness or
injury for a continuous period of sixty (60) days or more or for an aggregate
period of ninety (90) days in any twelve (12) month period. If there is any
disagreement between the Employer and the Executive as to the
- 2 -
<PAGE>
Executive's Disability or as to the date any such Disability began or ended, the
same shall be determined by a physician mutually acceptable to the Employer and
the Executive. The determination of such physician shall be conclusive evidence
of any such Disability and of the date any such Disability began or ended. The
Executive shall be available for such an examination at any reasonable time upon
prior reasonable notice thereof from the Employer. If the Executive fails or
refuses to co-operate in such examination, the determination of the Executive's
Disability and the date any such Disability began or ended shall be made by the
Employer in its sole discretion.
"DEVELOPMENTS" has the meaning set out in section 9(a).
"SUBSIDIARY" means a subsidiary within the meaning of the Business Corporations
Act (Ontario), as amended.
"U.S. PERSON" means a U.S. Person within the meaning of Regulation 5 under the
Securities Act of 1933 Act, as amended.
2. EMPLOYMENT.
Employer hereby employs Executive as EVP/President of Daleen- Canada,
and Executive hereby accepts such employment, all upon the terms and conditions
hereinafter set forth. The Executive will report to James Daleen of the
Employer. The Executive's duties will include the following:
(a) The Executive shall perform all functions and duties
consistent with his or her position as described in the
attached Schedule A on behalf of the Employer and its
Affiliates in a faithful, efficient, trustworthy and
professional manner, as reasonably required by the Employer.
The attached Schedule A sets forth the Executive's general
roles and responsibilities as an employee of Employer, which
general roles and responsibilities are subject to change by
Employer upon prior written notice. The Executive agrees to
comply with all written policies and regulations of the
Employer now in force or that may be properly adopted from
time to time, and the terms and conditions of this Agreement,
to devote his or her best efforts to the interests of the
Employer, and will not, without the prior written consent of
the Executive Vice President of Corporate Development, engage
in any other job or activity detrimental to the Employer's
interests or in contravention to the terms and conditions of
this Agreement. The Executive shall be based in Toronto and
shall travel as reasonably required in connection with the
performance of his or her duties hereunder. During the term of
this Agreement, the Executive shall devote substantially all
of his working time and efforts to the business and affairs of
the Employer. The Executive shall, upon request of the
Employer, perform services for any Affiliate of the Employer
without compensation except as provided herein.
(b) In addition, the Executive represents that he has not brought
to the Employer, and will not bring or use in the performance
of his duties at the Employer, any
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property or confidential information (whether or not in
writing) of a former employer or third party without that
employer's or third party's written consent. The Executive
hereby certifies that he is not a party to any other agreement
(or subject to any fiduciary obligation) which will interfere
with the Executive's full compliance with this Agreement. The
Executive has not entered into any agreement or understanding
either written or oral in conflict with the provisions of this
Agreement. The Executive acknowledges and agrees that the
Employer is employing him or her based upon its understanding
that the Executive will be fully capable, without restriction,
of performing under this Agreement in his capacity as
EVP/President of Daleen -Toronto for the Employer, and that
the Employer is relying upon the representations set forth
herein in connection with its providing this Agreement to the
Executive. For purposes of this Agreement, Inlogic Ontario
will not be considered a former employer of the Executive.
3. EXISTING EMPLOYMENT AGREEMENT.
The Executive confirms that the Executive on behalf of himself, his
heirs, executors, administrators and assigns hereby releases the Employer and
its Affiliates from all claims which he has or may have against the Employer,
including Inlogic Ontario, (and its current and former officers, directors,
employees, shareholders and agents) relating to periods prior to the Effective
Date, including without limitation any claims relating to Executive's employment
or engagement prior to the Effective Date with Employer and Inlogic Ontario,
regardless of whether the Executive was engaged in a consulting or employment
capacity. For greater certainty and as permissible by law, this release shall
extend to any entity through which Executive provided consulting services to
Inlogic Ontario. Notwithstanding the above and to the extent applicable,
Employer confirms that this Agreement continues Executive's employment with
Inlogic Ontario on an uninterrupted basis.
4. TERM.
This Agreement and the Executive's employment hereunder shall, for
purposes hereof, commence on the Effective Date and shall continue for an
indefinite term unless sooner terminated in accordance with the terms and
conditions set forth in this Agreement. Notwithstanding the foregoing, the
parties may mutually agree in writing to a term of employment other than an
indefinite term.
5. REMUNERATION.
As his or her entire compensation for all services rendered to the
Employer during the term of this Agreement, the Executive shall receive the
compensation provided for in this Section, subject to deductions for income
taxes and other required deductions:
(a) SALARY. The Employer will pay the Executive a gross annual
salary (the "Base Salary") of Cdn. $257,250 to be paid in
equal installments in accordance with the payroll practices of
the Employer. The Employer will annually review the Base
Salary.
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(b) BONUS. The Executive will be entitled to receive bonus
remuneration, if any, during the term of his or her
employment, as the Employer, in its sole discretion, may
authorize, which bonus shall be set forth in writing and
presented to the Executive. Bonus remuneration will be offered
and made available to Executive on the same basis as
comparable executives employed by Employer and its Affiliates.
(c) BENEFITS. The Executive shall be entitled to participate in
all of the benefit plans for senior employees of the Employer
in effect from time to time, as of and with effect from the
Effective Date. Immediately following the Effective Date,
Employer will continue the existing benefit plans of Inlogic
Ontario. Thereafter, Employer will transition the benefit
plans to comparable level and types as those offered by
Employer and its Affiliates so as to ensure substantially
equal benefits to the extent permitted and as available. The
Executive is entitled to take vacation and other time off in
accordance with Employer's "Time Off" Policy which will be
four (4) week's per annum, and up to an additional one (1)
week per annum on prior written consent of Executive's direct
report manager.
(d) EXPENSES. The Employer shall reimburse the Executive for all
reasonable travel and other business expenses incurred by him
or her in furtherance of the Executive's business in
accordance with the Employer's written policies and
procedures, plus Cdn. $1,000 per month for car and insurance.
6. STOCK OPTIONS.
Independent of any shares of the Employer previously owned by
Executive, the Executive shall receive upon completion of the Transaction and as
part of his or her compensation package an aggregate of 120,293 options to
purchase common stock of Daleen Technologies Inc. All options will be subject to
the provisions of the Daleen Technologies, Inc. Amended and Restated Stock
Incentive Plan and applicable stock option agreements. Other terms of the
options granted are as follows:
(a) CONVERSION OPTIONS. These stock options reflect the conversion
of stock options in Inlogic Ontario (prior to the closing of
the Transaction) into stock options of Daleen Technologies,
Inc. pursuant to the conversion formula associated with the
Transaction. Executive shall receive an option for 70,292
shares of Conversion Options. The grant date will be the
original date of grant from Inlogic Ontario and the exercise
price per share will be the original exercise price per share
as converted pursuant to the conversion formula associated
with the Transaction. Upon execution hereof, Employer will
accelerate one (1) year of vesting on all such Conversion
Options.
(b) TRANSACTION OPTIONS. These stock options reflect additional
stock options of Daleen Technologies, Inc. to be issued to the
Executive in connection with their continued employment with
the Employer pursuant to the provisions of this Agreement.
Executive shall receive an option for 50,000 shares of
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Transaction Options. The grant date will be the date of this
Agreement or as otherwise granted by the Board of Directors
(or a committee thereof) of Daleen Technologies, Inc., and the
exercise price per share will be the fair market value on the
date of grant.
(c) EXECUTIVE ACKNOWLEDGEMENT. Executive acknowledges that the
Conversion Options and the Transaction Options are granted to
the Executive in replacement and in full satisfaction of any
right the Executive might have under the options previously
granted to the Executive by the Employer and the Executive
acknowledges that the sole right to any options that he or she
has as of the date hereof is in the Conversion Options and
Transaction Options. Executive agrees that the terms of this
Agreement, and in particular this Section 6, supersede any
prior understanding or agreement in any way related to the
terms, conditions, vesting rights and/or value of any stock
options or other equity interests of or related to Inlogic
Ontario.
(d) ADDITIONAL STOCK OPTIONS. In addition to those set forth
above, Executive will, during the term hereof, have the
opportunity to earn additional stock option grants of Employer
or its Affiliates as those made available to comparable
executives employed by Employer and its Affiliates and based
upon performance hereunder, all at the sole discretion of the
Compensation Committee of the Affiliates of Employer.
7. CONFIDENTIALITY & NON-DISCLOSURE.
Executive acknowledges that Employer has developed, through the
expenditure of substantial time, effort and money, valuable trade secrets and
confidential and proprietary information relating to its business. Executive
further acknowledges that certain trade secrets and confidential business
information of Employer has been or will be disclosed to Executive in the course
of Executive's employment with Employer, and that the unauthorized disclosure or
use of such information would severely damage Employer's business. Therefore,
Executive agrees, subject to disclosure as may be required by law or a
governmental authority, as follows:
(a) The Executive agrees not to disclose the terms and conditions
of this Agreement to any other employee of the Employer or any
other party except the Executive may disclose such information
to his immediate family, financial advisors or
attorneys/lawyers.
(b) The Executive agrees to hold in confidence and not use or
disclose without the Employer's prior written consent (i) any
confidential information (technical or otherwise) that he or
she obtains or creates during the term of this Agreement which
pertains to any aspect of the Employer's business or (ii) any
information received in confidence by the Employer from a
third party, until such information becomes generally known by
the public. The Executive shall not make any unauthorized
copies of such information and as stated in Section 8 below,
will return to the Employer, upon termination of his or her
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employment or upon the Employer's request, all tangible forms
of such information, including, without limitation, research
and development projects and strategies, product strategies,
internet or intranet strategies, business or product
development strategies, financial information, partner and
customer relationships, and other information about former,
current, or prospective partners/customers, employee lists and
other information about former, current, or prospective
employees, software programs (source or object codes),
know-how, new product offerings, plans, projections,
confidential business information, copyrights, trade secrets,
and any other proprietary material (the "Confidential
Information").
8. SURRENDER OF EMPLOYER PROPERTY AND RECORDS.
Upon the termination of the Executive's employment, for any reason
whatsoever, and at any other time as requested by Employer, the Executive agrees
to surrender to Employer, in good condition, all records pertaining to
Employer's business operations and related to any work performed for Employer,
all Employer 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 within the Executive's possession or under the
Executive's control. Included are any documents or media containing the names,
addresses, and other information with regard to customers or potential customers
of the Employer.
9. INVENTION ASSIGNMENT.
(a) Executive agrees that any Development Executive conceives,
develops, creates or prepares in the course of Executive's
employment with Employer shall be a work made for hire.
Executive hereby grants, transfers and assigns to Employer all
of his right, 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 and patent application rights thereto, if any, and he
or she agrees that Employer may copyright said materials in
Employer's name and secure renewal, reissues and extensions of
such copyrights for such periods of time as the law may
permit. Executive hereby waives, as against Employer, its
successors and assigns and licensees, all his moral rights
which the Executive may have or will acquire in respect of the
copyright in any Developments. The Executive agrees to enforce
his or her moral rights as against others as directed by and
at the cost of Employer or its successor-in-title of the
copyright in the Developments. "Development" 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, related to
the business of the Employer or its Affiliates made or
conceived in the course of Executive's employment or
engagement whether solely or jointly by Executive during
Executive's employment whether or not subject to patent,
copyright or other forms of protection.
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(b) Items not assigned by this Section 9 are listed and described
on the attached "Schedule of Separate Works," for which the
parties agree to be effective must be signed by the Executive
and a duly authorized officer of Employer. Executive agrees
not to include any part of such items in the materials
Executive prepares for Employer unless and until such items
are licensed or assigned to Employer under separate written
agreement.
(c) At all times hereafter, Executive agrees promptly to disclose
to Employer all Developments, to execute separate written
assignments to Employer at Employer's request, and, at
Employer's cost, to assist Employer in obtaining patents or
copyrights in the U.S. and in all other countries, on any
Developments assigned to Employer that Employer, in its sole
discretion, seeks to patent or copyright. Executive also
agrees, at Employer's cost, to sign all documents, and do all
things necessary to obtain such patents or copyrights, to
further assign them to Employer, and upon Employer's
instruction and at Employer's cost, to reasonably protect
Employer against infringement by other parties at Employer's
expense with Employer prior approval.
(d) Executive shall keep complete, accurate, and authentic
information and records on all Developments in the manner and
form reasonably requested by Employer. Such information and
records, and all copies thereof, shall be the property of
Employer as to any Developments assigned to Employer.
Executive agrees to promptly surrender such information and
records at the request of Employer. All these materials will
be Confidential Information upon their creation.
10. NON-COMPETITION.
The Executive acknowledges that in the course of his or her employment
with Employer, Employer will give the Executive access to the Confidential
Information and the Executive's knowledge of the Confidential Information will
enable the Executive to put the Employer at a significant competitive
disadvantage if the Executive is employed or engaged by or becomes involved in a
Competitive Business. Accordingly, during the term of this Agreement and for a
period of twelve (12) months immediately following the termination of the
Executive's employment (unless for a shorter period of time as determined by
Employer as described below), for whatever reason, whether voluntary or
involuntary (with or without Cause), the Executive will not, without the written
consent of Employer, directly or indirectly, individually or in partnership or
in conjunction with any other person carry on, be engaged in, directly or
indirectly, in any manner whatsoever, including, without limitation, as an
employee, consultant, or advisor in any Competitive Business within North
America, provided however, an exceptions will be made following termination in
the case of (a) another business wherein the Executive is not working in a
competitive capacity and the competitive products and services that constitute a
Competitive Business are less than ten percent of such business' total revenue,
or (b) Executive's ownership of the shares of a publicly-traded company where
such ownership is less than 5% of the shares outstanding and
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<PAGE>
Executive otherwise has no involvement, directly or indirectly, in the
operation, management or support of said company.
The Employer and Executive agree that in the case of a termination of the
Executive's employment without Cause as described in Section 13(e), the length
of the non-competition period in this Section 10 and the length of the
non-solicitation period in Section 11 may be shortened by the Employer in its
sole discretion, by the Employer providing the Executive with written notice
thereof within ten (10) business days of the effective date of termination. In
no event may the Employer reduce the non-competition and the non-solicitation
provision to less than three (3) months. Executive will be entitled to severance
pay from Employer during the duration of the non-competition period and the
non-solicitation period, as such duration may be adjusted hereunder, all in
accordance with Section 13(e). The Executive and Employer further agree that the
duration of the non-competition and the duration of the non-solicitation period
shall be equal and they shall run simultaneous with one another, so that by way
of example, if the Employer were to shorten the non-competition period to six
months following termination, then the non-solicitation period shall
automatically shorten to that same six months.
11. NON-SOLICITATION.
The Executive acknowledges the uniqueness of the customer and third
party relationships developed by the Employer and the unique opportunity that
the Executive's employment and the Executive's access to the Confidential
Information offers to interfere with such relationships. Accordingly, the
Executive will not while employed or engaged by Employer and for a period of
twelve (12) months following the termination of Executive's employment with
Employer (unless for a shorter period of time as determined by Employer as
described in the second paragraph of Section 10 above), whether the termination
is voluntary or involuntary (with or without Cause), or for any other reasons
whatsoever:
(a) directly or indirectly on Executive's own behalf or on behalf
of any other person or entity, solicit from, accept from, or
transact business which would constitute Competitive Business,
with any former, current or prospective customer or supplier
of Employer with which the Executive had substantial personal
contact on behalf of the Seller, or Employer during the
twenty-four (24) month period immediately preceding the
termination of the Executive's employment; or
(b) hire, solicit for hire, recruit, or retain the services of any
employee or consultant of Employer or any Affiliate of
Employer.
12. RECOGNITION.
The Executive hereby recognizes and expressly acknowledges that the
provisions of Sections 7, 10 and 11 grant to Employer only such reasonable
protection as is admittedly necessary to preserve the legitimate interests of
Employer and the Executive equally recognizes that the description of the
"Competitive Business" is reasonable. Executive acknowledges that the services
to be rendered by Executive hereunder are extraordinary and
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unique and are vital to the success of Employer, and that damages at law would
be an inadequate remedy for any breach or threatened breach of this Agreement by
Executive. Therefore, in the event of a breach or threatened breach by Executive
of any provision of this Agreement, then Employer may be entitled, in addition
to all other rights or remedies, to equitable relief, including temporary or
permanent injunction to restrain such breach.
13. TERMINATION OF EMPLOYMENT.
This Agreement may be terminated at any time for the following reasons:
(a) by the Employer for Cause;
(b) by the Employer in the event of the death of the Executive;
(c) by the Employer in the event of the Disability of the
Executive in which case the Executive shall be entitled, to
the extent he qualifies, to the disability benefits for
employees of the Employer in effect at such time in lieu of
any other compensation whatsoever in respect of the
termination of the Executive's employment;
(d) upon mutual agreement of the parties hereto;
(e) without Cause and other than for the reasons in subsections
(a) through (d) above by the Employer providing to the
Executive pay in lieu of notice (the "severance pay") in the
form of the continuation of the Executive's Base Salary during
the duration of the non-competition and non-solicitation
provisions set forth in Sections 10 and 11 herein, which as
described in Section 10 will be no longer than twelve (12)
months and no shorter than three (3) months, as determined by
Employer pursuant to Section 10. Notwithstanding the
foregoing, to the extent the Employment Standards Act
(Ontario) mandates the payment of Base Salary for a period
longer than three (3) months, then such period shall be deemed
to be the minimum period for the purposes of this Section
13(e) and Sections 10 and 11. The Executive agrees that his or
her only entitlement on termination without Cause is that
agreed to in this Agreement and for greater certainty and
except as provided herein, the Employee is not entitled to
notice or pay in lieu of notice or severance pay under common
law; and
(f) the Executive may terminate this Agreement at any time upon
thirty (30) days prior written notice to the Employer,
provided, however, the Executive shall continue to work for
the Employer during such notice period unless otherwise
directed by the Employer.
(g) By Executive if Employer breaches a material provision of this
Agreement or violates any applicable labor or employment laws
of Ontario, which breach or violation is not cured by Employer
within a reasonable period of time of its receipt of written
notice thereof.
14. EXECUTIVE REPRESENTATIONS, WARRANTIES, AND ACKNOWLEDGEMENTS.
Executive represents and warrants to Employer that he is fully
empowered to enter and perform his or her obligations under this Agreement and,
without limitation, that he or she is under no restrictive covenants to any
person or entity that will be violated by his or her
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entering into and performing this Agreement, and that this Agreement constitutes
a valid and legally binding obligation of the Executive enforceable in
accordance with its terms. The Executive further represents and warrants that in
the performance of his or her duties he or she will not make unauthorized use of
any confidential information of any third party or knowingly infringe the
intellectual property rights of any third party. The Executive shall indemnify
Employer upon demand for and against any and all judgements, losses, claims,
damages, costs (including without limitation all legal fees and costs, even if
incident to appeals) incurred or suffered by the Employer 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 acknowledgement made in this section to be true and
correct at all times. The Executive further represents that he is not resident
in the United States and is not a U.S. Person.
15. ENTIRE AGREEMENT.
This Agreement represents the entire understanding and agreement
between the parties with respect to the subject matter hereof, and supersedes
all other agreements, negotiations, understandings and representations (if any)
made by and between such parties.
16. 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.
17. GOVERNING LAW AND VENUE.
This Agreement is to be governed by and construed and enforced in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein. The parties acknowledge that a substantial portion of
negotiations, anticipated performance and execution of this Agreement occurred
or shall occur in Ontario, Canada and that, therefore, without limiting the
jurisdiction or venue of any other federal or provincial 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 Province of Ontario; (b) consents to the
jurisdiction of each such court in any such suit, action or proceeding; and (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.
18. NOTICES.
Any notice, request, demand or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been given
if delivered or sent by facsimile transmission, upon receipt, or if sent by
registered or certified mail, upon the sooner of the date on which received is
acknowledged or the expiration of three (3) days after deposit in their post
office facilities properly addressed with postage prepaid. All notices to a
party will be sent to the address set forth below or to such other address or
person as such party may designate by notice to each party hereunder:
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To the Employer at:
Daleen Technologies, Inc.
902 Clint Moore Road
Suite 230
Boca Raton, FL 33487
Attention: Human Resources Department
To the Executive Mohammad Aamir.
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 provision of this Agreement 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, in the event the
Executive's employment and this Agreement is terminated, whether voluntarily or
involuntarily (with or without Cause), each party shall remain bound by the
provisions of this Agreement which by their terms impose obligations upon that
party that extend beyond the termination of this Agreement more particularly,
but not limited to, Sections 7, 10 and 11 of this Agreement.
22. WAIVERS.
The failure or delay of either party at any time to require performance
by the other party of any provision of this Agreement, even if known, shall not
affect the right of that party to require performance of that provision or to
exercise any right, power or remedy hereunder, and any waiver by a 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 either party in any case shall, of itself, entitle such
party to any other or further notice or demand in similar or other
circumstances.
23. COUNTERPARTS.
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This Agreement may be executed by the parties in one or more
counterparts, each of which when so executed and delivered shall be deemed to be
an original and such counterparts shall together constitute one and the same
instrument.
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IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
Effective Date.
INLOGIC SOFTWARE, INC.
By: /s/ Carl Scase
--------------------------------------
Authorized Signing Officer
/s/ MOHAMMAD AAMIR
- ------------------------------- -----------------------------------------
Date Employee
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SCHEDULE OF SEPARATE WORKS
The following are works that are not assigned by section 9 of the
Employment Agreement, in which Executive has any right, title or interest, and
which were conceived or written either wholly or in part by Executive, prior to
or outside the scope of Executive's employment by Employer or Seller.
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 Executive's knowledge.
- ------------------------------------- ------------------------------------
Date Executive
- ------------------------------------- ------------------------------------
Date Employer (name and title)
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SCHEDULE "A"
EXECUTIVE'S GENERAL ROLES AND RESPONSIBILITIES
Mohammad Aamir
President- Daleen Canada, EVP
As the President of Daleen Canada, EVP, your position will be based in Toronto
and report into both Dave Corey and James Daleen. As the president of Daleen
Canada you will be responsible for the seamless assimilation/ transition of the
Toronto operation into the overall Daleen strategy. Additionally, as EVP you
will provide leadership and direction to Corporate initiatives as assigned by
the CEO.
EXHIBIT 10.31
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("this Agreement") is made as of the Effective Date
(as defined herein).
BETWEEN:
INLOGIC SOFTWARE, INC., a Nova Scotia corporation ("Employer"),
and
GEORGE TIMMES ("Executive").
WITNESSETH:
WHEREAS, Employer is the successor of Inlogic Software Inc., an Ontario company
("Inlogic Ontario"), Executive was employed by Inlogic Ontario, and Inlogic
Ontario has continued into Nova Scotia and is now a Nova Scotia Corporation;
AND WHEREAS Employer believes it is in Employer's best interest to continue to
employ Executive, and Executive desires to continue to be employed by Employer;
AND WHEREAS Employer and Executive agree that this Agreement and the employment
on the terms hereunder contemplated hereunder is conditional upon the completion
of the transaction contemplated by the Share Purchase Agreement between Daleen
Technologies, Inc., Inlogic Acquisition, Inc. (the "Purchaser") and the Holders
of all of the Shares of Inlogic Software, Inc. (the "Transaction"), and the
effective date of this Agreement shall be the closing date of the Transaction
(the "Effective Date");
AND WHEREAS Employer and Executive desire to set forth the terms and conditions
on which Executive shall be employed by and provide his or her services to
Employer;
AND WHEREAS the execution and delivery of this Agreement by the Executive is a
material inducement to the Purchaser's agreement to consummate the Transaction
and is a condition precedent to the Transaction;
AND WHEREAS, the execution and delivery of this Agreement by the Employer is a
material inducement to the Executive's agreement hereunder which, as described
above, is a condition precedent to the Transaction;
AND WHEREAS the Executive will benefit personally from the Transaction.
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. DEFINITIONS.
<PAGE>
For the purpose of this Agreement, unless the context otherwise
requires, the following words and expressions that shall have the following
meanings:
"AFFILIATE" shall have the meaning set forth in the Business Corporations Act
(Ontario), as amended.
"CAUSE" shall be limited to,
(i) the failure or wilful refusal of the Executive to
substantially perform his or her material duties and
responsibilities as outlined on Schedule "A" in
accordance with the provisions of this Agreement,
except as such results from the Disability of the
Executive that is not cured by Executive, within ten
(10) days of written notification thereof to
Executive by Employer;
(ii) any fraudulent activity on the part of the Executive
materially adversely affecting the Employer;
(iii) the conviction of the Executive for any crime
involving fraud, misrepresentation or breach of
trust;
(iv) excessive use of alcohol or illegal drugs by the
Executive which interferes in a material way with the
performance of his or her obligations under this
Agreement;
(v) any wilful and intentional act on the part of the
Executive having the effect of materially injuring
the reputation, business or business relationships of
the Employer, or
(vi) any material breach of this Agreement by the
Executive which has not been remedied within a
reasonable period of ten (10) days following written
notice of such breach from the Employer.
"COMPETITIVE BUSINESS" means any business which is substantially similar to or
in competition with any of the businesses carried on by Employer or any of its
Affiliates at any time in which the non-competition and non-solicitation
provisions of this Agreement are relevant to the Executive, which business is
without limitation, the development and sale of (i) billing and customer
management software for the telecommunication, internet, utilities and cable
industries; (ii) e-commerce billing and customer management solutions for the
internet, telecommunication, utilities and cable industries; and (iii) internet
invitation services software.
"CONFIDENTIAL INFORMATION" has the meaning set out in section 7.
"DISABILITY" means the Executive's physical or mental inability to substantially
fulfil his or her duties on behalf of the Employer as a result of illness or
injury for a continuous period of sixty (60) days or more or for an aggregate
period of ninety (90) days in any twelve (12) month period. If there is any
disagreement between the Employer and the Executive as to the
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Executive's Disability or as to the date any such Disability began or ended, the
same shall be determined by a physician mutually acceptable to the Employer and
the Executive. The determination of such physician shall be conclusive evidence
of any such Disability and of the date any such Disability began or ended. The
Executive shall be available for such an examination at any reasonable time upon
prior reasonable notice thereof from the Employer. If the Executive fails or
refuses to co-operate in such examination, the determination of the Executive's
Disability and the date any such Disability began or ended shall be made by the
Employer in its sole discretion.
"DEVELOPMENTS" has the meaning set out in section 9(a).
"SUBSIDIARY" means a subsidiary within the meaning of the Business Corporations
Act (Ontario), as amended.
"U.S. PERSON" means a U.S. Person within the meaning of Regulation 5 under the
Securities Act of 1933 Act, as amended.
2. EMPLOYMENT.
Employer hereby employs Executive as VP of Marketing & Product
Management, and Executive hereby accepts such employment, all upon the terms and
conditions hereinafter set forth. The Executive will report to Dave Corey of the
Employer. The Executive's duties will include the following:
(a) The Executive shall perform all functions and duties consistent with
his or her position as described in the attached Schedule A on behalf
of the Employer and its Affiliates in a faithful, efficient,
trustworthy and professional manner, as reasonably required by the
Employer. The attached Schedule A sets forth the Executive's general
roles and responsibilities as an employee of Employer, which general
roles and responsibilities are subject to change by Employer upon prior
written notice. The Executive agrees to comply with all written
policies and regulations of the Employer now in force or that may be
properly adopted from time to time, and the terms and conditions of
this Agreement, to devote his or her best efforts to the interests of
the Employer, and will not, without the prior written consent of the
Executive Vice President of Corporate Development, engage in any other
job or activity detrimental to the Employer's interests or in
contravention to the terms and conditions of this Agreement. The
Executive shall be based in Toronto and shall travel as reasonably
required in connection with the performance of his or her duties
hereunder. During the term of this Agreement, the Executive shall
devote substantially all of his working time and efforts to the
business and affairs of the Employer. The Executive shall, upon request
of the Employer, perform services for any Affiliate of the Employer
without compensation except as provided herein.
(b) In addition, the Executive represents that he has not brought to the
Employer, and will not bring or use in the performance of his duties at
the Employer, any
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property or confidential information (whether or not in writing) of a
former employer or third party without that employer's or third party's
written consent. The Executive hereby certifies that he is not a party
to any other agreement (or subject to any fiduciary obligation) which
will interfere with the Executive's full compliance with this
Agreement. The Executive has not entered into any agreement or
understanding either written or oral in conflict with the provisions of
this Agreement. The Executive acknowledges and agrees that the Employer
is employing him or her based upon its understanding that the Executive
will be fully capable, without restriction, of performing under this
Agreement in his capacity as VP of Marketing & Product Management for
the Employer, and that the Employer is relying upon the representations
set forth herein in connection with its providing this Agreement to the
Executive. For purposes of this Agreement, Inlogic Ontario will not be
considered a former employer of the Executive.
3. EXISTING EMPLOYMENT AGREEMENT.
The Executive confirms that the Executive on behalf of himself, his
heirs, executors, administrators and assigns hereby releases the Employer and
its Affiliates from all claims which he has or may have against the Employer,
including Inlogic Ontario, (and its current and former officers, directors,
employees, shareholders and agents) relating to periods prior to the Effective
Date, including without limitation any claims relating to Executive's employment
or engagement prior to the Effective Date with Employer and Inlogic Ontario,
regardless of whether the Executive was engaged in a consulting or employment
capacity. For greater certainty and as permissible by law, this release shall
extend to any entity through which Executive provided consulting services to
Inlogic Ontario. Notwithstanding the above and to the extent applicable,
Employer confirms that this Agreement continues Executive's employment with
Inlogic Ontario on an uninterrupted basis.
4. TERM.
This Agreement and the Executive's employment hereunder shall, for
purposes hereof, commence on the Effective Date and shall continue for an
indefinite term unless sooner terminated in accordance with the terms and
conditions set forth in this Agreement. Notwithstanding the foregoing, the
parties may mutually agree in writing to a term of employment other than an
indefinite term.
5. REMUNERATION.
As his or her entire compensation for all services rendered to the
Employer during the term of this Agreement, the Executive shall receive the
compensation provided for in this Section, subject to deductions for income
taxes and other required deductions:
(a) SALARY. The Employer will pay the Executive a gross annual
salary (the "Base Salary") of US $200,000 to be paid in equal
installments in accordance with the payroll practices of the
Employer. The Employer will annually review the Base Salary.
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(b) BONUS. The Executive will be entitled to receive bonus
remuneration, if any, during the term of his or her
employment, as the Employer, in its sole discretion, may
authorize, which bonus shall be set forth in writing and
presented to the Executive. Bonus remuneration will be offered
and made available to Executive on the same basis as
comparable executives employed by Employer and its Affiliates.
(c) BENEFITS. The Executive shall be entitled to participate in
all of the benefit plans for senior employees of the Employer
in effect from time to time, as of and with effect from the
Effective Date. Immediately following the Effective Date,
Employer will continue the existing benefit plans of Inlogic
Ontario. Thereafter, Employer will transition the benefit
plans to comparable level and types as those offered by
Employer and its Affiliates so as to ensure substantially
equal benefits to the extent permitted and as available. The
Executive is entitled to take vacation and other time off in
accordance with Employer's "Time Off" Policy which will be
three (3) week's per annum, and up to an additional one (1)
week per annum on prior written consent of Executive's direct
report manager.
(d) EXPENSES. The Employer shall reimburse the Executive for all
reasonable travel and other business expenses incurred by him
or her in furtherance of the Executive's business in
accordance with the Employer's written policies and
procedures.
6. STOCK OPTIONS.
Independent of any shares of the Employer previously owned by
Executive, the Executive shall receive upon completion of the Transaction and as
part of his or her compensation package an aggregate of 54,247options to
purchase common stock of Daleen Technologies Inc. All options will be subject to
the provisions of the Daleen Technologies, Inc. Amended and Restated Stock
Incentive Plan and applicable stock option agreements. Other terms of the
options granted are as follows:
(a) CONVERSION OPTIONS. These stock options reflect the conversion
of stock options in Inlogic Ontario (prior to the closing of
the Transaction) into stock options of Daleen Technologies,
Inc. pursuant to the conversion formula associated with the
Transaction. Executive shall receive an option for 4,247
shares of Conversion Options. The grant date will be the
original date of grant from Inlogic Ontario and the exercise
price per share will be the original exercise price per share
as converted pursuant to the conversion formula associated
with the Transaction. Upon execution hereof, Employer will
accelerate one (1) year of vesting on all such Conversion
Options.
(b) TRANSACTION OPTIONS. These stock options reflect additional
stock options of Daleen Technologies, Inc. to be issued to the
Executive in connection with their continued employment with
the Employer pursuant to the provisions of this Agreement.
Executive shall receive an option for 50,000 shares of
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Transaction Options. The grant date will be the date of this
Agreement or as otherwise granted by the Board of Directors
(or a committee thereof) of Daleen Technologies, Inc., and the
exercise price per share will be the fair market value on the
date of grant.
(c) EXECUTIVE ACKNOWLEDGEMENT. Executive acknowledges that the
Conversion Options and the Transaction Options are granted to
the Executive in replacement and in full satisfaction of any
right the Executive might have under the options previously
granted to the Executive by the Employer and the Executive
acknowledges that the sole right to any options that he or she
has as of the date hereof is in the Conversion Options and
Transaction Options. Executive agrees that the terms of this
Agreement, and in particular this Section 6, supersede any
prior understanding or agreement in any way related to the
terms, conditions, vesting rights and/or value of any stock
options or other equity interests of or related to Inlogic
Ontario.
(d) ADDITIONAL STOCK OPTIONS. In addition to those set forth
above, Executive will, during the term hereof, have the
opportunity to earn additional stock option grants of Employer
or its Affiliates as those made available to comparable
executives employed by Employer and its Affiliates and based
upon performance hereunder, all at the sole discretion of the
Compensation Committee of the Affiliates of Employer.
7. CONFIDENTIALITY & NON-DISCLOSURE.
Executive acknowledges that Employer has developed, through the
expenditure of substantial time, effort and money, valuable trade secrets and
confidential and proprietary information relating to its business. Executive
further acknowledges that certain trade secrets and confidential business
information of Employer has been or will be disclosed to Executive in the course
of Executive's employment with Employer, and that the unauthorized disclosure or
use of such information would severely damage Employer's business. Therefore,
Executive agrees, subject to disclosure as may be required by law or a
governmental authority, as follows:
(a) The Executive agrees not to disclose the terms and conditions
of this Agreement to any other employee of the Employer or any
other party except the Executive may disclose such information
to his immediate family, financial advisors or
attorneys/lawyers.
(b) The Executive agrees to hold in confidence and not use or
disclose without the Employer's prior written consent (i) any
confidential information (technical or otherwise) that he or
she obtains or creates during the term of this Agreement which
pertains to any aspect of the Employer's business or (ii) any
information received in confidence by the Employer from a
third party, until such information becomes generally known by
the public. The Executive shall not make any unauthorized
copies of such information and as stated in Section 8 below,
will return to the Employer, upon termination of his or her
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employment or upon the Employer's request, all tangible forms
of such information, including, without limitation, research
and development projects and strategies, product strategies,
internet or intranet strategies, business or product
development strategies, financial information, partner and
customer relationships, and other information about former,
current, or prospective partners/customers, employee lists and
other information about former, current, or prospective
employees, software programs (source or object codes),
know-how, new product offerings, plans, projections,
confidential business information, copyrights, trade secrets,
and any other proprietary material (the "Confidential
Information").
8. SURRENDER OF EMPLOYER PROPERTY AND RECORDS.
Upon the termination of the Executive's employment, for any reason
whatsoever, and at any other time as requested by Employer, the Executive agrees
to surrender to Employer, in good condition, all records pertaining to
Employer's business operations and related to any work performed for Employer,
all Employer 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 within the Executive's possession or under the
Executive's control. Included are any documents or media containing the names,
addresses, and other information with regard to customers or potential customers
of the Employer.
9. INVENTION ASSIGNMENT.
(a) Executive agrees that any Development Executive conceives,
develops, creates or prepares in the course of Executive's
employment with Employer shall be a work made for hire.
Executive hereby grants, transfers and assigns to Employer all
of his right, 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 and patent application rights thereto, if any, and he
or she agrees that Employer may copyright said materials in
Employer's name and secure renewal, reissues and extensions of
such copyrights for such periods of time as the law may
permit. Executive hereby waives, as against Employer, its
successors and assigns and licensees, all his moral rights
which the Executive may have or will acquire in respect of the
copyright in any Developments. The Executive agrees to enforce
his or her moral rights as against others as directed by and
at the cost of Employer or its successor-in-title of the
copyright in the Developments. "Development" 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, related to
the business of the Employer or its Affiliates made or
conceived in the course of Executive's employment or
engagement whether solely or jointly by Executive during
Executive's employment whether or not subject to patent,
copyright or other forms of protection.
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(b) Items not assigned by this Section 9 are listed and described
on the attached "Schedule of Separate Works," for which the
parties agree to be effective must be signed by the Executive
and a duly authorized officer of Employer. Executive agrees
not to include any part of such items in the materials
Executive prepares for Employer unless and until such items
are licensed or assigned to Employer under separate written
agreement.
(c) At all times hereafter, Executive agrees promptly to disclose
to Employer all Developments, to execute separate written
assignments to Employer at Employer's request, and, at
Employer's cost, to assist Employer in obtaining patents or
copyrights in the U.S. and in all other countries, on any
Developments assigned to Employer that Employer, in its sole
discretion, seeks to patent or copyright. Executive also
agrees, at Employer's cost, to sign all documents, and do all
things necessary to obtain such patents or copyrights, to
further assign them to Employer, and upon Employer's
instruction and at Employer's cost, to reasonably protect
Employer against infringement by other parties at Employer's
expense with Employer prior approval.
(d) Executive shall keep complete, accurate, and authentic
information and records on all Developments in the manner and
form reasonably requested by Employer. Such information and
records, and all copies thereof, shall be the property of
Employer as to any Developments assigned to Employer.
Executive agrees to promptly surrender such information and
records at the request of Employer. All these materials will
be Confidential Information upon their creation.
10. NON-COMPETITION.
The Executive acknowledges that in the course of his or her employment
with Employer, Employer will give the Executive access to the Confidential
Information and the Executive's knowledge of the Confidential Information will
enable the Executive to put the Employer at a significant competitive
disadvantage if the Executive is employed or engaged by or becomes involved in a
Competitive Business. Accordingly, during the term of this Agreement and for a
period of twelve (12) months immediately following the termination of the
Executive's employment (unless for a shorter period of time as determined by
Employer as described below), for whatever reason, whether voluntary or
involuntary (with or without Cause), the Executive will not, without the written
consent of Employer, directly or indirectly, individually or in partnership or
in conjunction with any other person carry on, be engaged in, directly or
indirectly, in any manner whatsoever, including, without limitation, as an
employee, consultant, or advisor in any Competitive Business within North
America, provided however, an exceptions will be made following termination in
the case of (a) another business wherein the Executive is not working in a
competitive capacity and the competitive products and services that constitute a
Competitive Business are less than ten percent of such business' total revenue,
or (b) Executive's ownership of the shares of a publicly-traded company where
such ownership is less than 5% of the shares outstanding and
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Executive otherwise has no involvement, directly or indirectly, in the
operation, management or support of said company.
The Employer and Executive agree that in the case of a termination of the
Executive's employment without Cause as described in Section 13(e), the length
of the non-competition period in this Section 10 and the length of the
non-solicitation period in Section 11 may be shortened by the Employer in its
sole discretion, by the Employer providing the Executive with written notice
thereof within ten (10) business days of the effective date of termination. In
no event may the Employer reduce the non-competition and the non-solicitation
provision to less than three (3) months. Executive will be entitled to severance
pay from Employer during the duration of the non-competition period and the
non-solicitation period, as such duration may be adjusted hereunder, all in
accordance with Section 13(e). The Executive and Employer further agree that the
duration of the non-competition and the duration of the non-solicitation period
shall be equal and they shall run simultaneous with one another, so that by way
of example, if the Employer were to shorten the non-competition period to six
months following termination, then the non-solicitation period shall
automatically shorten to that same six months.
11. NON-SOLICITATION.
The Executive acknowledges the uniqueness of the customer and third
party relationships developed by the Employer and the unique opportunity that
the Executive's employment and the Executive's access to the Confidential
Information offers to interfere with such relationships. Accordingly, the
Executive will not while employed or engaged by Employer and for a period of
twelve (12) months following the termination of Executive's employment with
Employer (unless for a shorter period of time as determined by Employer as
described in the second paragraph of Section 10 above), whether the termination
is voluntary or involuntary (with or without Cause), or for any other reasons
whatsoever:
(a) directly or indirectly on Executive's own behalf or on behalf
of any other person or entity, solicit from, accept from, or
transact business which would constitute Competitive Business,
with any former, current or prospective customer or supplier
of Employer with which the Executive had substantial personal
contact on behalf of the Seller, or Employer during the
twenty-four (24) month period immediately preceding the
termination of the Executive's employment; or
(b) hire, solicit for hire, recruit, or retain the services of any
employee or consultant of Employer or any Affiliate of
Employer.
12. RECOGNITION.
The Executive hereby recognizes and expressly acknowledges that the
provisions of Sections 7, 10 and 11 grant to Employer only such reasonable
protection as is admittedly necessary to preserve the legitimate interests of
Employer and the Executive equally recognizes that the description of the
"Competitive Business" is reasonable. Executive acknowledges that the services
to be rendered by Executive hereunder are extraordinary and
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unique and are vital to the success of Employer, and that damages at law would
be an inadequate remedy for any breach or threatened breach of this Agreement by
Executive. Therefore, in the event of a breach or threatened breach by Executive
of any provision of this Agreement, then Employer may be entitled, in addition
to all other rights or remedies, to equitable relief, including temporary or
permanent injunction to restrain such breach.
13. TERMINATION OF EMPLOYMENT.
This Agreement may be terminated at any time for the following reasons:
(a) by the Employer for Cause;
(b) by the Employer in the event of the death of the Executive;
(c) by the Employer in the event of the Disability of the
Executive in which case the Executive shall be entitled, to
the extent he qualifies, to the disability benefits for
employees of the Employer in effect at such time in lieu of
any other compensation whatsoever in respect of the
termination of the Executive's employment;
(d) upon mutual agreement of the parties hereto;
(e) without Cause and other than for the reasons in subsections
(a) through (d) above by the Employer providing to the
Executive pay in lieu of notice (the "severance pay") in the
form of the continuation of the Executive's Base Salary during
the duration of the non-competition and non-solicitation
provisions set forth in Sections 10 and 11 herein, which as
described in Section 10 will be no longer than twelve (12)
months and no shorter than three (3) months, as determined by
Employer pursuant to Section 10. Notwithstanding the
foregoing, to the extent the Employment Standards Act
(Ontario) mandates the payment of Base Salary for a period
longer than three (3) months, then such period shall be deemed
to be the minimum period for the purposes of this Section
13(e) and Sections 10 and 11. The Executive agrees that his or
her only entitlement on termination without Cause is that
agreed to in this Agreement and for greater certainty and
except as provided herein, the Employee is not entitled to
notice or pay in lieu of notice or severance pay under common
law; and
(f) the Executive may terminate this Agreement at any time upon
thirty (30) days prior written notice to the Employer,
provided, however, the Executive shall continue to work for
the Employer during such notice period unless otherwise
directed by the Employer.
14. EXECUTIVE REPRESENTATIONS, WARRANTIES, AND ACKNOWLEDGEMENTS.
Executive represents and warrants to Employer that he is fully
empowered to enter and perform his or her obligations under this Agreement and,
without limitation, that he or she is under no restrictive covenants to any
person or entity that will be violated by his or her
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entering into and performing this Agreement, and that this Agreement constitutes
a valid and legally binding obligation of the Executive enforceable in
accordance with its terms. The Executive further represents and warrants that in
the performance of his or her duties he or she will not make unauthorized use of
any confidential information of any third party or knowingly infringe the
intellectual property rights of any third party. The Executive shall indemnify
Employer upon demand for and against any and all judgements, losses, claims,
damages, costs (including without limitation all legal fees and costs, even if
incident to appeals) incurred or suffered by the Employer 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 acknowledgement made in this section to be true and
correct at all times. The Executive further represents that he is not a resident
in the United States and is not a US Person.
15. ENTIRE AGREEMENT.
This Agreement represents the entire understanding and agreement
between the parties with respect to the subject matter hereof, and supersedes
all other agreements, negotiations, understandings and representations (if any)
made by and between such parties.
16. 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.
17. GOVERNING LAW AND VENUE.
This Agreement is to be governed by and construed and enforced in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein. The parties acknowledge that a substantial portion of
negotiations, anticipated performance and execution of this Agreement occurred
or shall occur in Ontario, Canada and that, therefore, without limiting the
jurisdiction or venue of any other federal or provincial 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 Province of Ontario; (b) consents to the
jurisdiction of each such court in any such suit, action or proceeding; and (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.
18. NOTICES.
Any notice, request, demand or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been given
if delivered or sent by facsimile transmission, upon receipt, or if sent by
registered or certified mail, upon the sooner of the date on which received is
acknowledged or the expiration of three (3) days after deposit in their post
office facilities properly addressed with postage prepaid. All notices to a
party will be sent to the address set forth below or to such other address or
person as such party may designate by notice to each party hereunder:
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To the Employer:
c/o
Daleen Technologies, Inc.
902 Clint Moore Road
Suite 230
Boca Raton, FI 33487
Attention: Human Resources Department
To the Executive George Timmes.
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 provision of this Agreement 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, in the event the
Executive's employment and this Agreement is terminated, whether voluntarily or
involuntarily (with or without Cause), each party shall remain bound by the
provisions of this Agreement which by their terms impose obligations upon that
party that extend beyond the termination of this Agreement more particularly,
but not limited to, Sections 7, 10 and 11 of this Agreement.
22. WAIVERS.
The failure or delay of either party at any time to require performance
by the other party of any provision of this Agreement, even if known, shall not
affect the right of that party to require performance of that provision or to
exercise any right, power or remedy hereunder, and any waiver by a 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 either party in any case shall, of itself, entitle such
party to any other or further notice or demand in similar or other
circumstances.
23. COUNTERPARTS.
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This Agreement may be executed by the parties in one or more
counterparts, each of which when so executed and delivered shall be deemed to be
an original and such counterparts shall together constitute one and the same
instrument.
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IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
Effective Date.
INLOGIC SOFTWARE, INC.
By: /s/ [ILLEGIBLE]
------------------------------------
Authorized Signing Officer
12/15/99 /s/ GEORGE B. TIMMES
- ----------------------------------- ---------------------------------------
Date Employee
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SCHEDULE OF SEPARATE WORKS
The following are works that are not assigned by section 9 of the
Employment Agreement, in which Executive has any right, title or interest, and
which were conceived or written either wholly or in part by Executive, prior to
or outside the scope of Executive's employment by Employer or Seller.
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 Executive's knowledge.
12/15/99 /S/ GEORGE B. TIMMES
- ---------------------------------- ---------------------------------------
Date Executive
DECEMBER 16, 1999 [ILLEGIBLE]
- ---------------------------------- ---------------------------------------
Date Employer (name and title)
<PAGE>
SCHEDULE "A"
EXECUTIVE'S GENERAL ROLES AND RESPONSIBILITIES
George Timmes
VP of Marketing & Product Management
As Vice President of Marketing & Product Management, your position will be based
in Boca and report directly to Dave Corey. You will be responsible for all
aspects of Daleen's product management and marketing, including participation in
the corporation strategic plan development, product life-cycle management,
competitor and competitive intelligence, Daleen solution partner relationship
management, marketing communications management, corporate branding and
positioning.
EXHIBIT 10.37
DALEEN TECHNOLOGIES, INC.
AMENDED & RESTATED
1999 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. Amended & Restated 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.
2.5 COMPANY means Daleen Technologies, Inc., a Delaware
corporation, and any successor to such organization.
2.6 DIRECTOR means a member of the Board.
2.7 EMPLOYEE means an employee of the Company, a Subsidiary or a
Parent.
2.8 EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.
2.9 EXERCISE PRICE means the price which shall be paid to purchase
one (1) Share upon the exercise of an Option granted under this Plan.
2.10 FAIR MARKET VALUE of each Share on any date 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 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
<PAGE>
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.
2.11 INSIDER means an individual who is, on the relevant date, an
officer, director or ten percent (10%) beneficial owner of any class of the
Company's equity securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the Exchange Act.
2.12 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.
2.13 KEY PERSON means (i) a member of the Board who is not an
Employee, (ii) a consultant, distributor or other person who has rendered or
committed to render 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.
2.14 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.
2.15 OPTION means an ISO or a Non-ISO.
2.16 OUTSIDE DIRECTOR means a Director who is not an Employee and
who qualifies as (1) a "non-employee director" under Rule 16b-3(b)(3) under the
1934 Act, as amended from time to time, and (2) an "outside director" under Code
/section/162(m) and the regulations promulgated thereunder.
2.17 PARENT means any corporation which is a parent of the Company
(within the meaning of Code /section/424).
2.18 PARTICIPANT means an individual who receives a Stock Incentive
hereunder.
2.19 PERFORMANCE-BASED EXCEPTION means the performance-based
exception from the tax deductibility limitations of Code /section/162(m).
2.20 PLAN means the Daleen Technologies, Inc. Amended & Restated
2000 Stock Incentive Plan, as may be amended from time to time.
2.21 SHARE means a share of the Common Stock of the Company.
2.22 STOCK INCENTIVE means an ISO, a Non-ISO, a Restricted Stock
Award or a Stock Appreciation Right.
2.23 STOCK INCENTIVE AGREEMENT means an agreement between the
Company and a Participant evidencing an award of a Stock Incentive.
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2.24 SUBSIDIARY means any corporation which is a subsidiary of the
Company (within the meaning of Code /section/424(f)).
2.25 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.
2.26 TEN PERCENT SHAREHOLDER means a person who owns (after taking
into account the attribution rules of Code /section/424(d)) more than ten
percent (10%) of the total combined voting power of all classes of shares of
either the Company, a Subsidiary or a Parent.
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 number of Reserved Shares (as
calculated below). The initial number of Reserved Shares shall be 5,648,881
(five million, six hundred forty-eight thousand, eight hundred eighty one).
Commencing on January 1, 2001 and continuing on each January 1 thereafter, the
number of Reserved Shares shall be increased each year, on a cumulative basis,
by 5,000,000 Shares (or, if less, the maximum number of Shares permitted based
on the limitations set forth in the following sentence), all as adjusted
pursuant to Section 11. Notwithstanding the foregoing, in no event shall the
increase in the number of Reserved Shares from one fiscal year to the next
exceed a number of Shares that would cause the total number of Reserved Shares
to exceed 20% of the total number of Fully Diluted Shares of Common Stock (as
defined below) calculated as of 5:00 p.m., eastern time, on the immediately
preceding December 31. The term "Fully Diluted Shares of Common Stock
Outstanding" shall mean the shares of Common Stock outstanding calculated on a
fully diluted basis, including without limitation shares of Common Stock
actually outstanding plus shares of Common Stock issuable in exchange for
convertible securities and upon exercise of outstanding options and warrants,
whether or not such convertible securities, options and warrants are then vested
or otherwise convertible. Such Reserved Shares shall be reserved, to the extent
that the Company deems appropriate, from authorized but unissued Shares, and
from Shares which have been reacquired by the Company. Furthermore, any Shares
subject to a Stock Incentive which remain after the cancellation, expiration or
exchange of such Stock Incentive thereafter shall again become available for use
under this Plan, but any Surrendered Shares which remain after the surrender of
an ISO or a Non-ISO under Section 8 shall not again become available for use
under this Plan. Notwithstanding anything herein to the contrary, no Participant
may be granted Options or Stock Appreciation Rights covering an aggregate number
of Shares in excess of 500,000 (five hundred thousand) in any calendar year.
SECTION 4.
EFFECTIVE DATE
The effective date of this amended and restated Plan, as documented
hereby, shall be the date it is adopted by the Board, as noted in resolutions
effectuating such adoption, 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. The provisions of this amended and restated Plan shall
apply to all Stock Incentives granted under this Plan on and after the effective
date of this Plan. Prior versions of this Plan shall continue to govern Stock
Incentives granted under such versions.
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SECTION 5.
ADMINISTRATION
5.1 GENERAL 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 the terms and provisions
of this Plan, 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.
5.2 AUTHORITY OF THE BOARD. Except as limited by law or by the
Articles of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Board shall have full power to select Employees and Key
Persons who shall participate in the Plan, to determine the sizes and types of
Stock Incentives in a manner consistent with the Plan, to determine the terms
and conditions of Stock Incentives in a manner consistent with the Plan, to
construe and interpret the Plan and any agreement or instrument entered into
under the Plan, to establish, amend or waive rules and regulations for the
Plan's administration, and to amend the terms and conditions of any outstanding
Stock Incentives as allowed under the Plan and such Stock Incentives. Further,
the Board may make all other determinations which may be necessary or advisable
for the administration of the Plan.
5.3 DELEGATION OF AUTHORITY. The Board may delegate its authority
under the Plan, in whole or in part, to a Committee (the Compensation Committee)
appointed by the Board consisting of not less than two (2) directors. The
members of the Committee shall be appointed from time to time by, and shall
serve at the discretion of, the Board. The Committee (if appointed) shall act
according to the policies and procedures set forth in the Plan and to those
policies and procedures established by the Board, and the Committee shall have
such powers and responsibilities as are set forth by the Board. Reference to the
Board in this Plan shall specifically include reference to the Committee where
the Board has delegated its authority to the Committee, and any action by the
Committee pursuant to a delegation of authority by the Board shall be deemed an
action by the Board under the Plan. Notwithstanding the above, the Board may
assume the powers and responsibilities granted to the Committee at any time, in
whole or in part. With respect to Committee appointments and composition, only a
Committee (or a sub-committee thereof) comprised solely of two (2) or more
Outside Directors may grant Stock Incentives which will meet the
Performance-Based Exception, and only a Committee comprised solely of Outside
Directors may grant Stock Incentives to Insiders that will be exempt from
Section 16(b) of the Exchange Act.
5.4 DECISIONS BINDING. All determinations and decisions made by
the Board (or its delegate) pursuant to the provisions of this Plan and all
related orders and resolutions of the Board shall be final, conclusive and
binding on all persons, including the Company, its stockholders, Directors,
Employees, Key Persons, Participants, and their estates and beneficiaries.
SECTION 6.
ELIGIBILITY
Employees and Key Persons selected by the Board 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 to receive a grant of ISO's.
SECTION 7
TERMS OF STOCK INCENTIVES
7.1 TERMS AND CONDITIONS OF ALL STOCK INCENTIVES.
(a) The Board, in its absolute discretion, shall grant Stock
Incentives under this Plan from time to time and shall have the right to grant
new Stock Incentives in exchange for outstanding Stock Incentives. Stock
Incentives shall be granted to Employees or Key Persons selected by the Board,
and the Board shall be
Daleen Technologies, Inc. Amended & Restated Stock Incentive Plan
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<PAGE>
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 shall be determined by the Board in its sole discretion, subject to
the provisions of Section 3 as to the total number of shares available for
grants under the Plan.
(c) Each Stock Incentive shall be evidenced by a Stock
Incentive Agreement executed by the Company and the Participant, which shall be
in such form and contain such terms and conditions as the Board in its
discretion may, subject to the provisions of the Plan, from time to time
determine.
(d) The date a Stock Incentive is granted shall be the date on
which the Board has approved the terms and conditions of the Stock Incentive
Agreement and has determined the recipient of the Stock Incentive and the number
of Shares covered by the Stock Incentive and has taken all such other action
necessary to complete the grant of the Stock Incentive.
7.2 TERMS AND CONDITIONS OF OPTIONS. Each grant of an Option shall
be evidenced by a Stock Incentive Agreement which shall:
(a) specify whether the Option is an ISO or Non-ISO; and
(b) incorporate such other terms and conditions as the Board,
acting in its absolute discretion, deems consistent with the terms of this Plan,
including (without limitation) a restriction on the number of Shares subject to
the Option which first become exercisable or subject to surrender during any
calendar year.
In determining Employee(s) or Key Person(s) to whom an Option
shall be granted and the number of Shares to be covered by such Option, the
Board may take into account the recommendations of the 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 Board, in its sole discretion, in connection with
accomplishing the purpose of this Plan. An Employee or Key Person who has been
granted an Option to purchase Shares, whether under this Plan or otherwise, may
be granted one or more additional Options. If the Board grants an ISO and a
Non-ISO to an Employee on the same date, the right of the Employee to exercise
or surrender one such Option shall not be conditioned on his or her failure to
exercise or surrender the other such Option.
(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 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. Any
Stock Incentive intended to meet the Performance-Based Exception must be granted
with an Exercise Price equivalent to or greater than the Fair Market Value of
the Shares subject thereto.
(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
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<PAGE>
(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; provided, however, in no event may an
Option which is an ISO provide for the exercise of the Option later than ninety
(90) days following a termination of employment or later than one year following
a termination of employment on account of disability. The Employee's rights, if
any, upon termination of employment will be set forth in the applicable Stock
Incentive Agreement.
(c) PAYMENT. Options shall be exercised by the delivery of a
written notice of exercise to the Company, setting forth the number of Shares
with respect to which the Option is to be exercised accompanied by full payment
for the Shares. Payment for shares of Stock purchased pursuant to exercise of an
Option shall be made in cash or, unless prohibited by the Stock Incentive
Agreement, by delivery to the Company of a number of Shares which have been
owned and completely paid for by the holder for at least six (6) months prior to
the date of exercise (I.E., "mature shares" for accounting purposes) having an
aggregate Fair Market Value equal to the amount to be tendered, or a combination
thereof. In addition, unless prohibited by the Stock Incentive Agreement, the
Option may be exercised through a brokerage transaction following registration
of the Company's equity securities under Section 12 of the Securities Exchange
Act of 1934 as permitted under the provisions of Regulation T applicable to
cashless exercises promulgated by the Federal Reserve Board. However,
notwithstanding the foregoing, with respect to any Option recipient who is an
Insider, a tender of shares or a cashless exercise must (1) have met the
requirements of an exemption under Rule 16b-3 promulgated under the Exchange
Act, or (2) be a subsequent transaction the terms of which were provided for in
a transaction initially meeting the requirements of an exemption under Rule
16b-3 promulgated under the Exchange Act. Unless the Stock Incentive Agreement
provides otherwise, the foregoing exercise payment methods shall be subsequent
transactions approved by the original grant of an Option. Except as provided in
subparagraph (f) below, payment shall be made at the time that the Option or any
part thereof is exercised, and no Shares shall be issued or delivered upon
exercise of an Option until full payment has been made by the Participant. The
holder of an Option, as such, shall have none of the rights of a stockholder.
Notwithstanding the above, and in the sole discretion of the
Board, an Option may be exercised as to a portion or all (as determined by the
Board) of the number of Shares specified in the Stock Incentive Agreement by
delivery to the Company of a promissory note, such promissory note to be
executed by the Participant and which shall include, with such other terms and
conditions as the Board shall determine, provisions in a form approved by the
Board under which: (i) the balance of the aggregate purchase price shall be
payable in equal installments over such period and shall bear interest at such
rate (which shall not be less than the prime bank loan rate as determined by the
Board) as the Board shall approve, and (ii) the Participant shall be personally
liable for payment of the unpaid principal balance and all accrued but unpaid
interest.
(d) CONDITIONS TO EXERCISE OF AN OPTION. Each Option granted
under the Plan shall be exercisable at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Board shall
specify in the Stock Incentive Agreement; provided, however, that subsequent to
the grant of an Option, the Board, at any time before complete termination of
such Option, may accelerate the time or times at which such Option may be
exercised in whole or in part. The Board may impose such restrictions on any
Shares acquired pursuant to the exercise of an Option as it may deem advisable,
including, without limitation, vesting or performance-based restrictions,
restrictions under applicable federal securities laws, under the requirements of
any stock exchange or market upon which such Shares are then listed and/or
traded, and under any blue sky or state securities laws applicable to such
Shares.
(e) TRANSFERABILITY OF OPTIONS. An Option shall not be
transferable or assignable except by will or by the laws of descent and
distribution and shall be exercisable, during the Participant's lifetime, only
by the Participant, or in the event of the disability of the Participant;
provided, however, that in the event the Participant is incapacitated and unable
to exercise his or her Option, such Option may be exercised by such
Participant's legal guardian, legal representative, or other representative whom
the Board deems appropriate based on applicable facts and circumstances. The
determination of incapacity of a Participant and the determination of the
appropriate representative of the Participant who shall be able to exercise the
Option if the
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<PAGE>
Participant is incapacitated shall be determined by the Board in its sole and
absolute discretion. Notwithstanding the foregoing, a Non-ISO may also be
transferred as a bona fide gift to one or more members of the Optionee's family
or to a trust for the benefit of one or more family members, in which case the
transferee shall be subject to all provisions of the Plan, the Stock Incentive
Agreement and the Exercise and Shareholder Agreement provided by the Company in
connection with the exercise of the Option and purchase of Shares. In the event
of such a gift, the Optionee shall promptly notify the Board of such transfer
and deliver to the Board such written documentation as the Board may in its
discretion request, including, without limitation, the written acknowledgment of
the donee that the donee is subject to the provisions of the Plan, the Stock
Incentive Agreement and the Exercise and Shareholder Agreement.
(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 Code
ss.424(a) and the regulations thereunder and may contain such other terms and
conditions as the Board may prescribe to cause such substitute Option to contain
as nearly as possible the same terms and conditions (including the applicable
vesting and termination provisions) as those contained in the previously issued
stock option being replaced thereby.
7.3 TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS. A Stock
Appreciation Right may be granted in connection with all or any portion of a
previously or contemporaneously granted Option or not in connection with an
Option. A Stock Appreciation Right shall entitle the Participant to receive upon
exercise or payment the excess of: (I) the Fair Market Value of a specified
number of Shares at the time of exercise, over (II) a specified price which
shall be not less than the Exercise Price for that number of Shares in the case
of a Stock Appreciation Right granted in connection with a previously or
contemporaneously granted Option, or in the case of any other Stock Appreciation
Right not less than one hundred percent (100%) of the Fair Market Value of that
number of Shares at the time the Stock Appreciation Right was granted. A Stock
Appreciation Right granted in connection with an Option may only be exercised to
the extent that the related Option has not been exercised. The exercise of a
Stock Appreciation Right shall result in a pro rata surrender of the related
Option to the extent the Stock Appreciation Right has been exercised.
(a) PAYMENT. Upon exercise or payment of a Stock Appreciation
Right, the Company shall pay to the Participant the appreciation in cash or
Shares (at the aggregate Fair Market Value on the date of payment or exercise)
as provided in the Stock Incentive Agreement or, in the absence of such
provision, as the Board may determine.
(b) CONDITIONS TO EXERCISE. Each Stock Appreciation Right
granted under the Plan shall be exercisable at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Board shall
specify in the Stock Incentive Agreement; provided, however, that subsequent to
the grant of a Stock Appreciation Right, the Board, at any time before complete
termination of such Stock Appreciation Right, may accelerate the time or times
at which such Stock Appreciation Right may be exercised in whole or in part.
(c) TRANSFERABILITY OF STOCK APPRECIATION RIGHTS. Except as
otherwise provided in a Participant's Stock Incentive Agreement, no Stock
Appreciation Right granted under the Plan may be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, except as otherwise provided in a
Participant's Stock Incentive Agreement, all Stock Appreciation Rights granted
to a Participant under the Plan shall be exercisable, during the Participant's
lifetime, only by the Participant; provided, however, that in the event the
Participant is incapacitated and unable to exercise his or her Stock
Appreciation Right, such Stock Appreciation Right may be exercised by such
Participant's legal guardian, legal representative, or other representative whom
the Board deems appropriate based on applicable facts and circumstances.
Notwithstanding the foregoing, a Stock Appreciation Right which is granted in
connection with the grant of a Non-ISO may be transferred, but only with the
Non-ISO and only as a bona fide gift, to one or more members of the Optionee's
family or to a trust for the benefit of one or more family members, in which
case the transferee shall be subject to all provisions of the Plan and the Stock
Incentive Agreement. In the event of such a gift, the Optionee shall promptly
notify the Board of such transfer and deliver to the Board such written
documentation as the Board may in its discretion request, including, without
limitation, the written acknowledgment of the donee that the donee is subject to
the provisions of the Plan and the Stock Incentive Agreement. The determination
of incapacity of a Participant and the determination of the appropriate
representative of the Participant shall be determined by the Board in its sole
and absolute discretion.
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<PAGE>
7.4 TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS. Shares
awarded pursuant to Restricted Stock Awards shall be subject to such
restrictions as determined by the Board for periods determined by the Board.
Unless the applicable Stock Incentive Agreement provides otherwise, holders of
Restricted Stock Awards shall be entitled to vote and receive dividends during
the periods of restriction to the same extent as holders of unrestricted Common
Stock. The Board shall have the power to permit, in its discretion, an
acceleration of the expiration of the applicable restriction period with respect
to any part or all of the Shares awarded to a Participant. The Board may require
a cash payment from the Participant in an amount no greater than the aggregate
Fair Market Value of the Shares awarded determined at the date of grant in
exchange for the grant of a Restricted Stock Award or may grant a Restricted
Stock Award without the requirement of a cash payment.
SECTION 8.
SURRENDER OF OPTIONS
8.1 GENERAL RULE. The Board, acting in its absolute discretion,
may incorporate a provision in a Stock Incentive Agreement to allow an Employee
or Key Person to surrender his or Option in whole or in part in lieu of the
exercise in whole or in part of that Option on any date that:
(a) the Fair Market Value of the Shares subject to such Option
exceeds Exercise Price for such Shares, and
(b) the Option to purchase such Shares is otherwise
exercisable.
8.2 PROCEDURE. The surrender of an Option in whole or in part
shall be effected by the delivery of the Stock Incentive Agreement to the Board,
together with a statement signed by the Participant which specifies the number
of Shares ("Surrendered Shares") as to which the Participant surrenders his or
her Option and how he or she desires payment be made for such Surrendered
Shares.
8.3 PAYMENT. A Participant in exchange for his or her Surrendered
Shares shall receive a payment in cash or in Shares, or in a combination of cash
and Shares, equal in amount on the date such surrender is effected to the excess
of the Fair Market Value of the Surrendered Shares on such date over the
Exercise Price for the Surrendered Shares. The Board, acting in its absolute
discretion, can approve or disapprove a Participant's request for payment in
whole or in part in cash and can make that payment in cash or in such
combination of cash and Shares as the Board deems appropriate. A request for
payment only in Shares shall be approved and made in Shares to the extent
payment can be made in whole shares of Shares and (at the Board's discretion) in
cash in lieu of any fractional Shares.
8.4 RESTRICTIONS. Any Stock Incentive Agreement which incorporates
a provision to allow a Participant to surrender his or her Option in whole or in
part also shall incorporate such additional restrictions on the exercise or
surrender of such Option as the Board deems necessary to satisfy the conditions
to the exemption under Rule 16b-3 (or any successor exemption) to Section 16(b)
of the Exchange Act.
SECTION 9.
SECURITIES REGULATION
Each Stock Incentive Agreement may provide that, upon the receipt of
Shares as a result of the surrender or exercise of a Stock Incentive, the
Participant shall, if so requested by the Company, hold such Shares for
investment and not with a view of resale or distribution to the public and, if
so requested by the Company, shall deliver to the Company a written statement
satisfactory to the Company to that effect. Each Stock Incentive Agreement may
also provide that, if so requested by the Company, the Participant shall make a
written representation to the Company that he or she will not sell or offer to
sell any of such Shares unless a registration statement shall be in effect with
respect to such Shares under the Securities Act of 1933, as amended ("1933
Act"), and any applicable state securities law or, unless he or she shall have
furnished to the Company an opinion, in form and substance satisfactory to the
Company, of legal counsel acceptable to the Company, that such registration is
not required. Certificates representing the Shares transferred upon the exercise
or surrender of a Stock Incentive granted under this Plan may at the discretion
of the Company bear a
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<PAGE>
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.
SECTION 11.
ADJUSTMENT
The number of Shares reserved under Section 3 of this Plan, the limit
on the number of Shares which may be granted during a calendar year to any
individual under Section 3 of this Plan, the number of Shares subject to Stock
Incentives granted under this Plan, and the Exercise Price of any Options, shall
be adjusted by the Board in an equitable manner to reflect any change in the
capitalization of the Company, including, but not limited to, such changes as
stock dividends or stock splits. Furthermore, the Board shall have the right to
adjust (in a manner which satisfies the requirements of Code 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 Board shall be
conclusive and binding on all affected persons and, further, shall not
constitute an increase in the number of Shares reserved under Section 3.
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 Board, or as is otherwise provided in the Stock
Incentive Agreements, may be canceled unilaterally by the Company in exchange
for whole Shares (or, subject to satisfying the conditions of an exemption under
Rule 16b-3 or any successor exemption to Section 16(b) of the Exchange Act, for
the whole Shares and cash in lieu of any 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 Board 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
Daleen Technologies, Inc. Amended & Restated Stock Incentive Plan
Page 9 of 11
<PAGE>
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 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 Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company as a
condition precedent for the fulfillment of any Stock Incentive, an amount
sufficient to satisfy Federal, state and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of this Plan Whenever Shares are to be issued or cash paid
to a Participant upon exercise of an Option, the Company shall have the right to
require the Participant to remit to the Company, as a condition of exercise of
the Option, an amount sufficient to satisfy federal, state and local withholding
tax requirements at the time of exercise. However, notwithstanding the
foregoing, to the extent that a Participant is an Insider, satisfaction of
withholding requirements by having the Company withhold Shares may only be made
to the extent that such withholding of Shares (1) has met the requirements of an
exemption under Rule 16b-3 promulgated under the Exchange Act, or (2) is a
subsequent transaction the terms of which were provided for in a transaction
initially meeting the requirements of an exemption under Rule 16b-3 promulgated
under the Exchange Act. Unless the Stock Incentive Agreement provides otherwise,
the withholding of shares to satisfy federal, state and local withholding tax
requirements shall be a subsequent transaction approved by the original grant of
a Stock Incentive. Notwithstanding the foregoing, in no event shall payment of
withholding taxes be made by a retention of Shares by the Company unless the
Company retains only Shares with a Fair Market Value equal to the minimum amount
of taxes required to be withheld.
14.4 NOTIFICATION OF DISQUALIFYING DISPOSITIONS OF ISO OPTIONS. If
a Participant sells or otherwise disposes of any of the Shares acquired pursuant
to an Option which is an ISO on or before the later of (1) the date two (2)
years after the date of grant of such Option, or (2) the date one (1) year after
the exercise of such Option, then the Participant shall immediately notify the
Company in writing of such sale or disposition and shall cooperate with the
Company in providing sufficient information to the Company for the Company to
properly report such sale or disposition to the Internal Revenue Service. The
Participant acknowledges and agrees that he may be subject to income tax
withholding by the Company on the compensation income recognized by Participant
from any such early disposition by either (or both) his payment to the Company
in cash or his payment out of the current wages or earnings otherwise payable to
him by the Company, and agrees that he shall include the compensation from such
early disposition in his gross income for federal tax purposes. Participant also
acknowledges that the Company may condition the exercise of any Option which is
an ISO on the Participant's express written agreement with these provisions of
this Plan.
Daleen Technologies, Inc. Amended & Restated Stock Incentive Plan
Page 10 of 11
<PAGE>
14.5 TRANSFER. The transfer of an Employee between or among the
Company, a Subsidiary or a Parent shall not be treated as a termination of his
or her employment under this Plan.
14.5 CONSTRUCTION. This Plan shall be construed under the laws of
the State of Delaware.
Daleen Technologies, Inc. Amended & Restated Stock Incentive Plan
Page 11 of 11
<PAGE>
POSITION TITLE: SR. ACCOUNTANT (IN CHARGE OF PAYROLL, TAXES & FIXED ASSETS)
DESCRIPTION
The Sr. Accountant is responsible for the management of the payroll and tax
departments, and the area of fixed assets.
REPORTING STRUCTURE
The Senior Accountant reports to the Accounting Manager.
RESPONSIBILITIES:
/Bullet/ Review processing of fixed assets, monthly depreciation, and reporting
requirements.
/Bullet/ Review processing of payroll and monthly maintenance.
/Bullet/ Prepare monthly sales commissions.
/Bullet/ Prepare monthly account analysis and adjust journal entries for payroll
and tax accounts.
/Bullet/ Prepare and submit monthly, quarterly, and annual payroll tax returns.
/Bullet/ Keep up with changes in income and payroll tax laws that affect the
company.
/Bullet/ Prepare and submit monthly sales tax return.
/Bullet/ Perform payroll and sales tax correspondence with states and local
governments.
/Bullet/ Research all relevant tax issues.
/Bullet/ Assist independent accountants with preparation of the annual tax
return.
/Bullet/ Assist independent accountants with quarterly and annual review /
audit.
/Bullet/ Assist Director of Accounting and Accounting Managers with various
reports and projects as required.
/Bullet/ Assume other responsibilities as assigned.
/Bullet/ Work with other departments as needed.
/Bullet/ Perform timely reviews for team members.
REQUIREMENTS:
/Bullet/ Four to five years of accounting experience including supervising
people.
/Bullet/ Bachelors degree in accounting.
/Bullet/ CPA required.
/Bullet/ Excellent communication and organization skills.
<PAGE>
GOALS & OBJECTIVES FOR 2000
SR. ACCOUNTANT (IN CHARGE OF PAYROLL, TAXES & FIXED ASSETS)
GOALS / OBJECTIVES:
/Bullet/ Upgrade software. This will enhance all areas of responsibilities.
/Bullet/ Train another person to process bi-weekly payroll. This will provide
accounting with better backup and support.
/Bullet/ Train another person to process monthly maintenance. This will provide
accounting with better backup and support.
/Bullet/ Train another person to process monthly payroll and sales tax returns.
This will provide accounting with better backup and support.
/Bullet/ Revamp monthly sales commission reports.
/Bullet/ Process Canadian payroll.
/Bullet/ Change salaried employees to "exception reporting" timesheets.
/Bullet/ Revamp submitting time off. All employees submit time off at beginning
of year. This will provide better planning company wide. This will
speed up payroll processing by using "exception reporting" timesheets.
Only changes in time off will need to resubmit a timesheet.
/Bullet/ Submit monthly, quarterly, and annual payroll tax payments & returns
electronically to IRS and states with a large number of employees. This
will speed up processing.
/Bullet/ Attend seminars and training to keep up with changes in income and
payroll tax laws that affect the company. Need this to keep CPA
certificate as well as keep current with changing laws.
/Bullet/ Dedicate more time in the direction of tax and supervise payroll and
fixed assets as the company grows. This will provide the company with a
tax department.
EXHIBIT 21.1
SUBSIDIARIES
Daleen International, Inc. - incorporated in U.S. Virgin Islands
Daleen IAC, LLC - incorporated in Delaware
Daleen Canada Corporation - incorporated in Nova Scotia
Daleen Callco Corporation - incorporated in Nova Scotia
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Daleen Technologies, Inc.
We consent to incorporation by reference in the registration statement on Form
S-8 (No. 333-89121) of Daleen Technologies, Inc. of our report dated January 24,
2000, relating to the consolidated balance sheets of Daleen Technologies, Inc.
and subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of operations, redeemable preferred stock and stockholders' (deficit)
equity, and cash flows for each of the years in the three-year period ended
December 31, 1999 and the related financial statement schedule, which report
appears in the Company's 1999 Annual Report on Form 10-K.
/s/ KPMG LLP
Fort Lauderdale, Florida
March 29, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF DALEEN TECHNOLOGIES INC. FOR THE TWELVE MONTHS
ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 52,852
<SECURITIES> 9,385
<RECEIVABLES> 4,380
<ALLOWANCES> 707
<INVENTORY> 0
<CURRENT-ASSETS> 70,625
<PP&E> 8,269
<DEPRECIATION> 3,424
<TOTAL-ASSETS> 133,881
<CURRENT-LIABILITIES> 14,424
<BONDS> 0
0
0
<COMMON> 214
<OTHER-SE> 119,243
<TOTAL-LIABILITY-AND-EQUITY> 133,881
<SALES> 14,055
<TOTAL-REVENUES> 20,725
<CGS> 1,018
<TOTAL-COSTS> 7,785
<OTHER-EXPENSES> 29,609
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> 15,340
<INCOME-TAX> 0
<INCOME-CONTINUING> 15,340
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,340
<EPS-BASIC> 1.06
<EPS-DILUTED> 1.06
</TABLE>
