0000950135-01-503240.txt : 20011101 0000950135-01-503240.hdr.sgml : 20011101 ACCESSION NUMBER: 0000950135-01-503240 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20011031 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20011031 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELANO TECHNOLOGY CORP CENTRAL INDEX KEY: 0001100043 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] STATE OF INCORPORATION: A6 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-94505 FILM NUMBER: 1771132 BUSINESS ADDRESS: STREET 1: 302 TOWN CENTRE BLVD. STREET 2: MARKHAM, ONTARIO, L3R OE8 CITY: ONTARIO CANADA STATE: A6 ZIP: 00000 BUSINESS PHONE: 905-947-2222 MAIL ADDRESS: STREET 1: 302 TOWN CENTRE BLVD STREET 2: MARKHAM CITY: ONTARIO STATE: A6 ZIP: 00000 8-K 1 b41027dte8-k.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): October 31, 2001 Delano Technology Corporation (Exact Name of Registrant as Specified in Charter) Ontario, Canada 333-94505 98-0206122 (State or Other Jurisdiction of (Commission (IRS Employer Incorporation) File Number) Identification No.) 302 Town Centre Boulevard Markham, Ontario, Canada L3R 0E8 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (905) 947-2222 Item 5. OTHER EVENTS. On October 31, 2001, Delano Technology Corporation (the "Company") announced that the Company has named Vikas Kapoor as the Chief Executive Officer of the Company and certain subsidiaries of the Company. Mr. Kapoor has served as a member of the Company's Board of Directors since July 2001. Prior to accepting the position of CEO of the Company, Mr. Kapoor was Chairman and Chief Executive Officer of Opera Ventures, a privately held firm which specializes in turnarounds and restructurings. As an essential inducement to his employment, the Company granted Mr. Kapoor 4,230,000 common shares, which vest over 30 months, subject to accelerated vesting in the event of a business combination and upon other events specified in the Restricted Share Agreement. Copies of the related press release and the relevant agreements entered into between the Company and Mr. Kapoor are attached as an exhibits hereto and are incorporated by reference herein. Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (c) EXHIBITS. 99.1 Press Release dated October 31, 2001. 99.2 Employment Agreement by and between the Company and Vikas Kapoor, dated as of October 5, 2001. 99.3 Restricted Share Agreement by and between the Company and Vikas Kapoor, dated as of October 5, 2001. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this report to be signed on its behalf by the undersigned authorized officer. DELANO TECHNOLOGY CORPORATION Toronto, Ontario October 31, 2001 By:/s/ David Lewis _____________________________ David Lewis Vice President, Legal & General Counsel -2- EXHIBIT INDEX Exhibit No. Description 99.1 Press Release dated October 31, 2001. 99.2 Employment Agreement by and between the Company and Vikas Kapoor, dated as of October 5, 2001. 99.3 Restricted Share Agreement by and between the Company and Vikas Kapoor, dated as of October 5, 2001. -3- EX-99.1 3 b41027dtex99-1.txt PRESS RELEASE DATED 10/31/2001 [DELANO LOGO] Exhibit 99.1 EMBARGOED FOR RELEASE FOR 6:30 A.M. EST, WEDNESDAY OCTOBER 31, 2001 Contact: Thomas Hearne Contact: Andre Fuochi Chief Financial Officer Media Relations Contact Delano Technology Corporation Maverick Public Relations T: 905-947-2136 T: 416-640-5519 E: thearne@delanotech.com E:andref@maverickpr.com DELANO ANNOUNCES IMPROVED OPERATING RESULTS KAPOOR BECOMES CEO Toronto - October 31, 2001 - Delano Technology Corporation (NASDAQ: DTEC, TSE: DLN) today announced a solid quarter in terms of operating performance - including substantial revenue gains and pro forma operating profitability. In fiscal Q2, ended September 30, 2001, Delano recorded nearly $4.0 million in revenue, a 30% increase over Q1. The signing of several blue chip companies drove the revenue increase. "We are the fastest and lowest cost way for a business to get up-and-running with a CRM solution," said Vikas Kapoor, the new CEO of Delano. "Delano's value proposition plays well at any time, but particularly in today's down market, and has allowed us to achieve revenue growth during a difficult period for the software industry." In addition, the company broke even on a pro forma operating cash basis. "We made very tough restructuring choices in July that have helped Delano achieve this positive result sooner than expected. We are now ready to invest to fuel future growth, " continued Kapoor. CEO Appointment Delano's board also announced that Kapoor has become Delano's CEO. "Vikas has the vision and experience to build a world-class company," said Dennis Bennie, Chairman of Delano. "He knows Delano well through his work on our board and brings deep operational strength to the running of the company." Since July, the company has slashed costs and re-focused resources to position Delano as the low-cost provider of customized CRM solutions. "A lot of hard work remains to be done, but we are turning the corner and I am optimistic about our outlook," said Kapoor. "Delano's roots as a premier provider of email marketing solutions will serve us well as that market continues to grow. I am eager to leverage that foothold and position Delano as a broader provider of innovative marketing solutions, " concluded Kapoor. "Vikas is a superb strategic thinker and we have enormous confidence in his vision for the future of the business," concluded Bennie. Kapoor previously served as President and CEO of Walker Digital in Stamford, CT, an incubator of marketing-oriented, internet-based businesses. Prior to that, he co-founded and built the Mitchell Madison Group, a global consulting firm with $200 million in revenues. Kapoor has an undergraduate degree from Princeton and an MBA from Harvard Business School, where he was a Baker Scholar. Operating Results Highlights of the company's operating results include: - Pro forma net income, excluding the recovery of deferred stock-based compensation, restructuring charges, asset impairment and depreciation for the quarter was $30,000, compared to a pro forma net loss (excluding the same items and in-process research and development) of $7.3 million or ($0.24) per share for the same period in the prior year and a pro forma net loss (excluding the same items) of ($0.32) cents per share in the June 2001 quarter. - Revenues in Q2 were nearly $4.0 million compared to revenues of $3.0 million in the June, 2001 quarter. - The company had cash on hand of $12.4 million on September 30, 2001 and approximately $14 million as of October 30, 2001. - The Company will add to its deferred stock-based compensation charge in future quarters related to Kapoor's compensation package that includes a grant of 4,230,000 common shares, which vest over 30 months subject to accelerated vesting in certain circumstances. Analysts and Investors Call An analysts and investors conference call to discuss the details of this announcement will take place on October 31, 2001 at 8:00 a.m. EST. Dial in: (416) 695-5806 Live Web cast: www.delanotech.com/investors A replay of the call will be available for one week, and will be accessible at (416) 695-5800, access code 956521. ABOUT DELANO TECHNOLOGY CORPORATION Delano is a CRM software company that provides an enterprise with the most flexible and effective way to intelligently manage the customer interactions that maximize customer value and enhance corporate profitability. The company's marketing and customer service applications combine advanced analytics with rich interaction capabilities to enable marketing intelligent, two-way dialogues between an enterprise and its customers. Delano's customers include industry-leading new economy, Fortune 500 and Global 2000 enterprises including Compaq, Charles Schwab, Warner Music Group, Nortel Networks, Ericsson, and i2 Technologies. The Company is headquartered in Toronto, Canada. For additional information, contact Delano Technology Corporation, 302 Town Centre Boulevard, Markham, ON, L3R OE8; www.delanotech.com Delano is a trademark of Delano Technology International SRL. All other company and product names mentioned are the trademarks or registered trademarks of their respective companies. This press release contains forward-looking statements, including statements which are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995, regarding the Company's financial performance for the quarter ended September 30, 2001 and regarding the Company's expected financial performance for the following fiscal quarters, expected future customer demand, the Company's ability to adapt to changing market conditions and to compete and the Company's future cash requirements. These statements are neither promises nor guarantees, but are subject to risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements, including without limitation risks relating to: the change in the Company's limited operating history and its history of losses, the Company's relatively fixed operating expenses, rapid technological change in the Company's marketplace, the Company's dependence on sales of its e-Business Interaction Suite and product enhancements, integration of the Company's recent acquisitions, increased levels of competition with the Company's industry and the level of demand for the Company's products and services. A more detailed discussion of these and other important risk factors can be found in the Company's filings with the SEC, including the Company's Form 10-K for the period ending March 31, 2001 and the company's Form 10-Q for the period ending June 30, 2001. Readers should not place undue reliance on any such forward-looking statements, which speak only as of the date they are made. The Company disclaims any obligation to publicly update or revise any such statements to reflect any change in Company expectations or in events, conditions, or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in such forward-looking statements. ### DELANO TECHNOLOGY CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS)
SEPTEMBER 30, MARCH 31, 2001 2001 -------- ----------- ASSETS (unaudited) Current assets: Cash and cash equivalents.................................... $ 12,378 $ 34,209 Short-term investments....................................... -- 1,155 Accounts receivable trade.................................... 5,347 8,099 Prepaid expenses and other................................... 1,297 3,674 ------------ ----------- Total current assets....................................... 19,022 47,137 Property and equipment.......................................... 3,324 11,300 Goodwill and identifiable intangibles, net ..................... -- 5,217 Other assets ................................................... 263 985 ------------ ----------- Total assets.................................................... $ 22,609 $ 64,639 ============ =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities..................... $ 3,092 $ 8,960 Current portion of restructuring charge accrual.............. 2,813 2,411 Deferred revenue............................................. 704 1,975 Current portion of obligations under capital leases.......... 145 182 ------------ ----------- Total current liabilities.................................. 6,754 13,528 Long-term liabilities: Obligations under capital leases............................. -- 49 Restructuring accrual........................................ 2,516 1,121 ------------ ----------- Total liabilities............................................... 9,270 14,698 Shareholders' equity: Capital stock................................................ 222,331 230,647 Warrant...................................................... 496 496 Deferred stock-based compensation............................ (2,218) (8,464) Accumulated other comprehensive losses....................... (340) (340) Deficit...................................................... (206,930) (172,398) ------------- ------------ Total shareholders' equity................................. 13,339 49,941 ------------ ----------- Total liabilities and shareholders' equity...................... $ 22,609 $ 64,639 ============ ===========
DELANO TECHNOLOGY CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
Three months ended Six months ended September 30, September 30, 2001 2000 2001 2000 ---------- ---------- ---------- ---------- Revenues: License $ 2,058 $ 7,009 $ 3,259 $ 12,370 Service 1,902 1,025 3,737 1,682 -------- -------- -------- -------- Total revenues 3,960 8,034 6,996 14,052 -------- -------- -------- -------- Cost of revenues: License 309 122 386 181 Service 1,041 1,169 2,868 1,970 -------- -------- -------- -------- Total cost of revenues 1,350 1,291 3,254 2,151 -------- -------- -------- -------- Gross profit 2,610 6,743 3,742 11,901 -------- -------- -------- -------- Operating expenses: Sales and marketing 1,405 11,116 9,554 21,504 Research and development 1,315 3,856 6,247 6,176 General and administrative 467 1,142 1,902 2,140 Amortization (recovery) of deferred stock-based compensation (925) 856 (2,144) 2,480 In process research and development -- 360 -- 360 Amortization of goodwill and identifiable intangibles -- -- 287 -- Impairment of goodwill -- -- 4,930 -- Asset impairment 7,026 -- 7,026 -- Restructuring charges 6,654 -- 10,889 -- -------- -------- -------- -------- Total operating expenses 15,942 17,330 38,691 32,660 -------- -------- -------- -------- Operating loss (13,332) (10,587) (34,949) (20,759) Interest and other income, net 218 1,384 563 2,926 Equity in loss of associated company (80) -- (146) -- -------- -------- -------- -------- Loss before income taxes (13,194) (9,203) (34,532) (17,833) Income taxes -- -- -- -- -------- -------- -------- -------- Net loss (13,194) (9,203) (34,532) (17,833) -------- -------- -------- -------- Basic and diluted loss per common share $ (0.35) $ (0.30) $ (0.92) $ (0.59) ======== ======== ======== ======== Shares used in computing basic and diluted loss per common share (in thousands) 37,594 30,264 37,436 30,112 ======== ======== ======== ======== Pro forma basic and diluted income (loss) (excluding restructuring charges, asset impairment, impairment and amortization of goodwill and identifiable intangibles, amortization (recovery) of deferred stock-based compensation and depreciation) $ 30 $ (7,288) $(11,831) $(13,918) ======== ======== ======== ======== Pro forma basic and diluted income (loss) per common share (excluding restructuring charges, asset impairment, impairment and amortization of goodwill and identifiable intangibles, amortization (recovery) of deferred stock-based compensation and depreciation) $ 0.00 $ (0.24) $ (0.32) $ (0.46) ======== ======== ======== ========
DELANO TECHNOLOGY CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS)
SIX MONTHS ENDED SEPTEMBER 30, 2001 2000 ------- ------- Cash provided by (used in): Operating activities: Loss for the period $(34,532) $(17,833) Depreciation and amortization which does not involve cash 1,897 984 Amortization (recovery) of deferred stock-based compensation (2,144) 2,480 Impairment of goodwill 4,930 -- Equity in loss of associated company 146 -- Non-cash charges 7,001 360 Changes in non-cash operating working capital: Accounts receivable trade 2,752 (4,699) Prepaid expenses and other assets 2,352 (1,164) Accounts payable and accrued liabilities (5,804) 3,998 Restructuring charge accrual 1,797 -- Deferred revenue (1,271) 80 ------- ------- Net cash used in operating activities (22,876) (15,794) Financing activities: Issuance of common shares and warrants 74 1,061 Payment on notes payable -- (745) Repayment of obligations under capital leases (88) (88) ------- ------- Net cash provided by (used in) financing activities (14) Investing activities: Sale of short-term investments 1,155 28,012 Additions to property and equipment (234) (8,124) Cash used in acquisition -- (1,451) Proceeds on sale of fixed assets 175 -- ------- ------- Cash provided by investing activities 1,096 18,437 Effect of currency translation of cash balances (37) (37) ------- ------- Increase (decrease) in cash and cash equivalents (21,831) 2,834 Cash and cash equivalents, beginning of period 34,209 82,370 ------- ------- Cash and cash equivalents, end of period $ 12,378 $ 85,204 ======== ========
EX-99.2 4 b41027dtex99-2.txt EMPLOYMENT AGREEMENT Exhibit 99.2 EMPLOYMENT AGREEMENT (the "Agreement") made as of October 5, 2001, (the "Effective Date") by and between Delano Technology Corporation, an Ontario corporation ("Delano" or the "Company") and Vikas Kapoor ("Kapoor"). WHEREAS, the Company desires to induce Kapoor to accept employment with the Company and one or more of its subsidiaries as Chief Executive Officer and Kapoor desires to be employed by the Company and one or more of the Company's subsidiaries as Chief Executive Officer pursuant to the terms of this agreement; AND WHEREAS as an essential inducement to Kapoor's employment with the Company, the Company and Kapoor are entering into a Restricted Share Agreement whereby the Company will grant common shares to Kapoor AND WHEREAS this Employment Agreement, together with the Restricted Share Agreement, is intended by the Company and Kapoor to constitute a written compensation contract for purposes of the definition of "Employment Benefit Plan" in Rule 405 under the U.S. Securities Act of 1933. NOW, THEREFORE, the parties agree as follows: AGREEMENT 1. TERM. (a) The Company hereby agrees to employ Kapoor and Kapoor hereby agrees to accept employment with the Company, in the positions set forth in Section 2 below, for the Term (as defined below), subject to the terms and conditions of this Agreement. (b) The term (the "Term") of this Agreement shall commence as of the Effective Date and shall continue until terminated pursuant to section 4. 2. POSITIONS; DUTIES AND RESPONSIBILITIES. (a) During the Term, Kapoor shall serve the Company as President and Chief Executive Officer and as a member of the Board of Directors. Kapoor shall have such duties and responsibilities as are incidental to, or reasonably requested in connection with, such positions, as well as such other comparable duties and responsibilities as may be reasonably assigned to him by Delano's Board of Directors or an authorized committee of the Board of Directors. Kapoor shall be located in New York, and shall travel to such other cities as may be required in his reasonable discretion. (b) During the Term, Kapoor shall serve the Company faithfully, diligently and to the best of Kapoor's ability, and shall devote substantially all of his business time and efforts to his employment with the Company; provided, however, that nothing in this Agreement shall preclude Kapoor from engaging in personal investment opportunities and one ongoing project which has been disclosed to the Company, referred to as the "Mergent Project;" provided that, (i) the time devoted by Kapoor to the Mergent Project and his personal investment opportunities shall not materially and substantially interfere with or derogate from his material obligations under this Agreement on an ongoing basis, and (ii) Kapoor will not pursue or participate in a personal investment which creates a conflict of interest between Kapoor, the Company or any customer or potential customer of the Company, or which may materially adversely affect the goodwill of the Company. 3. COMPENSATION. (a) Base Salary. During the Term, the Company shall pay to Kapoor a base salary at the rate of $500,000 per year ("Base Salary"), subject to increase in the discretion of the Compensation Committee of the Board of Directors and payable in accordance with the regular payroll practices of the Company. (b) Bonus. A bonus will be paid to Kapoor from time to time, as may be determined in the discretion of the Compensation Committee of the Board of Directors. (c) Benefits. Subject to any contribution therefore generally required of senior executives of Delano, Kapoor shall be entitled to participate in all employee benefits plans, including Delano's health and dental plans, as adopted by the Board of Directors and in effect for the most senior executives of the Company. Such participation shall be subject to (a) the terms of the applicable plan documents, (b) generally applicable Company policies and (c) the discretion of the Board or any administrative or other committee provided for in or contemplated by such plans. The Company may alter, modify, add to, or delete its employee benefits plans at any time as the Company, in its sole judgment, determines to be appropriate. Kapoor shall be entitled to 15 days of annual vacation, in accordance with applicable Company policies. Kapoor shall be entitled to expense reimbursement for any expenses reasonably incurred in performing his duties on behalf of the Company, prior to any termination. (d) Restricted Shares. Issue From Treasury - Delano shall grant to Kapoor, pursuant to the terms of a separate agreement (the "Restricted Share Agreement"), an aggregate of 4,230,000 common shares of the Company (the "Restricted Shares") which Restricted Shares shall be granted as at the Effective Date, subject to the restrictions and rights as set out in the Restricted Share Agreement. An 83(b) election may be made by Kapoor and, in such event, both Kapoor and the Company agree to make all appropriate filings in such connection. The Restricted Shares shall vest and become freely tradable by Kapoor to the extent of 1/6 of the aggregate number of shares immediately upon the Effective Date, and monthly in equal numbers of shares thereafter for thirty (30) months following the Effective Date, at which time, subject to the terms herein and the Restricted Share Agreement, one hundred percent (100%) of the Restricted Shares shall be vested and fully tradable. The Restricted Shares shall fully vest and become fully tradable on an accelerated basis upon: (i) a "Business Combination," as defined in Exhibit A to the Restricted Share Agreement; (ii) death or disability as hereinafter provided; or (iii) the termination of Kapoor's employment without Cause by the Company or by Kapoor for Good Reason, as hereinafter provided. To the extent of any conflict between this Agreement and the Restricted Share Agreement, the terms of this Agreement shall control. 4. TERMINATION OF EMPLOYMENT. (a) Termination Due to Death or Disability. Upon the termination of Kapoor's employment under this Agreement during the Term due to Kapoor's death or Kapoor's Disability (as defined in Section 5(b)), Company shall provide to Kapoor, or Kapoor's legal representative, within ten (10) days of such termination, (i) payment of any Base Salary earned through the date of the termination of Kapoor's employment with the Company; (ii) payment of additional salary equal to one (1) year Base Salary; (iii) reimbursement of expenses incurred by Kapoor up through the date of such termination; and (iv) payment of the earned but unpaid Bonus, if any. In such event, all theretofore unvested Restricted Shares shall vest in accordance with the terms of the Restricted Share Agreement. (b) Termination by the Company for Cause. If Kapoor's employment is terminated by the Company for Cause (as defined in Section 5(a)) during the Term, Kapoor shall be entitled to any Base Salary earned and expenses not reimbursed through the date of the termination of Kapoor's employment with the Company. Kapoor shall be entitled to no other or additional payments under this Agreement. (c) Termination Without Cause. If, during the Term, Kapoor's employment is terminated by the Company without Cause or he resigns for Good Reason (as hereinafter defined), which he shall have the right to do upon written notice to the Company, Company shall provide to Kapoor, within ten (10) days of such termination: (i) payment of any Base Salary earned through the date of the termination of Kapoor's employment with the Company; (ii) payment of additional salary equal to one (1) year Base Salary; (iii) reimbursement of expenses incurred by Kapoor up through the date of such termination; and (iv) payment of the earned but unpaid Bonus, if any. In such event, all theretofore unvested Restricted Shares shall vest in accordance with the terms of the Restricted Share Agreement. Kapoor shall be entitled to no other or additional payments under this Agreement. Notwithstanding the foregoing, if Kapoor elects not to terminate his services hereunder by reason of a Business Combination (as defined in paragraph 5(d)) then in such event Kapoor shall be entitled to the acceleration of unvested Restricted Shares as provided hereunder but not to the payments provided for in paragraphs 4(c) (ii). Termination without Cause and termination for Good Reason, shall not include a termination pursuant to Sections 4(a), (b), or (d). (d) Voluntary Termination. Kapoor may voluntarily terminate his employment at any time upon written notice to the Board of Directors of the Company. After Kapoor gives notice, Company may terminate Kapoor's employment at any time with or without Cause, and the termination will for purposes of this Agreement be treated as a Voluntary Termination under this paragraph (d). In the event of a Voluntary Termination, Kapoor shall be entitled to any Base Salary earned and unreimbursed expenses incurred through the date of the termination of Kapoor's employment with the Company. Kapoor shall be entitled to no other or additional payments under this Agreement. 5. DEFINITIONS. For purposes of the Agreement, the following terms shall be defined as set forth below: (a) Kapoor may be terminated by the Company for "Cause" for: (i) a material breach or material default by Kapoor of the performance of his duties with the Company which, if curable, has not been cured within 30 days of detailed written notice thereof from the Company; (ii) gross negligence in the performance of Kapoor's duties, willful misfeasance in connection with Kapoor's work or a breach of fiduciary duty by Kapoor; (no act or omission shall be considered willful unless done or omitted in bad faith or without reasonable belief that the action or omission was in the interest of the Company); (iii) the commission by Kapoor of an act of fraud, embezzlement or any other illegal conduct in connection with Kapoor's performance of his duties; (iv) Kapoor's conviction of a felony (or the equivalent in Canada). (b) "Disability" means Kapoor's inability, for a period of 90 consecutive days, to perform, with or without reasonable accommodation, the essential functions of his position by reason of mental or physical disability, whether resulting from illness, accident or otherwise. (c) "Voluntary Termination" means a termination of employment during the Term by Kapoor on Kapoor's own initiative delivered by written notice to the Company, other than a termination for death or Disability under Section 4(a) or for Good Reason under Section 4(e). (d) "Good Reason" shall mean: (i) the breach by the Company of this Agreement, which, if curable, has not been cured within 30 days of detailed written notice thereof from Kapoor, (ii) a diminution which, if curable, has not been cured within 30 days of detailed written notice thereof from Kapoor, in the title, compensation or responsibilities of Kapoor (unless approved in writing by Kapoor) (iii) appointment of any other person to an executive position at or above the position of President or CEO, or which otherwise requires Kapoor to report to such other person or position (iv) a "Business Combination" as defined in Exhibit A of the Restricted Share Agreement, or (v) a filing by the Company for bankruptcy or receivership, an adjudication that the Company is insolvent or bankrupt, an admission by the Company that it is unable to pay its debts as they mature, a failure by the Company to make payroll for two (2) consecutive weeks or an initiation by the Company of liquidation proceedings or acts tantamount to the same (e.g., disposition or distribution of material assets of the Company, or portions thereof). 6. NON-COMPETITION. As a condition of this Agreement, and in consideration for the payments set forth herein, Kapoor agrees that, during the Term, Kapoor will not become an officer, director or employee of, maintain a consulting or other professional relationship with, or acquire any securities (other than publicly-traded securities aggregating less than 1% of the outstanding shares) of, any enterprise that is engaged in any material respect in any business (including business under active development) that is competitive with a business being conducted or actively developed by Delano (or a subsidiary) at the date hereof or at the time during the Term. 7. CONFIDENTIALITY. Kapoor shall continue to be bound by the terms of the Confidentiality Agreement that was signed in conjunction with the Opera Ventures Agreement. 8. INDEMNIFICATION. Kapoor shall be entitled to indemnification from the Company to the fullest extent permitted by law. Delano agrees to name Kapoor as an additional named insured on its general liability and E&O policies, and D&O policies then in force from time to time during the term. 9. ENTIRE AGREEMENT. This Agreement contains the entire agreement between the Company and Kapoor concerning Kapoor's employment by the Company and supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between them with respect to the subject matter herein. Kapoor and the Company agree to keep the terms of this Agreement strictly confidential, subject to legal disclosure obligations. 10. AMENDMENT OR WAIVER. This Agreement cannot be changed, modified or amended without the consent in writing of both Kapoor and the Company. No waiver by either the Company or Kapoor at any time of any breach by the other party of any condition or provision of this Agreement shall be deemed a waiver of a similar or dissimilar condition or provision at the same or at any prior or subsequent time. Any waiver must be in writing and signed by Kapoor or an authorized officer of the Company, as the case may be (other than Kapoor). 11. SEVERABILITY. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. 12. SURVIVAL. Sections 3, 4, 5, 7, 12, 14 and 15 and other provisions to the extent such are necessary to the intended preservation of rights and obligations, shall survive any termination of this Agreement. 13. GOVERNING LAW AND JURISDICTION; ARBITRATION. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the New York without reference to principles of conflict of laws. Any dispute, controversy or claim arising out of or in connection with this Agreement shall be exclusively subject to arbitration before the American Arbitration Association ("AAA") in New York City, before a single arbitrator in accordance with the AAA's then current Employment Arbitration Rules. Both parties hereby consent to such jurisdiction and venue. Judgment upon any arbitration award may be entered in any court of competent jurisdiction. All parties shall cooperate in the process of arbitration for the purpose of expediting discovery and completing the arbitration proceedings. Nothing contained in this section or elsewhere in this Agreement shall in any way deprive either party of its right to obtain injunctive or other equitable relief in a court of competent jurisdiction. The parties hereto consent to the exclusive jurisdiction of the Courts of New York County in connection herewith. Each party hereto shall be responsible for their own costs and fees (including legal fees), provided that if any payment provided for hereunder is not timely paid to Kapoor and Kapoor engages counsel to recover the same, Delano shall be responsible for all reasonable costs and fees (including legal fees) incurred by Kapoor to recover the same. 14. NOTICES. Any notice given to either party shall be in writing and shall be deemed to have been given when delivered personally or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned, if to the Company, addressed to the Board of Directors at the Company principal executive offices, with a copy to the Chairman at his last known address, and if to Kapoor, at the address of Kapoor shown on the Company's records, with a copy to Levine Plotkin & Menin, LLP, 1740 Broadway, 22nd Floor, New York, New York 10019, Attn: Geoffrey D. Menin, Esq., facsimile: 212/245-8683 or at such other address as such party may give written notice of. 15. MISCELLANEOUS. (a) The headings of the Sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement. (b) This Agreement may be executed in two or more counterparts. (c) The Company shall make such deductions and withhold such amounts from each payment and benefit made or provided to Kapoor hereunder, as may be required from time to time by applicable law, governmental regulation or order. (d) All dollar amounts set out in this Agreement shall be United States dollars. 16. ASSIGNMENT; SUCCESSORS. This Agreement is personal in its nature and none of the parties hereto shall, without the consent of the others, assign or transfer this Agreement or any rights or obligations hereunder, provided that, in the event of the merger, consolidation, transfer, or sale of all or substantially all of the assets or stock of the Company, this Agreement shall be binding upon and inure to the benefit of such successor of the Company and such successor shall assume in writing all executory obligations to Kapoor hereunder and shall discharge and perform all the promises, covenants, duties, and obligations of the Company hereunder, and all references herein to the "Company" shall refer to such successor. IN WITNESS WHEREOF the parties have duly executed this Agreement as of the date first set out above. DELANO TECHNOLOGY CORPORATION By:/s/ Dennis Bennie -------------------------------- Title: Chairman Witness ) VIKAS KAPOOR ) ) ) /s/ Vikas Kapoor ----------------------------------- ) Name: Vikas Kapoor --------------------------- --------------------------- print name EX-99.3 5 b41027dtex99-3.txt RESTRICTED SHARE AGREEMENT Exhibit 99.3 RESTRICTED SHARE AGREEMENT THIS AGREEMENT is made effective as of the fifth day of October 2001, between Delano Technology Corporation, an Ontario corporation (the "Company"), and Vikas Kapoor (the "Grantee"). WHEREAS, the Company desires to induce the Grantee to accept employment with the Company and one or more of its subsidiaries as Chief Executive Officer; WHEREAS, the Grantee has represented to the Company that he will not accept employment with the Company without the grant of common shares contemplated by this Agreement and that, accordingly, the grant of common shares contemplated by this Agreement is an essential inducement to his employment with the Company; WHEREAS, as of the date hereof, the Company and the Grantee are entering into an Employment Agreement in connection with the Grantee's employment with the Company and one or more of its subsidiaries (the "Employment Agreement"); and WHEREAS, this Restricted Share Agreement, together with the Employment Agreement, is intended by the Company and the Grantee to constitute a written compensation contract for purposes of the definition of "Employment Benefit Plan" in Rule 405 under the Securities Act. NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: 1. GRANT OF RESTRICTED SHARES. The Company hereby grants to the Grantee 4,230,000 common shares on the terms and subject to the conditions set forth herein (the "Restricted Shares"). The Restricted Shares granted hereunder shall be registered in the Grantee's name, but the certificates evidencing such Restricted Shares shall be retained by the Company during the period prior to the vesting of such shares as set forth in Section 3 hereof (the "Restriction Period"). The Grantee shall execute a stock power, in blank, with respect to such Restricted Shares and deliver the same to the Company. The Company will retain custody of all dividends and distributions made or declared on the Restricted Shares until such time, if ever, as such Restricted Shares vest and the Restriction Period with respect thereto lapses. Such retained dividends or distributions shall not bear interest. If any such dividend or distribution is taxable to the Grantee, the Company shall release to the Grantee a portion of such retained dividend or distribution sufficient to pay the taxes payable thereon (at the highest marginal rate to which Grantee is subject) at the time such taxes become payable. The Grantee shall not be entitled to vote any Restricted Share until the Restriction Period with respect thereto lapses. 2. NON-TRANSFERABILITY. During the Restriction Period, the Grantee may not sell, transfer, pledge or otherwise encumber or dispose of Restricted Shares which have not then vested. Any attempted sale, transfer, assignment or other disposition of Restricted Shares shall be null and void and of no effect. 3. LAPSE OF RESTRICTIONS; FORFEITURE. (a) Except as otherwise provided in this Section 3, the Restricted Shares granted hereunder shall vest, and the Restriction Period shall lapse as follows: On the date hereof 705,000 shares On the 1st day of each month hereafter, 117,500 additional shares commencing November 1, 2001 Except as otherwise provided in this Section 3, at the end of 30 months from the date hereof, the Restricted Shares shall be fully vested and the Restriction Period imposed thereon shall have fully lapsed. (b) If the Grantee dies or becomes Disabled (as defined in the Employment Agreement), the Restriction Period shall lapse with respect to all previously unvested Restricted Shares on the date of death or Disability. Upon an event of Business Combination (as defined in Exhibit A hereto), the Restriction Period shall lapse with respect to all previously unvested Restricted Shares as of the consummation of the event which results in the Business Combination. (c) If the Grantee voluntarily terminates his employment with the Company or the Company terminates his employment for Cause (as defined in the Employment Agreement), the Restricted Shares, to the extent not vested prior to such termination, shall be immediately forfeited to the Company and the Grantee shall have no further rights with respect to such unvested shares. If the Grantee terminates his employment with the Company for Good Reason (as defined in the Employment Agreement) or the Company terminates the Grantee's employment without Cause, the Restriction Period shall lapse with respect to all Restricted Shares immediately upon termination of employment. 4. DELIVERY OF SHARE CERTIFICATES. Promptly following the execution and delivery hereof, certificate(s) evidencing 705,000 of the Restricted Shares shall be delivered to the Grantee. Upon the vesting of any of the other Restricted Shares granted hereunder, the certificates evidencing such Restricted Shares shall be delivered promptly to the Grantee. In the case of the Grantee's death, such certificates will be delivered to the beneficiary designated in writing by the Grantee pursuant to a form of designation provided by the Company or to the Grantee's executors or personal representatives, as the case may be. 5. REGISTRATION. The Company will promptly prepare, file and use reasonable best efforts to cause to be effective with the Securities and Exchange Commission on Form S-8 a registration statement that will enable Grantee to publicly resell the Restricted Shares granted hereunder. The Company shall maintain such registration statement in effect until all such shares have been resold. If, for any reason, Form S-8 is not available with respect to the Restricted Shares, the Company will promptly prepare and file and use reasonable best efforts to cause to be effective with the Securities and Exchange Commission on Form F-3 (or other comparable form) a re-sale registration statement relating to the Restricted Shares. 6. BINDING EFFECT. This Agreement shall be binding upon and inure the benefit of the heirs, executors, administrators and successors of the parties hereto. 7. GOVERNING LAW. This Agreement shall be construed and interpreted in accordance with the laws of the Province of Ontario without reference to rules relating to conflicts of law. 8. HEADINGS. Headings are for the convenience of the parties and are not deemed to be a part of this Agreement. 9. NO EMPLOYMENT GUARANTEE. Nothing in this Agreement shall be construed to confer upon the Grantee any right to continued employment with the Company (it being understood that the Employment Agreement governs the Grantee's employment relationship with the Company). -- 10. WITHHOLDING TAXES. If the Company has any withholding tax obligation with respect to the grant of Restricted Shares contemplated hereby, upon the Company's request, the Grantee shall immediately pay to the Company in cash the amount of such withholding tax. 11. LEGENDS. The certificates for the Restricted Shares granted hereunder shall bear such legends relating to the provisions of this Agreement and applicable securities law as the Company reasonably determines. Any such legend relating to the provisions of this Agreement shall be removed at the time of transfer of the applicable certificate(s) to the Grantee. Any such legend relating to applicable securities law shall be removed in accordance with applicable law and customary practice. 12. PLAN. This Agreement, together with the Employment Agreement, is intended by the Company and the Grantee to constitute a written compensation contract for purposes of the definition of "Employment Benefit Plan" in Rule 405 under the Securities Act. 13. 83(b) ELECTION. In the event an 83(b) election is made in connection with the grant of Restricted Shares hereunder, the Company shall promptly deliver to Grantee appropriate documentation reflecting a fair market value of $0.11 per share, consisting of publicly available information on the Company's trading prices as of the date hereof, it being understood by the parties that the closing price on this date was $0.11. EXECUTED effective as of the day and year first written above. DELANO TECHNOLOGY CORPORATION By:/s/ Dennis Bennie --------------------------------------- Name: Dennis Bennie Title: Chairman GRANTEE: /s/ Vikas Kapoor --------------------------------------- Vikas Kapoor EXHIBIT A Business Combination. For purposes of this Agreement, an event of "Business Combination" shall be deemed to have occurred if: (i) there shall have been consummated any merger or other business combination of the Company in which the voting shareholders of the Company, prior to such merger or other business combination, end up with less than 66.67% of the voting shares of the new or combined entity as the case may be following the consummation of such merger or other business combination, a sale or transfer of all or substantially all of the Company's consolidated assets or a combination of the foregoing transactions (a "Transaction") other than a Transaction involving only the Company and one or more of its Subsidiaries; or (ii) any person (as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended from time to time (the "Exchange Act"), and as used in Sections 13(d) and 14(d) thereof, including any "group" as defined in Section 13(d)(3) thereof (a "Person"), but excluding the Company, any majority owned subsidiary of the Company (a "Subsidiary") and any employee benefit plan sponsored or maintained by the Company or any Subsidiary (including any trustee of such plan acting as trustee)), becomes the beneficial owner of securities of the Company having at least 33% of the total voting power represented by all then outstanding voting securities of the Company, or has the power or ability to elect or cause the election of directors then consisting of a majority of the Board of Directors of the Company.