<PAGE>
As Filed With The Securities And Exchange Commission On June 14, 1999
Registration No. 333-5038-D
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
POST EFFECTIVE AMENDMENT NO. 3
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
______________________
THE VIALINK COMPANY
(Formerly APPLIED INTELLIGENCE GROUP, INC.)
(Name of Small Business Issuer in Its Charter)
Oklahoma 7372 73-1247666
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification
organization) Code Number) Number)
13800 Benson Road
Edmond, Oklahoma 73013-6417
Telephone: (405) 936-2500
Facsimile: (405) 936-2599
(Address and telephone number of principal executive offices)
LEWIS B. KILBOURNE
Chief Executive Officer
The Vialink Company
13800 Benson Road
Edmond, Oklahoma 73013-6417
Telephone: (405) 936-2500
Facsimile: (405) 936-2599
(Name, address and telephone number of agent for service)
______________________
copy to:
J. Matthew Lyons
Brobeck, Phleger & Harrison LLP
301 Congress Ave., Suite 1200
Austin, Texas 78701
Telephone: (512) 477-5495
Facsimile: (512) 477-5430
Approximate Date Of Commencement Of Proposed Sale To The Public: As Soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the Registration Statement is expected to be made pursuant
to Rule 434, check the following box. [_]
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
Explanatory Note
This registration statement is a post-effective amendment to the
registration statement on form SB-2, Registration No. 333-5038-D, which
registered a primary offering of securities by The viaLink Company. Pursuant to
that registration statement, we registered our initial public offer, issuance
and sale of 1,000,000 shares of common stock. par value $0.001 per share; the
offer, issuance and sale of 920,000 redeemable warrants and 920,000 shares of
common stock underlying the redeemable warrants; the offer, issuance and sale of
100,000 underwriter warrants and 100,000 shares of common stock underlying the
underwriter warrants; and the offer, issuance and sale of 80,000 warrant
underwriter warrants and 80,000 shares of common stock underlying the warrant
underwriter warrants. This post-effective amendment relates to all of the above
noted securities, excluding the initial public offering of the 1,000,000 shares
of our common stock.
<PAGE>
================================================================================
Prospectus
June 14, 1999
The viaLink Company
1,100,000 shares of common stock
underlying redeemable common stock purchase warrants,
underwriter warrants and warrant underwriter warrants
- --------------------------------------------------------------------------------
The viaLink Company:
. We are a leading provider of subscription-based electronic commerce
services, designed specifically for the food and consumer packaged goods
industries.
The Offering:
. We are offering up to 920,000 shares of common stock to the holders of
redeemable common stock purchase warrants. These shares of common stock
may be, but do not have to be, sold by these holders.
. The selling shareholders are offering up to 180,000 shares of common
stock underlying underwriter warrants and warrant underwriter warrants.
We are hereby registering the resale of these shares by the selling
shareholders.
. Each one of our redeemable common stock purchase warrants is exercisable
for one share of common stock at a price of $5.00 per share on or before
November 20, 1999.
. There is an existing trading market for our common stock. The reported
last sale price on June 9, 1999 was $15.63 per share.
. There is an existing trading market for our redeemable warrants. The
reported last sale price June 9, 1999 was $10.63 per warrant.
Our securities are quoted on the Nasdaq
SmallCap market:
common stock: IQIQ
redeemable warrants: IQIQW
An investment in our common stock involves substantial risk.
See "Risk Factors" beginning on Page 7.
- --------------------------------------------------------------------------------
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved of these securities, or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
- --------------------------------------------------------------------------------
We will amend and complete the information in this prospectus. Although we are
permitted by U.S. federal securities laws to offer these securities using this
prospectus, neither we nor the selling shareholders may sell them or accept your
offer to buy them until the documentation filed with the SEC relating to these
securities has been declared effective by the SEC. This prospectus is not an
offer to sell these securities or our solicitation of your offer to buy these
securities in any jurisdiction where that would not be permitted or legal.
<PAGE>
This prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any securities to any person in any jurisdiction where it is
unlawful to make such an offer or solicitation.
We have not registered the securities covered by this prospectus under the
respective securities laws of the states of Michigan, Missouri, Nebraska, New
Mexico, North Carolina, Tennessee or Washington or the District of Columbia,
Guam or Puerto Rico, nor are they subject to an exemption under such state
securities laws. Therefore, these securities may not be purchased, nor is a
solicitation of an offer to purchase to be made, in the jurisdictions identified
in the preceding sentence.
Until such time as the securities covered by this prospectus have been
approved in the states of Alabama, Alaska, Connecticut, Idaho, Illinois,
Indiana, Kentucky, Maine, Maryland, Massachusetts, Mississippi, New Hampshire,
New Jersey, Rhode Island, Utah, West Virginia and Wisconsin, such securities may
neither be purchased nor is a solicitation of an offer to purchase to be made in
such states.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary..................................................................... 3
Risk Factors........................................................................... 7
Special Cautionary Note Regarding Forward-Looking Statements........................... 18
Use of Proceeds........................................................................ 19
Dilution............................................................................... 20
Dividend Policy........................................................................ 20
Market Prices.......................................................................... 20
Selected Financial Data................................................................ 21
Management's Discussion and Analysis of Financial Condition and Results of Operations.. 22
Business............................................................................... 31
Management............................................................................. 41
Certain Transactions................................................................... 50
Principal and Selling Shareholders..................................................... 51
Description of Securities.............................................................. 54
Shares Eligible for Future Sale........................................................ 62
Plan of Distribution................................................................... 64
Legal Matters.......................................................................... 65
Experts................................................................................ 65
Where You Can Find Additional Information.............................................. 66
Index to Consolidated Financial Statements............................................. F-1
</TABLE>
We have not authorized any dealer, sales person or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy these securities in any jurisdiction where
that would not be permitted or legal. Neither the delivery of this prospectus
nor any sale made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of viaLink have
not changed since the date hereof.
<PAGE>
PROSPECTUS SUMMARY
This summary is qualified by more detailed information appearing in other
sections of this prospectus. The other information is important, so please read
this entire prospectus carefully. You should completely and carefully read this
prospectus, including the more detailed information and financial statements and
the notes to those financial statements.
The viaLink Company
We provide subscription-based electronic commerce services, designed
specifically for the food and consumer packaged goods industries. We have
developed a cost-effective, Internet-accessible shared database, the viaLink
Item Catalog, that enables subscribing manufacturers, suppliers and retailers to
exchange product, pricing and promotional information. Our services offer a
single interface solution for retailers to receive product information from all
their suppliers, regardless of the technological capabilities of the retailer or
the supplier.
Our Item Catalog service offers benefits to every member of the supply
chain. Retailers can reduce costs associated with manual entry of item and cost
data, wholesalers can eliminate the costs associated with maintaining interfaces
with multiple retailer systems, distributors will receive timely and accurate
product information and manufacturers can consistently and efficiently
communicate with their entire supply chain. Product, pricing and promotional
information contained in our database is secured with state-of-the-art firewalls
and password protections. With the use of a personal computer, commonly
available software and a Web browser, we enable our subscribers to improve
management of information flow, reduce errors and invoice discrepancies, enhance
the accounts receivable collection process and reduce redundant information
processing.
Recent Developments
At our 1999 annual meeting of shareholders, our shareholders approved the
reincorporation of viaLink from Oklahoma to Delaware. We intend to effect the
reincorporation within 30 days after the date of this prospectus. For more
information on the reincorporation and the rights of our security holders
following the reincorporation, please see "Description of Securities -- Delaware
Reincorporation" below.
On May 3, 1999, we entered into an agreement with Ernst & Young LLP under
which Ernst & Young will perform consulting and integration services for us and
provide us with marketing and sales support to assist in the development of our
viaLink services at Ernst & Young's client sites. In connection with this
transaction, we have issued to Ernst & Young a warrant to purchase up to 250,000
shares of our common stock at a price of $8.00 per share. Additionally, we have
agreed to pay a royalty to Ernst & Young equal to 7% of our services revenues
for a period of two years and if some specific performance objectives are met,
we will continue this royalty payment in perpetuity. For more information on our
strategic relationship with Ernst & Young, please see "Business -- Strategic
Relationships" below.
On February 4, 1999, we entered into an agreement with Hewlett-Packard
Company pursuant to which Hewlett-Packard has agreed to provide us with hosting,
co-marketing and consulting support for our Item Catalog service. In addition,
Hewlett-Packard will provide us with the technological platform to power our
Item Catalog service and $6.0 million of financing through a secured, high-yield
subordinated convertible note which bears interest at 11.5% per annum, is
secured by a lien on our intellectual property and is convertible, beginning in
August 2000, into our common stock at a price of $7.00 per share. For more
information on our strategic relationship with Hewlett-Packard, please see
"Business -- Strategic Relationships" below.
On December 31, 1998, we sold our wholly-owned subsidiary, ijob, Inc., to
DCM Company, Inc., a corporation wholly owned by David C. Mitchell, the
president of ijob, in exchange for an $800,000 promissory note. On March 11,
1999, we received $800,000 plus accrued interest from DCM in full payment of the
promissory note.
Effective September 1, 1998, we sold the assets underlying our management
consulting services to The Netplex Group, Inc. Netplex paid $3.0 million in cash
and issued to us 643,770 shares of their preferred stock, which was valued at
$1.0 million on the date of the sale. In conjunction with the sale of our
consulting assets, we
3
<PAGE>
entered into an earn-out agreement that may provide us with cash payments up to
$1.5 million generated from the assets sold to Netplex until March 31, 2000.
Historically, we have generated approximately 90% of our revenues from the
assets sold to Netplex.
How To Contact Us
Our principal executive offices and headquarters are located at 13800
Benson Road, Edmond, Oklahoma 73013-6417, and our telephone number is (405) 936-
2500. Our World Wide Web home page is located at http://www.vialink.com.
Information contained in, or linked to, our Website does not constitute part of
this prospectus.
The Offering
The following information regarding shares outstanding is as of May 31,
1999. It excludes an aggregate of 1,592,125 shares of common stock issuable upon
the exercise of stock options outstanding as of May 31, 1999, with a weighted
average exercise price of $3.65 per share and 93,878 shares of common stock
reserved for issuance pursuant to our employee stock purchase plan as of May 31,
1999.
<TABLE>
<S> <C>
Common stock outstanding prior
to this offering.............................. 2,889,342 shares
Common stock offered:
By viaLink.................................... 920,000 shares
By the selling shareholders................... 180,000 shares
----------------
Total........................................ 1,100,000 shares
Common stock to be outstanding after this
offering assuming the redeemable warrants,
underwriter warrants and warrant underwriter
warrants are exercised in full.................. 3,989,342 shares
Use of Proceeds................................. We intend to use the estimated
net proceeds of $4.5 million
that we will receive from this
offering for the enhancement
and development of our
services, acquisition of other
hardware and software and
working capital and other
general corporate purposes. We
will not receive any proceeds
from the shares sold by the
selling shareholders. See "Use
of Proceeds."
Nasdaq SmallCap Market Symbols.................. common stock: IQIQ
redeemable warrants: IQIQW
</TABLE>
4
<PAGE>
Summary Consolidated Financial Data
(unaudited)
This information was derived from our audited financial statements. You
should read the following summary consolidated data together with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements and notes included elsewhere in this
prospectus. The pro forma as adjusted balance sheet gives effect to the exercise
of the redeemable warrants at an exercise price of $5.00 per share, the
underwriter warrants and the warrant underwriter warrants at a price of $6.00
per share, net of the costs of this offering, estimated at $110,000. See
"Description of Securities -- Redeemable Common Stock Purchase Warrants" and "--
Underwriter Warrants and Warrant Underwriter Warrants."
<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 31, March 31,
--------------------------------------- -------------------------
1998 1997 1996 1999 1998
----------- ----------- ----------- ----------- -----------
Statements of Operations Data:
<S> <C> <C> <C> <C> <C>
Revenues................................ $ 8,230,628 $ 9,022,842 $ 9,507,370 $ 108,178 $ 3,098,403
Expenses................................ 9,870,673 11,995,787 10,556,704 2,465,512 3,007,665
Loss from operations.................... (1,640,045) (2,972,945) (1,049,334) (2,357,334) 90,739
Gain on sale of assets.................. 2,998,453 -- -- 462,041 --
Other income............................ 340,670 -- -- 273,000 --
----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes....... 1,699,078 (2,972,945) (1,049,334) (1,622,293) 90,739
Provision (benefit) for income taxes.... 1,049,440 (1,112,127) (366,925) -- 34,481
Net income (loss)....................... 649,638 (1,860,818) (682,409) (1,622,293) 56,258
Other comprehensive income (loss)....... (315,673) -- -- 1,447,856 --
----------- ----------- ----------- ----------- -----------
Comprehensive income (loss)............. $ 333,965 $(1,860,818) $ (682,409) $ (174,437) $ 56,258
=========== =========== =========== =========== ===========
Net income (loss) per common share:
Basic................................. $ 0.24 $ (0.68) $ (0.37) $ (0.57) $ 0.02
=========== =========== =========== =========== ===========
Diluted............................... $ 0.21 $ (0.68) $ (0.37) $ (0.57) $ 0.02
=========== =========== =========== =========== ===========
Weighted average shares outstanding:
Basic................................. 2,741,041 2,727,438 1,838,522 2,866,802 2,729,521
Diluted............................... 3,102,443 2,727,438 1,838,522 2,866,802 2,779,665
</TABLE>
<TABLE>
<CAPTION>
As of March 31, 1999
----------------------------------
Pro Forma
Actual As Adjusted
----------- ------------
<S> <C> <C>
Balance Sheet Data:
Total current assets....................... $ 8,996,208 $14,566,208
Working capital............................ 7,836,030 13,406,030
Total assets............................... 11,151,733 16,721,733
Current liabilities........................ 1,160,178 1,160,178
Long-term debt............................. 592,322 592,322
Stockholders' equity....................... 9,399,233 14,969,233
</TABLE>
5
<PAGE>
Summary Pro Forma Consolidated Financial Data
You should read the following summary unaudited pro forma consolidated
financial data together with our consolidated financial statements and unaudited
pro forma consolidated financial statements and notes included elsewhere in this
prospectus. This pro forma financial data assumes that both the sale of ijob and
the asset sale to Netplex occurred upon December 31, 1997 and at the beginning
of each period for which statements of operations are presented. This pro forma
information does not give effect to the exercise of the redeemable warrants, the
underwriter warrants, the warrant underwriter warrants or outstanding stock
options exercisable for the purchase of 1,574,989 common stock or to the 93,974
shares of common stock reserved for issuance pursuant to our employee stock
purchase plan as of December 31, 1998. We have presented the unaudited pro forma
consolidated financial statements merely for illustrative purposes. This
information is not indicative of the financial condition and results of
operations we would have achieved had the sale of ijob and the assets to Netplex
actually been consummated in accordance with the assumption described in the
notes to the unaudited pro forma consolidated financial statements.
<TABLE>
<CAPTION>
Pro Forma
-------------------
Year Ended
December 31, 1998
-------------------
<S> <C>
Statements of Operations Data:
Revenues................................................... $ 732,587
Expenses................................................... 2,287,401
Loss from operations....................................... (2,935,305)
Gain on sale of assets..................................... 2,998,453
Other income............................................... 1,106,670
Income before income taxes................................. 1,169,818
Provision for income taxes................................. 1,049,440
Net income................................................. 120,378
Other comprehensive loss................................... (315,673)
Comprehensive loss......................................... (195,295)
Net income per common share:
Basic.................................................... $ 0.04
===========
Diluted.................................................. $ 0.04
===========
Weighted average shares outstanding:
Basic.................................................... 2,741,041
Diluted.................................................. 3,102,443
</TABLE>
6
<PAGE>
RISK FACTORS
Before you invest in our common stock, you should be aware of various
risks, including those discussed below. You should carefully consider these risk
factors, together with all of the other information included in this prospectus,
before you decide whether to purchase shares of our common stock.
Due to the sale of our consulting assets to Netplex, we need to replace most of
our historical revenue with revenue from our viaLink services. Since our
services are unproven, our business, financial results and stock price could be
adversely affected
We have historically derived substantially all of our revenues from
providing management consulting services and computer system integration
services to the retail and wholesale distribution industries. In order to permit
us to focus our resources solely on developing and marketing our viaLink
services, we sold the assets underlying our management consulting services and
computer integration services to Netplex. We had previously generated
approximately 90% of our total revenues from the assets sold to Netplex. We also
sold our wholly owned subsidiary, ijob.
As a result of these sales, we are now substantially dependent on revenues
generated from our viaLink services. Our viaLink services have achieved only
limited market acceptance and, to date, have accounted for an insubstantial
amount of our historical revenues. Consequently, we resemble a development stage
company and will face many of the inherent risks and uncertainties that
development stage companies face. These risks include our:
. Need for our services to achieve market acceptance and produce a
sustainable revenue stream;
. Need to expand sales and support and product development organizations;
. Need to manage rapidly changing operations;
. Dependence upon key personnel;
. Reliance on strategic relationships; and
. Competition.
Our business strategy may not successfully address these risks, and our
viaLink services may not achieve market acceptance. If our viaLink services fail
to achieve market acceptance or if we fail to recognize significant revenues to
replace the revenues lost in the sale to Netplex, our business, financial
condition and operating results would be materially adversely affected.
We have a history of negative cash flow from operations and operating losses and
expect future operating losses
By selling our consulting business and ijob, we lost the source of
approximately 97% of our historical revenues. To date, revenues from our viaLink
services have been insignificant. Moreover, we expect to expend significant
resources in aggressively developing and marketing these services into an
unproven market. Therefore, we expect to incur negative cash flow from
operations and net operating losses for the foreseeable future. We may not ever
generate sufficient revenues to achieve or sustain profitability or generate
positive cash flow. We have incurred net operating losses of approximately $1.0
million in 1996, $3.0 million in 1997 and $1.6 million in 1998. On a pro forma
basis giving effect to the sale of our consulting business and ijob, as if sold
on January 1, 1998, we had pre-tax income of approximately $1.2 million for
1998. However, this $1.2 million pro forma pre-tax income includes an
approximate $3.0 million one-time gain on the sale of assets from our consulting
business, and therefore should not be construed as representative of future
operations. As of March 31, 1999, we had an accumulated deficit of approximately
$2,586,000 representing the sum of our historical net losses.
7
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We rely solely on our viaLink services. If our viaLink services fail to become
accepted by the food and consumer packaged good industries, our business will be
materially and adversely affected
Virtually all of our revenues for the foreseeable future will be derived
from a single source: subscription sales of our viaLink services. We have only
recently introduced these services. They may not achieve market acceptance. To
date we have received only an insignificant amount of revenues from these
services. The market acceptance of our Item Catalog service as an industry-wide
shared database will depend upon subscriptions from a large number of industry
manufacturers, suppliers and retailers. A large number of manufacturers,
suppliers and retailers may not subscribe to this service. Furthermore, we
cannot predict the amount of time required for a significant number of
manufacturers, suppliers and retailers to subscribe to our services. If our
services do not achieve market acceptance, or if market acceptance develops more
slowly than expected, our business, operating results and financial condition
will be seriously damaged.
A number of factors will determine whether our services will achieve market
acceptance, including:
. Performance and functionality of our viaLink services;
. Ease of adoption;
. Satisfaction of our initial subscribers;
. Success of our marketing efforts;
. Our ability to successfully manage the transition of our database to the
Hewlett-Packard hosting facility;
. Success of our strategic relationships;
. Improvements in technological performance; and
. Continued acceptance of the Internet for business use.
The markets for business-to-business electronic commerce services evolve
rapidly. If new markets evolve, customers in those markets, including our
current customers, may not choose our viaLink services.
The unpredictability of our quarter-to-quarter results could cause our stock
price to be volatile or decline
Our future operating results may vary significantly from quarter to quarter
due to a variety of factors, many of which are outside our control. Our expense
levels are based primarily on our estimates of future revenues and are largely
fixed in the short term. We may be unable to adjust spending rapidly enough to
compensate for any unexpected revenue shortfall, including as a result of
delayed or lack of market acceptance of our viaLink services. Accordingly, any
significant shortfall in revenues in relation to our planned expenditures would
materially adversely affect our business, operating results and financial
conditions.
Due in large part to our uncertainty regarding the success of our viaLink
services, we cannot predict with certainty our quarterly revenues and operating
results. Further, we believe that period-to-period comparisons of our operating
results are not necessarily a meaningful indication of future performance,
especially in light of the significant changes in business which we have
undertaken. It is likely that in one or more future quarters our results may
fall below the expectations of securities analysts and investors. If this
occurs, the trading price of our common stock would likely decline.
8
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We have recently entered into two strategic relationships and may enter into
more in the future. If these strategic relationships do not produce the
anticipated benefits or if we are unable to enter into additional future
strategic relationships, our viaLink services may not achieve market acceptance
Our current strategic relationships may not prove to be beneficial to us,
and they may not be sustained. Further, we may not be able to enter into
successful new strategic relationships in the future, which could have a
material adverse effect on our business, operating results and financial
condition. We currently have formed strategic relationships with Ernst & Young
and Hewlett-Packard. Ernst and Young has agreed to provide us with sales and
marketing support as well as consulting and integration services. Hewlett-
Packard has agreed to provide us with a technological platform to host our
services. Maintaining these and other relationships will help us to validate our
technology, facilitate broad market acceptance of our services and enhance our
sales and marketing. However, these existing strategic relationships may not
bring us the anticipated benefits and we may not be able to enter into new
strategic relationships in the future. If we are unable to develop key
relationships or maintain and enhance existing relationships, we may have
difficulty achieving market acceptance for our viaLink services.
The Hewlett-Packard note will leverage us considerably, causing financial and
operating risk, and may result in significant dilution
As a result of our issuing a $6.0 million subordinated secured convertible
promissory note to Hewlett-Packard, our debt service requirements will increase
substantially when we are required to begin making repayments in February 2004.
The degree to which we are leveraged could materially adversely affect our
ability to obtain future financing and could make us more vulnerable to industry
downturns and competitive pressures. Our ability to meet our debt obligations
will be dependent upon our future performance, which will be subject to
financial, business and other factors affecting our operations. Additionally,
beginning in August 2000 all principal and interest due under the note could be
converted into shares of our common stock at $7.00 per share, a substantial
discount from our current stock price, resulting in substantial dilution to our
current shareholders.
We are dependent upon the operation of the production and data center by
Hewlett-Packard for the timely and secure delivery of our services
As part of our strategic relationship, we utilize Hewlett-Packard's data
center as the host for our viaLink services. We are dependent on our continued
relationship with Hewlett-Packard and on their data center for the timely and
secured delivery of our services.
The 7% royalty we must pay to Ernst & Young could adversely affect our ability
to become profitable
Pursuant to an alliance agreement between Ernst & Young and us, we must
pay a royalty of 7% of our service revenues to Ernst & Young until May 2001.
Upon meeting specified objectives relating to significant Ernst & Young clients
becoming our customers, these royalty payments will continue in perpetuity.
These royalty payments could inhibit our ability to become profitable and could
have an adverse effect on our operating results and financial condition.
The issuance of the warrant to Ernst & Young could result in substantial
dilution to our current shareholders
The issuance of the warrant to Ernst & Young to purchase 250,000 shares
of our common stock could cause substantial dilution to our current
shareholders. Our common stock was trading at $21.25 on May 17, 1999 and the
warrant is exercisable for a price of $8.00 per share of our common stock.
We may be unable to obtain the additional capital required to grow our business
We intend to spend large amounts of capital to fund our growth and develop
a market and market acceptance for our Item Catalog service and other viaLink
services. We have incurred operating losses and negative cash flow in the past
and expect to incur operating losses and negative cash flow in the future. In
addition, we do not currently have a line of credit and do not have current
plans to establish a new line of credit. We expect that the cash we received in
the Hewlett-Packard financing and cash we may receive upon exercise of our
warrants will enable us to meet our working capital and capital expenditure
requirements throughout 1999 and into 2000. After
9
<PAGE>
that time, our ability to fund our planned working capital and capital
expenditures will depend upon our ability to obtain sufficient equity or debt
financing. Our future financing requirements will depend on a number of factors,
including our:
. Achieving and sustaining profitability;
. Growth rate;
. Working capital requirements;
. Market acceptance; and
. Costs of future research and development activities.
We may not be able to obtain the additional financing necessary to satisfy
our cash requirements or to implement our growth strategy successfully.
Moreover, if our stock price drops significantly, the warrant holders may choose
not to exercise their warrants and purchase the underlying shares of our common
stock, which will adversely affect our 1999 cash flow. If we cannot obtain
adequate additional financing, we will be forced to curtail our planned business
expansion and may be unable to fund our ongoing operations, including the
marketing and development of our Item Catalog service and our other viaLink
services. If adequate additional financing is not available, we may also be
required to license our rights to commercialize our proprietary technologies to
third parties, and we may not be able to acquire complementary businesses and
technologies which could further our growth strategy.
We do not have any current plans to acquire other businesses or
technologies. However, if we do decide to acquire other businesses or
technologies, up to 30% of the proceeds from the exercise of the warrants could
be used for this purpose.
Pursuant to an agreement with Barron Chase Securities, Inc., the
underwriter of our initial public offering, we have agreed not to issue any
preferred stock until November 20, 1999 without their prior written consent.
This could further limit our ability to obtain additional financing.
If we face increased competition, we may be forced to reduce the prices of our
services in an attempt to gain or protect our market share
If we face increased competition, we may not be able to sell our viaLink
services on terms favorable to us. Furthermore, increased competition could
reduce our market share or require us to reduce the price of our services. We
currently compete principally on the basis of the specialized and unique
features and functions of our viaLink services including their:
. Ability to operate with other network products and operating systems;
. Product quality;
. Ease-of-use;
. Reliability; and
. Performance.
To achieve market acceptance and thereafter to increase our market share,
we will need to continually develop additional services and introduce new
features and enhancements. Many of our competitors and potential competitors
have significant advantages that we do not, including:
. Significantly greater financial, technical and marketing resources;
. Greater name recognition;
10
<PAGE>
. A broader range of products and services; and
. More extensive customer bases.
Consequently, they may be able to respond more quickly than we can to new or
emerging technologies and changes in customer requirements.
We must adapt to technology trends and evolving industry standards to remain
competitive
Our market is susceptible to rapid changes due to technological innovation,
evolving industry standards and changes in subscriber needs. If our competitors
introduce new products and services embodying new technologies, our existing
services may become obsolete. Our future success will depend upon our ability to
continue to develop and introduce a variety of new services and enhancements,
which respond to technological change, evolving industry standards and customer
requirements on a timely basis, to address the increasingly sophisticated needs
of our customers.
If Internet usage does not continue to grow, we may not be able to continue our
business plan
Our ability to achieve market acceptance depends upon the food and consumer
packaged goods industries' widespread acceptance of the Internet as a vehicle
for business-to-business electronic commerce. There are a number of critical
issues concerning commercial use of the Internet, including security,
reliability, cost, quality of service and ease of use and access. Organizations
that have already invested substantial resources in other means of exchanging
information may be reluctant to implement Internet-based business strategies.
There can be no assurance that Internet-based information management utilizing
viaLink, or any other product, will become widespread. If the Internet fails to
become widely accepted by the food and consumer packaged goods industries,
viaLink subscribers may be required to utilize private communications networks,
at comparatively higher cost.
Undetected software errors or failures found in new products may result in loss
of or delay in market acceptance of our products which could materially
adversely affect our operating results
Errors or defects in our products may result in loss of revenues or delay
in market acceptance and could materially adversely affect our business,
operating results and financial condition. Software products such as ours may
contain errors or defects, sometimes called "bugs," particularly when first
introduced or when new versions or enhancements are released. In the past, we
have discovered software errors in some of our new products after their
introduction. Despite our testing, current versions, new versions or
enhancements of our products may still have defects and errors after
commencement of commercial operation.
We may become subject to product liability claims which, whether or not
successful, could materially adversely affect our business
A product liability claim, whether or not successful, could damage our
reputation and our business, operating results and financial condition. Our
license agreements with our customers typically contain provisions designed to
limit our exposure to potential product liability claims. However, these
contract provisions may not preclude all potential claims. Product liability
claims in excess of insurance limits could require us to spend significant time
and money in litigation or to pay significant damages.
If the security measures protecting our services are inadequate, our business
will be adversely affected
Our Item Catalog service and other viaLink services contain security
protocols. However, our database and these services may be vulnerable to break-
ins and similar security breaches that jeopardize the security of the
information stored in, and transmitted through, the computer systems of our
subscribers. Any security breach could result in significant liability to us and
also deter potential subscribers. Moreover, the security and privacy concerns
11
<PAGE>
of potential subscribers, as well as concerns related to computer viruses, may
inhibit the marketability of our viaLink services.
Our planned aggressive growth will strain our resources
We intend to expand our operations rapidly in the foreseeable future to
pursue existing and potential market opportunities. If this rapid growth occurs,
it will place significant demands on our management and operational resources.
We will need to hire additional sales and marketing, research and development
and technical personnel to increase and support our sales. We will also need to
hire additional support and administrative personnel, expand customer service
capabilities and expand our information management systems. From time to time,
we have experienced, and we expect to continue to experience, difficulty in
hiring and retaining talented and qualified employees. Our failure to attract
and retain the highly trained technical personnel that are essential to our
product development, marketing, service and support teams may limit the rate at
which we can generate revenue and develop new products or product enhancements.
In order to manage our growth effectively, we must implement and improve our
operational systems, procedures and controls on a timely basis. If we fail to
implement and improve these systems, our business, operating results and
financial condition will be seriously damaged.
Our management team may not be able to work together effectively to implement
our business model
We have recently hired many of our current executive officers to establish
a team to manage our operations. These newly hired officers include our Chief
Executive Officer, hired in October 1998, our Chief Operating Officer, hired in
October 1998, our Executive Vice President of Business Development, hired in
April 1999, our Chief Financial Officer, hired in April 1999, our Vice President
of Strategic Products, hired in March 1999, our Vice President of Human
Resources, hired in April 1999 and our Vice President of Operations, promoted in
February 1999. These individuals had not previously worked together and are in
the process of integrating as a management team.
Our success is substantially dependent on our ability to retain our key
personnel
The loss of services of our key technical, sales and senior management
personnel would seriously damage our business, results of operations and
financial condition. On October 1, 1998, we entered into employment agreements
with both Lewis B. Kilbourne, our Chief Executive Officer, and Robert N. Baker,
our President and Chief Operating Officer. Both of these agreements has a term
of three years, with year-to-year renewals. We also maintain a key man life
insurance policy for Mr. Baker.
We may make unspecified future acquisitions using a significant portion of the
potential proceeds from the exercise of the warrants or enter into additional
joint venture arrangements. These actions may divert management attention from
our operations and may be unsuccessful, either of which could have a material
adverse affect on our business
Although we do not have any current plans for future acquisitions, in the
future we may acquire additional businesses, products and technologies, or enter
into joint venture arrangements that could complement or expand our business.
Management's negotiations of potential `acquisitions or joint ventures and
management's integration of acquired businesses, products or technologies could
divert their time and resources. The decision to make any future acquisitions
could require us to use up to 30% of the proceeds we receive from the exercise
of the warrants, issue dilutive equity securities, incur debt or contingent
liabilities, amortize goodwill and other intangibles, or write-off in-process
research and development and other acquisition-related expenses. Further, we may
not be able to successfully integrate any acquired business, products or
technologies with our existing operations or retain key employees. If we are
unable to fully integrate an acquired business, product or technology, we may
not receive the intended benefits of that acquisition.
12
<PAGE>
If we fail to adequately protect our intellectual property rights or face a
claim of intellectual property infringement by a third-party, we could lose our
intellectual property rights or be liable for significant damages
Our success is in part dependent upon our proprietary software technology.
Companies in the software industry have experienced substantial litigation
regarding intellectual property. We license our products under agreements
containing provisions prohibiting the unauthorized use, copying and transfer of
the licensed program. In addition, we rely on a combination of trade secret,
copyright and trademark laws as well as non-disclosure and confidentiality
agreements to protect our proprietary technology. We own no patents. However,
these measures provide only limited protection, and we may not be able to detect
unauthorized use or take appropriate steps to enforce our intellectual property
rights.
Any litigation to enforce our intellectual property rights may divert
management resources and may not be adequate to protect our business. We also
could be subject to claims that we have infringed the intellectual property
rights of others. In addition, we may be required to indemnify our end-users for
similar claims made against them. Any claims against us could require us to
spend significant time and money in litigation, pay damages, develop new
intellectual property or acquire licenses to intellectual property that is the
subject of the infringement claims. These licenses, if required, may not be
available on acceptable terms. As a result, intellectual property claims against
us could have a material adverse effect on our business, operating results and
financial condition.
We depend on third-party technology for use in our products. If we are unable to
continue to use these software licenses our business may be materially adversely
affected
We rely upon software that we license from third parties, including
software that is integrated with our internally developed software and used in
our products to perform key functions. These third-party software licenses may
not continue to be available to us on commercially reasonable terms. The loss
of, or inability to maintain or obtain any of these software licenses, could
result in delays in our ability to provide our services or in reductions in the
services we provide until we develop, identify, license and integrate equivalent
software. Any delay in product development or in providing our services could
damage our business, operating results and financial condition.
We would lose revenues and incur significant costs if our systems and software
or material third-party systems or software are not Year 2000 compliant
Some computers, software and other equipment include programming code in
which calendar year data is abbreviated to only two digits. As a result of this
design decision, some of these systems could fail to operate or fail to produce
correct results if "00" is interpreted to mean 1900, rather than 2000. These
problems are widely expected to increase in frequency and severity as the year
2000 approaches and are commonly referred to as the "Year 2000 Problem."
The Year 2000 Problem presents us with several potential risks including
the following:
Internal infrastructure. The Year 2000 Problem could affect computers,
software and other equipment that we use internally as well as divert
management's attention from ordinary business activities. In addition to
computers and related systems, the operation of our office and facilities
equipment, such as fax machines, photocopiers, telephone switches, security
systems, elevators and other common devices, may be affected by the Year 2000
problem.
Suppliers/third-party relationships. There can be no assurance that our
vendors, customers, suppliers, service providers or other third parties that we
rely upon will resolve any or all Year 2000 Problems with their systems on a
timely basis.
Software/services. We believe that it is not possible to determine with
complete accuracy that all Year 2000 Problems affecting the software used in
providing our services have been identified or corrected due to the complexity
of this software.
13
<PAGE>
Consulting services. We may be subject to Year 2000 Problem claims in
connection with software programs developed and previously installed on customer
sites through our recently discontinued consulting services. Under our asset
sale agreement with Netplex, we are responsible, and potentially liable, for
problems with the software installed by us in customer sites prior to September
1, 1998.
We expect to identify and resolve all Year 2000 Problems by the end of the
second quarter of 1999, that could materially adversely affect our business,
financial condition or results of operations. We are currently developing
contingency plans to be implemented as part of our efforts to identify and
correct Year 2000 Problems affecting our internal systems and expect to complete
our contingency plans by June 30, 1999. However, we believe that it is not
possible to determine with complete certainty that all Year 2000 Problems
affecting us will be identified or corrected in a timely manner. If we fail to
identify and correct all Year 2000 Problems affecting our internal systems, or
if we are forced to implement our contingency plans, our business, financial
condition or results of operations could be materially adversely affected.
As an Internet company, our stock and warrants may experience extreme price and
volume fluctuations
The market prices for our common stock and redeemable warrants have
fluctuated in the past and are likely to continue to be highly volatile and
subject to wide fluctuations. In addition, the stock market has experienced
extreme price and volume fluctuations. The market prices of the securities of
Internet-related companies have been especially volatile. In the past, companies
that have experienced volatility in the market price of their stock have been
the object of securities class action litigation. If we were to be the object of
securities class action litigation, it could result in substantial costs and a
diversion of management's attention and resources.
The price of our common stock may decline due to shares eligible for future sale
Sales of a substantial number of shares of common stock could adversely
affect the market price of the common stock and could impair our ability to
raise capital through the sale of equity securities. If all of our warrants are
exercised, we will have outstanding 3,989,342 shares of common stock, assuming
no exercise of outstanding options after May 31, 1999. Of these shares:
. 2,792,691 shares will be freely tradable without restriction or further
registration under the Securities Act unless purchased by our
"affiliates";
. 74,861 shares will be freely tradable without restriction or further
registration under the Securities Act following the termination of the
lock-up arrangement under the promotional shares escrow agreement
described below;
. 1,065,139 shares held by affiliates will become available for sale
pursuant to the volume and manner of sale provisions of Rule 144
following the termination of the promotional shares escrow agreement
described below; and
. 1,481,790 shares of common stock will be "restricted securities" as
defined in Rule 144 of the Securities Act.
An additional 495,212 shares of common stock are issuable upon the exercise
of currently exercisable options. Substantially all shares issued following the
exercise of these options will be freely tradable. Shortly after the date of
this prospectus, we anticipate registering the resale of 410,000 of these
shares.
Additionally, pursuant to our agreement with Ernst & Young and the warrant
we issued to Ernst & Young in connection with that agreement, Ernst & Young has
agreed to purchase 62,500 shares of our common stock at a price per share of
$8.00. We are obligated to register these securities for resale under the
Securities Act shortly after the date of this prospectus. Upon the registration
of these shares, they will become freely tradable without restriction or further
registration. An additional 187,500 shares may be purchased by Ernst & Young
pursuant to this warrant. Ernst & Young has certain registration rights in
connection with these shares. For more information regarding the Ernst & Young
warrant, please see "Business -- Strategic Relationships" below.
14
<PAGE>
Beginning in August 2000, the $6.0 million promissory note we issued to
Hewlett-Packard becomes convertible into our common stock at a price of $7.00
per share. In the event that Hewlett-Packard elects to convert this note and
these shares are registered for resale under the Securities Act, the shares will
be available for sale. The table below sets forth the approximate number of
Conversion Shares issuable at various times during the term of the convertible
note, assuming we do not make any repayments of principal or interest and
Hewlett-Packard exercises its conversion right in full:
<TABLE>
<CAPTION>
Principal and Conversion Shares
Date Interest Due ($) (@$7.00 share)
---- --------------- -------------
<S> <C> <C>
August 5, 2000 $7,035,000 1,005,000
(18 months)
(initial conversion date)
August 5, 2001 7,725,000 1,103,571
(30 months)
August 5, 2002 8,415,000 1,202,143
(42 months)
August 5, 2003 9,105,000 1,300,714
(54 months)
February 28, 2004 9,493,475 1,356,211
(60 months)
(maturity date)
</TABLE>
For more information on the convertible note we issued to Hewlett-Packard,
please see "Business -- Strategic Relationships" below.
The 920,000 outstanding redeemable warrants are currently in-the-money and
exercisable. The closing price of our common stock on June 9, 1999 was $15.63
per share and the warrants may be exercised to purchase one share of common
stock at a price of $5 per share.
In connection with our initial public offering of common stock, our
executive officers, some former executive officers and certain holders of stock
options entered into a Promotional Shares Escrow Agreement. Under this
agreement, they agreed until November 19, 1999 not to sell or otherwise dispose
of any shares of our common stock, unless the subsequent holder agrees to take
such securities subject to the agreement.
We have broad discretion in how we use the proceeds we receive from the exercise
of the warrants
We have broad discretion in how we use the proceeds we may receive in
connection with the exercise of the warrants. Therefore, you must rely on the
judgment of management in the application of the proceeds. In particular, we may
use a significant portion of the proceeds from the exercise of the warrants to
acquire other companies or technologies or enter into joint ventures. If we
choose to do so, our shareholders would not have the opportunity to review the
financial status of or vote on such future acquisitions. Please see "Use of
Proceeds" for more information related to our current plans with respect to the
use of proceeds we receive upon exercise of the warrants.
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<PAGE>
Our officers and directors own a significant percentage of our company, and will
be able to exercise significant influence over our company
Our executive officers and directors, in the aggregate, beneficially own
approximately 40% of our outstanding common stock. As a result, these
shareholders, if they act together, could control all matters submitted to our
shareholders for a vote, including the election of directors and the approval of
mergers and other business combination transactions.
It may be difficult for a third party to acquire us due to provisions in our
charter, bylaws and the laws of our state of incorporation
Provisions of our charter and bylaws as well as the Oklahoma General
Corporation Act could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our shareholders. We are subject to the
business combination provisions of the Oklahoma General Corporation Act which
restrict many possible business combinations (i.e. acquisitions) with interested
shareholders. These provisions may have the effect of inhibiting a non-
negotiated merger or other business combinations.
At our 1999 annual meeting of shareholders, our shareholders approved the
reincorporation of viaLink from Oklahoma to Delaware. The charter and bylaws of
viaLink Delaware will be substantially similar to the charter and bylaws of
viaLink Oklahoma. Upon the effectiveness of our reincorporation we will be
subject to the Delaware General Corporation Law. Delaware laws contain
provisions similar to Oklahoma law which will restrict our ability to engage in
business combinations with interested shareholders.
The sale of shares of our common stock issuable upon the exercise of our
warrants is contingent upon continuing registration requirements
We will only be able to issue shares of common stock upon exercise of the
redeemable warrants if the sale of the common stock underlying the redeemable
warrants is lawful under applicable federal and state securities laws. To be
lawful, we must maintain effectiveness of the registration statement of which
this prospectus is a part. In addition, we must register or qualify the common
stock underlying the redeemable warrants for sale in the states in which the
redeemable warrant holders reside. We have agreed to maintain effectiveness of
the registration statement to permit sale of the common stock upon exercise of
the redeemable warrants. However, we may decide not to seek to qualify the
common stock underlying the redeemable warrants for sale in all of the states in
which the redeemable warrant holders reside. Even if we seek to qualify the
common stock, we cannot be sure that such qualification will occur. If we are
unable to qualify the common stock for sale or fail to maintain an effective
registration statement, the market value of the redeemable warrants may be
diminished and the market for the redeemable warrants may be limited.
Specific investors in states which have not approved the issuance of the
securities covered by this prospectus may be unable to exercise the warrants or
sell shares of our common stock issuable upon exercise of the warrants
The sale of our common stock upon exercise of the redeemable warrants could
violate the securities laws of some states or other jurisdictions. We have and
will use our best efforts to cause the sale of the common stock to be lawful
upon exercise of redeemable warrants. However, we are not required to accept the
exercise of the redeemable warrants if, in the opinion of counsel, the sale of
the common stock upon such exercise would be unlawful under applicable
securities laws. In this case, the redeemable warrants will not be accepted for
exercise. Consequently, the redeemable warrant holder will be required to sell
the redeemable warrants in the open market, if a public trading market exists,
or hold the redeemable warrants until they expire or, if applicable, we redeem
the warrants for $0.125 per redeemable warrant. Please refer to the inside front
cover of this prospectus for a list of jurisdictions in which the exercise of
the redeemable warrants or the resale of shares issued upon exercise of the
underwriter warrants may be unlawful.
16
<PAGE>
Our redemption of the redeemable warrants could result in the loss of a
substantial portion of your investment or force you to exercise or sell the
warrants
Redeemable warrant holders who do not exercise their redeemable warrants
prior to the time the redeemable warrants are redeemed will forfeit their rights
to purchase the shares of common stock underlying the redeemable warrants. In
the event that we elect to redeem the redeemable warrants, the redeemable
warrant holders will be confronted with several alternatives:
. Holders may be forced to exercise the redeemable warrants at a time that
may be financially disadvantageous;
. Holders may be forced to sell the redeemable warrants, notwithstanding
possible adverse market conditions; or
. Holders will be required to accept the redemption price of $.125 per
redeemable warrant, which may be an amount substantially less than the
purchase price of the redeemable warrant.
The exercise of warrants and stock options may have a dilutive effect on the
price of our stock
Investors purchasing shares of common stock in the offering will incur
immediate and substantial dilution in net tangible book value per share. Please
see "Dilution" below for more information regarding the dilution which will be
experienced.
If the redeemable warrants and underwriter warrants are not exercised, we will
need to seek other sources of capital
In the event that the holders of our redeemable warrants and underwriter
warrants choose not to exercise the warrants, we will not receive any proceeds.
This would force us to find additional sources of capital to fund our growth.
Our securities could be delisted from the Nasdaq SmallCap market which may make
the purchase and sale of our securities more difficult
Shares of our common stock and redeemable warrants are quoted on the Nasdaq
SmallCap market. Our securities could be delisted from the Nasdaq SmallCap
market, which would force us to list our shares on the OTC Bulletin Board or
some other quotation medium, such as "pink sheets," depending upon our ability
to meet the specific listing requirements of those quotation systems. As a
result, an investor would find it more difficult to dispose of, or to obtain
accurate quotations of the price of our securities. Such delisting may also have
the adverse effect of reducing the visibility, liquidity and prestige of our
common stock. For continued listing on the Nasdaq SmallCap Market, we must
maintain compliance with the following standards set forth by Nasdaq: (i) have
net tangible assets of at least $2 million, market capitalization of at least
$35 million or net income of at least $500,000; (ii) market value of public
float of at least $1 million; (iii) a minimum bid price per share of our common
stock of $1; (iv) at least two market makers in our securities; and (v) at least
300 shareholders.
Our common stock may become subject to "penny stock" regulations which would
impose significant restrictions on the broker-dealers who purchase or sell our
securities
In the event our common stock is delisted from the Nasdaq SmallCap Market
and does not trade on another national securities exchange, we may become
subject to "penny stock" regulations that impose additional sales practice and
market making requirements on broker-dealers who sell or make a market in our
securities. A "penny stock" is generally a stock that is not listed on a
national securities exchange or NASDAQ, is listed in "pink sheets" or on the
NASD OTC Bulletin Board, have a price per share of less than $5 per share and
are issued by a company with net tangible assets less than $5 million. The penny
stock trading rules impose additional duties and responsibilities upon broker-
dealers recommending the purchase of a penny stock (by a purchaser that is not
an
17
<PAGE>
accredited investor as defined by Rule 501(a) promulgated under the Securities
Act of 1933) or the sale of a penny stock. Among such duties and
responsibilities, with respect to a purchaser who has not previously had an
established account with the broker-dealer, the broker-dealer is required to
obtain information concerning the purchaser's financial situation, investment
experience and investment objections and make a reasonable determination that
transactions in the penny stock are suitable for the purchase and the purchaser
has sufficient knowledge and experience in financial matters. The broker-dealer
must also receive a signed written statement setting forth the basis for such
determination. If our securities become subject to penny stock regulations, it
would adversely affect the ability and willingness of broker-dealers who sell or
make a market in our common stock and of investors to sell our securities in the
secondary market.
_____________________
SPECIAL CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate" and "continue" or similar words. You should
read statements that contain these words carefully because they discuss our
future expectations, contain our projections of the future operating results of
our operations or of our financial condition or state other forward-looking
information. We believe that it is important to communicate our future
expectations to our investors. However, there may be events in the future that
we are not able to accurately predict or control. The risk factors listed in
this section, as well as any cautionary language in this prospectus, provide
examples of risks, uncertainties and events that may cause our actual results to
differ materially from the expectations we describe in our forward-looking
statements. Before you invest in our common stock, you should be aware that the
occurrence of the events described in these risk factors and elsewhere in this
prospectus could have a material adverse effect on our business, operating
results and financial condition.
18
<PAGE>
USE OF PROCEEDS
If all the redeemable warrants are exercised, we will receive approximately
$4.5 million after deducting our estimated offering expenses. Warrant exercise,
however, is at the option of the warrant holders. Some or all of the warrant
holders may decide not to exercise their warrants. Should warrant holders choose
not to exercise their warrants, we will not receive proceeds from these holders,
and we will therefore receive less than $4.5 million in net proceeds. Pending
the following uses, we will invest the net proceeds in government securities and
other short-term, investment-grade, interest-bearing instruments. The proceeds
received from the exercise of the warrants will be used entirely by us and will
not benefit parties affiliated with us.
We currently intend to use the proceeds, assuming all redeemable warrants
are exercised, approximately as set forth below (due to rounding, the "Percent"
column does not add up to 100%):
<TABLE>
<CAPTION>
Use Amount Percent
- --- ------ -------
<S> <C> <C>
Enhancement and Further Development of Our viaLink Services: $3,200,000 71 .1%
(Internal Software Development Costs,
Acquisition of Computer Hardware and Software,
Sales and Marketing Expenses and
Operational and Administrative Expenses)
Acquisition of Other Computer Hardware and Software 550,000 12.2
SEC, Nasdaq, Accounting, Legal and Blue Sky Fees 150,000 3.3
Working Capital and Other General Corporate Purposes 600,000 13.3
---------- -----
Total $4,500,000 100.0%
</TABLE>
We will receive an exercise price per share of $6.00 if a selling
shareholder decides to exercise our underwriter warrants, provided that the
selling shareholder does not purchase the shares by using the net exercise
feature of the underwriter warrants. We currently intend to use the proceeds we
receive from the exercise of the underwriter warrants for the purposes stated
above and in the same percentages as stated above.
However, as a result of changes in our business, we reserve the right to
change the allocations provided above with respect to our use of proceeds for
the redeemable warrants and the underwriter warrants.
We will not receive any proceeds from the sale of common stock by the
selling shareholders.
19
<PAGE>
DILUTION
Our net tangible book value as of March 31, 1999 was $8,025,799 or $2.79
per share of common stock. Net tangible book value per share represents the
amount of our total tangible assets less total liabilities, divided by the
number of shares of our common stock outstanding. Assuming the exercise of the
920,000 redeemable warrants at the exercise price of $5.00 per share and the
application of the estimated net proceeds therefrom, our net tangible book value
as of March 31, 1999 would have been $12,625,799, or $3.33 per share of common
stock. This represents an immediate increase in the net tangible book value of
$0.54 per share to our existing shareholders and an immediate dilution in the
net tangible book value of $1.67 per share to new investors of common stock in
this offering. The following table illustrates this per share dilution:
<TABLE>
<CAPTION>
Percentage of
Exercise Price
--------------
<S> <C> <C> <C>
Exercise price per share............................................. $5.00 --
Net tangible book value per share as of March 31, 1999............ $2.79 56%
-----
Increase per share attributable to new investors.................. .54 11
-----
Net tangible book value per share after this offering................ 3.33 67
-----
Dilution per share to new investors.................................. $1.67 33
===== ==
</TABLE>
DIVIDEND POLICY
We intend to retain any future earnings to finance the expansion of our
business and do not anticipate paying cash dividends for the foreseeable future.
Any future determination as to the payment of dividends will be at the
discretion of our board of directors. In addition, the terms of the secured
subordinated promissory note we issued to Hewlett-Packard prohibit us from
paying any dividends while any amounts remain outstanding under this note.
MARKET PRICES
The common stock and the redeemable warrants have been quoted on the Nasdaq
SmallCap Market under the symbols "IQIQ" and "IQIQW," respectively, since
November 1996. The following table sets forth the high and low sale prices of
the common stock and redeemable warrants as reported by the Nasdaq SmallCap
Market.
<TABLE>
<CAPTION>
Common Stock Price Redeemable Warrant Price
------------------ ------------------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
1997: $ 5.38 $ 3.63 $ 1.69 $0.63
First Quarter
Second Quarter 4.50 2.88 1.00 0.38
Third Quarter 5.88 3.00 1.50 0.50
Fourth Quarter 4.50 2.94 1.13 0.50
1998: 4.50 2.88 1.00 0.38
First Quarter
Second Quarter 5.13 2.38 1.19 0.44
Third Quarter 3.69 2.13 1.00 0.38
Fourth Quarter 14.50 2.44 9.25 0.44
1999:
First Quarter 33.00 10.56 26.63 7.25
Second Quarter (through 24.88 12.25 18.81 8.06
June 9, 1999)
</TABLE>
We believe there are currently approximately 1,300 record holders of common
stock and approximately 260 record holders of redeemable warrants. On June 9,
1999, the closing sale prices of our common stock and redeemable warrants as
reported on the Nasdaq SmallCap Market were $15.63 and $10.63, respectively.
20
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data is qualified by reference to, and
should be read in conjunction with, our financial statements and related notes
contained elsewhere in this prospectus and "Management's Discussion and Analysis
of Financial Condition and Results of Operations." The selected financial data
presented below is not necessarily indicative of our future results of
operations or financial performance. The selected financial information as of
and for the years ended December 31, 1996, 1997 and 1998, is derived from our
audited financial statements appearing elsewhere in this prospectus. For the
three months ended March 31, 1999 and 1998 and as of March 31, 1999, this
information is derived from our unaudited financial statements appearing
elsewhere in this prospectus.
<TABLE>
<CAPTION>
Year Ended Three Months
December 31, Ended March 31,
--------------------------------------- -------------------------
1998 1997 1996 1999 1998
----------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Statements of Income Data:
Revenues.............................. $ 8,230,628 $ 9,022,842 $ 9,507,370 $ 108,178 $ 3,098,404
Expenses:
Direct cost of sales................. 1,563,757 2,211,956 2,570,840 -- 377,068
Salaries and benefits................ 5,256,247 6,174,503 5,167,571 501,358 1,787,430
Selling, general and administrative.. 1,964,180 2,708,351 2,007,999 1,150,822 558,599
Interest expense, net................ 161,355 73,581 219,089 634,498 36,116
Depreciation and amortization........ 925,134 827,396 591,205 178,834 248,452
----------- ----------- ----------- ----------- -----------
Total expenses...................... 9,870,673 11,995,787 10,556,704 2,465,512 3,007,665
Loss from operations.................. (1,640,045) (2,972,945) (1,049,334) (2,357,334) 90,739
Gain on sale of assets................ 2,988,453 -- -- 462,041 --
Other income.......................... 340,670 -- -- 273,000 --
----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes..... 1,699,078 (2,972,945) (1,049,334) (1,622,293) 90,739
Provision (benefit) for income taxes.. 1,049,440 (1,112,127) (366,925) -- 34,481
----------- ----------- ----------- ----------- -----------
Net income (loss)..................... 649,638 (1,860,818) (682,409) (1,622,293) 56,258
Other comprehensive income
(loss)--unrealized loss on securities (315,673) -- -- 1,447,856 --
----------- ----------- ----------- ----------- -----------
Comprehensive income (loss)........... $ 333,965 $(1,860,818) $ (682,409) $ (174,437) $ 56,258
=========== =========== =========== =========== ===========
Net income (loss) per common share:
Basic................................. $ 0.24 $ (0.68) $ (0.37) $ (0.57) $ 0.02
=========== =========== =========== =========== ===========
Diluted............................... $ 0.24 $ (0.68) $ (0.37) $ (0.57) $ 0.02
=========== =========== =========== =========== ===========
Weighted average shares outstanding:
Basic................................. 2,741,041 2,727,438 1,838,522 2,866,802 2,729,521
Diluted............................... 3,102,443 2,727,438 1,838,522 2,866,802 2,779,665
</TABLE>
<TABLE>
<CAPTION>
As of December 31, March 31,
------------------------- -----------
1998 1997 1999
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
Balance Sheet Data:
Current assets............................................... $ 2,160,384 $ 1,567,827 $ 8,996,208
Working capital (deficit).................................... 1,049,917 (331,366) 7,836,030
Total assets................................................. 4,597,046 5,804,153 11,151,733
Current liabilities.......................................... 1,110,467 1,899,193 1,160,178
Long-term debt............................................... -- 1,017,024 592,322
Stockholders' equity......................................... 3,486,579 2,887,936 9,399,233
</TABLE>
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and the notes appearing elsewhere in this
prospectus.
Overview
viaLink provides a business-to-business electronic commerce solution for
the food and consumer packaged goods industries. We have developed a cost-
effective, Internet-accessible shared database, the Item Catalog, that enables
subscribing manufacturers, suppliers and retailers to exchange product, pricing
and promotional information. Our solution offers a single interface solution
where retailers can receive product information from all of their suppliers,
regardless of the technological capabilities of the retailer or the supplier.
Suppliers and manufacturers are able to efficiently communicate product and
pricing information to their customers, significantly reducing the operational
and administrative costs of supply chain management. We also offer the Exchange
Manager and ItemXpress services to complement our Item Catalog service. Exchange
Manager allows subscribers to exchange order and invoice transactions through a
single interface, regardless of their number of trading partners. ItemXpress
allows subscribers to quickly and accurately create an initial setup of their
pricebook through a custom load for each retailer's system.
We expect that our future revenues will be generated primarily from monthly
subscriptions to the Item Catalog, Exchange Manager and ItemXpress services.
Under our former pricing model, monthly subscription fees collected from
retailers, wholesalers and manufacturers in the food and consumer packaged goods
industries were calculated based on the amount of each service the subscriber
used. Fees were generated when retailers and suppliers would "match"
transactions through the Item Catalog service system. We have recently changed
our pricing model to begin pricing our services based on a flat monthly rate
with a variable component based on usage. The variable portion of each
subscriber's monthly service fee is calculated based on the service and amount
of service the subscriber uses. For example, for use of the Item Catalog
service, retailers pay based on the number of suppliers from whom they receive
data; suppliers pay based on the number of retailers that download their data;
and manufacturers pay based on the number of retailers that subscribe to the
service. We price our other services based on the number of stores supported or
the amount of data stored and retrieved.
Until March 31, 2000, we may also receive quarterly payments of up to $1.5
million pursuant to an earn-out agreement with Netplex. We currently receive
revenues from Web hosting services we perform, but expect to reduce our focus on
this service.
In order to achieve market acceptance, we expect to continue our high level
of expenditures for investment in, and sales and marketing of, our viaLink
services. One of our strategies is to invest in new technology to facilitate
deployment and acceptance of our viaLink services. However, in order to
implement this strategy, we believe that we will need significant additional
capital resources, as well as hosting and marketing partners for our viaLink
services. We are currently seeking additional equity or debt financing and
negotiating with potential hosting and marketing partners.
In connection with the note we issued to Hewlett-Packard, we have adopted a
policy regarding the accounting required for such convertible securities. Based
on the price of our common stock at the commitment date and the conversion price
of the debt into our common stock by Hewlett-Packard at $7.00 per share, the
intrinsic value of the conversion feature at the commitment date was
approximately $20,000,000. However, the value is limited by the amount of the
proceeds and we have allocated the full amount of proceeds to the beneficial
22
<PAGE>
conversion feature and recorded the $6,000,000 as additional paid-in capital.
Furthermore, we have recognized a non-cash interest charge of the beneficial
conversion feature in the amount of $592,322 during the first quarter of 1999,
by establishing long-term debt in the same amount. We will continue to record a
non-cash interest charge of approximately $1,000,000 and increase the long-term
debt each quarter until the conversion date of August 5, 2000, 18 months after
the effective date of the transaction with Hewlett-Packard, at which date the
amount of the principal balance of the long-term debt will be $6,000,000.
On February 4, 1999, we entered into financing agreements and a note
purchase agreement with Hewlett-Packard pursuant to which Hewlett-Packard
purchased from us a $6.0 million secured subordinated promissory note. This note
bears interest at 11.5% per annum. Subject to approval by our shareholders, the
note will be exchanged for a subordinated secured convertible promissory note,
which is convertible into our common stock at a conversion price of $7.00 per
share. The purchase of the note occurred on February 5, 1999. As of April 30,
1999, we had cash and cash equivalents and short-term investments totaling $5.1
million.
On May 3, 1999, we entered into an agreement with Ernst & Young pursuant to
which Ernst & Young will provide us with consulting and integration services and
sales and marketing support, to assist us in the development of our viaLink
services. In connection with this agreement, we issued Ernst & Young a warrant
to purchase up to 250,000 shares of our common stock at a price of $8.00 per
share. Additionally, we have agreed to pay a royalty of 7% of our service
revenues to Ernst & Young for a period of two years and in the event that at
least ten "significant clients" of Ernst & Young become subscribers to our
services during this two year period, we will be obligated to continue this
royalty payment in perpetuity. As of the date if the issuance of the warrant,
the warrant conversion price was below the value of our stock. The difference
will result in a non-cash charge to our statement of operations.
We expect to report substantial losses from operations in 1999. The extent
of these losses will depend substantially on the amount of revenues generated
from subscriptions to our viaLink services, which have not yet achieved market
acceptance. To date, revenues from these services have not been significant. As
a result of our high level of expenditures for selling and marketing and
investments in these services, we expect to incur losses in future periods until
such time as the recurring revenues from these services are sufficient to cover
expenses.
We recognize revenue from subscriptions to our Item Catalog, Exchange
Manager and ItemXpress services as the services are performed. Revenue from the
earn-out agreement with Netplex, which is expected to pay us approximately $1.5
million over the next 18 months, is recognized quarterly as earned. Actual
payments are rendered to us from Netplex, according to the terms of the earn-out
agreement. Web site hosting and other miscellaneous revenues are recognized as
services are performed.
Sale of Consulting Business and ijob, Inc.
In order to focus on the development and deployment of our viaLink
services, we recently sold the assets related to our management consulting and
systems integration services (including our proprietary Retail Services
Application software) to Netplex. Historically, approximately 90% of our
revenues were generated from our consulting business. As a result of the sales
of assets, we resemble a development stage company since our planned principal
operations are underway, but have not yet generated significant revenues.
Netplex paid us $3.0 million in cash and issued us 643,770 shares of
Netplex preferred stock, having a then market value of approximately $1.0
million. We used certain of the cash proceeds from the sale to pay (1) $551,062
of long-term debt, (2) $565,094 of shareholder loans, including interest, and
(3) expenses attributable to the sale. The net gain from the consulting assets
sale was $2,998,453. In conjunction with the consulting asset sale, viaLink
entered into an earn-out agreement with Netplex. Under the earn-out agreement,
we are entitled to receive a cash payment equal to the lesser of $1.5 million or
50% of any net profits generated from the consulting and systems integration
assets until March 31, 2000. We recorded and received a September 1998 earn-out
payment of $132,770, which we recorded as other income. A receivable for
$207,900 for the earn-out payment for the fourth quarter of 1998 is included in
Other Receivables on the balance sheet at December 31, 1998 which was received
on March 12, 1999. We also have entered into a remarketing and relicensing
agreement with Netplex to sell CHAINLINK, our proprietary communications
software product. Under the remarketing and relicensing agreement,
23
<PAGE>
we have agreed to cease our own marketing and selling of CHAINLINK. Beginning
January 1, 2002, Netplex has the irrevocable right to purchase CHAINLINK from
us.
On December 31, 1998, we sold our wholly-owned subsidiary, ijob to DCM
Company, a corporation wholly-owned by David C. Mitchell, the President and a
member of the board of directors of ijob at the time of the sale. ijob is an
Internet-based, human resource screening and acquisition Company. We had
incurred substantial losses in connection with ijob and had provided significant
cash support for its operations. The sale of ijob enables us to focus on
developing our Item Catalog service and other viaLink services. DCM purchased
all of the outstanding stock of ijob for a collateralized, ten-year $800,000
secured promissory note that accrues interest at 8%. A gain on the sale of ijob
of $462,000 has been deferred at December 31, 1998, due to the highly leveraged
nature of DCM. On March 11, 1999, we received $800,000 plus accrued interest
from DCM in full payment of the promissory note we were issued by DCM upon our
sale of ijob. We have released all security interests which we held pursuant to
a security and pledge agreement in the fixed assets, contract rights, accounts
receivable and general intangibles of ijob. Accordingly, the deferred gain on
the sale of $462,000 was recognized in the consolidated statement of operations
in the first quarter of 1999.
Results of Operations
The following table sets forth, for the periods illustrated, certain
statements of operations data expressed as a percentage of total revenues.
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
---------------------------- --------------------
1998 1997 1996 1999 1998
-------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues.............................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses:
Direct cost of sales................................. 19.0 24.5 27.0 -- 12.2
Salaries and benefits................................ 63.9 68.4 54.4 463.5 57.7
Selling, general and administrative.................. 23.9 30.0 21.1 1,063.8 18.0
Interest expense, net................................ 2.0 0.8 2.3 586.5 1.2
Depreciation and amortization........................ 11.2 9.2 6.2 165.3 8.0
Total expenses................................... 120.0 132.9 111.0 2,279.1 97.1
Loss from operations.................................. (20.0) (32.9) (11.0) (2,179.1) 2.9
Gain on sale of assets and other
income............................................ (40.6) -- -- 679.5 --
Income (loss) before income taxes..................... 20.6 (32.9) (11.0) (1,499.7) 2.9
Provision (benefit) for income taxes................. 12.8 (12.3) (3.9) -- 1.1
Net income (loss)..................................... 7.8 (20.6) (7.1) (1,499.7) 1.8
Other comprehensive loss............................. 3.8 -- -- 1,338.4 --
Comprehensive income (loss)........................... 4.0% (20.6)% (7.1)% (161.2)% 1.8%
</TABLE>
First Quarter 1999 Compared to First Quarter 1998
Introduction
The sale of our consulting and systems integration business to Netplex was
effective September 1, 1998, and the sale of ijob was effective December 31,
1998. Consequently, our results of operations for the three months ended March
31, 1999 do not include the sales, expenses and results of operations related to
the consulting and systems integration operations and for the operations of
ijob. Our results of operations for the three months ended March 31, 1998
include the sales, expenses and results of operations related to the consulting
and systems integration assets and the ijob assets. Therefore, the results of
operations for the three months ended March 31, 1999 are not comparable to the
three months ended March 31, 1998.
Results of Operations
Revenues. Prior to the sale of our consulting and systems integration
business and ijob, revenues consisted primarily of management consulting and
system integration fees as well as sales of proprietary software licenses and
24
<PAGE>
hardware and the ijob services. Therefore, without those revenue sources, our
total revenues decreased 97%, or $3.0 million to $108,000 in the three months
ended March 31, 1999, from $3.1 million for the three months ended March 31,
1998.
Direct Cost of Sales. Direct cost of sales, which consist of purchased
hardware and software for resale, and costs associated with viaLink's
proprietary software products have been eliminated in 1999 with the sale of our
consulting business in 1998.
Salaries and Benefits Expense. Salaries and benefits expense consists of
direct payroll costs for salaries and wages, benefits, employment taxes and
contract programmers. With the sale of our consulting business effective
September 1, 1998, and the sale of ijob effective December 31, 1998, our
employee count has decreased from a staff of approximately 146 at the end of the
first quarter of 1998 to approximately 45 at the end of the first quarter of
1999. Therefore, overall salaries, wages, taxes and benefits expense decreased
by 72%, or $1.3 million to $501,000 in the three months ended March 31, 1999.
Selling, General and Administrative Expense. SG&A increased 106%, or
$590,000, to $1.2 million in the first quarter 1999, from $559,000 in the first
quarter of 1998. The increase in SG&A is primarily attributable to increased
expenses for recruiting and staffing and professional fees associated with the
Hewlett-Packard financing arrangement and regulatory filings. Professional
recruiting fees were $223,000 in the first quarter of 1999 compared to only
$11,000 in the first quarter of 1998. Also included in professional fees in the
first quarter of 1999 is approximately $189,000 for trade show and marketing
expenses that were not incurred in the first quarter of 1998.
Interest Expense, Net. Interest expense, net, increased 1657%, or $598,000,
to $634,000 for the three months ended March 31, 1999, from $36,000 for the same
period in 1998. This increase was due to the February 5, 1999 Hewlett-Packard
promissory note and borrowing of $6,000,000 at 11.5% interest, plus the
accounting for the beneficial conversion feature of the proceeds as more fully
discussed in Note 5 to the unaudited financial statements for the quarter ended
March 31, 1999 contained elsewhere in this prospectus. We will record a non-cash
interest charge of approximately $1,000,000 per quarter until the conversion
date of August 5, 2000. Monthly interest expense is offset by interest income on
short-term investments.
Depreciation and Amortization. Depreciation and amortization expense
decreased $70,000, or 28%, to $179,000 for the three months ended March 31,
1999, compared to $249,000 for the same period in 1998. This decrease was due to
the sale of the consulting division and ijob assets in 1998.
Gain on Sale of Assets and Other Income. On March 11, 1999, DCM paid the
note receivable of $800,000 plus accrued interest in full and we recognized the
deferred gain of $462,000 during the first quarter of 1999. We have also
recorded $273,000 of income under the earn-out agreement with Netplex.
Tax Provision (Benefit). SFAS 109, Accounting for Income Taxes, requires,
among other things, the separate recognition, measured at currently enacted tax
rates, of deferred tax assets and deferred tax liabilities for the tax effect of
temporary differences between the financial reporting and tax reporting bases of
assets and liabilities, and net operating loss and tax credit carryforwards for
tax purposes. A valuation allowance must be established for deferred tax assets
if it is "more likely than not" that all or a portion will not be realized.
Prior to the third quarter of 1998, we had recorded a tax benefit of $1.0
million related to the pre-tax losses incurred in prior years, and no valuation
allowance had been established prior to the third quarter of 1998. As a result
of the net gain on the consulting business sale, the deferred tax asset of $1.0
million was realized and a valuation allowance of $190,000 was established for
the remaining net deferred tax asset as of September 30, 1998. The deferred tax
asset, generated by losses recorded in the fourth quarter of 1998, was offset by
a full valuation allowance. We will continue to provide a full valuation
allowance for future and current net deferred tax assets until such time as
management believes it is more likely than not that the asset may be realized.
Other Comprehensive Income. Due to the increase in the market value at
March 31, 1999, of the common stock of Netplex underlying the 643,770 shares of
preferred stock received as consideration of the sale of our consulting assets,
we have recorded other comprehensive income of $1.4 million. Reporting of
comprehensive income in the current period is a result of the adoption of SFAS
130 in 1998.
25
<PAGE>
1998 Compared to 1997
The sale of our consulting business was effective as of September 1, 1998.
Consequently, our results of operations in 1998 do not include the sales,
expenses and results of operations related to the consulting and systems
integration operations for September through December 1998. Our results of
operations in 1997 include the sales, expenses and results of operations related
to the consulting and systems integration assets. Therefore, the results of
operations in 1998 compared to 1997 are not comparable. Prior to the sale of our
consulting business, we were operating under very restricted cash flow
capabilities and much of the decrease in expenses was due to this restriction on
cash flow.
Revenues. Prior to the sale of our consulting business, revenues consisted
of management consulting and system integration fees as well as sales of
proprietary software licenses and hardware. Revenues decreased 9%, or $792,000,
to $8.2 million in 1998, from $9.0 million in 1997. This decrease in gross
revenues was primarily attributable to the reduction in revenues resulting from
the consulting business sale. Hardware and product sales, including commissions
received on referral of such sales, decreased a total of 37%, or $1.1 million,
to $1.8 million in 1998, compared to $2.8 million in 1997. These decreases were
offset by an overall combined increase of $271,000 in all other revenue areas.
Direct Cost of Sales. Direct cost of sales consisted of purchased hardware
and software for resale, and costs associated with viaLink's proprietary
software products. Direct cost of sales decreased 29%, or $648,000, to $1.6
million in 1998, from $2.2 million in 1997. This decrease corresponded with the
decrease in hardware and product sales, offset by the increase in solution sales
in 1998. As a result of the consulting business sale, we will no longer be a
reseller of hardware and software and will no longer incur these expenses.
Salaries and Benefits Expense. Salaries and benefits expense consists of
direct payroll costs of salaries and wages, benefits, and employment taxes as
well as contract programmers. Salaries and benefits expense decreased by 15%, or
$918,000, to $5.3 million in 1998, from $6.2 million in 1997. These decreased
expenses were due to the consulting business sale.
Selling, General and Administrative Expense. SG&A decreased 27%, or
$744,000, to $2.0 million in 1998, from $2.7 million in 1997. Virtually every
area of SG&A decreased from 1997 to 1998 as a result of the overall concentrated
effort of management, due to cash flow restrictions, to better control and
reduce these expenses, and to some degree to the consulting business sale.
Travel and training expenses decreased 30%, or $183,000, from 1997 to 1998,
primarily due to the consulting business sale, as the majority of travel related
to the consulting business. Advertising and promotion, primarily as a result of
cash flow restrictions, decreased in 1998 by $129,000 from 1997, as did supplies
and resources, decreasing a total of $148,000 in 1998 for the same reason.
Professional fees decreased $126,000 in 1998 to $373,000, from $499,000 in 1997,
primarily the result of extraordinary level of expenditures in 1997, not
recurring in 1998, and to cash flow restrictions.
Interest Expense, Net. Interest expense, net, increased 119%, or $88,000,
to $161,000 in 1998, from $74,000 in 1997. This increase was due to increased
borrowing under our line of credit in 1998. We currently have no line of credit,
but expect to incur interest expense under our $6.0 million note with Hewlett-
Packard, which bears interest at a rate of 11.5% per annum.
Depreciation and Amortization. Depreciation and amortization expense
increased $98,000, or 12%, to $925,000 in 1998, compared to $827,000 in 1997.
This increase was due to $1.1 million of total capital asset expenditures during
1997 and does not include depreciation and amortization related to the assets
sold in the consulting business sale from the date of sale.
Gain on Sale of Consulting Business and Other Income. As a result of the
consulting business sale, we incurred a one-time net gain of $3.0 million. Other
income received or accrued under the earn-out agreement with Netplex totaled
$341,000 for 1998.
Tax Provision (Benefit). SFAS 109, Accounting for Income Taxes, requires,
among other things, the separate recognition, measured at currently enacted tax
rates, of deferred tax assets and deferred tax liabilities for the tax effect of
temporary differences between the financial reporting and tax reporting bases of
assets and liabilities, and net operating loss and tax credit carryforwards for
tax purposes. A valuation allowance must be established for
26
<PAGE>
deferred tax assets if it is "more likely than not" that all or a portion will
not be realized. Prior to the third quarter of 1998, we had recorded a tax
benefit of $1.0 million related to the pre-tax losses incurred in prior years,
and no valuation allowance had been established prior to the third quarter of
1998. As a result of the net gain on the consulting business sale in the third
quarter of 1998, the deferred tax assets of $1.0 million was realized and a
valuation allowance of $190,000 was established for the remaining net deferred
tax asset as of September 30, 1998. Losses were recorded in the fourth quarter
of 1998, which no net deferred tax asset was recorded. We will not record any
further tax benefits and deferred tax assets until such time as management
believes it is more likely than not that viaLink will be profitable in the
future.
Other Comprehensive Loss. Other comprehensive loss of $316,000 is the
result of the write-down to market value at December 31, 1998 of the Netplex
preferred stock received in connection with the consulting business sale to
Netplex. As of December 31, 1998, the Netplex preferred stock is carried on the
books at a value of $684,000. As of March 19, 1999, the market value of the
643,770 common shares of Netplex underlying the preferred stock owned was $1.8
million. Reporting of comprehensive loss in the current year is a result of the
adoption of SFAS 130.
1997 Compared to 1996
Revenues. Revenues decreased 5%, or $485,000, to $9.0 million in 1997, from
$9.5 million in 1996. Solutions and license revenues decreased 87%, or $866,000,
to $132,000 in 1997 from $997,000 in 1996. This decrease was due primarily to a
$898,000 single sale of our RSA product that occurred in 1996. Management
consulting and system integration and customer support fees decreased $491,000,
or 9%, to $5.0 million in 1997 from $5.5 million in 1996. This decrease was due,
in part, to the completion of several large consulting projects in the first and
second quarters of 1997. Revenues from network services and network based
computer applications increased 439%, or $817,000, to $1.0 million in 1997 from
$186,000 in 1996. Of this increase, $568,000 was generated from ijob, and the
remainder was derived from Web site maintenance and hosting fees and Item
Catalog service fees. Hardware and product sales decreased 4%, or $120,000, to a
total of $2.7 million in 1997, from $2.8 million in 1996.
Direct Cost of Sales. Direct cost of sales decreased 14%, or $359,000, to
$2.2 million in 1997 from $2.6 million in 1996. This decrease was due to
decreases sales of product and hardware and solutions and licenses in 1997.
Salaries and Benefits. Salaries and benefits increased 19%, or $1.0
million, to $6.2 million in 1997 from $5.2 million in 1996. Direct payroll costs
of salaries, wages, benefits and employment taxes increased 14%, or $677,000, to
$5.6 million in 1997 from $4.9 million in 1996. This increase was due primarily
to the addition of 21 new employees in 1997. Contract labor expenses totaled
$489,000 in 1997 compared to $85,000 in 1996, an increase of 477%, or $404,000.
Start-up costs and expenses from ijob accounted for $135,000 of the contract
labor expense increase. During 1997, we significantly increased our use of
contract programmers for client engagements. Previously, we had rarely used
contract programmers. These cost increases were offset by an increase of 31%, or
$174,000, in capitalized software development costs, which consist of salaries,
wages and benefits expended to further develop and enhance the viaLink services,
to a total of $743,000 in 1997 from $569,000 in 1996.
Selling, General and Administrative. SG&A increased 35%, or $700,000, to
$2.7 million in 1997 from $2.0 million in 1996. Over half of the increase in
SG&A was due to the start-up costs and ongoing operations of ijob. Professional
fees increased 104%, or $254,000, to $499,000 in 1997 from $244,000 in 1996.
ijob accounted for $138,000 of the increase in professional fees and the
remainder was attributable to development of our Item Catalog service.
Advertising and promotion expenses increased $147,000 to $217,000 in 1997 from
$70,000 in 1996. ijob accounted for $54,000 of the increase in advertising and
promotional expenses and the balance was due to increased sales and marketing
promotion activities of the Item Catalog service. During 1997, we intensified
our marketing and sales activities related to our Item Catalog service,
resulting in increased travel, long distance, advertising and promotion
expenses. Occupancy expenses and insurance increased 25%, or $119,000, to
$599,000 in 1997 from $481,000 in 1996. ijob accounted for $52,000 of this
increase, and the remainder was primarily due to the continued development of
our Item Catalog service. Telecommunications expense increased 68%, or $106,000,
to $261,000 in 1997 from $155,000 for 1996. ijob accounted for $52,000 of this
increase, and the remaining
27
<PAGE>
increase was due to the expansion of communication systems and Web site hosting
services related to our Item Catalog service.
Interest Expense, Net. Interest expense, net decreased 66%, or $146,000, to
$74,000 in 1997 from $219,000 for 1996. This decrease was generally due to the
repayment of outstanding bank debt in the fourth quarter of 1996.
Depreciation and Amortization. Depreciation and amortization expense
increased 40%, or $236,000, to $827,000 in 1997 from $591,000 in 1996. This
increase was due to capital asset expenditures made during 1997 and 1996
totaling $333,000 and $626,000, respectively, and capitalized software
development costs of $752,000 and $655,000, respectively. Of the total
capitalized costs in 1997, $104,000 of the costs were associated with the
development of ijob.
Provision (Benefit) for Income Taxes. We recorded a tax benefit of $1.1
million related to the pre-tax loss of $3.0 million in 1997 and a tax benefit of
$367,000 related to the pre-tax loss of $1.0 million in 1996. These tax benefits
were the results of net operating loss carryforwards totaling $4.5 million
which, if not utilized, will expire in 2011 and 2012. The cumulative net
deferred tax asset at December 31, 1997 was $1.0 million.
Liquidity and Capital Resources
On March 11, 1999 we received $800,000 plus accrued interest from DCM in
full payment of the promissory note we were issued by DCM in connection with our
sale of ijob.
Due to the sale of our consulting business to Netplex in the third quarter
of 1998, we anticipate that future revenues will be substantially less than
historical revenues and that cash requirements in connection with developing,
selling and marketing will be substantial. On February 4, 1999, we completed the
financing agreements with Hewlett-Packard, under which Hewlett-Packard provided
us with $6.0 million in financing through a collateralized, subordinated
promissory note, bearing interest at 11.5%. As of March 19, 1999, we had cash
and cash equivalents totaling approximately $6.2 million.
Our working capital position was significantly enhanced as a result of the
consulting business sale. On December 31, 1998, we had $2.2 million in current
assets and $1.1 million in current liabilities, with working capital of
approximately $1.1 million. During 1998, net cash increased $635,000. Net cash
used in operating activities in 1998 was $450,000, compared to net cash used in
operating activities in 1997 of $743,000. For the next six to nine months, we do
not expect significant cash flow to be generated from operations. Therefore, we
must use our current cash, cash equivalents and collection of accounts
receivable to operate the business and/or obtain additional financing.
During 1998, we invested $42,000 in various fixed assets and $617,000 for
software development costs, compared to total expenditures of $333,000 and
$752,000, respectively, for the same items in 1997. As of February 28, 1999, we
had no material firm cash commitments for capital expenditures other than
capitalized internal staff costs for further development of our viaLink
services, but expect our cash requirements for capital expenditures for 1999 to
be substantial.
During 1998, financing activities used net cash of $864,000, which
consisted primarily of payments on the shareholder notes in the principal amount
of $482,830, plus the repayment in full of the outstanding balance on the line
of credit. Payments on our capital lease obligations of $132,000 offset receipts
of $265,000 from the exercise of stock options and purchases under our stock
purchase plan and stock bonus plan.
We currently do not have any available working capital borrowing or credit
facility available for additional borrowings. We have borrowed $6.0 million from
Hewlett-Packard, under a five year secured subordinated promissory note, bearing
interest at 11.5%, with interest and principal payable at maturity in February
2004. We have incurred operating losses and negative cash flow in the past and
expect to incur operating losses and negative cash flow in the future. We
anticipate that we will fund our operations for the next 12 months from the cash
we received in the Hewlett-Packard financing and cash we may receive upon
exercise of our outstanding redeemable warrants expiring in November 1999, which
will enable us to meet our working capital and capital expenditure
28
<PAGE>
requirements throughout 1999 and into 2000. After that time, our future capital
requirements will depend on our revenue growth, profitability, working capital
requirements and level of investment in long term assets. Increases in these
capital requirements or a lack of revenues due to delayed or lower market
acceptance of our viaLink services would accelerate our use of our cash and cash
equivalents.
Year 2000 Plan
Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field. These date code fields
will need to accept four-digit entries to distinguish 21st century dates from
20th century dates. This problem could result in system failures or
miscalculations causing disruptions of business operations. As a result, in
approximately one year, computer systems and/or software used by many companies
may need to be upgraded to comply with such "Year 2000" requirements.
Significant uncertainty exists in the software industry concerning the potential
effects associated with such compliance.
Our vendors, customers, suppliers and service providers are under no
contractual obligation to provide Year 2000 information to us. Generally, we
believe our key internal software systems are either compliant, or the problems
can be corrected by purchasing small amounts of hardware, software or software
upgrades, where necessary. We are also continuing our assessment of the
readiness of external entities, such as subcontractors, suppliers, vendors, and
service providers that interface with us.
Based on our assessments and current knowledge, we believe we will not, as
a result of the Year 2000 issue, experience any material disruptions in internal
processes, information processing or services from outside relationships. We
presently believe that the Year 2000 issue will not pose significant operational
problems and that we will be able to manage our total Year 2000 transition
without any material effect on our results of operations or financial condition.
The most likely risks to us from Year 2000 issues are external, due to the
difficulty of validating all key third parties' readiness for Year 2000. We have
sought and will continue to seek confirmation of such compliance and seek
relationships which are compliant.
We currently anticipate that all of our internal systems and equipment will
be Year 2000 compliant by the end of the second quarter of 1999 and that the
associated costs will not have a material adverse effect on our results of
operations and financial condition. However, the failure to properly assess or
timely implement a material Year 2000 problem could result in a disruption in
our normal business activities or operations. Such failures, depending on the
extent and nature, could materially and adversely effect our operations and
financial condition. We are currently developing a contingency plan and expect
to have such a plan in place by June 30, 1999.
Under the terms of the sale of our consulting business to Netplex, we
retain the liability and responsibility for software programs developed and
installed in customer sites by us prior to September 1, 1998. We are unable to
determine at this time the extent to which potential liability for Year 2000
requirements from those previous installations may exist. We could incur
substantial costs, which would potentially have a material adverse effect on our
business, financial condition and operating results.
We do not believe that the costs of our Year 2000 program have been or are
material to our financial position or results of operations. All expenses have
been charged against earnings as incurred, and we intend to continue to charge
such costs against earnings as the costs are incurred.
In the ordinary course of business we test and evaluate our own software
products on a continuous basis. We believe that our own developed software
products are generally Year 2000 compliant, meaning that the use or occurrence
of dates on or after January 1, 2000 will not materially affect the performance
of our software and network services products with respect to four digit date
dependent data or the ability of such products to correctly create, store,
process and output information related to such date data. Notwithstanding such
belief by management, the products being tested for compliance include all of
the services and systems included in the viaLink services. Since these are
network database systems, there is not an issue of earlier versions which will
require upgrade to be Year 2000 compliant.
The estimates and conclusions set forth herein regarding Year 2000
compliance contain forward-looking statements and are based on management's
estimates of future events and information provided by third parties.
29
<PAGE>
There can be no assurance that such estimates and information provided will
prove to be accurate. Risks to completing the Year 2000 project include the
availability of resources, our ability to discover and correct potential Year
2000 problems and the ability of suppliers and other third parties to bring
their systems into Year 2000 compliance.
Recently Issued Accounting Pronouncements
In October 1997, the AICPA Accounting Standards Executive Committee issued
Statement of Position 97-2, Software Revenue Recognition ("SOP 97-2"), which
supercedes Statement of Position 91-1, Software Revenue Recognition. SOP 97-2
focuses on when and in what amounts revenue should be recognized for licensing,
selling, leasing, or otherwise marketing computer software and is effective for
transactions entered into in fiscal years beginning after December 15, 1997. In
March 1998, the AICPA Accounting Standards Executive Committee issued Statement
of Position 98-4, Deferral of the Effective Date of Provision of SOP 97-2,
Software Revenue Recognition ("SOP 98-4"). SOP 98-4 defers for one year specific
provisions of SOP 97-2. In December of 1998, the AICPA Accounting Standards
Executive Committee issued Statement of Position 98-9, Modification of SOP 97-2,
Software Revenue Recognition, with respect to Certain Transactions ("SOP 98-9").
SOP 98-9, also amends specific provisions of SOP 97-2 and extends the deferral
of the application of certain provisions of SOP 97-2 as amended by SOP 98-4
through fiscal years beginning on or before March 15, 1999. We do not believe
that the adoption of SOP 97-2, including the effects of these amendments, will
have a material impact on its financial position and results of operations.
30
<PAGE>
BUSINESS
General
Overview
We provide a set of subscription-based electronic commerce services,
designed specifically for the food and consumer packaged goods industries. The
viaLink Item Catalog service provides a secure, low-cost, consistent way for the
participants in the retail supply chain -- manufacturers, wholesalers
distributors and retailers -- to communicate item and pricing information. Item
Catalog manages all of the complexity of the trading relationship, including new
and deleted items, costs and promotions. On-network data translations allow
seamless electronic connections directly into the subscribers' systems.
Our viaLink services allow subscribers to more efficiently manage
information flows to and from their trading partners through a single interface.
Instead of making many electronic data interchange, or EDI, connections to reach
many trading partners, each participant only makes one electronic connection to
the viaLink services, in EDI or some other convenient format. Retailers can
reduce costs by avoiding time-intensive, error-prone manual entry of item and
cost data. Wholesalers avoid the cost of creating multiple interfaces to
retailer systems. Distributors are assured of timely and accurate flow of new
and updated product information. Manufacturers have a consistent and cost-
effective way of communicating with their entire supply chain.
Company Background and Development
We were formed in 1985 as Applied Intelligence Group, Inc. From inception
until the sale of our consulting business in 1998, our operations consisted
primarily of consulting services related to the planning, designing, building
and installation of computerized information management systems and computerized
checkout or point-of-sale systems in the retail and distribution industry.
In 1993, we began the design and development of viaLink, an Internet-
based subscription service. We introduced the viaLink Item Catalog service in
January 1997. Since the introduction of Item Catalog and the related viaLink
services, we have made the strategic decision to shed all other non-core assets
in order to permit us to focus exclusively on the development, marketing and
implementation of our viaLink services.
We sold our consulting business to Netplex in September 1998 and changed
our name to The viaLink Company in October 1998. In December 1998, we sold our
ijob subsidiary to a company controlled by David C. Mitchell, the President of
ijob. On March 11, 1999, we received payment in full plus accrued interest on
the $800,000 promissory note which was issued to us by DCM upon our sale of
ijob.
Historically, our consulting business had provided substantially all of
our revenues. As a result of the sale of these assets, we resemble a development
stage company since our planned principal operations are underway, but have not
yet generated significant revenues. This fundamental change in our business is
extremely risky, and there can be no assurance that our strategic decision to
shift our focus from our historical businesses to the viaLink services
ultimately will be successful. For more information on our development and the
sale of our consulting business and ijob, please see "--Purchase and Sale of
Significant Assets" below.
Industry Background and Limitations of Historical Approaches
The food and consumer packaged goods industries are among the last
industries to become fully automated and have only begun to take advantage of
the Internet. These industries are looking for ways to support a greater number
of services and increase margins and turnover. Currently there is no established
universal, low-cost method for manufacturers, wholesalers, and other suppliers
serving the food and consumer packaged goods industries to share data easily and
efficiently with their retail customers, or for retail headquarters to share
this data with their stores.
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Retailers in both the food and consumer packaged goods industries,
consisting primarily of convenience and grocery stores, order their inventory
from a large number of manufacturers, wholesalers and direct store delivery
companies. For example, a convenience store may have up to 5,000 items in
inventory supplied by up to 50 suppliers, and a grocery store may have up to
50,000 items in inventory supplied by up to 75 suppliers. Despite each
retailer's large number of suppliers, and the large number of inventory items
each store has on hand, retail organizations have generally continued to utilize
a paper-based order and supply chain. The inefficiencies of the paper system are
time consuming and often result in operational and administrative errors,
increasing cost for all parties in the supply chain. This provides a significant
challenge to paper intensive and data challenged industries in which better,
faster and more accurate information sharing could help to reduce costs, and
increase margins and turnover.
One of the most significant challenges facing a retail organization is
maintenance of its "pricebook." The pricebook typically contains descriptions of
each item in a store's inventory, along with the item's universal product code
(UPC), purchase cost, retail sales price and any discounts to be received from
the item supplier. Because many retail organizations do not communicate
electronically with their supply chain, managers operating retail stores must
maintain their pricebook by manually keying item and price information from
suppliers' reports, catalogs, e-mails and faxes into their pricebook. A retail
organization may have hundreds of suppliers, and each supplier may have
different prices on the items it supplies to different stores operated by the
same retail organization, depending upon the location of the store. For
instance, an item supplied to a store in New York City may have a higher price
than the same item supplied to a store in Macon, Georgia, even though the two
stores are operated by the same organization. The large number of items and
variability of pricing makes pricebook maintenance extremely difficult, and
manual pricebook maintenance produces a high number of errors. According to the
National Association of Convenience Stores, pricebook maintenance often poses
the most significant challenge to computerization of the retail store's
purchases and sales.
Although electronic data interchange, or EDI, technology has been
available, many retail organizations have found it technologically and
financially unreasonable to create hundreds of point-to-point EDI connections to
their numerous distributors and suppliers. In the traditional EDI model, each
participant creates, or "maps", an EDI conversation with every one of its supply
chain partners. The result of this is that a tiny fraction of the core business
interactions are conducted electronically, and virtually all advanced supply
chain applications have been inaccessible to these organizations. Furthermore,
even if retail organizations found it feasible to electronically link to each of
their suppliers, many of their suppliers are not electronically linked to their
manufacturers. Therefore, communication among manufacturers, suppliers and
retailers have remained paper intensive.
Moreover, the unavailability of basic electronic commerce capabilities,
such as timely electronic distribution of product and pricing information, has
impeded the deployment of more advanced supply chain concepts, such as
Collaborative Planning, Forecasting and Replenishment and Scan-Based-Trading.
For example, while each store may and often does have automatic scanning
capabilities at check-out, the data from the check-out is usually deleted, and
the communication among the manufacturers, suppliers and retailers remains
largely paper driven. Only a small percentage of the information captured from a
retail sale in a grocery store ever finds its way back up the supply chain to
the manufacturers.
As a result, retailers desiring to implement point-of-sale, in-store
technologies and other inventory, pricing and purchasing applications generally
are confronted with:
. The need for substantial additional investments in computer hardware,
software, training and technological obsolescence;
. The challenge of managing information related to up to tens of
thousands of product items from hundreds of suppliers and
distributors;
. Technological and system operation complexities, demanding additional
personnel resources, training, skills and technical expertise;
. The lack of industry standards for information sharing among retailers
and their suppliers and distributors;
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. The difficulty in obtaining information from suppliers and
distributors and maintaining such information on a current basis; and
. The lack of a scalable shared industry network.
The viaLink Solution
We offer a set of subscription-based electronic commerce services
designed specifically for the food and consumer packaged goods industries. The
viaLink Item Catalog Service provides a secure, low-cost, consistent way for
participants in the retail supply chain to communicate about items and costs.
This service allows subscribers to efficiently manage information flows to and
from their trading partners through a single interface. Instead of making many
EDI connections to reach many trading partners, each participant only makes one
electronic connection to the viaLink services, in EDI or some other convenient
format. The viaLink Item Catalog Service manages all of the complexity of the
trading relationship, including new and deleted items, costs and promotions. On-
network data translations allow seamless electronic connections directly into
the subscribers' systems.
We believe that our services offer significant benefits to every
participant in the grocery supply chain. With the use of a personal computer,
commonly available software and a Web browser, viaLink enables its subscribers
to improve management of information flow, reduce errors and invoice
discrepancies, enhance the accounts receivable collection process and reduce
redundant information processing. Retailers avoid the cost and hassle of manual
entry of item and cost data. Wholesalers avoid the cost of creating multiple
interfaces to retailer systems. Distributors receive a timely and accurate flow
of new and updated product information. Manufacturers have a consistent and
cost-effective way of communicating with their entire supply chain.
Our viaLink services have the following key features and benefits:
Key Features
. Subscription-Based. Through our partner Hewlett-Packard, we will
------------------
serve as the database host and provide the viaLink services on a
subscription basis, so that each subscriber's technology and capital
investments are minimized.
. Single Interface. Allows retailers and suppliers to share and manage
----------------
information on a real-time basis through one, easy-to-learn, industry-
standard Web browser interface.
. EDI Capabilities. For those suppliers who utilize EDI, the viaLink
----------------
services can map to whatever format is needed to download into the
existing system, while adhering to EDI standards.
. Secured Network. Information is protected from unauthorized users
---------------
with a series of firewalls and passwords.
Benefits
. Reduced Invoice Errors. Having the correct pricing information
----------------------
before the product arrives alleviates invoice discrepancies.
. More Efficient Promotions. Promotion information can be delivered
-------------------------
on a timely basis.
. Reduced Workload. Moving information electronically eliminates
----------------
redundant data entry for all trading partners using the system,
allowing resources to be reallocated.
. Faster Product Introductions. Information on new products is
----------------------------
available to existing systems before the products arrive at the back
door allowing them to be placed on the selling floor immediately upon
receipt.
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The viaLink Services
Our viaLink services consist of the following components:
Item Catalog. The viaLink Item Catalog allows retailers and suppliers to
exchange product, price, and promotion information electronically. This Web-
accessible shared database and multiple interface formats, make real electronic
commerce available to the grocery supply chain.
The viaLink Item Catalog service offers subscribers the following key
advantages:
. Shared Database. Shared database provides more accurate data. Because
---------------
product description, UPC and case make-up is stored in our database, all
users share the same copy of the item data. This reduces the number of
in-store and delivery errors caused by incorrect or incomplete product
information.
. Single Interface. Allows retailers and suppliers to exchange product
----------------
information through a single interface. Suppliers can use EDI or
proprietary batch files, or simply log on to our Web site and key in the
information. Retailers can choose one of several output formats,
including direct interfaces to many of the most popular retail software
systems. All data is transferred in a single format, regardless of the
formats chosen by trading partners. This eliminates the time required to
establish specific formats with each trading partner.
. Cost Maintenance. Provides flexibility to simplify the task of
----------------
delivering and receiving cost and promotion information. This reduces
time spent correcting delivery and receiving errors, researching
disputed invoices and locating late or missing promotion information.
ItemXpress. The viaLink ItemXpress can provide subscribers with the
foundation for a strong pricebook in less than a week. viaLink ItemXpress
dramatically reduces the time and cost associated with the initial item setup of
a retailer's pricebook, while increasing data accuracy. Item information can be
extracted from our extensive database to create a custom load for each
retailer's system.
The principal advantages the viaLink ItemXpress service offers subscribers
are:
. Shorter Set-up Time. Enables retailers to begin using their
-------------------
pricebooks as early as one week after implementation. Traditional
approaches to building item files often take six months or longer and
require several cycles of requesting information, researching and
correcting errors.
. Fewer Staff Hours. Allows retailers to load thousands of items into
-----------------
their pricebook, often in 50 or fewer staff hours. Retailers currently
typically spend thousands of hours of their staff's valuable time
compiling item information and entering it into their pricebook.
. Increased Accuracy. Allows retailers to use an extensive database of
------------------
pre-verified item data to produce a custom download of items. This
product information is accurate and ready-to-use.
Exchange Manager. The viaLink Exchange Manager allows companies to exchange
order and invoice transactions through a single interface, regardless of the
number of trading partners. Built on the viaLink Item Catalog, Exchange Manager
verifies order and invoice information against the Item Catalog and creates
exception reports.
Exchange Manager offers the following principal advantages over the
traditional method of exchanging electronic orders and invoices:
. Exception Reporting. Identifies items that are not authorized in the
-------------------
catalog, as well as costs that are different from those already in the
catalog. These exception reports allow retailers and suppliers to take
corrective action before the order or shipment is processed, eliminating
operational problems.
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. Retrieval and Reporting. Stores orders and invoices in the viaLink
-----------------------
database for easy retrieval and reporting. This shared database gives
retailers and suppliers a similar view of the information.
. Historical Reporting. Allows retailers and suppliers to access a
--------------------
history of previous purchases. This common-view feature aids joint
projects and refines merchandising and operational programs.
. On-line Interface. Available via the Web, the on-line interface allows
-----------------
retailers and suppliers to access their order and invoice information
with only a minor investment in technology.
Pricing
We have recently changed our pricing model to begin pricing our services
based on a flat monthly rate with a variable component based on usage. We
calculate the variable portion of each subscriber's monthly service fee based on
the service and amount of service the subscriber uses. For example, for use of
our Item Catalog service, retailers pay based on the number of suppliers from
whom they receive data; suppliers pay based on the number of retailers that
download their data; and manufacturers pay based on the number of retailers that
subscribe to the service. We price our other services based on the number of
stores supported or the amount of data stored and retrieved.
Security
To minimize the security risks associated with a shared network on the
Internet, we have implemented extensive security protocols in our services. The
services provide encryption protection of confidential information as it passes
through the Internet. We also have constructed a double "firewall" between our
services and the Internet, which is intended to restrict unauthorized use and
prevent security breaches. We believe that the relocation of our services to the
Hewlett-Packard database platform will enable us to further improve our system
security and customer data integrity.
Although we have implemented numerous security measures, our service
remains vulnerable to break-ins and similar security breaches that jeopardize
the security of the information stored in and transmitted through the computer
systems of our users, which may result in significant liability to us and also
deter potential customers. Moreover, the security and privacy concerns of
potential customers, as well as concerns related to computer viruses, may
inhibit the marketability of our services. Although we maintain insurance to
protect against these risks, there can be no assurance that such insurance will
remain available to us on commercially reasonable terms or at all, or that any
claims against us would not exceed the coverage.
Strategic Relationships
We believe that forming relationships with significant industry leaders
will be critical to achieving market penetration and acceptance of our services.
We believe that leveraging such relationships will enable us to more quickly
penetrate our target market. To date, we have formed relationships with Hewlett-
Packard and Ernst & Young. In February 1999, we created the position of Vice
President of Strategic Development to further develop the Hewlett-Packard and
Ernst & Young relationships and to pursue additional relationships.
Hewlett-Packard
In addition to financing in the form of a $6.0 million convertible note,
Hewlett-Packard has agreed to provide us with the database platform to host
viaLink's Item Catalog and other services. To evidence that the viaLink services
reside on a Hewlett-Packard database, we have agreed that our Web-based user
interface will display a "Powered by HP" icon. Hewlett-Packard also may provide
us with co-marketing and consulting support from time to time. The terms of our
loan from Hewlett-Packard contemplates that we will use up to 50% of the loan
amount to purchase Hewlett-Packard products and services. In addition, Hewlett-
Packard may have an advisor present at our board meetings.
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Beginning in August 2000, the $6.0 million note we issued to Hewlett-
Packard becomes convertible into shares of our common stock at a price of $7.00
per share.
Ernst & Young
On May 3, 1999 we entered into a strategic relationship with Ernst & Young
pursuant to which Ernst & Young has agreed to provide us with marketing and
sales support and consulting and integration services in connection with the
deployment of our Item Catalog service. This strategic relationship consists of
four agreements: an Alliance Agreement, a Warrant Agreement, a Master Services
Agreement and a Registration Rights Agreement.
Alliance Agreement. The Alliance Agreement is a non-exclusive agreement by
which Ernst & Young will provide us with its consulting services, including
services related to general systems integration, implementation, project
management and training in connection with our Item Catalog service and other
viaLink services.
We have agreed to pay Ernst & Young a royalty for a period of two years
beginning on the date of the agreement which may be extended in perpetuity upon
the achievement of certain milestones. This royalty will be equal to 7% of our
revenues from our subscription services which we provide to suppliers and
retailers of food and consumer packaged goods. Ernst & Young will not receive
any royalties for services we provide to clients for which Ernst & Young serves
as the principal independent auditor and which are subject to the SEC's periodic
reporting requirements.
During this two-year term, if at least ten "significant clients" subscribe
to our services, we will be required to continue the royalty payment in
perpetuity. A significant client is defined to mean any present or future client
of Ernst & Young reasonably considered (upon the mutual agreement of Ernst &
Young and us) to be "Tier 1" clients based on sales, revenues, income, market
capitalization and stature in the industry and markets for suppliers and
retailers of consumer packaged goods for food, grocery, drug store, convenience
store and mass merchandise chains and food service operators. However, a
significant client shall not include any client for which Ernst & Young serves
as the principal independent auditor and which are subject to the SEC's periodic
reporting requirements.
Warrant. In connection with the Alliance Agreement, we issued a warrant to
Ernst & Young pursuant to which it may purchase up to 250,000 shares of our
common stock at a price of $8.00 per share.
Master Services Agreement. Under the Master Services Agreement, Ernst &
Young has agreed to provide professional services to us to further the
implementation of our viaLink services. We may pay for Ernst & Young's services
either in cash or in shares of our common stock. If we pay with our common
stock, we will receive a substantial discount from the standard rates Ernst &
Young charges for such services. Our common stock will be valued at 85% of the
average closing bid prices for the five trading days prior to the date the
invoice for these services is rendered to us by Ernst & Young. However, if Ernst
& Young is the beneficial owner of more than 9.99% of the voting power of our
common stock on a fully-diluted basis, we will not have the option to pay for
such services with our common stock.
Initially, we may request up to $500,000 in value of Ernst & Young's
services pursuant to this agreement. At such times as we enter into binding
agreements for our services with an aggregate of one, five and ten significant
clients of Ernst & Young, we may request an additional $500,000 in value of
Ernst & Young's services, up to a total of $2 million in the aggregate.
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<PAGE>
Customers
Our viaLink services have been operational for over a year, and as of
December 31, 1998 had more than 200 subscribers. The following is a
representative list of the retailer and supplier customers of our viaLink
services as of the date of this prospectus:
<TABLE>
<CAPTION>
Suppliers Retailers
--------- ---------
<S> <C>
Buffalo Rock Pepsi of Newnan Andronico's Market
Charles E. Brown Beverage Co. Baker's Supermarkets
Fleming Companies of Altoona NOCO Express Shops
Frito-Lay, Inc. (Corporate) Store 24 Companies, Inc.
Great Plains Coca-Cola Bottling Co. Texaco Refining & Marketing, Inc.
J. T. Davenport & Sons, Inc.
McKee Foods Corporation
Pepsi Cola Marketing Group
S. J. McCullagh, Inc.
Tom's Foods, Inc.
</TABLE>
We also currently provide Web hosting activities unrelated to our viaLink
services. We intend to continue to provide Web hosting for some of our customers
until such time, if ever, as we can begin to generate substantial revenue from
our viaLink services. After the sale of our consulting business and of ijob, our
Web hosting services for two customers, UROCOR and the National Association of
Convenience Stores, account for approximately 80% of our current revenues.
Historically, due primarily to our consulting business which we sold in
1998, we had significant customer concentration. In 1998, 1997 and 1996, three
customers individually accounted for 13%, 11% and 11%, 20%, 13% and 10%, and
17%, 14% and 10% of our total revenues, respectively. In 1998, 1997 and 1996,
approximately 49%, 57% and 57%, respectively, of our total revenues were
attributable to five clients. Due to the sale of our consulting business, we
believe that our historic customer concentration levels are no longer relevant
to an understanding of our business. However, we lost 90% of our historical
revenue sources with the sale. We are unable at this time to predict whether
customer concentration in our viaLink services will develop in the future.
Sales and Marketing
We market our services to food and consumer packaged goods manufacturers,
suppliers and retailers directly through our sales and marketing support group
and senior staff members and indirectly through our partners, particularly Ernst
& Young, if such agreement is consummated. As of April 30, 1999, our sales and
marketing support group consisted of only four full-time employees. We intend to
substantially expand our sales and marketing team in 1999 and attempt to further
leverage our relationships with Ernst & Young and Hewlett-Packard.
Our sales and marketing team is responsible for sales-lead generation,
follow-up on customer referrals, and providing input into our ongoing viaLink
services and product development efforts based on customer feedback and market
data. We generate sales and marketing leads through trade advertising, customer
referrals, public relations, trade shows and strategic relationships. We also
utilize a variety of other consulting and contractor relationships to help
develop and promote our viaLink services. We believe that forming indirect sales
and co-marketing relationships, such as with Ernst & Young, will allow us to
leverage the resources of these parties and more rapidly penetrate our target
market.
We intend to significantly expand our sales and marketing operations in
1999, including a significant increase in staff, and to expend significant
capital resources in doing so. Our failure to locate and hire qualified sales
and marketing personnel or to obtain the funds from internally generated
revenues or financings to support the growth in our sales and marketing
organization would have a material adverse effect on our business, financial
condition and operating results.
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Product Development and Enhancement
We initially introduced Item Catalog in 1997 and intend to continue to make
significant investments in product development and enhancement to continue to
improve and extend our viaLink services. Currently, the dynamic nature of the
information technology industry places large research and development demands on
businesses that desire to remain competitive. To compete with larger firms with
substantially greater capital resources, we have devoted significant portions of
available resources to stay abreast of industry developments and to offer
competitive products and services.
In addition to internally developed product developments and enhancements,
we intend to seek acquisition of complementary businesses, products and
technologies, or enter into joint venture or license agreements to broaden our
product offerings and provide more comprehensive solutions to the grocery supply
chain.
During 1999, we intend to expend significant development resources to
reestablish our services in an HP environment, then move our service to the
Hewlett-Packard database hosting facility, where it will be operated and managed
by Hewlett-Packard. In addition, our product development staff will be working
on product enhancements and extensions, including a significant commitment to
Scan-Based Trading initiatives.
As of April 30, 1999, our product development staff, technical support and
operations staff consisted of 20 full-time employees. As a result of the sale of
our consulting business, we do not believe that our past expenditures on
research and development activities are relevant to an understanding of our
current business.
We expect that we will require significant additional resources to fund our
product development and enhancement efforts. A failure to receive such funds
from internally generated revenues or financings could have a material adverse
effect on our business, financial condition and operating results, as well as
the prospects of our viaLink services.
Competition
The environment within which we operate is intensely competitive and
subject to rapid change. We currently compete principally on the basis of the
specialized nature of our services. Due to the unique nature of our service and
the early stage of development of the market for our services, our viaLink
services have encountered little direct competition. However, we believe that
several large groups, possibly including major consulting organizations, are
attempting to develop an electronic commerce utility which, if successful, may
perform functions similar to our services. Many of our potential competitors
have substantially greater resources than we do. Any failure by us to achieve
rapid market penetration or to successfully address the risks posed by expected
competition would have a material adverse effect on our business, financial
condition and operating results.
Proprietary Rights
Our success and ability to compete are dependent upon our ability to
develop and maintain the proprietary aspects of our technology and operate
without infringing on the proprietary rights of others. We rely primarily on a
combination of copyright, trademark and trade secret laws, confidentiality
procedures and contractual provisions to protect our proprietary rights. Because
the software development industry is characterized by rapid technological
change, we believe that factors such as the technological and creative skills of
our personnel, new product developments, frequent product enhancements, name
recognition and reliable product maintenance are more important to establishing
and maintaining a technology leadership position than the various legal
protections available for our technology. We have no patents or patent
applications pending. Instead, we attempt to protect our products through a
combination of copyright, trademark and trade secret laws. viaLink(R) is our
registered trademark.
We also require employee and third-party non-disclosure and confidentiality
agreements. We seek to protect our software, documentation and other written
materials under trade secret and copyright laws, which afford only limited
protection. We cannot be certain that others will not develop technologies that
are similar or superior to our technology or design around the copyrights and
trade secrets owned by us. We license our viaLink services
38
<PAGE>
primarily under licenses included as part of our subscription agreements. We
believe, however, that these measures afford only limited protection. Despite
these precautions, it may be possible for unauthorized parties to copy portions
of our software products, reverse engineer, or obtain and use information that
we regard as proprietary.
We are not aware that we are infringing any proprietary rights of third
parties. There can be no assurance, however, that third parties will not claim
infringement by us of their intellectual property rights. We expect that
software product developers will increasingly be subject to infringement claims
as the number of products and competitors in our industry segment grows and the
functionality of products in different industry segments overlaps. Any such
claims, with or without merit, could be time consuming to defend, result in
costly litigation, divert management's attention and resources, cause product
shipment delays or require us to enter into royalty or licensing agreements. In
the event of a successful claim of product infringement against us, should we
fail or be unable to either license the infringed or similar technology or
develop alternative technology on a timely basis, our business, operating
results and financial condition could be materially adversely affected.
We rely upon software that we license from third parties, including
software that is integrated with our internally developed software and is used
in our products to perform key functions. There can be no assurance that these
third-party software licenses will continue to be available to us on
commercially reasonable terms. The loss of or inability to maintain any such
software licenses could result in shipment delays or reductions until equivalent
software could be developed, identified, licensed and integrated which could
materially adversely affect our business, operating results and financial
condition.
Employees
As of April 30, 1999, we had 49 full-time employees and one part-time
employee. Of the 49 full-time employees, four were employed in sales and
marketing, 20 were employed in product research and development, technical
support and operations, ten were employed in implementation, customer support
and service, and 15 were employed in human resources, administration, finance
and accounting. None of our employees are represented by a labor union. We have
not experienced any work stoppages and consider our relations with our employees
to be good.
Purchase and Sales of Significant Assets
Sale of Consulting Services
From our inception, we had been engaged in the business of providing
management consulting and technology systems integration services. However,
consistent with our effort to focus on the development of our viaLink services,
we sold the assets related to those operations, granted a nonexclusive license
to use, copy and distribute worldwide our CHAINLINK software product, and sold
our rights to use the name "Applied Intelligence Group" to Netplex in September
1998. As consideration for these assets, Netplex paid us $3.0 million in cash
and issued us 643,770 shares of Netplex Class B Preferred Stock, with each share
of preferred stock convertible into one share of Netplex common stock. Prior to
this sale, these consulting assets accounted for substantially all of our
revenues.
In connection with the sale, we entered into an earn-out agreement with
Netplex. Pursuant to this earn-out agreement, during each of the seven fiscal
quarters beginning with the quarter ending September 30, 1998 and ending with
the quarter ending March 31, 2000, Netplex will pay us the lesser of 50% of the
net profit earned by the consulting business as operated by Netplex or up to an
aggregate of $1.5 million. Additionally, if the aggregate net profit earned by
the consulting business for the ten fiscal quarters beginning with the quarter
ending September 30, 1998 and ending with the quarter ending December 31, 2000
exceeds $5.0 million, we would receive up to 643,770 additional shares of
Netplex preferred stock.
The shares of Netplex preferred stock and shares of the common stock
issuable upon conversion thereof constitute restricted shares under the
Securities Act and unless a registration statement is filed which allows for the
sale of these shares, we may only sell the Netplex shares pursuant to Rule 144
of the Securities Act. Rule 144 provides for holding periods which would inhibit
our ability to dispose of these shares in the near term. However,
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pursuant to the acquisition agreement between Netplex and us, Netplex has
agreed, at its sole cost and expense, to file a registration statement with
respect to these shares by no later than September 1, 1999 and to maintain the
effectiveness of the registration statement until the shares may be sold
pursuant to Rule 144.
Effective with this sale, Robert Barcum resigned as our president and Chief
Executive Officer but remains Chairman of the Board. Additionally, David North
resigned as Vice President of Consulting and Larry Davenport resigned as Vice
President of Marketing and Sales upon the closing of this sale. Dr. Lewis
Kilbourne, an outside director, was elected Chief Executive Officer of viaLink.
Robert Baker was elected as our President and Chief Operating Officer.
Sale of ijob, Inc.
On December 31, 1998, we sold our ijob subsidiary to DCM, a corporation
wholly owned by David C. Mitchell, the President and a member of the board of
directors of ijob at the time of the sale. Our ijob subsidiary operated our Web-
based human resources application asset. The sale of ijob represents another
step in our effort to shed non-core assets and focus on the development of our
viaLink services.
DCM purchased all of the outstanding stock of ijob for a secured, ten-year,
$800,000 promissory note that accrued interest at a rate of 8% per annum and was
secured by the fixed assets, contract rights, accounts receivable and general
intangibles of ijob. On March 11, 1999, we received $800,000 plus accrued
interest from DCM in full payment of the promissory note we were issued by DCM
upon our sale of ijob. We have released all security interests which we held
pursuant to a security and pledge agreement in the fixed assets, contract
rights, accounts receivable and general intangibles of ijob.
We organized ijob in April 1997 to operate ijob.com, a human resources
recruiting application. In June 1997, ijob acquired assets of Human
Technologies, Inc., including several software programs, in exchange for options
to purchase 50,000 shares of viaLink common stock at an exercise price of $3.50
per share.
Vantage Capital Resources Inc. Acquisition
On June 12, 1996, Vantage Capital Resources, Inc., a company controlled by
John Simonelli and Larry E. Howell, merged with and into viaLink pursuant to an
agreement and plan of merger dated May 8, 1996. In consummation of the merger,
we exchanged 610,000 shares of our common stock, on a one-for-one basis, for the
outstanding common stock of Vantage. We accounted for the Vantage merger in a
manner similar to the pooling of interests method of accounting. Pursuant to an
exchange agreement dated October 14, 1996, Messrs. Simonelli and Howell each
exchanged the 180,000 shares of viaLink common stock they received in connection
with the Vantage merger for options to purchase viaLink common stock for $5.00
per share, exercisable before November 30, 2001.
Legal Proceedings
There are no material legal proceedings pending, or to our knowledge,
threatened against us.
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MANAGEMENT
Executive Officers and Directors
Set forth below is certain information with respect to each of our
executive officers and directors as of April 30, 1999
<TABLE>
<CAPTION>
Name Age Position
- -------------------------------------- --- -------------------------------------------------------
<S> <C> <C>
Robert L. Barcum...................... 49 Chairman of the Board of Directors and Director (Class II)
Lewis B. Kilbourne, Ph.D.............. 52 Chief Executive Officer and Director (Class I)
Robert N. Baker....................... 47 President, Chief Operating Officer and Director (Class II)
Robert I. Noe......................... 47 Executive Vice President of Business Development
J. Andrew Kerner...................... 40 Vice President of Finance and Chief Financial Officer
Stephen G. Conover.................... 48 Vice President of Strategic Projects
John M. Duck.......................... 56 Vice President, Treasurer and Secretary
David Lloyd........................... 48 Vice President of Human Resources
Craig Smith........................... 37 Vice President of Operations
Sue Hale.............................. 54 Director (Class I)
Jimmy M. Wright....................... 45 Director (Class II)
</TABLE>
Robert L. Barcum is one of our co-founders and has served as a director
since our formation in 1985 and as an executive officer from 1985 to 1998. Mr.
Barcum currently serves as Chairman of the Board. In connection with the sale
of our consulting business, Mr. Barcum resigned as our President and Chief
Executive Officer and accepted a position with The Netplex Group, Inc. Since
1991, he has served as an outside director of Duckwall-ALCO Stores, Inc., a
publicly-held retailer. Since 1993, he has served as an outside director of
Commercial Distributing Inc., a private distributor of automotive products in
the automobile after-market. Since 1995, he has served on the Business Advisory
Council of Oklahoma Christian University of Science and Arts, and since 1996 he
has served as a member of the Advisory Board of Kent State University. Mr.
Barcum has more than 25 years of experience in management information systems
for retail organizations.
Lewis B. "Bucky" Kilbourne, Ph.D. has served as a director and a member of
the audit committee of the board of directors since December 1997 and was
elected as our Chief Executive Officer on October 1, 1998. Dr. Kilbourne has 20
years of financial experience in the retail, restaurant and banking business.
Dr. Kilbourne is a Professor of Finance and Economics at Oklahoma City
University. Dr. Kilbourne also has also served as President of Kilbourne and
Associates, Inc., a management consulting firm located in Oklahoma City that
works with regional firms experiencing earnings and cash flow problems in the
retail and restaurant industry, since May 1997. From January 1994 to May 1997,
Dr. Kilbourne served as Chief Financial Officer of Sonic Corporation, a national
restaurant chain. Dr. Kilbourne has a B.A. in political science and economics
from Louisiana State University and a M.A. and Ph.D., both in economics, from
the University of Pennsylvania.
Robert N. Baker is one of our co-founders and has served as a director
since our formation in 1985 and as a Vice President until November 1998. Mr.
Baker has served as our President and Chief Operating Officer, since November
1998 and is responsible for developing the viaLink services. Mr. Baker has over
20 years of experience in management, technical support and systems development
within the retail industry. He graduated magna cum laude from Oklahoma
Christian University of Science and Arts with a B.S. in mathematics.
Robert I. Noe serves as our Executive Vice President of Business
Development and is responsible for marketing, sales, customer relations and
services. Mr. Noe joined us in April 1999. Prior to that time, Mr. Noe served
as the Vice President of Industry Solutions and in other management positions at
Electronic Data Systems, a publicly traded professional services company, since
1985. Mr. Noe received his B.S. in business administration from Central
Michigan University.
J. Andrew Kerner joined us in April 1999 as Vice President of Finance and
Chief Financial Officer. Mr. Kerner previously served as Executive Vice
President and Chief Financial Officer of Cameron Ashley Building
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Products, a publicly-traded building products distributor from April 1998 to
April 1999. Mr. Kerner also served in several senior financial management
positions with PepsiCo's Frito-Lay division in the United States and Europe from
November 1987 to April 1998. Mr. Kerner received a B.A. in economics and an
M.B.A. in finance from The University of Texas at Austin.
Steven G. Conover joined us in March 1999 as Vice President of Strategic
Projects, and is currently in charge of the Scan Based Trading project for
viaLink. Mr. Conover has over 25 years experience in retail and supply chain
management. Prior to joining viaLink, Mr. Conover served as Senior Group
Manager of Supply Chain Innovation for Frito-Lay from March 1996 to March 1999.
He also served as Senior Group Manager of Finance and Marketing for Frito-Lay
from March 1994 to March 1996. Mr. Conover received his B.S. from Purdue
University in industrial engineering and his M.B.A. in finance from the
University of West Florida.
John M. Duck joined us as Director of Finance and Administration in 1991
and currently serves as Vice President, Treasurer and Secretary. From April
1996 to April 1999 Mr. Duck also served as our Chief Financial Officer. From
January 1990 to July 1991, Mr. Duck served as Chief Financial Officer of Griffin
Entities, Inc., a private food manufacturer and processor. From 1986 to 1990,
Mr. Duck served as Chief Financial Officer of Mr. Rooter Corporation, a public
franchise sewer and drain manufacturing and cleaning company. Mr. Duck
currently serves on the Board of Directors of the Edmond Chamber of Commerce and
is a member of the Oklahoma County Workforce Development Board. Mr. Duck is a
certified public accountant and holds a B.A. in economics from Oklahoma City
University.
David Lloyd joined us in April 1999 as Vice President of Human Resources.
Mr. Lloyd previously served as Senior Vice President of Human Resources and
Administration for Fujitsu ICL Retail Systems, Inc., from April 1997 to April
1999. In that capacity, he handled all human resource and administration
responsibilities for United States and Europe operations, including facilities
management for all 44 Fujitsu locations in the United States. Mr. Lloyd also
served as Vice President of Human Resources for Station Casinos, from June 1994
to April 1997, and Vice President of Human Resources and Administration of Nikko
Hotels International from April 1985 to June 1994. Mr. Lloyd earned his B.A. in
economics from Upsala College in New Jersey, and his MBA from New York Institute
of Technology.
Craig Smith is currently the Vice President of Operations of viaLink and is
responsible for brand management and customer service. Mr. Smith joined us in
February 1995 as a consultant and was promoted to Vice President in February
1999. Prior to joining viaLink, Mr. Smith was with Star Enterprise, a joint
venture of Texaco and Aramco, as part of the information technology services
team. Mr. Smith has been involved in selecting, implementing, building and
marketing information systems in the retail and related industries for over 15
years. He received his B.S. in computer science from the University of Missouri
at Rolla, and his M.B.A. with a concentration in marketing and finance from the
University of Houston.
Sue Hale has served as a director of viaLink and as a member of the
compensation and audit committees of the board of directors since March 1999.
Since January 1996, Ms. Hale has served as the General Manager of Connect
Oklahoma, a statewide news and information services company. From 1989 to 1996,
she served as the Assistant Managing Editor at The Daily Oklahoman, a daily
newspaper. Ms. Hale also serves as the Chairman of the Central Oklahoma chapter
of the American Red Cross. Ms. Hale received a B.A. in English and music from
Southwestern College.
Jimmy M. Wright has served as a director of viaLink and as a member of the
compensation and audit committees of the board of directors since February 1998.
Mr. Wright serves as the Chief Logistics Officer of Amazon.com, a publicly-
traded Web-based retailer, since July 1998. Mr. Wright is also currently the
Managing Partner with Diversified Retail Solutions, L.L.C., a supply chain
consulting business, where he has served since February 1998. In January 1998,
Mr. Wright retired as Vice President of Distribution for Wal-Mart Stores, Inc.
During his 12 year tenure at Wal-Mart, he was involved in all facets of
strategic planning, including supply chain management, personnel, site selection
and building design. Mr. Wright has served as an invited advisor to the Defense
Logistics Agency and has been a multi-year participant in the U.S. Army's Wise
Person summits, which advise the Deputy Chief of Staff Logistics on strategic
logistics issues and trends. Mr. Wright received his B.B.A. in management from
The University of Texas, Permian Basin.
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<PAGE>
Board of Directors and Committees
Our board of directors consists of five directors divided into three
classes with each class serving for a term of three years. At each annual
meeting of shareholders, the holders of our common stock will elect directors to
succeed those directors whose terms are expiring. Dr. Kilbourne and Ms. Hale
are Class I directors whose terms will expire in 2000; Messrs. Barcum and Baker
are Class II directors whose terms will expire in 2001; and Mr. Wright is a
Class III director whose term will expire in 1999. Dr. Kilbourne served as one
of our two non-employee directors until he was elected Chief Executive Officer
on October 1, 1998. Ms. Hale and Mr. Wright are our two non-employee directors.
Our board of directors has created a compensation committee and an audit
committee. The compensation committee makes recommendations to the board of
directors concerning salaries and incentive compensation for our officers and
employees and administers our stock plans. The members of the compensation
committee are Mr. Wright and Ms. Hale. The audit committee makes
recommendations to the board of directors regarding the selection of independent
auditors, reviews the results and scope of audits and other accounting-related
services and reviews and evaluates our internal control functions. The members
of the audit committee are Dr. Kilbourne, Mr. Wright and Ms. Hale.
Directors' Compensation
We currently pay our non-employee directors other than the Chairman of the
Board $10,000 annually for their services as members of the board of directors.
We also pay our Chairman of the Board, Mr. Barcum, an annual stipend of $25,000.
Under our 1998 Non-Qualified Stock Option Plan, non-employee directors are
eligible to receive stock option grants at the discretion of the board of
directors. Employee directors are eligible to receive stock option grants at
the discretion of the compensation committee of the board of directors under our
1995 Stock Option Plan.
In 1998, we granted options to purchase 15,000 shares of our common stock
at an exercise price of $9.00 to our non-employee directors, Messrs. Barcum and
Wright. We also granted options to purchase 200,000 shares of our common stock
to Dr. Kilbourne, 100,000 of which were granted pursuant to our Non-Qualified
Plan at an exercise price of $3.00 per share, 50,000 of which were granted
pursuant to our 1995 Plan at an exercise price of $3.00 per share and 50,000 of
which were granted pursuant to our Non-Qualified Plan at an exercise price of
$3.125 per share. We also granted options to purchase 150,000 shares of our
common stock to Mr. Baker, 100,000 of which were granted pursuant to our Non-
Qualified Plan at an exercise price of $3.00 per share and 50,000 of which were
granted pursuant to our 1995 Plan at an exercise price of $3.30 per share. No
option grants or awards were made to any director in 1997.
Compensation Committee Interlocks and Insider Participation
Lewis B. Kilbourne, a director and our Chief Executive Officer, is a member
of the compensation committee of the board of directors. Prior to October 1,
1998, Dr. Kilbourne was a non-employee director.
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<PAGE>
Executive Compensation
Summary Compensation Table. The following table sets forth the
compensation earned by our Chief Executive Officer, former Chief Executive
Officer and our two most highly compensated executive officers other than our
Chief Executive Officers during 1998. Although Mr. Reinhardt resigned as an
executive officer and director in 1998, his compensation is listed below. No
other executive officer currently employed by us received salary and bonus in
excess of $100,000 during 1998. During 1998, these executive officers received
additional non-cash compensation, perquisites and other personal benefits.
However, the aggregate amount and value thereof did not exceed the lesser of
$50,000 or 10% of the total annual salary and bonus paid to and accrued for the
individual during the year.
<TABLE>
<CAPTION>
Annual Compensation
-------------------------
Other Long-Term
Annual Compensation
---------------------
Compe- Securities Underlying
Name and Principal Position Year Salary nsation Options
- --------------------------------------------------- ---- -------- --------- ---------------------
<S> <C> <C> <C> <C>
Robert L. Barcum (1)............................... 1998 $122,321 $ -- 15,000
Chief Executive Officer 1997 169,716 -- --
1996 169,150 -- --
Lewis B. Kilbourne, Ph.D. (2)...................... 1998 20,769 40,000(3) 200,000
Chief Executive Officer 1997 -- -- --
1996 -- -- --
Robert N. Baker.................................... 1998 120,713 -- 150,000
President and Chief Operating Officer 1997 169,940 -- --
1996 169,159 -- --
Russell L. Reinhardt (4)........................... 1998 114,655 -- --
Vice President 1997 171,774 -- --
1996 171,840 -- --
</TABLE>
__________________
(1) Resigned as Chief Executive Officer on September 30, 1998
(2) Elected Chief Executive Officer on October 1, 1998
(3) Mr. Kilbourne received $30,000 for his services in connection with the sale
of our consulting assets to Netplex and $10,000 for his service as a non-
employee member of the board of directors. Both of these amounts were
earned prior to his employment with viaLink.
(4) Resigned as executive officer and director on September 30, 1998
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<PAGE>
Option Grants in 1998. The following table sets forth information
concerning stock options granted to each of the executive officers during 1998.
<TABLE>
<CAPTION>
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees Price Per Expiration
Date Granted in 1998 Share Date
- ------------------------------------ ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Robert L. Barcum.................... 15,000(1) 1.3% $ 9.00 10/31/2007
Lewis B. Kilbourne.................. 100,000(1) 8.5 3.00 10/31/2007
50,000(2) 4.3 3.00 02/28/2005
50,000(1) 4.3 3.125 10/31/2007
Robert N. Baker..................... 100,000(1) 8.5 3.00 09/30/2003
50,000(2) 4.3 3.30 09/29/2003
Russell L. Reinhardt................ -- -- -- --
</TABLE>
__________________
(1) Granted under the 1998 Non-Qualified Stock Option Plan.
(2) Granted under the 1995 Stock Option Plan.
Year-End Option Exercises in 1998 and December 31, 1998 Option Values. The
following table sets forth, for each of the executive officers named in the two
immediately preceding tables, information concerning option exercises for 1998
and the number and value of securities underlying unexercised options held on
December 31, 1998. None of the named executive officers exercised any stock
options during 1998. We determined the value of unexercised in-the-money
options by subtracting the exercise price from the fair market value of our
common stock at December 31, 1998 ($10.125 per share), and multiplying that
number by the number of shares underlying the options.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options
Shares Acquired Value at December 31, 1998 at December 31, 1998
-------------------------------- -----------------------------
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ----------------------- --------------- ------------ ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Barcum....... -- -- -- 15,000 $ -- $ 16,875
Lewis B. Kilbourne..... -- -- 20,000 180,000 140,000 1,278,750
Robert N. Baker........ -- -- -- 150,000 -- 1,053,750
Russell L. Reinhardt... -- -- -- -- -- --
</TABLE>
Stock Plans
1995 Stock Option Plan. We adopted The viaLink Company 1995 Stock Option
Plan in March 1995 and amended the 1995 Plan on April 30, 1996 and September 1,
1998. The 1995 Plan was replaced by The viaLink Company 1999 Stock Option/Stock
Issuance Plan in May 1999. The 1995 Plan provided for the issuance of incentive
stock options and non-incentive stock options to attract, retain and motivate
our management, directors, professional employees or professional non-employee
service providers and other individuals who have benefited or could benefit us.
As of May 31, 1999, options to purchase 642,277 shares at a weighted
average exercise price of $3.03 were outstanding. The compensation committee
appointed by the board of directors administers and interprets the 1995 Plan.
In the case of an incentive stock option, the purchase price of common stock
issuable upon exercise of the option must not be less than the fair market value
of our common stock on the date of the grant. In the case of a non-incentive
stock option, the purchase price of common stock issuable upon the exercise of
the option must not be less than 75% of the fair market value of our common
stock on the date of the grant. The purchase price may be paid in cash, in
shares of common stock valued at fair market value on the exercise date or
through a same day sale provision. Any withholding tax liability incurred in
connection with an option exercise may be satisfied by having us withhold shares
of common stock acquired upon exercise of the option. The maximum term of any
option granted under the 1995 Plan is ten years. The aggregate fair market
value on the date of the grant of the common
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<PAGE>
stock for which an incentive stock option is exercisable may not exceed $100,000
in any calendar year. Options granted under the 1995 Plan are generally non-
transferable by the option holder, except by will or the laws of descent and
distribution. Option holders must generally exercise their options during their
lifetime. In the event we experience a change in control or other significant
events, all options outstanding under the 1995 Plan shall become automatically
fully vested and immediately exercisable.
1998 Non Qualified Stock Option Plan. We adopted The viaLink Company 1998
Non-Qualified Stock Option Plan on February 9, 1998, and we amended the Non-
Qualified Plan effective September 1, 1998. The Non-Qualified Plan was replaced
by the 1999 Plan in May 1999. We adopted the Non-Qualified Plan to attract,
retain and motivate our directors, executive officers, employees and independent
contractors and consultants and other individuals who have benefited or could
benefit us by way of granting non-qualified stock options. The purchase price
of common stock issuable upon exercise of options must not be less than 85% of
the fair market value of our common stock on the date of grant. All options
granted pursuant to the Non-Qualified Plan expire after ten years from the date
of grant. The purchase price may be paid in cash or in shares of common stock
valued at fair market value on the exercise date. The board of directors has
the discretion to fix the period and the time at which any options granted under
the Non-Qualified Plan may be exercised. In the event we are acquired, all
outstanding options will become fully exercisable. As of May 31, 1999, 535,848
stock options were outstanding at a weighted average exercise price of $3.85 per
share. All such stock options were issued at or above fair market value at the
date of grant.
1998 Stock Grant Plan. We adopted The viaLink Company 1998 Stock Grant
Plan on February 10, 1998 to attract, retain and motivate our consultants,
independent contractors and key employees through grants of our common stock.
The Stock Grant Plan was replaced by the 1999 Plan in May 1999. The sale,
transfer or other disposal of shares of common stock received under the Stock
Grant Plan is restricted for a period of one year. As of May 31, 1999, we had
issued 5,033 shares of common stock under the Stock Grant Plan at a weighted
average exercise price of $3.12.
1999 Stock Option/Stock Issuance Plan. At our 1999 annual meeting our
shareholders approved the adoption of The viaLink Company 1999 Stock
Option/Stock Issuance Plan to attract and retain the services of individuals
essential to our long-term growth and financial success. Our officers and other
key employees, non-employee board members and consultants and other advisors
will be eligible to receive option grants under the 1999 Plan.
We have reserved 3,608,280 shares of our common stock for issuance over the
ten year term of the 1999 Plan, including shares initially reserved under the
predecessor plans. This share reserve will automatically be increased on the
first trading day of each calendar year, beginning with the 2000 calendar year,
by an amount equal to 1% of the shares of common stock outstanding on the last
trading day of the immediately preceding calendar year, but in no event will
such annual increase exceed 50,000 shares. As of May 31, 1999, no options to
purchase shares of common stock were outstanding under the 1999 Plan. Options
may be granted under the 1999 Plan at an exercise price per share not less than
the fair market value per share of Common Stock on the option grant date. The
fair market value per share of common stock on any relevant date under the 1999
Plan will be the average of the highest bid and lowest asked prices per share on
that date on the Nasdaq SmallCap Market. We may permit one or more participants
to pay the exercise price of outstanding options or the purchase price of shares
under the 1999 Plan by delivering a promissory note payable in installments. We
would determine the terms of any such promissory note.
In the event we are acquired, whether by merger or asset sale by the
shareholders of more than 50% of our total combined voting power recommended by
the board, each outstanding option which is not assumed by the successor
corporation or otherwise continued will automatically accelerate in full, and
all unvested shares will immediately vest.
Shares may be sold under the 1999 Plan at a price per share not less than
the fair market value per share of our common stock, payable in cash or though a
promissory note payable to us. Shares may also be issue solely as a bonus for
past services or upon attainment of specified performance goals. These issued
shares may either be immediately vested upon issuance or subject to a vesting
schedule tied to the performance of service or the attainment of performance
goals.
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Employee Stock Purchase Plan. We established The viaLink Company Employee
Stock Purchase Plan on April 1, 1997. At our 1999 annual meeting our
shareholders approved the adoption of the 1999 Employee Stock Purchase Plan
which will replace the predecessor Employee Stock Purchase Plan as of July 1,
1999. The Stock Purchase Plan encourages employees to participate in our stock
ownership and economic progress by providing them with the opportunity to
purchase our common stock through payroll deductions. We have authorized and
reserved 100,000 shares of common stock for issuance under the Stock Purchase
Plan. As of May 31, 1999, employees had purchased 6,122 shares of common stock
at a weighted average price of $2.75.
The Stock Purchase Plan and the stock granted under the Stock Purchase Plan
are intended to meet the qualification requirements set forth in Sections 421
and 423 of the Internal Revenue Code of 1986, as amended. The Stock Purchase
Plan is administered by the compensation committee of the board of directors.
The committee administers and interprets the Stock Purchase Plan and has the
authority to establish, adopt or revise rules and regulations with respect to
the Stock Purchase Plan.
All full-time employees who have been continuously employed more than six
months will be eligible to participate in the Stock Purchase Plan by entering
into an option agreement to purchase shares of our common stock. However, if
employees own or would own, assuming the exercise of all stock options held by
them, five percent or more of our common stock, they are not eligible to
participate in the Stock Purchase Plan. Ownership includes any shares owned by
their family members and indirectly through a corporation, partnership or trust.
Stock Purchase Plan participants may contribute up to $20 per pay period into
their account to purchase whole shares of our common stock at pre-determined
calendar quarter grant dates or exercise dates. The option price is 85% of the
per share fair market value on the grant date or the exercise date, whichever is
lower, of the quarterly purchase period. A participant is not permitted to
purchase more than 50 shares of common stock during each quarterly purchase
period. The participants may not assign, encumber or otherwise transfer their
stock options except by will or under laws of inheritance.
For more information regarding the 1999 Employee Stock Purchase Plan,
please see our proxy statement dated April 19, 1999 with respect to our 1999
annual meeting of shareholders.
Other Stock Options. In connection with a transaction with Vantage Capital
Resources, Inc., we issued John Simonelli and Larry E. Howell options to
purchase a total of 360,000 shares of common stock with an exercise price of
$5.00 per share . In connection with the sale of our ijob subsidiary, we issued
Ronald Beasley and David C. Mitchell options to purchase a total of 50,000
shares of common stock with an exercise price of $3.50 per share.
As of May 31, 1999, we had issued, through all of our incentive plans and
other stock option arrangements, options to purchase a total of 1,592,125 shares
of common stock at a weighted average exercise price of $3.77. Of the options
issued, options to purchase 495,212 shares of common stock were exercisable at a
weighted average exercise price of $4.54 per share.
Profit Sharing Plan
In 1985, we adopted The viaLink Company Profit Sharing Plan. All of our
employees who have completed at least one year of service with us may enroll in
the Profit Sharing Plan. We may, at our discretion, make an annual contribution
to the Profit Sharing Plan on behalf of employees. If made, our contribution
begins to vest for each employee's account after the employee has completed two
years of service. Thereafter, each employee's account vests ratably as to 20%
of the employee's account following each subsequent year of completed service
with us. We will distribute vested contributions to an employee upon:
. The employee's retirement;
. The employee's death or disability;
. The termination of the employee's employment; or
. The termination of the Profit Sharing Plan.
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We did not make any contributions to the Profit Sharing Plan for the fiscal
years ended December 31, 1995, 1996, 1997 and 1998.
In 1993, we amended the Profit Sharing Plan to include a 401(k) deferred
compensation feature. Under the 401(k) feature, eligible participants may elect
to defer up to 15% of their salaries, not to exceed the annual statutory limits,
pursuant to a voluntary salary reduction agreement. We may determine matching
levels of contributions from time to time, at the discretion of the
administrative committee. We did not make any matching contributions during
1995, 1996, 1997 or 1998. All 401(k) employee contributions are fully vested.
Employment Arrangements
On October 1, 1998, we entered into employment contracts with Lewis B.
Kilbourne and Robert N. Baker. Under the contracts, we will pay an annual base
salary of $150,000 to Dr. Kilbourne and $175,127 to Mr. Baker. Dr. Kilbourne
and Mr. Baker are each also eligible to receive an annual bonus equal to 50% of
his then current annual salary.
Under the contracts, we granted to each of Dr. Kilbourne and Mr. Baker
incentive stock options for the purchase of 50,000 shares of common stock under
the 1995 Plan and non-qualified stock options for the purchase of 100,000 shares
of common stock under the 1998 Non-Qualified Plan. Both the incentive stock
options and non-qualified stock options vest and become exercisable over a three
year period. The options granted to Dr. Kilbourne have an exercise price of
$3.00 per share. The incentive stock options granted to Mr. Baker are
exercisable for $3.30 per share and the non-qualified stock options are
exercisable for $3.00 per share. Dr. Kilbourne's incentive stock options expire
on February 28, 2005 and his non-qualified stock options expire on October 31,
2007. Mr. Baker's incentive stock options expire on September 29, 2007 and his
non-qualified stock options expire September 30, 2003. In the event the
contracts with Dr. Kilbourne or Mr. Baker are terminated or specific corporate
reorganization events occur, any non-exercisable options will become fully
exercisable.
Each employment contract has a term of three years and is subject to
automatic renewal on a year-to-year basis, unless either party provides six-
months prior written notice of termination. If we terminate the contracts for
any reason other than for "cause" (as defined in the agreement), or if Dr.
Kilbourne or Mr. Baker terminate their contract for any reason other than an
uncured breach, Dr. Kilbourne or Mr. Baker will be entitled to:
. The continuation of his then current salary and the benefits provided
pursuant to the agreement;
. A one time payment in the amount of the greater of:
(A) the bonus due; or
(B) 15% of the salary payable for such quarter; and
. A lump sum payment of $400,000.
Key Man Life Insurance
We maintain a key man life insurance policy for Mr. Baker in the amount of
$1.25 million. We will receive any proceeds from this policy.
Director Liability and Indemnification
The Oklahoma General Corporation Act and our certificate of incorporation
limit the liability of each of our directors to us or our shareholders for
monetary damages for a breach of their fiduciary duty as directors. These
provisions do not eliminate the liability of a director for:
. Breach of the director's duty of loyalty to us or our shareholders;
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. Acts or omissions by a director not in good faith or which involve
intentional misconduct or a knowing violation of law;
. Unlawful payments of dividends or unlawful stock repurchases or knowing
violation of the law; or
. Any transaction from which the director derived an improper personal
benefit.
In addition, these provisions do not eliminate liability of a director for
violations of federal securities laws, nor do they limit our rights or those of
our shareholders, in appropriate circumstances, to seek equitable remedies such
as injunctive or other forms of non-monetary relief.
Our certificate of incorporation and bylaws provide that we shall indemnify
our directors and officers against expense or liability to the full extent
permitted by the Oklahoma General Corporation Act. In addition, we are also a
party to indemnification agreements with each of our directors.
Insider Trading Policy and Non-Public Information Disclosure
We have adopted policies relating to insider trading to prevent the misuse
of material and non-public information by our officers, directors and employees
as well as the disclosure of non-public information to any person outside of
viaLink. Under this policy, our officers, directors and employees are
prohibited from engaging in transactions in our securities when that person
possesses material information which has not previously been made public.
Material information is information that would affect an investor's decision to
purchase or sell our securities or those of another publicly-held corporation.
In addition, our officers, directors and employees are prohibited from
disclosing any non-public information to any person outside of viaLink if that
information has been obtained as a result of or in connection with that person's
position as an officer, director or employee of us. Our officers, directors and
employees are also prohibited from using such information in connection with
transactions in our securities or the securities of any other publicly-held
company. These policies also provide guidelines regarding the maintenance of
the confidentiality of non-public information so as to avoid dissemination of
that information prior to public disclosure.
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CERTAIN TRANSACTIONS
ijob Sale
On December 31, 1998, we sold our wholly-owned subsidiary, ijob, to DCM
Corporation in exchange for an $800,000 promissory note. David C. Mitchell is
the sole shareholder of DCM and was the president of ijob. On March 11, 1999,
we received $800,000 plus all accrued interest from DCM in full payment of the
promissory note.
Notes Payable to Shareholders and Officers
On October 15, 1996, we redeemed 22,500 shares of our common stock from
David B. North, a shareholder and formerly one of our executive officers. We
issued Mr. North a promissory note for $39,375, bearing interest at the rate of
10% per annum, with a maturity date of November 15, 1997. We later extended
maturity of the note to November 15, 2000.
As of September 30, 1998, Robert L. Barcum, Robert N. Baker and Russell L.
Reinhardt had loaned viaLink, in the aggregate, $443,055. In return, we issued
these individuals promissory notes, bearing interest at rates of 8.5% to 11.5%
per annum, with maturity dates commencing March 8, 1999 through December 21,
2001. We believe that the terms of these loans were at least as favorable as we
could have obtained from unaffiliated third-party lenders.
On October 16, 1998, we repaid the promissory notes to Messrs. North,
Barcum, Baker and Reinhardt from proceeds of the consulting assets sale.
Payments and Option Grants to Officers
On October 16, 1998, we paid Dr. Kilbourne $30,000 for his services
associated with the consulting assets sale. On October 1, 1998, the board of
directors elected Dr. Kilbourne as our Chief Executive Officer, and he signed an
employment agreement with us. For details regarding Dr. Kilbourne's employment
contract, please see "Management - Employment Arrangements." Prior to becoming
our Chief Executive Officer, Dr. Kilbourne served on the board of directors. In
1998, we paid Dr. Kilbourne $20,769 in salary for his service as Chief Executive
Officer, $10,000 in director fees and granted him options to purchase 150,000
shares of our common stock at an exercise price of $3.00 per share pursuant to
his employment agreement and options to purchase 50,000 shares of common stock
at an exercise price of $3.125 per share as compensation for his service as a
director. For details regarding his employment agreement, please see
"Management--Employment Agreements." In 1997, we paid Dr. Kilbourne $2,500 in
director fees.
During 1998, we granted Mr. Baker options to acquire 150,000 shares of our
common stock at a weighted average exercise price of $3.10 pursuant to his
employment contract. For details regarding Mr. Baker's employment contract,
please see "Management - Employment Arrangements." We also granted John M.
Duck, our Vice President, Secretary and Treasurer, options to acquire 60,000
shares of our common stock at an exercise price of $3.00 per share and Larry R.
Davenport, our former Vice President of Marketing and Sales, options to acquire
20,000 shares of our common stock at $3.00 per share. Mr. Davenport exercised
options to purchase 12,000 shares of our common stock on February 3, 1999 and
options to purchase 8,000 shares of our common stock expired. All such options
were issued at or above their fair market value on the date of the grant.
We have adopted a policy that any future transactions between us and our
officers, directors and five percent of greater shareholders will be subject to
approval by a majority of our disinterested independent directors and will be on
terms no less favorable than we could obtain from unaffiliated parties.
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PRINCIPAL AND SELLING SHAREHOLDERS
The following table presents certain information regarding the beneficial
ownership of our common stock as of April 30, 1999, by:
. Each person who is known by us to own beneficially more than five
percent of our outstanding common stock;
. Each of our directors and executive officers named in the Summary
Compensation Table;
. Each selling shareholder; and
. All of our current executive officers and directors as a group.
The percentage of outstanding shares is based on 2,889,342 shares of our
common stock outstanding as of May 31, 1999 and 3,989,342 shares of our common
stock outstanding immediately following completion of this offering. It
includes 920,000 shares of common stock issuable upon the exercise of our
redeemable warrants and 180,000 shares of common stock issuable to holders of
underwriter warrants and warrant underwriter warrants, assuming the holders of
these warrants exercise all of their warrants prior to the completion of this
offering.
The SEC deems a security holder the beneficial owner of a security when
that person maintains voting or investment power with respect to security,
subject to community property laws, where applicable. If stock options are
presently exercisable or exercisable within 60 days of April 30, 1999, the SEC
will deem the shares underlying those options to be outstanding and beneficially
owned by their holder when computing the percentage of common stock held by that
person. However, the SEC will not deem shares underlying these options to be
outstanding when computing the percentage of common stock held by others.
We have been informed that each of the holders of the underwriter warrants
and warrant underwriter warrants had a direct or indirect business relationship
with Barron Chase Securities, Inc., the underwriter of our initial public
offering at the time of our initial public offering. To our knowledge, there is
no other material relationship between any of these holders and us.
Unless otherwise noted, all shareholders listed have sole voting and
investment power with respect to their shares and the address for each
shareholder listed below is: c/o The viaLink Company, 13800 Benson Road, Edmond,
Oklahoma 73013-6417. Unless otherwise noted, the address for each of the
selling shareholders is c/o Barron Chase Securities, Inc., 7700 West Camino
Real, Suite 200, Boca Raton, Florida 33433. There are no family relationships
between our executive officers and directors.
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<TABLE>
<CAPTION>
Shares Owned Shares Owned
Prior to the Offering Shares After the Offering(2)
-------------------------- -----------------------
Number Percent Offered(1) Number Percent
--------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Directors, Officers and
5% Shareholders:
Robert L. Barcum 559,816 19.4 -- 559,816 14.0
Robert N. Baker 554,529 19.2 -- 554,529 13.9
Russell L. Reinhardt (3) 316,081 10.9 -- 316,081 7.9
Lewis B. Kilbourne (4) 21,002 * -- 21,002 *
Jimmy Wright (5) 20,000 * -- 20,000 *
John M. Duck (6) 10,362 * -- 10,362 *
Robert I. Noe -- -- -- -- --
J. Andrew Kerner -- -- -- -- --
Stephen G. Conover -- -- -- -- --
David Lloyd -- -- -- -- --
Craig Smith -- -- -- -- --
Sue Hale -- -- -- -- --
Selling Shareholders:
Robert Kirk(7) 132,000 4.6 72,000 60,000 1.5
Glenn Desort 36,000 1.2 36,000 -- --
Michael Morrisett(8) 10,400 * 9,000 -- --
Marie Lima 9,000 * 9,000 -- --
David A. Carter 9,000 * 9,000 -- --
Wendy Tand Gusrae 9,000 * 9,000 -- --
Philip Aiello, Jr. 700 * 500 200 *
Paul Medrano 1,000 * 1,000 -- --
Daniel O'Halloran 1,250 * 1,250 -- --
Roger Lockhart (9) 82,100 * 22,000 30,000 *
Kent Grimm 1,250 * 1,250 -- --
Brian Herman (10) 131,900 * 10,000 60,000 1.5
All executive officers
and directors as a group
(5 persons) (11) 1,165,709 40.6 -- 1,165,709 29.2
</TABLE>
____________________
* Less than 1%
(1) There is no assurance that the selling shareholders will sell any or all of
these shares.
(2) Assumes that all redeemable warrants and underwriter warrants are exercised
and that the directors, officers and 5% shareholders and the selling
shareholders acquire no additional shares of our common stock prior to the
completion of this offering and that the shares of our common stock which
are not being offered pursuant to this prospectus are not sold.
(3) Mr. Reinhardt's address is 12800 Coyote Valley Road, Salida, Colorado 81201.
(4) Includes 20,000 shares underlying options which will be exercisable within
60 days of the date of this prospectus.
(5) Includes 20,000 shares underlying options which will be exercisable within
60 days of the date of this prospectus. Mr. Wright's address is c/o DRS,
1913 North Walton Blvd., Suite 1, Bentonville, Arkansas 72712.
(6) Includes 10,056 shares underlying options which will be exercisable within
60 days of the date of this prospectus.
(7) Includes 60,000 shares underlying options which will be exercisable within
60 days of the date of this prospectus. The options and the underlying
shares are subject to the promotional shares escrow agreement until November
20, 1999.
(8) Includes 1,400 shares underlying redeemable warrants which will be
exercisable within 60 days of this prospectus.
(9) Includes 30,000 shares underlying options which will be exercisable within
60 days of the date of this prospectus. The options and the underlying
shares are subject to the promotional shares escrow agreement until November
20, 1999.
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(10) Includes 60,000 shares underlying options which will be exercisable within
60 days of the date of this prospectus. The options and the underlying
shares are subject to the promotional shares escrow agreement until
November 20, 1999.
(11) Includes 50,056 shares underlying options which will be exercisable within
60 days of the date of this prospectus.
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DESCRIPTION OF SECURITIES
Pursuant to our certificate of incorporation, as amended, we are authorized
to issue up to 40,000,000 shares of capital stock, consisting of 30,000,000
shares of common stock, $.001 par value, and 10,000,000 shares of preferred
stock, $.001 par value. At the 1999 annual meeting of shareholders, our
shareholders approved the reincorporation of viaLink from Oklahoma to Delaware.
The description of our securities post-reincorporation is provided below under
"Delaware Reincorporation." We will notify you by a supplement to this
prospectus upon the completion of the reincorporation. We expect to complete the
reincorporation within 30 days of the date of this prospectus.
Common Stock
Holders of common stock are entitled to receive dividends out of assets
legally available at such times and in such amounts as the board of directors
may, from time to time, determine, and upon liquidation and dissolution are
entitled to receive all assets available for distribution to the shareholders,
subject to any rights that holders of preferred stock may have. Holders of
common stock are entitled to one vote per share on matters voted upon by the
shareholders. The common stock has no preemptive rights and no subscription,
redemption or conversion privileges. The common stock does not have cumulative
voting rights, which means that holders of a majority of shares voting for the
election of directors can elect all members of the board of directors. viaLink's
certificate of incorporation provides that the provisions therein related to the
staggered or classified board of directors, the number of directors, removal of
directors, and vacancies on the board of directors may be amended, altered,
changed or repealed only by the affirmative vote of the holders of two-thirds of
the issued and outstanding stock having voting power, voting together as a
single class. Furthermore, the amended certificate of incorporation provides
that the bylaws may be adopted, amended, altered, changed or repealed by the
board of directors only by the affirmative vote of the holders of a majority of
the issued and outstanding capital stock having voting power, voting together as
a single class. In general and except as described above, a majority vote of
shares represented at a meeting of shareholders at which a quorum is present
(generally the holders of a majority of the shares entitled to vote, in person
or by proxy) is sufficient for all actions that require the vote or concurrence
of shareholders. All outstanding shares of common stock are, and all shares of
common stock to be outstanding upon completion of the offering will be, validly
issued, fully paid and nonassessable.
Preferred Stock
viaLink's board of directors has the authority, without further action by
the stockholders, to issue up to 10,000,000 shares of preferred stock in one or
more series and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, sinking fund terms and the number of shares
constituting any series or the designation of such series, without any further
vote or action by shareholders. The issuance of preferred stock could also
adversely affect the voting power of holders of common stock and the likelihood
that such holders will receive dividend payments and payments upon liquidation
and could have the effect of delaying, deferring or preventing a change in
control of viaLink. Accordingly, the issuance of shares of preferred stock may
discourage bids for the common stock or may otherwise adversely affect the
market price of the common stock. viaLink has no present plan to issue any
shares of preferred stock.
Pursuant to an agreement with Barron Chase Securities, Inc., the
underwriter of our initial public offering, we have agreed not to issue any
preferred stock until November 20, 1999 without their prior written consent.
This could further limit our ability to obtain additional financing.
In connection with the filing of this prospectus, we have agreed that we
will not offer preferred stock to promoters except on the same terms as it is
offered to all other existing shareholders or new shareholders, or unless the
issuance of preferred stock is approved by the majority of our disinterested,
independent directors who have access, at our expense, to legal counsel.
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Redeemable Common Stock Purchase Warrants
As of April 30, 1999, we had outstanding 920,000 redeemable warrants. Each
redeemable warrant entitles its holder to purchase one share of common stock at
an exercise price of $5.00 per share until November 20, 1999. The redeemable
warrants are evidenced by warrant certificates in registered form.
The redeemable warrants were originally offered in connection with the
initial public offering of our common stock in November 1996. At the time of the
offering, the $5.00 exercise price of the redeemable warrants was equal to the
initial public offering price of our common stock.
The redeemable warrants do not confer upon the holder any voting or any
other rights of a shareholder of viaLink. Upon notice to the holders of
redeemable warrants, viaLink, with the consent of Barron Chase Securities, Inc.,
has the right to reduce the exercise price or extend the expiration date of the
redeemable warrants.
The redeemable warrants may be exercised upon surrender of the warrant
certificate evidencing those warrants on or prior to the expiration date (or
earlier redemption date) of such warrants at the offices of UMB Bank, N.A., the
warrant agent, with the form of "Purchase Form" on the reverse side of the
warrant certificate completed and executed as indicated, accompanied by payment
of the full exercise price (by certified check payable to the order of The
viaLink Company) for the number of redeemable warrants being exercised.
No redeemable warrants will be exercisable unless at the time of exercise
viaLink has filed with the Commission a current prospectus covering the issuance
of shares of common stock upon the exercise of such redeemable warrant and the
issuance of share has been registered or qualified or is deemed to be exempt
from registration or qualification under the securities laws of the state of
residence of the holder of the warrant. viaLink will use its best efforts to
maintain a current prospectus relating to the issuance of shares of common stock
upon the exercise of the redeemable warrants until the expiration of the
warrants. While it is our intention to maintain a current prospectus, there is
no assurance that we will be able to do so.
No fractional shares will be issued upon exercise of the redeemable
warrants. However, if a holder of a redeemable warrant exercises all redeemable
warrants then owned of record, viaLink will pay to that holder, in lieu of the
issuance of a fractional share which may otherwise be issuable, an amount of
cash equal to such fractional interest based on the market value of the common
stock on the last trading day prior to the exercise date.
The redeemable warrants are redeemable by us at a price of $.125 per
warrant, and prior to their expiration, on at least 30 days prior written notice
to the registered holder of the redeemable warrants, provided the closing high
bid or sale price per share of the common stock (if the common stock is then
traded on Nasdaq or a national securities exchange, respectively) for a period
of 30 consecutive trading days, ending on the 20th day prior to the date of any
redemption notice, equals or exceeds at least $7.00 (subject to adjustment in
certain events). The redeemable warrants shall be exercisable until the close of
the business day preceding the date fixed for redemption.
Underwriter Warrants and Warrant Underwriter Warrants
We issued to the selling shareholders in connection with our initial public
offering common stock underwriter warrants and warrant underwriter warrants to
purchase up to 180,000 shares of common stock. The underwriter warrants are
exercisable for a five-year period ending November 20, 2001. Each underwriter
warrant entitles its holder to purchase one share of common stock at an exercise
price of $6.00 per share and one warrant underwriter warrant at an exercise
price of $.15 per warrant underwriter warrant. Each warrant underwriter warrant
entitles its holder to purchase one share of common stock at an exercise price
of $6.00 per share until November 20, 1999.
The underwriter warrants and warrant underwriter warrants contain
provisions providing for appropriate adjustment in the event of any merger,
consolidation, recapitalization, reclassification, stock dividend, stock split
or similar transaction. The underwriter warrants and warrant underwriter
warrants contain net issuance provisions permitting the holder thereof to elect
to exercise the underwriter warrants and warrant underwriter warrants in whole
or in part and instruct us to withhold from the securities issuable upon
exercise, a number of securities, valued at the current fair market value on the
date of exercise, to pay the exercise price. Such net exercise provision has the
effect
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of requiring us to issue shares of common stock without a corresponding increase
in capital. A net exercise of the underwriter warrants and warrant underwriter
warrants will have the same dilutive effect on the interests of our shareholders
as will a cash exercise. The underwriter warrants and warrant underwriter
warrants do not entitle the holders thereof to any rights as a shareholder until
such underwriter warrants or warrant underwriter warrants are exercised and
shares of common stock are purchased thereunder.
Transfer and Warrant Agent
UMB Bank, N.A. is the transfer agent for the common stock and the warrant
agent for the redeemable warrants. Their mailing address is 928 Grand Blvd.,
Post Office Box 410064, Kansas City, Missouri 64141.
Shareholder Action
Pursuant to our certificate of incorporation and bylaws, with respect to
any act or action required of or by our shareholders, the affirmative vote of
the holders of a majority of the issued and outstanding shares of the common
stock entitled to vote thereon is sufficient to authorize, affirm, ratify or
consent to such act or actions, except as otherwise provided in our bylaws,
certificate of incorporation or the Oklahoma General Corporation Act. Our
certificate of incorporation requires the vote of the holders of two-thirds of
our issued and outstanding stock having voting power, voting as a single class,
to amend, repeal or adopt any provision inconsistent with provisions of our
certificate of incorporation limiting director liability and providing for
staggered terms of directors and indemnity of officers, directors, employees and
agents of viaLink. See "--Anti-Takeover Provisions -- Amended Certificate of
Incorporation and Bylaws," below.
Pursuant to the Oklahoma General Corporation Act, shareholders may take
actions without the holding of a meeting by written consent signed by the
holders of a sufficient number of shares to approve the transaction had all of
the outstanding shares of the capital stock entitled to vote thereon been
present at a meeting. Upon completion of this offering, assuming the exercise of
all redeemable warrants, underwriter warrants and warrant underwriter warrants,
the current officers and directors, as a group, will beneficially own
approximately 40% of our outstanding common stock and will continue to have
significant voting power. See "Principal and Selling Shareholders." We are
required to provide prompt notice of any corporate action taken without a
meeting to those shareholders who have not consented in writing to such
corporate action.
Anti-Takeover Provisions
Our certificate of incorporation and bylaws, and the Oklahoma General
Corporation Act include a number of provisions which may have the effect of
encouraging persons considering unsolicited tender offers or other unilateral
takeover proposals to negotiate with the board of directors rather than pursue
non-negotiated takeover attempts. We believe that the benefits of these
provisions outweigh the potential disadvantages of discouraging such proposals
because, among other things, negotiation of such proposals might result in an
improvement of their terms. The description below relating to provisions of our
certificate of incorporation and bylaws is intended as a summary only and is
qualified in its entirety by reference to our certificate of incorporation and
bylaws.
Amended Certificate of Incorporation and Bylaws
Our certificate of incorporation provides that the provisions therein
related to the staggered or classified board of directors, the number of
directors, removal of directors, and vacancies on the board of directors may be
amended, altered, changed or repealed only by the affirmative vote of the
holders of two-thirds of the issued and outstanding stock having voting power,
voting together as a single class. Furthermore, the amended certificate of
incorporation provides that the bylaws may be adopted, amended, altered, changed
or repealed by the board of directors only after the affirmative vote of the
holders of at least two-thirds of the issued and outstanding capital stock
having voting power, voting together as a single class.
These provisions are intended to make it more difficult for shareholders to
circumvent provisions contained in viaLink's certificate of incorporation and
bylaws, such as the provision that provides for the classification of the
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board of directors. See "Management -- Board of Directors." These provisions,
however, also make it more difficult for shareholders to amend the certificate
of incorporation or bylaws as to certain matters without the approval of the
board of directors, even if a majority of shareholders deems such amendment to
be in the best interests of all shareholders.
Classified Board of Directors
Our certificate of incorporation and bylaws provide that the board of
directors shall be comprised of three classes of directors, each class
constituting approximately one-third of the total number of directors with each
class serving staggered three-year terms. The classification of the directors
makes it more difficult for shareholders to change the composition of the board
of directors. We believe, however, that the longer time required to elect a
majority of a classified board of directors will help ensure continuity and
stability of our management and policies.
The classification provisions may also have the effect of discouraging a
third-party from accumulating large blocks of our common stock or attempting to
obtain control of us, even though such an attempt might be beneficial to us and
our shareholders. Accordingly, shareholders could be deprived of some
opportunities to sell their shares of common stock at a higher market price than
might otherwise be the case.
Number of Directors; Removal; Filling Vacancies
Our certificate of incorporation provides that the number of directors
shall be fixed by the board of directors, but shall not be less than three nor
more than fifteen. Our bylaws provide that the number of directors will be fixed
by the board of directors within the limits mentioned above. The board of
directors has fixed the number of directors at five. The amended certificate of
incorporation provides that any vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by the affirmative vote of the directors in office, though less than a quorum,
or by the sole remaining director. Furthermore, any reduction in the number of
directors shall not have the effect of removing any director prior to the
expiration of such director's term.
Our bylaws also provide that directors may only be removed by the
shareholders for cause by the affirmative vote of the holders of not less than a
majority of the total voting power of all outstanding securities of viaLink then
entitled to vote generally in the election of directors, voting together as a
single class.
Preferred Stock
Our certificate of incorporation authorizes the issuance of preferred stock
in classes, and the board of directors to set and determine the voting rights,
redemption rights, conversion rights and other rights relating to each such
class of preferred stock. In some circumstances, the preferred stock could be
issued and have the effect of preventing a merger, tender offer or other
takeover attempt which the board of directors opposes. We have agreed to not
issue any preferred stock until November 20, 1999 without the written consent of
Barron Chase Securities, Inc.
Oklahoma Anti-Takeover Statutes
We are subject to Section 1090.3 and Sections 1145 through 1155 of the
Oklahoma General Corporation Act (the "OGCA").
Subject to specific exceptions, Section 1090.3 of the OGCA prohibits a
publicly-held Oklahoma corporation from engaging in a "business combination"
with an "interested shareholder" for a period of three years after the date of
the transaction in which such person became an interested shareholder, unless
the interested shareholder attained such status with approval of the board of
directors or the business combination is approved in a prescribed manner, or
certain other conditions are satisfied. A "business combination" includes
mergers, asset sales, and other transactions resulting in a financial benefit to
the interested shareholder. Subject to some exceptions, an "interested
shareholder" is a person who, together with affiliates and associates, owns, or
within the past three years did own, 15 percent or more of the corporation's
voting stock.
In general, Sections 1145 through 1155 of the OGCA provide that shares
("interested shares") of voting stock acquired (within the meaning of a "control
share acquisition") become non-voting stock for a period of three
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years following such control share acquisition, unless a majority of the holders
of non-interested shares approve a resolution reinstating the interested shares
with the same voting rights that such shares had before such interested shares
became control shares. Any person ("acquiring person") who proposes to make a
control share acquisition may, at the person's election, and any acquiring
person who has made a control share acquisition is required to, deliver an
acquiring person statement to the corporation disclosing prescribed information
regarding the acquisition. The corporation is required to present to the next
annual meeting of the shareholders the reinstatement of voting rights with
respect to the control shares that resulted in the control share acquisition,
unless the acquiring person requests a special meeting of shareholders for such
purpose and undertakes to pay the costs and expenses of such special meeting. In
the event voting rights of control shares acquired in a control share
acquisition are reinstated in full and the acquiring person has acquired control
shares with a majority or more of all voting power, all shareholders of the
corporation have dissenters' rights entitling them to receive the fair value of
their shares which will not be less than the highest price paid per share by the
acquiring person in the control share acquisition.
A "control share acquisition" includes the acquisition by any person
(including persons acting as a group) of ownership of, or the power to direct
the exercise of voting power with respect to, control shares (generally shares
having more than 20% of all voting power in the election of directors of a
publicly held corporation), subject to specific exceptions including:
. an acquisition pursuant to an agreement of merger, consolidation, or
share acquisition to which the corporation is a party and is effected
in compliance with certain Sections of the OGCA;
. an acquisition by a person of additional shares within the range of
voting power for which such person has received approval pursuant to a
resolution by the majority of the holders of non-interested shares;
. an increase in voting power resulting from any action taken by the
corporation, provided the person whose voting power is thereby
affected is not an affiliate of the corporation;
. an acquisition pursuant to proxy solicitation under and in accordance
with the Securities Exchange Act of 1934, as amended, or the laws of
Oklahoma; and
. an acquisition from any person whose previous acquisition of shares
did not constitute a control share acquisition, provided the
acquisition does not result in the acquiring person holding voting
power within a higher range of voting power than that of the person
from whom the control shares were acquired.
The anti-takeover provisions of the OGCA may have the effect of
discouraging a third party from acquiring large blocks of the common stock of
viaLink within a short period or attempting to obtain control of viaLink, even
though such an attempt might be beneficial to viaLink and its shareholders.
Accordingly, assuming development of a market for common stock, shareholders
could be deprived of some opportunities to sell their shares of common stock at
a higher market price than might otherwise be the case.
Delaware Reincorporation
At our 1999 annual meeting of shareholders, our shareholders approved the
reincorporation of viaLink from Oklahoma to Delaware. Effective upon filing of
the Agreement and Plan of Merger with the secretary of state of the states of
Delaware and Oklahoma, we will complete this reincorporation.
Reincorporation in Delaware will not change our business plan, management,
assets, liabilities, net worth, capitalization or employee benefit plans. Each
outstanding share of viaLink Oklahoma's common stock will automatically become
one share of the common stock of viaLink Delaware. Furthermore, each stock
option, warrant or convertible security that would be, or later becomes,
exercisable for, or convertible into, shares of the viaLink Oklahoma common
stock will automatically be, or later become, exercisable for, or convertible
into, the same number of shares of viaLink Delaware common stock on the same
terms and conditions.
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Authorized Shares of Capital Stock
After the reincorporation, the authorized capital stock of viaLink Delaware
will consist of 50,000,000 shares of common stock, par value $0.001 per share,
and 10,000,000 shares of preferred stock, par value $0.001 per share. viaLink
Delaware will not issue any shares of stock in connection with the
reincorporation other than the shares into which the outstanding shares of
viaLink Oklahoma will convert.
Conversion of Shares
As soon as the reincorporation becomes effective, viaLink Delaware will
issue a press release announcing that the transaction has occurred. At the same
time, the holders of the old shares of viaLink Oklahoma will become holders of
the new shares of viaLink Delaware. Shares of viaLink Oklahoma will
automatically convert into shares of viaLink Delaware, on these terms:
. The conversion will be on a one-for-one basis.
. Each share of viaLink Oklahoma common stock outstanding at the
effective date will become one share of viaLink Delaware common stock.
. Each share of viaLink Oklahoma common stock held in the treasury of
viaLink Oklahoma will become a share held in the treasury of viaLink
Delaware.
This means that, beginning on the effective date, each viaLink Oklahoma
stock certificate which was outstanding just before the reincorporation will
automatically represent the same number of viaLink Delaware shares. Therefore,
shareholders of viaLink Oklahoma need not exchange their stock certificates for
new viaLink Delaware stock certificates. Likewise, shareholders should not
destroy their old certificates and should not send their old certificates to us,
either before or after the effective date.
Conversion of Options and Warrants
Each stock option, warrant or convertible security that would be, or later
becomes, exercisable for, or convertible into, shares of viaLink Oklahoma common
stock will automatically be, or later become, exercisable for, or convertible
into, the same number of shares of viaLink Delaware common stock on the same
terms and conditions.
Trading of the Stock
After the reincorporation, those who were formerly stockholders of viaLink
Oklahoma may continue to make sales or transfers using their viaLink Oklahoma
stock certificates. viaLink Delaware will issue new certificates representing
shares of viaLink Delaware common stock for transfers occurring after the
effective date. On request, viaLink Delaware will issue new certificates to
anyone who holds viaLink Oklahoma stock certificates.
Shareholders whose shares of viaLink Oklahoma were freely tradable before
the reincorporation will own shares of viaLink Delaware that are freely tradable
after the reincorporation. Similarly, any shareholders holding shares of viaLink
Oklahoma with transfer restrictions before the reincorporation will hold shares
of viaLink Delaware which have the same transfer restrictions after the
reincorporation. For purposes of computing the holding period under Rule 144 of
the Securities Act of 1933, as amended, those who hold viaLink Delaware stock
certificates will be deemed to have acquired their shares on the date they
originally acquired their shares in viaLink Oklahoma.
After the reincorporation, viaLink Delaware will continue to be a publicly
held company, with its common stock tradable on the Nasdaq SmallCap Market.
viaLink Delaware will also file with the Commission and provide to its
stockholders (the Delaware term for shareholders) the same types of information
that viaLink Oklahoma has previously filed and provided.
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Certain Federal Income Tax Consequences
The following is a brief summary of the principal federal income tax
consequences of the reincorporation under current law to holders of the viaLink
Oklahoma common stock. This summary is for general information only. It does not
address potential legislative changes that may affect these consequences, and it
does not address any state, local or foreign tax consequences of the
reincorporation. We have not obtained, and does not intend to obtain, a ruling
from the Internal Revenue Service to the effect that the reincorporation is
nontaxable.
In general, neither we nor our shareholders will recognize any gain or loss
by reason of the reincorporation. The tax basis of the shares of viaLink
Delaware common stock received by a shareholder of viaLink Oklahoma through the
reincorporation will be the same as the tax basis of viaLink Oklahoma common
stock prior to the reincorporation. A shareholder of viaLink Oklahoma who holds
the stock as a capital asset should include the period he, she or it has held
the viaLink Oklahoma common stock in determining the holding period for his, her
or its viaLink Delaware shares.
Comparison of Oklahoma and Delaware Corporate Laws and Description of Our
Securities After the Reincorporation
Our shareholders will become stockholders of the new Delaware corporation,
viaLink Delaware. There are certain differences between the Oklahoma General
Corporation Act and the Delaware General Corporation Law that will affect the
rights of shareholders in certain respects. Some of these differences define the
particular provisions a corporation may choose to put into its charter, and
other differences may not affect us in a material way.
The primary difference in the rights of shareholders under the OGCA and
DGCL relates to corporate action by written consent in lieu of a shareholders'
meeting. Under both the OGCA and DGCL, shareholders are permitted to take action
by the written consent of at least the minimum number of votes required to act
at a shareholders' meeting, unless the charter forbids it. However, the OGCA
also provides that, with respect to a corporation (1) with a class of voting
stock listed or traded on a national securities exchange or registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended, and (2) which
has 1,000 or more shareholders of record, shareholders taking action by written
consent must obtain unanimous approval for such written consent to be valid,
unless otherwise provided in the corporation's charter. viaLink Oklahoma has a
provision in its charter limiting the applicability of this requirement of
unanimous approval, and permitting actions by written consent of a majority of
the shares of common stock outstanding.
Material Changes in viaLink Delaware Charter and Bylaws from viaLink Oklahoma
Charter and Bylaws
The viaLink Delaware charter and bylaws will be in effect and will govern
the rights of stockholders after the merger of viaLink Oklahoma into viaLink
Delaware takes place. The viaLink Delaware charter is substantially similar to
the viaLink Oklahoma charter. Except for the provisions relating to authorized
stock, stockholders' ability to present proposals at stockholder meetings and
nominate directors, stockholders' ability to call special meetings and the
ability to remove directors, the differences between the two primarily result
from differences between the OGCA and the DGCL as discussed above. Set forth
below is a summary of the material changes in the viaLink Delaware charter and
bylaws from the current viaLink Oklahoma charter and bylaws. The bylaws of
viaLink Delaware and viaLink Oklahoma are substantially similar except that the
bylaws of viaLink Delaware reflect the DGCL and the provisions of the viaLink
Delaware charter, as well as certain administrative differences described below.
Copies of the charter and bylaws of viaLink Oklahoma are available for
inspection at the principal office of viaLink Oklahoma and copies will be sent
to stockholders upon request.
Changes in Authorized Capital Stock
The viaLink Oklahoma charter now provides that we have the authority to
issue two classes of stock, consisting of 30,000,000 shares of common stock, par
value $0.001 per share, and 10,000,000 shares of preferred stock, par value
$0.001 per share. The viaLink Delaware charter authorizes 50,000,000 shares of
common stock, par value $0.001 per share, and 10,000,000 shares of preferred
stock, with no change in the voting powers,
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qualifications, rights and privileges of such shares. The increase in the number
of shares of authorized common stock will give us more flexibility to engage in
certain future transactions, including capital raising and acquisitions,
although we currently have no definitive plans with respect to such matters.
Stockholder Proposals and Nominating Directors
The viaLink Delaware bylaws require stockholders to provide us with written
nominations of directors and proposals to be considered at meetings of
stockholders at least 120 days in advance of the proposed record date of such
meeting. Each stockholder proposal must state (i) a brief description of the
business desired to be brought, (ii) the name and address of the stockholder
proposing such business, (iii) the class and number of our shares which are
beneficially owned by the stockholder, (iv) any material interest of the
stockholder in such business and (v) any other information that is required to
be provided by the stockholder pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended, in such stockholder's capacity as a proponent
of a stockholder proposal. Neither the viaLink Oklahoma charter nor bylaws
contain any provisions regarding such notice requirements for shareholder
proposals and director nominations.
Stockholder Ability to Call Special Meetings
The viaLink Oklahoma bylaws permit the board of directors or the president
to call special meetings of shareholders. In addition, the viaLink Oklahoma
bylaws require the president, or in his absence, the secretary, to call a
special meeting of shareholders upon a written request setting forth the purpose
of such meeting of not less than a majority of our capital stock which is issued
and outstanding and entitled to vote.
The viaLink Delaware bylaws state that special meetings of our stockholders
may only be called, for any purpose or purposes, by (i) the chairman of the
board of directors, (ii) the president or (iii) the board of directors pursuant
to a resolution adopted by a majority of the total number of authorized
directors. The viaLink Delaware bylaws also allow a special meeting to be called
by any permitted person or persons other than the board of directors if the
request is in writing, specifies the general nature of the business proposed to
be transacted and is delivered personally or sent by registered mail or by
telegraphic or other facsimile transmission to our chairman of the board of
directors, president or secretary.
Ability to Remove Directors
The viaLink Oklahoma charter permits removal of directors by shareholders
only for cause with the affirmative vote of the holders of not less than a
majority of the total voting power of all outstanding shares of our capital
stock then entitled to vote generally in the elections of directors. The viaLink
Delaware charter also will contain such a provision.
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SHARES ELIGIBLE FOR FUTURE SALE
As of May 31, 1999, viaLink has 2,889,342 shares of common stock issued
and outstanding. Of these shares, 1,692,691 shares are freely tradable without
restriction under the Securities Act of 1933, as amended, except any shares
purchased by affiliates of viaLink, as that term is defined in Rule 144 under
the 1933 Act, may generally only be sold in compliance with the limitations of
Rule 144 as described below.
The remaining 1,196,651 shares of common stock outstanding are deemed
"restricted securities" within the meaning of Rule 144 (the "Restricted
Shares"), all of which are eligible for sale in the public market subject to the
resale limitations of Rule 144 and subject to the escrow agreement as described
in "--Promotional Shares Escrow Agreement," below.
Pursuant to our agreement with Ernst & Young and the warrant we issued to
Ernst & Young in connection with that agreement, Ernst & Young has agreed to
purchase 62,500 shares of our common stock at a price per share of $8.00. We are
obligated to register these securities for resale under the Securities Act
shortly after the date of this prospectus. Upon the registration of these
shares, they will become freely tradable without restriction or further
registration. An additional 187,500 shares may be purchased by Ernst & Young
pursuant to this warrant. Ernst & Young has certain registration rights in
connection with these shares. For more information regarding the Ernst & Young
warrant, please see "Business -- Strategic Relationships."
Beginning in August 2000, the $6.0 million promissory note we issued to
Hewlett-Packard becomes convertible into our common stock at a price of $7.00
per share. In the event that Hewlett-Packard elects to convert this note and
these shares are registered for resale under the Securities Act, the shares will
be available for sale. For more information regarding the convertible note we
issued to Hewlett-Packard, please see "Business -- Strategic Relationships."
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
restricted securities for at least one year is entitled to sell, within any
three-month period, a number of such securities that does not exceed the greater
of (1) one percent of the then outstanding shares of such securities or (2) the
average weekly trading volume in the securities in the over-the-counter market
during the four calendar weeks preceding the date on which notice of such sale
is filed, provided that requirements concerning availability of public
information, manner of sale and notice of sale are satisfied. In addition,
affiliates must comply with the restrictions and requirements of Rule 144, other
than the one-year holding period requirement, in order to sell shares of common
stock which are not restricted securities. Under Rule 144(k), a person who is
not an affiliate and has not been an affiliate for at least three months prior
to the sale and who has beneficially owned the restricted securities for at
least two years may resell such securities without compliance with the foregoing
requirements of Rule 144. In meeting the one- or two-year holding period
described above, a holder of restricted securities can include the holding
period of a prior owner who was not an affiliate. The holding periods described
above do not begin to run until the full purchase price or other consideration
is paid by the person acquiring the restricted securities from the issuer or an
affiliate. Furthermore, the holding periods of restricted securities acquired
pursuant to merger do not begin to run until the restricted securities are
acquired from the issuer.
No predictions can be made as to the effect, if any, that future sales of
the common stock, or the availability of shares for future sale, will have on
the prevailing market price of the common stock. Sales of substantial amounts of
common stock, or the perception that such sales could occur, could adversely
affect prevailing market prices of the common stock and could impair viaLink's
future ability to obtain capital through an offering of equity securities.
Promotional Shares Escrow Agreement
Pursuant to a promotional shares escrow agreement dated November 19, 1996,
imposed by the Administrator of the Oklahoma Department of Securities in
connection with viaLink's initial public offering and registration of the common
stock and redeemable warrants, Robert L. Barcum, Robert N. Baker, Russell L.
Reinhardt, David B. North, John Simonelli and Larry E. Howell deposited with
BankOne, Oklahoma, NA (f/k/a Liberty Bank and & Trust Company of Oklahoma City,
N.A.), as escrow agent, 1,500,000 shares of common stock and stock options
exercisable for the purchase of 360,000 shares of common stock (as well as any
shares of common
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stock received upon exercise of stock options) (the "Deposited Securities"). The
Deposited Securities are held for the benefit of the holders (the "Public
Shareholders") of the common stock and redeemable warrants (the "Subject
Securities") that were purchased pursuant to viaLink's initial public offering.
The Deposited Securities will be held in escrow for a three-year period, ending
November 19, 1999 (the "Escrow Period"), to secure the Depositors' agreements
under the escrow agreement.
Under the terms of the escrow agreement, the Depositors agreed that during
the Escrow Period, in event of a distribution of viaLink's assets or securities
to the Public Shareholders (including the Depositors) as a result of the
dissolution, liquidation, merger, consolidation or reorganization of viaLink or
the sale or exchange of viaLink's assets or securities (including by way of
tender offer), or any other transaction or proceeding with a person other than
the Depositors (a, "Distribution"), the Public Shareholders will initially share
on a pro rata, per share basis in the Distribution, in proportion to the public
offering prices of the Subject Securities until the Public Shareholders have
received, or have had irrevocably set aside for them, an amount equal to the
aggregate public offering prices of the Subject Securities. Thereafter, all
holders of viaLink's equity securities, including the Depositors with respect to
the Deposited Securities, will participate on an equal, per share basis in the
remaining amount of the Distribution. The Distribution may proceed on lesser
terms and conditions if a majority of the holders of the Subject Securities that
are not held by Depositors, officers, or directors of viaLink, or their
associates or affiliates vote, or consent by consent procedure, to approve the
lesser terms and conditions.
During the Escrow Period, the Deposited Securities may not be transferred,
sold or otherwise disposed of by the Depositors (or any transferees), unless the
proposed transferee agrees to accept the securities subject to the Escrow
Agreement.
Registration Rights
We have granted registration rights to the holders of our underwriter
warrants and warrant underwriter warrants and the shares of our common stock
issuable upon exercise of those warrants. Until November 20, 2000, the holders
of at least 50% of these registrable securities which are then outstanding may
request registration under the Securities Act of all or any part of their
registrable securities, such registration to be effective for a period of at
least nine consecutive months. The holders of these registrable securities are
entitled to request one such demand registration, the expenses of which shall be
paid for by us. In addition, the holders of these registrable securities also
have piggyback registration rights. We have also granted registration rights to
some holders of options to purchase 360,000 shares of our common stock. We
originally issued these options to John Simonelli and Larry E. Howell on October
15, 1996 in connection with our acquisition of Vantage Capital Resources, Inc.
If we propose to register any of our securities under the Securities Act (other
than by filing a registration statement on Form S-8 or Form S-4) at any time,
the option holders may request to have the securities they hold included in such
registration. Upon such request, we shall use our best efforts, providing that
it is permissible under the Securities Act to register such securities on such
registration statement, to include the option holders securities in the proposed
registration statement. However, we may determine for any reason, after
consultation with the option holders who have requested to have their securities
included in the registration statement, not to register or to delay the
registration of the option holders securities.
In connection with our agreement with Hewlett-Packard and the convertible
note issued thereunder, we have granted registration rights to Hewlett-Packard
with respect to shares of our common stock issuable upon conversion of the note.
Hewlett-Packard may request that these securities be registered in up to four
demand registrations, however only one of these demand registrations may be
pursuant to a registration statement on Form S-1 or Form SB-2 or other similar
forms of registration statements. We have also granted Hewlett-Packard unlimited
piggyback registration rights. Both the demand and piggyback registration rights
contain cut-back provisions under which we may not have to register the shares
requested by Hewlett-Packard if such registration, in the opinion of the
underwriters of such offering, would be imprudent.
In connection with our agreement with Ernst & Young and the warrants issued
thereunder, we have granted registration rights to Ernst & Young with respect to
shares of our common stock issuable upon exercise of the warrants. Ernst & Young
may request that these securities be registered in up to five demand
registrations, however only two of these demand registrations may be pursuant to
a registration statement on Form S-1 or Form SB-2 or other similar forms of
registration statements. We have also granted Ernst & Young unlimited piggyback
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registration rights. Both the demand and piggyback registration rights contain
cut-back provisions under which we may not have to register the shares requested
by Ernst & Young if such registration, in the opinion of the underwriters of
such offering, would be imprudent. In addition, pursuant to this agreement,
Ernst & Young has agreed to purchase 62,500 shares of our common stock at a
price of $8.00 per share pursuant to the warrants. We have agreed to register
these shares for resale shortly after the date of this prospectus.
PLAN OF DISTRIBUTION
viaLink
We will offer and distribute the 920,000 shares of common stock issuable
upon exercise of the redeemable warrants if and when the redeemable warrants are
exercised by their holders. Holders of redeemable warrants who exercise their
warrants while the registration statement of which this prospectus is a part is
effective under the Securities Act may freely resell the shares of common stock
issuable upon exercise, except for holders who are "affiliates" of viaLink
within the meaning of the Securities Act. Affiliates may resell such shares in
accordance with certain provisions of Rule 144. We have not used an underwriter
with respect to the exercise of any of the warrants, and we will not pay any
fees when the redeemable warrants are exercised. All cash we receive upon
exercise of the redeemable warrants will be proceeds and will be used for
general corporate purposes.
Selling Shareholders
We will receive the exercise price of the underwriter warrants and the
warrant underwriter warrants, if such warrants are exercised, but will receive
no proceeds from the resale of the underlying shares which may be offered
hereby. The shares of common stock offered hereby may be sold by the selling
shareholders, or by pledgees, donees, transferees or other successors in
interest that receive the shares as a gift, partnership distribution or other
non-sale related transfer, from time to time in transactions in the over-the-
counter market, in negotiated transactions, or a combination of such methods of
sale, at prices related to prevailing market prices or negotiated prices. The
selling shareholders may affect such transactions by selling the shares to or
through broker-dealers, and the broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the selling shareholder
and/or the purchasers of the shares for whom the broker-dealers may act as
agents or to whom they sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions).
In order to comply with the securities laws of certain states, if
applicable, the shares will be sold in jurisdictions only through registered or
licensed brokers or dealers. In addition, in some states the shares may not be
sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
The selling shareholders and any broker-dealers or agents that participate
with the selling shareholders in the distribution of the shares may be deemed to
be "underwriters" within the meaning of the Securities Act, and any commissions
received by them and any profit on the resale of the shares purchased by them
may be deemed to be underwriting commissions or discounts under the Securities
Act.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the shares may not simultaneously engage in
market making activities with respect to our common stock during a period
beginning one or five business days prior to the commencement of such
distribution. In addition and without limiting the foregoing, each selling
shareholder will be subject to applicable provisions of the Exchange Act and the
rules and regulations thereunder, including Rule 102, which provisions may limit
the timing of purchases and sales of shares of common stock by the selling
shareholders.
We will pay all costs and expenses incurred in connection with the
registration under the Securities Act of the shares. This includes:
. all registration and filing fees;
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. printing expenses;
. fees and disbursements of our counsel and accountants;
. any brokerage fees and commissions;
. fees and disbursement of counsel for selling shareholders; and
. stock transfer and other taxes attributable to the sale of the shares.
The selling shareholders will bear all commissions and discounts, if any,
attributable to the sales of the shares.
The selling shareholders are under no obligation to sell all or any of the
shares. The selling shareholders are not restricted as to the prices at which
they may sell their shares and sales of such shares at less than the market
price may depress the market price of the common stock.
LEGAL MATTERS
The validity of issuance of the shares of common stock offered by us
pursuant to the offering will be passed upon for us by Dunn, Swan & Cunningham,
Oklahoma City, Oklahoma and certain other legal matters in connection with this
offering will be passed upon for us by Brobeck, Phleger & Harrison LLP, Austin,
Texas.
EXPERTS
The consolidated balance sheets as of December 31, 1998 and 1997 and the
consolidated statements of operations, stockholders' equity, and cash flows for
each of three years in the period ended December 31, 1998, included in this
prospectus, have been included herein in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
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WHERE YOU CAN FIND ADDITIONAL INFORMATION
We are subject to the information requirements of the Securities Exchange
Act of 1934, as amended, and therefore must file annual, quarterly and special
reports, proxy materials and other information with the SEC. You can inspect and
copy any document we file at the SEC's public reference room, 450 Fifth Street,
N.W. Washington, D.C. 20549, or at its regional offices located at 500 West
Madison, Suite 1400, Chicago, Illinois 60661, and at 7 World Trade Center, Suite
1300, New York, New York 10048. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. The SEC maintains a web site
at http://www.sec.gov that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
SEC.
We have filed with the SEC a registration statement on Form SB-2 under the
Securities Act of 1933, as amended, with respect to the shares offered hereby.
Statements made in this prospectus as to the contents of any document referred
to are not necessarily complete. With respect to each document filed as an
exhibit to this registration statement, you should refer to the exhibit for a
more complete description of the matter involved. You may inspect the
registration statement, including the exhibits and schedules, at the SEC's
public reference facilities at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. You may also obtain copies of the registration
statement or any portion of it from such office at prescribed rates.
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), as a "small business issuer" as
defined under Regulation S-B promulgated under the 1933 Act. In accordance with
the 1934 Act, we file reports and other information with the Commission (File
No. 000-21729). Such reports and other information can be inspected and copied
at, and copies of such materials can be obtained at prescribed rates from, the
Public Reference Section of the Commission in Washington, D.C.
We have recently filed the following documents with the SEC under the
Exchange Act:
. our Definitive Proxy Statement for the annual meeting of shareholders
to be held on May 21, 1999;
. our Annual Report on Form 10-KSB for the year ended December 31, 1998;
. our Quarterly Report on Form 10-QSB for the fiscal quarter ended March
31, 1999;
. our Current Reports on Form 8-K dated October 16, 1998, December 31,
1998, February 4, 1999, and May 3, 1999;
. the description of our common stock contained in our registration
statement on Form 8-A, filed with the SEC under the Exchange Act; and
. the description of our redeemable warrants contained in our
registration statement on Form 8-A, filed with the SEC under the
Exchange Act.
We distribute to our shareholders annual reports containing financial
statements audited by our independent public accountants and, upon request,
quarterly reports for the first three quarters of each fiscal year containing
unaudited consolidated financial information. You should direct requests for
such information to Shareholder Relations, The viaLink Company, 13800 Benson
Road, Edmond, Oklahoma 73013, (405) 936-2500.
66
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Unaudited Financial Statements of The viaLink Company
The viaLink Company Unaudited Balance Sheets as of March 31, 1999..................... F-2
The viaLink Company Unaudited Statements of Income for the Three Months
Ended March 31, 1999 and 1998.................................................... F-3
The viaLink Company Unaudited Statements of Stockholders' Equity for the
Three Months Ended March 31, 1999................................................ F-4
The viaLink Company Unaudited Statements of Cash Flows for the Three
Months Ended March 31, 1999 and 1998............................................. F-5
The viaLink Company Notes to Unaudited Financial Statements........................... F-6
Financial Statements of The viaLink Company
Report of Independent Accountants........................................................ F-9
The viaLink Company Consolidated Balance Sheets as of December 31, 1998
and 1997......................................................................... F-10
The viaLink Company Consolidated Statements of Operations for the Years
Ended December 31, 998, 1997 and 1996............................................ F-11
The viaLink Company Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1998, 1997 and 1996............................. F-12
The viaLink Company Consolidated Statements of Cash Flows for the
Years Ended December 31, 1998, 1997 and 1996..................................... F-13
The viaLink Company Notes to Financial Statements........................................ F-14
Unaudited Pro Forma Consolidated Statement of Operations of The viaLink Company
The viaLink Company Unaudited Pro Forma Consolidated Statement of
Operations for the year ended December 31, 1998.................................. F-23
</TABLE>
F-1
<PAGE>
THE VIALINK COMPANY (formerly Applied Intelligence Group, Inc.)
CONSOLIDATED BALANCE SHEET
as of March 31, 1999
(unaudited)
<TABLE>
<CAPTION>
ASSETS March 31, 1999
--------------
<S> <C>
Current assets:
Cash and cash equivalents $ 3,333,977
Short-term investments 2,646,284
Accounts receivable--trade, net of allowance for
doubtful accounts of $7,841 at March 31, 1999 91,684
Other receivables 546,426
Prepaid expenses 111,527
Marketable securities, available-for-sale 2,132,183
Deferred offering costs 134,127
--------------
Total current assets 8,996,208
Furniture, equipment and leasehold improvements, net 732,960
Software development costs, net 1,372,934
Note receivable, net of deferred gain on sale --
Other assets 49,631
--------------
Total assets $ 11,151,733
--------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 1,136,040
Current portion of capital lease obligation 24,138
--------------
Total current liabilities 1,160,178
Convertible debt 592,322
--------------
Total liabilities 1,752,500
Stockholders' equity:
Common stock, $.001 par value; 30,000,000 shares
authorized; 2,874,342 shares issued and outstanding
at March 31, 1999 2,874
Additional paid-in capital 10,850,613
Accumulated deficit (2,586,437)
Accumulated other comprehensive income (loss) 1,132,183
--------------
Total stockholders' equity 9,399,233
--------------
Total liabilities and stockholders' equity $ 11,151,733
==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE>
THE VIALINK COMPANY (formerly Applied Intelligence Group, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
for the Three Months Ended March 31, 1999 and 1998
(unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Revenues $ 108,178 $ 3,098,404
Expenses:
Direct cost of sales -- 377,068
Salaries and benefits 501,358 1,787,430
Selling, general and administrative 1,150,822 558,599
Interest expense, net 634,498 36,116
Depreciation and amortization 178,834 248,452
----------- -----------
Total expenses 2,465,512 3,007,665
----------- -----------
Income (loss) from operations (2,357,334) 90,739
Gain on sale of assets 462,041 --
Other income 273,000 --
----------- -----------
Income (loss) before income taxes (1,622,293) 90,739
Provision for income taxes -- 34,481
----------- -----------
Net income (loss) (1,622,293) 56,258
Other comprehensive income:
Unrealized gain on securities 1,447,856 --
----------- -----------
Comprehensive income (loss) $ (174,437) $ 56,258
=========== ===========
Weighted average shares outstanding--Basic 2,866,802 2,729,521
=========== ===========
Net income (loss) per common share--Basic $ (0.57) $ 0.02
=========== ===========
Weighted average shares outstanding--Dilutive 2,866,802 2,779,665
=========== ===========
Net income (loss) per common share--Dilutive $ (0.57) $ 0.02
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
THE VIALINK COMPANY (formerly Applied Intelligence Group, Inc.)
STATEMENTS OF STOCKHOLDERS' EQUITY
for the Three Months Ended March 31, 1999
(unaudited)
<TABLE>
<CAPTION>
Accumulated
Additional Other
Paid-in Accumulated Comprehensive
Shares Amount Capital (Deficit) Income (Loss)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1998 2,826,613 $ 2,827 $ 4,763,569 $ (964,144) $ (315,673)
Exercise of stock options 47,633 47 86,090 -- --
Stock issued under Employee
Stock Purchase Plan 96 -- 954 -- --
Proceeds from Hewlett-Packard
Note -- -- 6,000,000 -- --
Net income (loss) -- -- -- (1,622,293) --
Unrealized gain on Securities
Available for Sale -- -- -- -- 1,447,856
------------ ------------ ------------ ------------ ------------
Balance, March 31, 1999 2,874,342 $ 2,874 $ 10,850,613 $ (2,586,437) $ 1,132,183
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
THE VIALINK COMPANY (formerly Applied Intelligence Group, Inc.)
STATEMENTS OF CASH FLOWS
for the Three Months Ended March 31, 1999 and 1998
(unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(1,622,293) $ 56,258
Adjustments to reconcile net income (loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization 178,834 248,452
Gain on sale of ijob (462,041) --
Deferred income tax provision -- 34,481
Decrease (increase) in accounts receivable 66,433 (411,569)
Decrease in other receivables 39,352 685
Increase in inventory -- (1,825)
Increase in prepaid expenses (94,811) (79,819)
Increase in other assets (11,067) (3,500)
Increase in accounts payable and accrued liabilities 69,767 444,098
Decrease in deferred revenue -- (101,294)
----------- -----------
Net cash provided by (used in) operating activities (1,835,826) 185,967
Cash flows from investing activities:
Capital expenditures (97,814) (21,771)
Capitalized expenditures for software development (126,775) (198,202)
Collection on note receivable from ijob 800,000 --
----------- -----------
Net cash provided by (used in) investing activities 575,411 (219,973)
Cash flows from financing activities:
Decrease in book overdraft -- (23,619)
Payment of deferred offering costs (134,127) --
Purchase of short-term investments (2,646,284) --
Proceeds from convertible debt 6,000,000 616,864
Proceeds from exercise of stock options, stock bonus and
stock purchase plans 87,091 2,649
Payments of capital lease obligations (20,056) (36,523)
Payments on long-term debt -- (490,000)
Non-cash interest on convertible debt 592,322 --
----------- -----------
Net cash provided by financing activities 3,878,946 69,371
----------- -----------
Net increase in cash 2,618,531 35,365
Cash and cash equivalents at beginning of period 715,466 80,769
----------- -----------
Cash and cash equivalents at end of period $ 3,333,977 $ 116,134
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
THE VIALINK COMPANY (formerly Applied Intelligence Group, Inc.)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 1999
1. DESCRIPTION OF BUSINESS
-----------------------
The viaLink Company provides a business-to-business electronic commerce
solution for the food and consumer packaged goods industries. We have
developed a cost-effective, Internet-accessible shared database, the
viaLink(TM) Item Catalog, that enables subscribing manufacturers, suppliers
and retailers to exchange product, pricing and promotional information. Our
solution offers a single interface solution for retailers to receive
product information from all their suppliers, regardless of the
technological capabilities of the retailer or the supplier. Suppliers and
manufacturers are able to efficiently communicate product and pricing
information to their customers, significantly reducing the operational and
administrative costs of supply chain management. Product, pricing and
promotional information contained in the viaLink database is secured with
firewalls and password protections. With the use of a personal computer and
commonly available software and a Web browser, viaLink enables its
subscribers to improve management of information flow, reduce errors and
invoice discrepancies, enhance the accounts receivable collection process
and reduce redundant information processing.
Our strategy is to invest in new network information systems to facilitate
our plan to build recurring network service revenues with higher profit
margins. In order to implement this strategy, we believe that we will need
significant additional capital resources and we are seeking additional
financing sources and negotiating with other potential technology,
strategic or marketing partners. There can be no assurance, however, that
these efforts will be successful or that we will be able to obtain
additional financing or agreements with other partners on commercially
reasonable terms, if at all. Our failure to successfully negotiate such
arrangements would have a material adverse affect on our operations and
business, financial condition and results of operations, including our
viability as an enterprise. As a result of the high level of expenditures
for investment in technology development, implementation, customer support
services, and selling and marketing expenses, we expect to incur losses in
the foreseeable future periods until such time, if ever, as the recurring
revenues from these systems are sufficient to cover the expenses.
Our clients and customers range from small, rapidly growing companies to
large corporations and are geographically dispersed throughout the United
States.
2. BASIS OF PRESENTATION
---------------------
Reference is made to the Company's Annual Report on Form 10-KSB for the
year ending December 31, 1998.
We have prepared the accompanying unaudited consolidated financial
statements in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of our management, the accompanying unaudited
financial statements contain all adjustments (consisting solely of normal
recurring adjustments) considered necessary to present fairly our financial
position and results of operations and cash flow. These interim unaudited
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and related notes included in our
Annual Report on Form 10-KSB, for the year ended December 31, 1998, as
filed with the Securities and Exchange Commission on March 4, 1999.
Operating results for the three month period ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the full
year ending December 31, 1999.
3. DIVESTITURES
------------
On December 31, 1998, we sold our wholly-owned subsidiary, ijob, Inc. to
DCM Company ("DCM"), a corporation wholly-owned by David C. Mitchell, the
President and a member of the Board of Directors of
F-6
<PAGE>
ijob at the time of the sale. DCM purchased all of the outstanding stock of
ijob for a collateralized, ten-year $800,000 promissory note that accrues
interest at 8%. The promissory note was collateralized by substantially all
of ijob's fixed assets, contract rights, accounts receivable and general
intangibles. The net gain of $462,041 on the sale was deferred and netted
against the $800,000 promissory note at December 31, 1998, as DCM was
considered to be a highly leveraged entity. On March 11, 1999, the
promissory note and accrued interest was paid in full. Accordingly, we have
recognized the gain on the sale of $462,041 in the consolidated statement
of operations for the three months ending March 31, 1999.
Effective September 1, 1998, we sold the assets related to our management
consulting and systems integration services (including our proprietary
Retail Services Application software) to The Netplex Group, Inc (the
"Consulting Assets Sale"). Netplex paid us $3.0 million in cash and issued
us 643,770 shares of Netplex preferred stock, with a market value of $1.0
million on the date of the sale. In conjunction with the sale of our
consulting assets, we entered into an earn-out agreement that may provide
us with quarterly cash payments up to $1.5 million generated from the
assets sold to Netplex until March 31, 2000. We used the cash proceeds from
the sale to repay (i) $551,062 of long-term debt, (ii) $565,094 of
shareholder loans including interest and (iii) expenses attributable to the
Consulting Assets Sale. The net gain from the Consulting Assets Sale was
$2,998,453. As of March 31, 1999, the market value of the 643,770 shares of
NetPlex preferred stock was $2,132,183, yielding an unrealized gain of
$1,447,856, which has been included in comprehensive income in our
consolidated statement of operations for the three months ended March 31,
1999.
Accordingly, our consolidated balance sheet as of March 31, 1999 and the
consolidated statements of operations for the three months ended March 31,
1999, do not include the assets and operations of the consulting and
systems integration business, nor do they include the assets and operations
of ijob, which are included in the comparable period of 1998. Therefore,
the periods presented are not comparable.
We expect to report losses from operations throughout 1999. We expect to
continue our high level of expenditures for investment in technology,
development, implementation, customer support services, and sales and
marketing of, our viaLink services. The extent of our quarterly losses will
depend on revenues from network services and application products, which
have
4. RECONCILIATION FOR BASIC AND DILUTIVE EARNINGS PER SHARE ("EPS")
----------------------------------------------------------------
For the Three Months Ended March 31, 1998
<TABLE>
<CAPTION>
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ----------- -----------
<S> <C> <C> <C>
Basic EPS
Income available to common shareholders $ 56,258 2,729,521 $ 0.02
-----------
Effect of Dilutive Securities Options -- 50,144
----------- -----------
Dilutive EPS
Income available to common shareholders
plus assumed conversions $ 56,258 2,779,665 $ 0.02
----------- ----------- -----------
</TABLE>
Options to purchase 360,000, 50,000 and 102,500 shares of common stock at
$5.00, $3.50 and $3.875, respectively, per share, and warrants to purchase
920,000 and 180,000 shares of common stock at $5.00 and $6.00, respectively
per share, were outstanding during the first quarter of 1998, but were not
included in the computation of diluted EPS because the exercise prices were
greater than the average market price of the common shares. The options,
which expire on November 30, 2001 through March 1, 2007, respectively, were
still outstanding at March 31, 1998.
At March 31, 1999, options to purchase 1,579,958 shares at an average price
of $3.63, warrants to purchase 920,000 and 180,000 shares of common stock
at $5.00 and $6.00, respectively, and 857,143 shares of common stock to be
issued upon the conversion of the Hewlett-Packard note, were outstanding
during the
F-7
<PAGE>
three month period ending March 31, 1999, but were not included in the
computation of diluted earnings per share because the effect of these
outstanding options, warrants and stock issuable upon conversion of debt
would be antidilutive.
5. CONVERTIBLE DEBT
----------------
On February 4, 1999, we entered into a financing agreement and note
purchase agreement with Hewlett-Packard pursuant to which Hewlett-Packard
purchased from viaLink a $6.0 million secured subordinated promissory note.
This note bears interest at 11.5 % per annum, with interest payments
deferrable to maturity in February 2004. Subject to authorization and
approval by our shareholders to issue the common stock underlying the
convertible note to be issued to Hewlett-Packard, which we are seeking at
our 1999 annual meeting of shareholders, the note will be exchanged for a
subordinated secured convertible promissory note, convertible into our
common stock at a conversion price of $7.00 per share. The closing of the
purchase of the note occurred on February 5, 1999 (the "Effective Date").
The Emerging Issues Task Force ("EITF") has issued EITF issue number 98-5
"Accounting for Convertible Securities with Beneficial Conversion Features
or Contingently Adjustable Conversion Ratios", which addresses issues
surrounding convertible debt securities with a nondetachable conversion
feature that is in-the-money at the commitment date (a "beneficial
conversion feature"). The task force reached a tentative conclusion that
beneficial conversion features present in convertible securities should be
recognized and measured by allocating a portion of the proceeds equal to
the intrinsic value of that feature to additional paid-in capital. The
intrinsic value of the beneficial conversion feature was approximately
$20,000,000 at the commitment date. However, the value is limited to the
$6,000,000 proceeds based on the prescribed accounting. Accordingly, we
have allocated the full amount of proceeds to the beneficial conversion
feature and recorded $6,000,000 as additional paid-in capital as of March
31, 1999, and recognized an additional non-cash interest charge of $592,322
for interest expense from February 5, 1999 through March 31, 1999, through
establishing long-term debt in the same amount.
6. TAX PROVISION
-------------
SFAS 109, Accounting for Income Taxes, requires, among other things, the
separate recognition, measured at currently enacted tax rates, of deferred
tax assets and deferred tax liabilities for the tax effect of temporary
differences between the financial reporting and tax reporting bases of
assets and liabilities, and net operating loss and tax credit carryforwards
for tax purposes. A valuation allowance must be established for deferred
tax assets if it is "more likely than not" that all or a portion will not
be realized. At March 31, 1998, we had recorded a tax benefit of $970,000
related to the pre-tax losses incurred in prior years, and no valuation
allowance had been established. As a result of the net gain on the
consulting business sale, the deferred tax asset was realized. The deferred
tax asset at December 31, 1998 and March 31, 1999, generated by losses
recorded in the fourth quarter of 1998 and the first quarter of 1999,
respectively, was offset by a fall valuation allowance. We will continue to
provide a full valuation allowance for future and current net deferred tax
assets until such time as management believes it is more likely than not
that the asset may be realized.
F-8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
The viaLink Company (formerly Applied Intelligence Group, Inc.)
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of The viaLink
Company (formerly Applied Intelligence Group, Inc.) at December 31, 1998 and
1997, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. 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 of these statements in accordance with generally accepted
auditing standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
Oklahoma City, Oklahoma
February 22, 1999
F-9
<PAGE>
THE VIALINK COMPANY (formerly Applied Intelligence Group, Inc.)
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---------- -----------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 715,446 $ 80,769
Accounts receivable - trade, net of allowance for doubtful
accounts of $7,841 in 1998 and $1,724 in 1997 158,117 1,337,322
Other receivables 585,778 44,893
Inventory -- 8,707
Current portion of deferred tax asset -- 44,502
Prepaid expenses 16,716 51,634
Marketable securities, available-for-sale 684,327 --
---------- -----------
Total current assets 2,160,384 1,567,827
Furniture, equipment and leasehold improvements, net 719,910 1,462,575
Software development costs, net 1,340,230 1,735,420
Deferred tax asset, net -- 1,004,938
Note receivable, net of deferred gain on sale 337,958 --
Other assets 38,564 33,393
---------- -----------
Total assets $4,597,046 $ 5,804,153
---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Book overdraft $ -- $ 23,619
Accounts payable and accrued liabilities 1,066,273 1,507,018
Deferred revenue -- 236,134
Current portion of capital lease obligations 44,194 132,422
---------- -----------
Total current liabilities 1,110,467 1,899,193
Capital lease obligations, net of current portion -- 44,194
Long-term debt -- 490,000
Notes payable to shareholders -- 482,830
---------- -----------
Total liabilities 1,110,467 2,916,217
Commitments (Note 10)
Stockholders' equity:
Common stock, $.001 par value; 30,000,000 shares authorized;
2,826,613 and 2,729,509 shares issued and outstanding
at December 31, 1998 and 1997, respectively 2,827 2,730
Additional paid-in capital 4,763,569 4,498,988
Accumulated deficit (964,144) (1,613,782)
Accumulated other comprehensive loss (315,673) --
---------- -----------
Total stockholders' equity 3,486,579 2,887,936
---------- -----------
Total liabilities and stockholders' equity $4,597,046 $ 5,804,153
---------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-10
<PAGE>
THE VIALINK COMPANY (formerly Applied Intelligence Group, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues $ 8,230,628 $ 9,022,842 $ 9,507,370
Expenses:
Direct cost of sales 1,563,757 2,211,956 2,570,840
Salaries and benefits 5,256,247 6,174,503 5,167,571
Selling, general and administrative 1,964,180 2,708,351 2,007,999
Interest expense, net 161,355 73,581 219,089
Depreciation and amortization 925,134 827,396 591,205
----------- ----------- -----------
Total expenses 9,870,673 11,995,787 10,556,704
----------- ----------- -----------
Loss from operations (1,640,045) (2,972,945) (1,049,334)
Gain on sale of assets 2,998,453 -- --
Other income 340,670 -- --
----------- ----------- -----------
Income (loss) before income taxes 1,699,078 (2,972,945) (1,049,334)
Provision (benefit) for income taxes 1,049,440 (1,112,127) (366,925)
----------- ----------- -----------
Net income (loss) 649,638 (1,860,818) (682,409)
Other comprehensive loss:
Unrealized loss on securities (315,673) -- --
----------- ----------- -----------
Comprehensive income (loss) $ 333,965 $(1,860,818) $ (682,409)
----------- ----------- -----------
Weighted average common shares outstanding - Basic 2,741,041 2,727,438 1,838,522
----------- ----------- -----------
Net income (loss) per common share - Basic $ .24 $ (.68) $ (.37)
----------- ----------- -----------
Weighted average common shares outstanding - Diluted 3,102,443 2,727,438 1,838,522
----------- ----------- -----------
Net income (loss) per common share - Diluted $ .21 $ (.68) $ (.37)
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-11
<PAGE>
THE VIALINK COMPANY (formerly Applied Intelligence Group, Inc.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Accumulated Retained
Common Stock Additional Other Earnings
-------------------------------
Paid-In Comprehensive Accumulated
Shares Amounts Capital Loss (Deficit)
----------- ----------- ----------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1995 1,500,000 $ 1,500 $ 66,484 $ -- $ 929,445
Vantage Capital
Resources, Inc., merger 610,000 610 394,317 -- --
Stock redemptions (383,500) (383) (40,742) -- --
Initial public offering 1,000,000 1,000 4,071,167 -- --
Net loss -- -- -- -- (682,409)
----------- ----------- ----------- -------------- -----------
Balance, 2,726,500 2,727 4,491,226 -- 247,036
December 31, 1996
Exercise of stock options 444 -- 279 -- --
Stock issued under Employee
Stock
Purchase Plan 2,565 3 7,483 -- --
Net loss -- -- -- -- (1,860,818)
----------- ----------- ----------- -------------- -----------
Balance (Deficit),
December 31, 1997 2,729,509 2,730 4,498,988 -- (1,613,782)
Exercise of stock options 88,610 89 240,303 -- --
Stock issued under Employee
Stock
Purchase Plan 3,461 3 8,555 -- --
Stock issued under Employee
Stock
Bonus Plan 5,033 5 15,723 -- --
Net Income -- -- -- -- 649,638
Unrealized loss on securities
available for sale -- -- -- (315,673) --
----------- ----------- ----------- -------------- -----------
Balance (Deficit),
December 31, 1998 2,826,613 $ 2,827 $ 4,763,569 $ (315,673) $ (964,144)
=========== =========== =========== ============== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-12
<PAGE>
THE VIALINK COMPANY (formerly Applied Intelligence Group, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 649,638 $(1,860,818) $ (682,409)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 925,134 827,396 591,205
Deferred income tax provision (benefit) 1,049,440 (1,112,127) (241,730)
Gain on sale of assets (2,998,453) -- --
Loss on disposal of fixed assets 12,694 -- 5,720
Decrease (increase) in accounts receivable 1,054,162 672,515 363,680
Decrease (increase) in other receivables (540,885) 269,981 (95,995)
Decrease (increase) in inventory 8,707 19,452 (5,767)
Decrease (increase) in prepaid expenses 34,918 24,630 19,974
Decrease (increase) in other assets (11,218) 83,748 (68,698)
Increase (decrease) in accounts payable and accrued (397,899) 428,512 (184,601)
liabilities
Increase (decrease) in deferred revenue (236,134) (96,315) 207,986
------------ ----------- -----------
Net cash used in operating activities (449,896) (743,026) (90,635)
------------ ----------- -----------
Cash flows from investing activities:
Proceeds from sale of assets, net of cost 2,607,731 -- --
Capital expenditures (41,785) (332,987) (625,893)
Capitalized expenditures for software development (617,180) (752,158) (655,248)
------------ ----------- -----------
Net cash provided by (used in) investing activities 1,948,766 (1,085,145) (1,281,141)
------------ ----------- -----------
Cash flows from financing activities:
Increase (decrease) in book overdraft (23,619) (261,141) 115,294
Proceeds from long-term debt 3,522,639 1,270,000 5,609,000
Proceeds from shareholder notes -- 6,455 39,375
Proceeds from exercise of stock options, stock bonus 264,678 7,765 --
and stock purchase plan
Proceeds from sale of stock -- -- 4,425,969
Payments of capital lease obligations (132,422) (135,153) (111,347)
Payments of shareholder notes (482,830) (20,000) --
Payments on long-term debt (4,012,639) (780,000) (6,904,000)
------------ ----------- -----------
Net cash provided by (used in) financing activities (864,193) 87,926 3,174,291
------------ ----------- -----------
Net increase (decrease) in cash 634,677 (1,740,245) 1,802,515
Cash and cash equivalents at beginning of period 80,769 1,821,014 18,499
------------ ----------- -----------
Cash and cash equivalents at end of period $ 715,446 $ 80,769 $ 1,821,014
============ =========== ===========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 220,553 $ 123,778 $ 251,967
============ =========== ===========
Cash paid for income taxes, net of cash received for income
taxes $ 26,454 $ 114,852 $ (10,000)
============ =========== ===========
Supplemental disclosures of noncash investing and financing
activities:
Capital lease obligation incurred $ -- $ -- $ 205,938
============ =========== ===========
</TABLE>
Effective December 31, 1998, the Company sold its investment in its wholly-
owned subsidiary, ijob, Inc., for a $800,000 note receivable. The net gain on
the sale of $462,042 has been deferred and netted against the note.
The accompanying notes are an integral part of these consolidated
financial statements.
F-13
<PAGE>
THE VIALINK COMPANY (formerly Applied Intelligence Group, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
General Description of Business The viaLink Company (the "Company")
-------------------------------
provides business-to-business electronic commerce solutions for the grocery
and convenience store industries. The Company has developed a cost-
effective, Internet-accessible shared database, the viaLink Item Catalog,
that enables subscribing manufacturers, suppliers and retailers to exchange
product, pricing and promotional information. The Company's solution
offers a single interface solution for retailers to receive product
information from all their suppliers, regardless of the technological
capabilities of the retailer or the supplier. Suppliers and manufacturers
are able to efficiently communicate product and pricing information to
their customers, significantly reducing the operational and administrative
costs of supply chain management. Product, pricing and promotional
information contained in the viaLink database is secured with state-of-the-
art firewalls and password protections. With the use of a personal
computer and commonly available software and a Web browser, viaLink enables
its subscribers to improve management of information flow, reduce errors
and invoice discrepancies, enhance the accounts receivable collection
process and reduce redundant information processing.
The Company's clients and customers range from small, rapidly growing
companies to large corporations and are geographically dispersed throughout
the United States.
Basis of Presentation The consolidated financial statements include the
---------------------
accounts of the Company and its wholly-owned subsidiary, ijob, Inc., which
was formed June 30, 1997. All material intercompany balances and
transactions have been eliminated. On December 31, 1998 ijob, Inc. was
sold and, therefore, is not included in the Company's December 31, 1998
balance sheet (see Note 2).
Use of Estimates The preparation of financial statements in conformity
----------------
with generally accepted accounting principles requires the use of
management's estimates and assumptions in determining the carrying values
of certain assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts for certain revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalents For purposes of the statement of cash flows,
-------------------------
the Company considers all highly liquid investments with a maturity of
three months or less at the time of purchase to be cash equivalents.
Marketable Securities The Company classifies its marketable securities as
---------------------
available-for-sale in accordance with SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The Company's securities are
carried at fair market value, with the unrealized gains and losses reported
as a separate component in stockholders' equity until realized.
Risks from Concentrations Financial instruments, which potentially subject
-------------------------
the Company to concentrations of credit risk, consist principally of
temporary cash investments, notes receivable and accounts receivable. The
Company places its temporary cash investments with high credit quality
financial institutions. Concentrations of credit risk with respect to
accounts receivable are limited due to the size of customers and their
dispersion across different regions. The Company does not believe a
material risk of loss exists with respect to its financial position due to
concentrations of credit risk.
The Company, through the sale of its management consulting and systems
integration services, received 643,770 shares of preferred stock
convertible into common shares of the Netplex Group, Inc. which are
classified as available-for-sale marketable securities and are subject to
fluctuations in value due to market conditions.
The Company's revenues were in part dependent on large license fees and
systems integration contracts from a limited number of customers. In 1998,
1997 and 1996 three customers individually accounted for 13, 11, and 11
percent, 20, 13, and 10 percent, and 17, 14, and 10 percent of the
Company's total revenues, respectively. In 1998, 1997 and 1996,
approximately 49, 57 and 57 percent, respectively, of the Company's total
revenues were attributable to five clients. During 1998 the Company sold
its wholly owned subsidiary, ijob, Inc., and the assets underlying its
management consulting and systems integration
F-14
<PAGE>
services (see Note 2). Historically, approximately 90% of the Company's
revenues were generated from assets sold pursuant to these sales. As a
result of the sales, the Company resembles a development stage company
since its planned principal operations are underway, but have not yet
generated significant revenues.
Furniture, equipment and leasehold improvements Furniture, equipment and
-----------------------------------------------
leasehold improvements are stated at cost. Expenditures for repairs and
maintenance are charged to expense as incurred. Upon disposition, the cost
and related accumulated depreciation are removed from the accounts and the
resulting gain or loss is reflected in operations for the period. The
Company depreciates furniture and equipment using the straight-line method
over their estimated useful lives ranging from 5 to 10 years. Leasehold
improvements are amortized over the lease term using the straight-line
method.
Revenue Recognition The Company recognizes revenues as the services are
-------------------
provided. Revenues collected in advance are deferred and recognized as
earned. Revenues for fixed-price contracts are recognized using the
percentage of completion method. Accounts receivable included unbilled
amounts of $193,355 at December 31, 1997. As of December 31, 1998 there
were no unbilled amounts.
Direct Cost of Sales Direct Cost of sales represents the cost of hardware
--------------------
and certain point-of-sale software acquired for resale, including royalty
payments required for sale of the Company's proprietary software products.
Earnings Per Share The Company presents basic and diluted earnings per
------------------
share ("EPS") as required under Statement of Accounting Standard No. 128,
"Earnings Per Share," ("SFAS 128"). SFAS 128 simplifies the standards for
computing earnings per share by replacing the presentation of primary
earnings per share with a presentation of basic earnings per share and by
simplifying the calculation of diluted earnings per share. A reconciliation
of the numerator and the denominator used in the calculation of earnings
per share is as follows:
<TABLE>
<CAPTION>
For the Year Ended December 31, 1998
Income Shares Per
(Numerator) (Denominator) Share
---------------- ------------------ -------------
<S> <C> <C> <C>
Basic EPS
Income available to common shareholders $649,638 2,741,041 $0.24
=====
Effect of dilutive securities options -- 361,402
-------- ---------
Dilutive EPS
Income available to common shareholders $649,638 3,102,443 $0.21
plus assumed conversions ======== ========= =====
</TABLE>
At December 31, 1998, options to purchase 360,000 and 30,000 shares of
common stock at $5.00 and $9.00 per share, respectively, and warrants to
purchase 920,000 and 180,000 shares of common stock at $5.00 and $6.00,
respectively, were outstanding, but were not included in the computation of
diluted EPS because the exercise price of the options and warrants was
greater than the average market price of the common shares.
At December 31, 1997, options to purchase 583,078 shares at an average
exercise price of $4.19 and warrants to purchase 920,000 and 180,000 shares
of common stock at $5.00 and $6.00, respectively, were outstanding, but
were not included in the computation of diluted EPS because the exercise
price of the options and warrants was greater than the average market price
of the common shares.
At December 31, 1996, options to purchase 435,208 shares at an average
exercise price of $4.32 and warrants to purchase 920,000 and 180,000 shares
of common stock at $5.00 and $6.00, respectively, were outstanding, but
were not included in the computation of diluted EPS because the exercise
price of the options and warrants was greater than the average market price
of the common shares.
Income Taxes The Company accounts for income taxes in accordance with
------------
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires deferred tax liabilities or assets
to be recognized for the anticipated future tax effects of temporary
F-15
<PAGE>
difference that arise as a result of the differences in the carrying
amounts and tax bases of assets and liabilities, and for loss carryforwards
and tax credit carryforwards.
Costs of Product Development The Company incurred costs and expenses of
----------------------------
approximately $1,827,000, $1,875,000, and $1,204,000 for product
development in 1998, 1997, and 1996, respectively. A substantial portion
of these costs relates to development of a network subscription service
that the Company made available to subscribers in January of 1997. Certain
of these costs are capitalized as Software Development Costs (See Note 4).
Comprehensive Income In 1998, the Company adopted SFAS 130, "Reporting
--------------------
Comprehensive Income." SFAS 130 establishes new rules for reporting of
comprehensive income and its components. Comprehensive income consists of
unrealized loss on the fair market value of marketable securities and is
presented as a separate component of stockholders' equity. Prior years'
financial statements have been presented to conform to these requirements.
Recently Issued Accounting Pronouncements In October 1997, the AICPA
-----------------------------------------
Accounting Standards Executive Committee issued Statement of Position 97-2,
Software Revenue Recognition ("SOP 97-2"), which supercedes Statement of
Position 91-1, Software Revenue Recognition. SOP 97-2 focuses on when and
in what amounts revenue should be recognized for licensing, selling,
leasing, or otherwise marketing computer software and is effective for
transactions entered into in fiscal years beginning after December 15,
1997. In March 1998, the AICPA Accounting Standards Executive Committee
issued Statement of Position 98-4, Deferral of the Effective Date of
Provision of SOP 97-2, Software Revenue Recognition ("SOP 98-4"). SOP 98-4
defers for one year certain provisions of SOP 97-2. In December of 1998,
the AICPA Accounting Standards Executive Committee issued Statement of
Position 98-9, Modification of SOP 97-2, Software Revenue Recognition, with
respect to Certain Transactions ("SOP 98-9"). SOP 98-9, also amends certain
provisions of SOP 97-2 and extends the deferral of the application of
certain provisions of SOP 97-2 as amended by SOP 98-4 through fiscal years
beginning on or before March 15, 1999. The Company does not believe that
the adoption of SOP 97-2, including the effects of these amendments, will
have a material impact on its financial position and results of operations.
2. DIVESTITURES:
------------
On December 31, 1998, the Company sold its wholly-owned subsidiary, ijob,
Inc. to DCM Company ("DCM"), a corporation wholly-owned by David C.
Mitchell, the President and a member of the board of directors of ijob at
the time of the sale. DCM purchased all of the outstanding stock of ijob
for a collateralized, ten-year $800,000 promissory note that accrues
interest at 8%. DCM is required to pay the promissory note in full upon
the occurrence of certain events, including the date upon which David C.
Mitchell owns less than 51% of DCM. The promissory note is collateralized
by principally all of the fixed assets, contract rights, accounts
receivable and general intangibles of ijob. The net gain of $462,042 on
the sale has been deferred and netted against the $800,000 promissory note,
as DCM is considered to be a highly leveraged entity.
Effective September 1, 1998, the Company sold the assets related to its
management consulting and systems integration services (including the
Company's proprietary Retail Services Application ("RSA") software) to
Netplex Group, Inc ("Consulting Asset Sale"). Netplex paid the Company
$3.0 million in cash and issued the Company 643,770 shares of Netplex
preferred stock, with a market value of approximately $1.0 million. The
Company used the cash proceeds from the sale to repay (i) $551,062 of long-
term debt, (ii) $565,094 of shareholder loans including interest and (iii)
expenses attributable to the Consulting Asset Sale. The net gain from the
Consulting Assets Sale was $2,998,453. As of December 31, 1998, the market
value of the 643,770 shares of Netplex preferred stock was $684,327,
yielding an unrealized loss of $315,673, which has been included in
comprehensive loss. The following represents condensed unaudited results
of operations related to the management consulting and systems integration
services:
<TABLE>
<CAPTION>
August 31, 1998 December 31, 1997
--------------- -----------------
<S> <C> <C>
Revenues $6,831,916 $7,544,678
Expenses 5,045,104 7,335,395
---------- ----------
Income before Taxes $1,786,812 $ 209,283
========== ==========
</TABLE>
F-16
<PAGE>
3. FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
-----------------------------------------------
Furniture, equipment and leasehold improvements at December 31, 1998 and
1997 consists of the following:
<TABLE>
<CAPTION>
1998 1997
------------------- ------------------
<S> <C> <C>
Furniture and fixtures $ 286,583 $ 482,818
Computer equipment 1,432,776 2,029,864
Computer software 492,790 657,498
Leasehold improvements 49,669 55,779
----------- -----------
2,261,818 3,225,959
Less: accumulated depreciation and amortization (1,541,908) (1,763,384)
----------- -----------
Furniture, equipment and leasehold improvements, net $ 719,910 $ 1,462,575
=========== ===========
</TABLE>
Included in furniture and fixtures in 1997 was $125,886 of assets under a
capital lease. In 1998 the capital lease was paid in full and the Company
obtained ownership of the related furniture and fixtures. Included in
computer equipment in 1998 and 1997 was $321,840 of assets under capital
leases. The accumulated depreciation for all assets under capital leases
at December 31, 1998 and 1997 was $282,245 and $195,177, respectively.
4. SOFTWARE DEVELOPMENT COSTS:
--------------------------
The Company capitalizes certain costs, including interest, that are
directly related to the development of software. In accordance with
Statement of Financial Accounting Standards No. 86, capitalization of costs
begins when technological feasibility has been established and ends when
the product is available for customers. Capitalized software development
costs are amortized using the straight-line method over the estimated
useful life of five years. Amortization of capitalized software costs for
December 31, 1998, 1997, and 1996 was $466,875, $324,837, and $176,756,
respectively. Accumulated amortization at December 31, 1998 and 1997 was
$763,755 and $841,826, respectively.
The Company continually assesses whether the unamortized capitalized cost
of software development is impaired. This assessment is based on the
future cashflows expected to be generated by the related product. If
impairment is determined, the amount of such impairment is calculated based
on the estimated net realizable value of the related asset. No write-offs
were made in 1998 and 1997.
Total interest costs for the years ended December 31, 1998, 1997, and 1996
were $168,946, $116,183, and $291,089, respectively, of which $54,423 was
capitalized in 1996. No interest was capitalized in 1998 and 1997.
5. LONG-TERM DEBT:
--------------
On July 19, 1995, the Company entered into a revolving credit agreement
(the "Agreement") with a bank whereby the Company could borrow, under two
separate notes, up to the lesser of $3,000,000 or the borrowing base as
defined in the agreement. Pursuant to the terms of the revolving credit
agreement, upon successful completion of the Company's initial public
offering, the working capital note of $800,000 was paid in full on November
27, 1996, and in October 1997, and December 1997, the terms of the
remaining note were renegotiated to a credit line of $500,000. Interest on
the note was prime plus 0.5% at December 31, 1997, which was 9%.
During the first quarter of 1998, the Company completed a new credit
facility with a commercial lender that replaced the revolving credit
agreement with the bank. Under the new credit facility the Company could
borrow up to $1,000,000; however, amounts borrowed were limited to 75% of
the Company's accounts receivable as defined by the new facility. The
facility was collateralized by accounts receivable and all tangible assets
of the Company and was guaranteed by three principal officers of the
Company. The interest rate on the new facility was prime plus 3%. The
promissory note under this agreement was paid in full on October 16, 1998.
During the first quarter of 1998, the Company obtained a credit facility
including a large sale financing option with IBM Credit Corp., whereby the
Company could finance directly with
F-17
<PAGE>
IBM Credit Corp. large sales of hardware or software. As of December
31,1998, there were no amounts outstanding on this credit facility and in
February of 1999, the Company terminated its arrangement under this credit
facility. The Company no longer has any available working capital
borrowings or credit facility available for borrowings.
On February 4, 1999, the Company entered into a financing agreement with
Hewlett-Packard Company. Hewlett-Packard provided the Company $6.0 million
pursuant to a Subordinated Secured Promissory Note bearing interest at a
rate of 11.5% per annum. The Company received such funds on February 5,
1999. No principal or interest payments are due on the Hewlett-Packard
Note until February 2004. This Note is collateralized by a lien on our
viaLink services, including the underlying source code. Upon receipt of
shareholder approval, which the Company intends to seek at the 1999 annual
meeting of shareholders, this initial Note would be exchanged for a
substantially similar note which would be convertible beginning in August
2000 into the Company's common stock at a price of $7 per share. In
connection with the financing, Hewlett-Packard will provide the
technological platform to host the Company's Item Catalog and other
services, co-marketing and consulting services. The Hewlett-Packard loan
agreement also provides that up to 50% of the loan proceeds are intended to
be used to purchase Hewlett-Packard products and services.
The carrying values of financial instruments included in long-term debt
approximate their fair values due to the nature and terms of the
instruments involved.
6. NOTES PAYABLE TO SHAREHOLDERS:
-----------------------------
In October 1998, the Company repaid all shareholder notes in the principal
amount of $482,830, plus accrued interest of $82,264. Notes payable to
shareholders at December 31, 1997, totaled $482,830 and included interest
at rates ranging from 8.5% to 11.5%.
Interest expense for 1998 and 1997 related to the notes payable to
shareholders was $38,293 and $46,473, respectively.
7. STOCKHOLDERS' EQUITY:
--------------------
The Company established The viaLink Company Employee Stock Purchase Plan
(the "Employee Stock Purchase Plan" or "Plan") in April 1997, which was
approved by the shareholders at the 1997 annual meeting of shareholders.
The Employee Stock Purchase Plan provides the opportunity for employees to
purchase the Company's stock through payroll deductions, to encourage
participation in the ownership and economic progress of the Company. Plan
participants may contribute up to $20 per pay period into their account to
purchase whole shares of the common stock of the Company at pre-determined
calendar quarter grant dates or exercise dates. The price will be 85
percent of the per share fair market value on the granting date or the
exercise date, whichever is the lesser, of the purchase period. The number
of shares of common stock authorized and reserved for issuance under the
Plan is 100,000 shares. For each of the years ended December 31, 1998 and
1997, 3,461 and 2,565 shares, respectively, shares of common stock have
been purchased by Employees of the Company, and are included in the total
outstanding shares as of December 31, 1998.
8. STOCK OPTION PLANS:
------------------
In 1995, the Company created the 1995 Stock Option Plan (the "Plan"). The
Plan provides for incentive stock options and non-incentive stock options
to key management, directors, key professional employees or key
professional non-employee service providers of the Company. In April 1996,
the Company amended the Plan to authorize and reserve up to 300,000 shares
of common stock for issuance of options under the Plan, and again amended
the Plan on September 1, 1998 to increase the number of authorized shares
under the Plan to 800,000. The Plan permits the issuance of qualified and
nonqualified stock options. During 1998, the Company issued 670,750
options at an average exercise price of $3.04.
In conjunction with the Company's merger with Vantage Capital Resources,
Inc. in 1996 the Company issued 360,000 options exercisable at $5.00 per
share. Such options become exercisable after 2 years and expire after 5
years from the original grant date.
F-18
<PAGE>
On February 9, 1998, the board of directors of the Company adopted the 1998
Non-Qualified Stock Option Plan (the "Non-Qualified Stock Plan" or "Plan"),
to attract, retain and motivate directors, executive officers, key
employees and independent contractors of the Company and its subsidiaries
by way of granting non-qualified stock options with stock appreciation
rights attached. The Non-Qualified Stock Plan, as amended on September 1,
1998, authorizes and reserves up to 800,000 shares of common stock for
issuance and options under the Plan. The option price shall not be less
than 85 percent of the fair market value of the common stock on the date of
grant. All options pursuant to the Plan expire after ten years from the
date of grant. The board of directors has the discretion to fix the period
and the time at which any options granted under the Plan may be exercised.
During 1998 the Company issued 501,857 options at an average exercise price
of $3.38 pursuant to the Plan.
On February 10, 1998, the board of directors of the Company adopted the
1998 Stock Grant Plan (the "Stock Grant Plan" or "Plan") to attract, retain
and motivate consultants, independent contractors and key employees of the
Company and its subsidiaries by way of granting shares of stock in the
Company. The Stock Grant Plan authorizes and reserves up to 150,000 shares
of common stock of the Company for issuances under the Plan. Shares of
common stock received pursuant to the Stock Grant Plan restrict the sale,
transfer or other disposal of said shares for a period of one year. During
1998, 5,033 shares of common stock have been issued pursuant to the Plan at
an average price of $3.12.
Pro forma information regarding net income and earnings per share is
required by FAS No. 123 and has been determined as if the Company had
accounted for its stock options under the fair value method defined by FAS
No. 123. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for fiscal year 1998, 1997 and 1996,
respectively: interest rates (zero-coupon U.S. government issued with a
remaining life equal to the expected term of the options) of 4.52%, 6.47%,
and 6.10%; dividend yields of 0.0%; volatility factors of expected market
price of the Company's common stock of 65%; and weighted-average expected
life of the options of 6.7, 5.9, and 3.5 years.
The Company applies APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations in accounting for its employee stock
options. APB No. 25 requires compensation expense be recorded for any
difference between the option price and market value on the measurement
date. Accordingly, based on the fact that all option's exercise price
equals the market price at date of grant, no compensation cost has been
recognized in 1998, 1997 and 1996.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
stock options.
The Company's pro forma information is as follows for December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------------- ------------------ ----------------
<S> <C> <C> <C>
Net income (loss), as reported $649,638 $(1,860,818) $(682,409)
Pro forma $112,172 $(2,393,944) $(780,194)
Earnings (loss) per shares-diluted, as reported $ .21 $ (.68) $ (.37)
Pro forma $ .04 $ (.88) $ (.42)
</TABLE>
F-19
<PAGE>
A summary of the Company's stock option activity and related information
follows as of December 31:
<TABLE>
<CAPTION>
Weighted
Number of Average
Shares Exercise Price
------------------ ------------------
<S> <C> <C>
Outstanding at December 31, 1995 45,513 $0.63
Granted 396,238 4.69
Exercised - -
Canceled (6,543) 0.80
---------
Outstanding at December 31, 1996 435,208 4.32
Granted 167,500 3.76
Exercised (444) 0.63
Canceled (19,186) 3.31
---------
Outstanding at December 31, 1997 583,078 4.19
Granted 1,172,607 3.18
Exercised (88,610) 2.71
Canceled (44,453) 3.44
---------
Outstanding at December 31, 1998 1,622,622 $3.56
=========
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------------- -----------------------------
Weighted Weighted
Range of Weighted Average Average
Exercise Outstanding Average Remaining Exercisable Exercise
Prices at 12/31/98 Exercise Price Life at 12/31/98 Price
-------------- --------------- -------------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
$0.63 to $1.80 34,410 $0.92 7 years 34,410 $0.92
$3.00 to $3.88 1,198,212 $3.07 6 years 150,595 $3.45
$5.00 to $9.00 390,000 $5.31 9 years 360,000 $5.00
$0.63 to $9.00 1,622,622 $3.56 6 years 545,005 $4.31
</TABLE>
9. INCOME TAXES:
------------
The components of the provision (benefit) for income taxes for the years
ended December 31, 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Current $ - $ - $(125,195)
Deferred 1,049,440 (1,112,127) (241,730)
---------- ----------- ---------
Provision (benefit) for income taxes $1,049,440 $(1,112,127) $(366,925)
========== =========== =========
</TABLE>
The difference in federal income taxes at the statutory rate and the
provision for income taxes for the years ended December 31, 1998, 1997, and
1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Income tax expense (benefit) at federal statutory rate $ 577,687 $(1,010,801) $(356,773)
State income taxes 67,963 (118,918) (41,973)
Change in valuation allowance 401,302 - -
Revision of prior year estimate - - 14,273
Other 2,488 17,592 17,548
---------- ----------- ---------
Provision (benefit) for income taxes $1,049,440 $(1,112,127) $(366,925)
========== =========== =========
</TABLE>
F-20
<PAGE>
<TABLE>
<CAPTION>
Deferred tax assets (liabilities) are comprised of the following: December 31,
--------------------------------------------
1998 1997
------------------- ------------------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 2,980 $ 655
Compensated absences 17,583 43,847
Tax carryforwards 24,985 24,969
Unrealized loss on marketable securities 119,956 --
Net operating loss carryforward 781,387 1,730,999
--------- ----------
946,891 1,800,470
Deferred tax liabilities:
Intangible assets (508,763) (659,460)
Depreciation and amortization (36,826) 91,570)
--------- ----------
Net deferred tax asset, before valuation allowance 401,302 1,049,440
Valuation allowance (401,302) --
--------- ----------
Net deferred tax asset $ -- $1,049,440
========= ==========
</TABLE>
At December 31, 1998, the Company had net operating loss ("NOL")
carryforwards for Federal and State purposes of approximately $2,000,000
and $2,400,000, respectively, and other carryforwards of approximately
$66,000. The Federal and State NOL carryforwards begin to expire in 2011.
SFAS 109 requires that the Company record a valuation allowance when it is
more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of the deferred tax asset
depends on the Company's ability to generate sufficient taxable income in
the future. If the Company achieves sufficient profitability to utilize
the NOL, the valuation allowance will be reduced resulting in a reduction
of future income tax expense.
The ability of the Company to utilize the NOL carryforward to reduce future
taxable income taxes may be limited upon occurrence of certain capital
stock transactions during any three-year period resulting in an aggregate
ownership change of more than 50%.
10. LEASES:
------
The Company leases its office and storage space under operating leases.
The terms range from month-to-month up to ten years and include options to
renew. The Company also leases office equipment under various
noncancelable lease agreements. Total rental expense in 1998, 1997 and
1996 for all leases was $410,669, $455,369 and $333,225, respectively.
Future minimum lease payments under noncancelable leases at December 31,
1998 follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
--------------- ---------------
<S> <C> <C>
1999 $46,018 $ 445,446
2000 - 402,158
2001 - 332,211
2002 - 330,000
2003 - 330,000
Thereafter - 1,136,000
-------------- ----------
Future minimum lease payments 46,018 $2,975,815
==========
Less amount representing interest 1,824
---------------
Present value of minimum lease payments $44,194
---------------
</TABLE>
Future minimum lease payments have not been reduced by future minimum sub-
lease rentals of approximately $1.4 million under operating leases.
F-21
<PAGE>
11. RETIREMENT PLAN:
---------------
The Company has a profit sharing plan (the "Plan") for certain eligible
employees who have attained the age of 18 and completed one year of
service. Under the Plan, employer contributions are made at management's
discretion. Participants may contribute up to 6% of earnings as eligible
contributions and up to 15% of earnings in total for any Plan year. The
Company's discretionary matching percentage is equal to each participant's
share of total eligible contributions for a year. The Company made no
contributions in 1998, 1997, and 1996.
F-22
<PAGE>
THE VIALINK COMPANY (formerly Applied Intelligence Group, Inc.)
Unaudited Pro Forma Consolidated Statement of Operations
The unaudited pro forma financial information for the three months ended
March 31, 1999 is not required.
The accompanying unaudited pro forma consolidated statement of operations
is provided to illustrate the effect of the sale of the consulting business of
The viaLink Company to The Netplex Group, Inc. and the sale of the viaLink's
wholly-owned subsidiary, ijob, Inc., to DCM Company, Inc. on the historical
financial statements of viaLink, as if these sales had occurred, for statement
of operations purposes on January 1, 1998. The unaudited pro forma consolidated
statement of operations is not necessarily indicative of operating results which
would have been achieved had the sales been consummated as of the beginning of
the period presented and should not be construed as representative of future
operations. The unaudited pro forma adjustments described in the accompanying
notes are based on available information and certain assumptions that viaLink
believes are reasonable. These unaudited pro forma financial statements should
be read in conjunction with viaLink's Annual Report on Form 10-KSB for the year
ended December 31, 1998.
F-23
<PAGE>
THE VIALINK COMPANY (formerly Applied Intelligence Group, Inc.)
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Twelve Months Ended December 31, 1998
(unaudited)
<TABLE>
<CAPTION>
Pro Forma
Adjustments Pro Forma Pro Forma Pro Forma
December 31, Consulting December 31, Adjustments December 31,
1998 Business Sale 1998 ijob Sale 1998
------------ ----------------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues........................... $ 8,230,628 $ 6,831,916 (a) $ 1,398,712 $ 666,125 (j) $ 732,587
Expenses:
Direct cost of sales.............. 1,563,757 (1,563,757) (b) -- -- --
Salaries and benefits............. 5,256,247 130,000 (c) 2,822,971 (535,570) (k) 2,287,401
(2,563,276) (d)
Selling, general and
administrative................... 1,964,180 (662,505) (e) 1,036,675 (269,196) (l) 767,479
(265,000) (f)
Interest expense, net............. 161,355 (161,355) (g) -- -- --
Depreciation and amortization..... 925,134 (255,569) (h) 669,565 (56,553) (m) 613,012
------------ ------------ ----------- ---------- -----------
Total expenses................... 9,870,673 (5,341,462) 4,529,211 (861,319) 3,667,892
------------ ------------ ----------- ---------- -----------
Loss from operations............... (1,640,045) (1,490,454) (3,130,499) (195,194) (2,935,305)
Gain on sale of assets............. 2,998,453 -- 2,998,453 -- 2,998,453
Other income....................... 340,670 (766,000) (i) 1,106,670 -- 1,106,670
------------ ------------ ----------- ---------- -----------
Income (loss) before income taxes.. 1,699,078 724,454 974,624 (195,194) 1,169,818
Provision (benefit) for income
taxes............................. 1,049,440 -- 1,049,440 -- 1,049,440
------------ ------------ ----------- ---------- -----------
Net income (loss).................. 649,638 724,454 (74,816) (195,194) 120,378
Other comprehensive income (loss):
unrealized loss on securities..... (315,673) -- (315,673) -- (315,673)
------------ ------------ ----------- ---------- -----------
Comprehensive income (loss)........ $ 333,965 $ 724,454 $ (390,489) $ (195,194) $ (195,295)
============ =========== =========== ========== ===========
Weighted average shares
outstanding -- Basic 2,741,041 2,741,041 2,741,041
============ =========== ===========
Net income (loss)
per common share -- Basic........ $ 0.24 $ (0.03) $ 0.04
============ =========== ===========
Weighted average common
shares outstanding-Diluted....... 3,102,443 2,741,041 3,102,443
============ =========== ===========
Net income (loss) per
common share-Diluted............. $ 0.21 $ (0.03) $ 0.04
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of this
pro forma consolidated financial statement.
F-24
<PAGE>
THE VIALINK COMPANY (formerly Applied Intelligence Group, Inc.)
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
December 31, 1998
(a) This adjustment eliminates the revenue directly related to the consulting
business of the Company which was acquired by The Netplex Group, Inc. on
September 1, 1998.
(b) This adjustment eliminates the direct cost of revenue associated with the
product and solutions revenue of our consulting business.
(c) This adjustment accrues the estimated salary for our new CEO.
(d) This adjustment eliminates the direct and indirect payroll, taxes and
benefits and contract labor expenses associated with our consulting
business.
(e) This adjustment eliminates the direct and indirect selling, general and
administrative expenses associated with our consulting business.
(f) This adjustment reduces selling, general and administrative expenses for
amounts that Netplex would have paid to viaLink under the Sub-lease and
the Administrative Services Agreement had the sale of our consulting
business been effective January 1, 1998.
(g) This adjustment eliminates interest expense because the proceeds of the
sale would have paid the our credit facility and shareholder notes at
January 1, 1998.
(h) This adjustment eliminates the depreciation and amortization of the fixed
assets and capitalized software development costs that were acquired by
Netplex in the purchase of our consulting business.
(i) This adjustment records the income that would have been received under the
earn-out agreement with Netplex effective January 1, 1998.
(j) This adjustment eliminates the revenue directly related to ijob, Inc. which
was acquired by DCM Company, Inc. on December 31, 1998.
(k) This adjustment eliminates the direct and indirect payroll, taxes and
benefits and contract labor expenses associated with ijob, Inc.
(l) This adjustment eliminates the direct and indirect selling, general and
administrative expenses associated with ijob, Inc.
(m) This adjustment eliminates the depreciation and amortization of the fixed
assets and capitalized software development costs that were associated
with ijob, Inc.
F-25
<PAGE>
================================================================================
THE VIALINK COMPANY
1,100,000 Shares
common stock
(underlying redeemable common stock
purchase warrants
and underwriter warrants)
_______________________
PROSPECTUS
June 14, 1999
_______________________________
Any requests for information concerning these offerings may be made by calling
or writing viaLink's offices at:
THE VIALINK COMPANY
13800 Benson Road
Edmond, Oklahoma 73013-6417
Attention: Corporate Securities
Telephone: (405) 936-2500
The Warrant Agent for the redeemable common stock purchase warrants is:
UMB BANK, N.A.
928 Grand Blvd.
Post Office Box 410064
Kansas City, Missouri 64141
Telephone: (816) 860-7760
===============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN REGISTRATION STATEMENT
Item 24. Indemnification of Directors and Officers
Section 1031 of the Oklahoma General Corporation Act permits (and our
certificate of incorporation and bylaws, which are incorporated by reference
herein, authorize) indemnification of our officers and directors and the
officers and directors of another corporation, partnership, joint venture, trust
or other enterprise who serve at the request of us, against expenses, including
attorneys fees, judgments, fines and amount paid in settlement actually and
reasonably incurred by such person in connection with any action, suit or
proceeding in which such person is a party by reason of such person being or
having been a director or officer of viaLink or at our request, if he conducted
himself in good faith and in a manner he reasonably believed to be in or not
opposed to our best interests, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. We may
not indemnify an officer or a director with respect to any claim, issue or
matter as to which such officer or director shall have been adjudged to be
liable to us, unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the court shall deem proper. To the extent that an officer or director is
successful on the merits or otherwise in defense on the merits or otherwise in
defense of any action, suit or proceeding with respect to which such person is
entitled to indemnification, or in defense of any claim, issue or matter
therein, such person is entitled to be indemnified against expenses, including
attorney's fees, actually and reasonably incurred by him in connection
therewith.
The circumstances under which indemnification is granted with an action
brought on behalf of us are generally the same as those set forth above;
however, expenses incurred by an officer or a director in defending a civil or
criminal action, suit or proceeding may be paid by us in advance of final
disposition upon receipt of an undertaking by or on behalf of such officer or
director to repay such amount if it is ultimately determined that such officer
or director is not entitled to indemnification by us.
These provisions may be sufficiently broad to indemnify such persons for
liabilities arising under the Securities Act of 1933, as amended, in which case
such provision is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Item 25. Other Expenses of Issuance and Distribution
<TABLE>
<S> <C>
*Legal Fees....................................................................... $ 75,000.00
*Accounting Fees and Expenses..................................................... 10,000.00
*Transfer Agent's Fees and Costs of Certificates.................................. 5,000.00
*Miscellaneous.................................................................... 20,000.00
-----------
Total................................................................... $110,000.00
</TABLE>
________________________________________
*Estimated
Item 26. Recent Sales of Unregistered Securities.
1
<PAGE>
Since June 1, 1996, we have issued unregistered securities to a limited
number of people as described below. These issuances were deemed exempt from
registration under the Securities Act in reliance on Rule 701 promulgated under
the Securities Act or Section 4(2) of the Securities Act.
In January 1997 we issued and sold 444 shares of common stock to a
stockholder for an aggregate purchase price of $279.72 pursuant to the exercise
of options issued by us.
In June 1997 we issued and sold 490 shares of common stock to stockholders
for an aggregate purchase price of $1,303.40 pursuant to our employee stock
purchase plan.
In October 1998, we exchanged 360,000 shares of common stock for options to
purchase 360,000 shares of common stock at an exercise price of $5.00 per share.
In September 1997 we issued and sold 952 shares of common stock to
stockholders for an aggregate purchase price of $2,836.96 pursuant to our
employee stock purchase plan.
In December 1997 we issued and sold 992 shares of common stock to
stockholders for an aggregate purchase price of $3,346.54 pursuant to our
employee stock purchase plan.
In March 1998 we issued and sold 992 shares of common stock to stockholders
for an aggregate purchase price of $2,480.00 pursuant to our employee stock
purchase plan.
In April 1998 we issued 5,033 shares of common stock to stockholders for an
aggregate purchase price of $ 15,702.96 pursuant to our stock grant plan.
In May 1998 we issued 4,381 shares of common stock to a stockholder for an
aggregate purchase price of $6,068.79 pursuant to the exercise of options issued
by us.
In June 1998 we issued 1,029 shares of common stock to stockholders for an
aggregate purchase price of $2,572.50 pursuant to our employee stock purchase
plan.
In September 1998 we issued 984 shares of common stock to stockholders for
an aggregate purchase price of $2,194.32 pursuant to our employee stock
purchase plan.
In November 1998 we issued 18,236 shares of common stock to stockholders
for an aggregate purchase price of $22,728.87 pursuant to the exercise of
options issued by us.
In December 1998 we issued 65,993 shares of common stock to stockholders
for an aggregate purchase price of $211,594.03 pursuant to the exercise of
options issued by us.
In December 1998 we issued 456 shares of common stock to stockholders for
an aggregate purchase price of $1,140.00 pursuant to our employee stock
purchase plan.
In January 1999 we issued 35,183 shares of common stock to stockholders for
an aggregate purchase price of $42,787.03 pursuant to the exercise of options
issued by us.
2
<PAGE>
In February 1999 we issued 12,450 shares of common stock to stockholders
for an aggregate purchase price of $43,350.00 pursuant to the exercise of
options issued by us.
In February 1999, we issued a $6.0 million secured convertible promissory
note to Hewlett-Packard. Beginning in August 2000, this note becomes
convertible into shares of our common stock at a price of $7.00 per share.
In March 1999 we issued 96 shares of common stock to stockholders for an
aggregate purchase price of $953.28 pursuant to our employee stock purchase
plan.
In May 1999 we issued 15,000 shares of common stock to stockholders for an
aggregate purchase price of $46,875.00 pursuant to the exercise of options
issued by us.
In May, 1999, we issued a warrant to purchase up to 250,000 shares of our
common stock at an exercise price of $8.00 per share.
We have from time to time granted stock options to employees. The following
table sets forth information regarding these grants.
Number Exercise Price
of Shares Per Share
--------- --------------
June 1997..................................... 50,000 3.50
March 1998.................................... 34,990 3.00
March 1998.................................... 20,000 3.50
March 1998.................................... 87,500 3.13
October 1998.................................. 950,117 3.00
October 1998.................................. 50,000 3.30
December 1998................................. 17,136 7.00
December 1998................................. 30,000 9.00
March 1999.................................... 15,000 15.13
Item 27. Exhibits and Financial Statement Schedules
Exhibit No. Description
---------- -----------
1.1* Form of Underwriting Agreement between Barron Chase
Securities, Inc. and Registrant
1.2* Selected Dealer Agreement between Barron Chase Securities,
Inc. and selected dealers
2.1* Agreement and Plan of Merger dated May 8, 1996 by and among
Registrant, Vantage Capital Resources, Inc., John Simonelli,
Larry E. Howell, Robert L. Barcum, Robert N. Baker and David
B. North
2.2 Asset Purchase Agreement dated June 12, 1997 by and among
ijob, Inc., Human Technologies, Inc., David C. Mitchell and
Ron Beasley (filed as Exhibit 2.2 to Registrant's Annual
Report on Form 10-KSB for the year ending December 31, 1997
(the "1997 10-KSB") and incorporated herein by reference)
2.3 Asset Acquisition Agreement dated August 31, 1998 by and
between Registrant and The Netplex Group, Inc. (filed as
Appendix A to Definitive 14-C Information Statement dated
October 15, 1998 (the "1998 14-C") and incorporated herein
by reference)
2.4 First Amendment to Asset Acquisition Agreement dated
September 9, 1998 by and between Registrant and The Netplex
Group, Inc. (filed as Appendix A-2 to the 1998 14-C and
incorporated herein by reference)
2.5 Stock Purchase Agreement dated December 31, 1998 by and
among Registrant, DCM Company, Inc., David C. Mitchell and
ijob, Inc. (filed as Exhibit 2.5 to Registrant's Annual
Report on Form 10-KSB for the year ending December 31, 1998
(the "1998 10-KSB") and incorporated herein by reference)
2.6 Form of Agreement and Plan of Merger to be entered into by
and between Registrant and The viaLink Company (Delaware) at
the effective date of the reincorporation (filed as Appendix
D to Registrant's Definitive 14-A Proxy Statement dated
April 19, 1999 (the "1999 Proxy Statement") and incorporated
herein by reference)
3.1 Registrant's Certificate of Incorporation, as amended and
restated (filed as Exhibit 3.1 to Registrant's Registration
Statement on Form S-8 (Reg. No. 333-69203) (the "December
1998 Form S-8") and incorporated herein by reference)
3.2* Registrant's Bylaws
3.3 Form of Certificate of Incorporation of The viaLink Company
(Delaware) to be filed at the effective date of the
reincorporation (filed as Appendix E to 1999 Proxy Statement
and incorporated herein by reference)
3.4 Form on Bylaws of The viaLink Company (Delaware) to be filed
at the effective date of the reincorporation (filed as
Appendix F to 1999 Proxy Statement and incorporated herein
by reference)
4.1* Form of Certificate of Common Stock of Registrant
4.2* Form of Underwriter Warrant Agreement by and between Barron
Chase Securities, Inc. and Registrant
3
<PAGE>
Exhibit No. Description
---------- -----------
4.3* Form of Warrant Agreement by and between Liberty Bank &
Trust Company of Oklahoma City, N.A. and Registrant
4.4* Form of Certificate of Redeemable Common Stock Purchase
Warrant
4.5 Stock Option Agreement dated June 12, 1997 by and between
David C. Mitchell and Registrant (filed as Exhibit 4.9 to
the 1997 10-KSB and incorporated herein by reference)
4.6 Amendment to Stock Option Agreement dated June 11, 1999 by
and between David C. Mitchell and Registrant
4.7 Common Stock Purchase Warrant Agreement dated June 12, 1997
by and between Ron Beasley and Registrant (filed as Exhibit
4.10 to the 1997 10-KSB and incorporated herein by
reference)
4.8 Amendment to Common Stock Purchase Warrant Agreement dated
June 11, 1999 by and between Ron Beasley and Registrant
4.9 The viaLink Company (formerly Applied Intelligence Group,
Inc.) 1995 Stock Option Plan, as amended and restated
effective September 1, 1998 (filed as Exhibit 4.7 to
Registrant's Registration Statement on Form S-8 (Reg. No.
333-69203) and incorporated herein by reference)
4.10 Shareholder Agreement dated as of February 4, 1999 by and
between Registrant and Hewlett-Packard Company (filed as
Exhibit 4.1 to Registrant's Current Report on Form 8-K dated
February 4, 1999 (the "February 1999 8-K") and incorporated
herein by reference)
4.11 Promotional Shares Escrow Agreement dated November 19, 1996
by and among Registrant, Liberty Bank & Trust Company of
Oklahoma City, N.A., Robert L. Barcum, Robert N. Baker,
Russell L. Reinhardt, David B. North, John Simonelli and
Larry E. Howell (filed as Exhibit 4.12 to the 1998 10-KSB
and incorporated herein by reference)
4.12 Stock Option Agreement dated as of December 19, 1998 by and
between Registrant and John Simonelli, as amended and
restated (filed as Exhibit 4.13 to the 1998 10-KSB and
incorporated herein by reference)
4.13 Stock Option Agreement dated as of December 19, 1998 by and
between Registrant and Larry E. Howell, as amended and
restated (filed as Exhibit 4.14 to the 1998 10-KSB and
incorporated herein by reference)
4.14 Stock Option Agreement dated as of December 19, 1998 by and
between Registrant and Robert T. Kirk (filed as Exhibit 4.15
to the 1998 10-KSB and incorporated herein by reference)
4.15 Stock Option Agreement dated as of December 18, 1998 by and
between Registrant and Brian Herman (filed as Exhibit 4.16
to the 1998 10-KSB and incorporated herein by reference)
4.16 Stock Option Agreement dated as of December 19, 1998 by and
between Registrant and Eureka Holdings, Inc (filed as
Exhibit 4.17 to the 1998 10-KSB and incorporated herein by
reference)
4.17 Stock Option Agreement dated as of December 19, 1998 by and
between Registrant and Roger Lockhart (filed as Exhibit 4.18
to the 1998 10-KSB and incorporated herein by reference)
4.18 $8.00 Warrant to Purchase Common Stock of The viaLink
Company, dated as of May 3, 1999 issued by Registrant to
Ernst & Young U.S. LLP (filed as Exhibit 4.1 to Registrant's
Current Report on Form 8-K dated May 3, 1999 (the "May 1999
8-K") and incorporated herein by reference)
4.19 Registration Rights Agreement dated May 3, 1999 by and
between Registrant and Ernst & Young U.S. LLP (filed as
Exhibit 4.2 to the May 1999 8-K and incorporated herein by
reference)
5.1* Opinion of Dunn Swan & Cunningham, counsel to Registrant,
regarding the legality of the securities covered by this
registration statement
10.1 Note Purchase Agreement dated as of February 4, 1999 by and
between Registrant and Hewlett-Packard Company (filed as
Exhibit 10.1 to the February 1999 8-K and incorporated
herein by reference)
10.2* Lease dated October 3, 1994 by and between Registrant and
Oklahoma Christian Investment Corporation
10.3 Subordinated Secured Convertible Promissory Note dated
February 4, 1999 issued by Registrant in favor of Hewlett-
Packard Company (filed as Appendix C to the 1999 Proxy
Statement and incorporated herein by reference)
4
<PAGE>
Exhibit No. Description
---------- -----------
10.4 Security Agreement dated as of February 4, 1999 by and
between Registrant and Hewlett-Packard Company (filed as
Exhibit 10.3 to the February 1999 8-K and incorporated
herein by reference)
10.5* Form of Merger and Acquisition Fee Agreement by and between
Registrant and Barron Chase Securities, Inc.
10.6* Exchange Agreement dated October 14, 1996 by and among
Registrant, Robert L. Barcum, Robert N. Baker, Russell L.
Reinhardt, David B. North, John Simonelli, and Larry E.
Howell
10.7 Conveyance Agreement dated June 12, 1997 by and between
Registrant and ijob, Inc. (filed as Exhibit 10.47 to the
June 1997 10-QSB and incorporated herein by reference)
10.8 Earn-out Agreement dated September 30, 1998 by and between
Registrant and The Netplex Group, Inc (filed as Exhibit
10.49 to the 1998 14-C and incorporated herein by reference)
10.9 Administrative Services Agreement dated August 31, 1998 by
and between Registrant and The Netplex Group, Inc (filed as
Exhibit 10.51 to Registrant's Current Report on Form 8-K
dated October 16, 1998 (the "October 1998 8-K") and
incorporated herein by reference)
10.10 Sublease dated September 1, 1998 by and between Applied
Intelligence Group, Inc. and The Netplex Group, Inc. (filed
as Exhibit 10.52 to the October 1998 8-K and incorporated
herein by reference)
10.11 Software Remarketing and Reselling Agreement effective as of
September 1, 1998 by and between Registrant and The Netplex
Group, Inc. (filed as Exhibit 10.53 to the October 1998 8-K
and incorporated herein by reference)
10.12 Form of Indemnification Agreement dated February 9, 1998 by
and between Registrant and Registrant's executive officers
(filed as Exhibit 10.16 to the 1998 10-KSB and incorporated
herein by reference)
10.13 Employment Agreement dated October 1, 1998 by and between
Registrant and Lewis B. Kilbourne (filed as Exhibit 10.17 to
the 1998 10-KSB and incorporated herein by reference)
10.14 Employment Agreement dated October 1, 1998 by and between
Registrant and Robert N. Baker (filed as Exhibit 10.18 to
the 1998 10-KSB and incorporated herein by reference)
10.15 The viaLink Company (f/k/a Applied Intelligence Group, Inc.)
1998 Non-Qualified Stock Option Plan (filed as Exhibit 4.5
to Registrant's Registration Statement on Form S-8 (Reg. No.
333-47549) and incorporated herein by reference)
10.16 The viaLink Company (f/k/a Applied Intelligence Group, Inc.)
1998 Stock Grant Plan (filed as Exhibit 4.4 to Registrant's
Registration Statement on Form S-8 (Reg. No. 333-47547) and
incorporated herein by reference)
10.17 The viaLink Company (f/k/a Applied Intelligence Group, Inc.)
1997 Employee Stock Purchase Plan (filed as Exhibit 4.3 to
Registrant's Registration Statement on Form S-8 (Reg. No.
333-30073) and incorporated herein by reference)
10.18 The viaLink Company 1999 Stock Option/Stock Issuance Plan
(filed as Appendix A to the 1999 Proxy Statement and
incorporated herein by reference)
10.19 1999 Stock Option/Stock Issuance Plan Form of Stock Option
Agreement
10.20 1999 Stock Option/Stock Issuance Plan Form of Stock Issuance
Agreement
10.21 1999 Stock Option/Stock Issuance Plan Form of Automatic
Stock Option Agreement
10.22 The viaLink Company 1999 Employee Stock Purchase Plan (filed
as Appendix B to the 1999 Proxy Statement and incorporated
herein by reference).
10.23 Amended and Restated Alliance Agreement dated as of May 3,
1999 by and between Registrant and Ernst & Young LLP (filed
as Exhibit 10.1 to the May 1999 8-K and incorporated herein
by reference)
10.24 Master Services Agreement dated May 3, 1999 by and between
Registrant and Ernst & Young LLP (filed as Exhibit 10.2 to
the May 1999 8-K and incorporated herein by reference)
21.1 Subsidiaries of Registrant (filed as Exhibit 21.1 to the
1998 10-KSB and incorporated herein by reference)
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Dunn Swan & Cunningham (included in its opinion
filed as Exhibit 5.1)
24.1* Power of Attorney (see page II-7)
____________________
(*) Previously furnished as an Exhibit to this Registration Statement.
5
<PAGE>
Item 28. Undertakings
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales of securities
are being made, a post-effective amendment to this registration
statement to:
(i) Include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change
in the information in the Registration Statement; and
(iii) Include any additional or changed material information
on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that
time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act, may be permitted to directors, officers and controlling
persons of Registrant pursuant to the foregoing provisions, or otherwise,
Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a director, officer or
controlling person of Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The Registrant hereby undertakes that:
(1) For determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by Registrant under Rule
424(b)(1), or (4), or 497(h) under the Securities Act as part of
this Registration Statement as of the time the SEC declared it
effective.
(2) For determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus as a
new registration statement for the securities offered in the
registration statement, and that offering of the securities at
that time by the initial bona fide offering of those securities.
6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Amendment No. 3
to the registration statement to be signed on its behalf by the undersigned in
the City of Edmond, State of Oklahoma, on June 14, 1999.
THE VIALINK COMPANY
(Registrant)
By: /S/Lewis S. Kilbourne
--------------------------------
Lewis B. Kilbourne
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/S/Robert L. Barcum Chairman of the Board June 14, 1999
- ------------------------------------------
Robert L. Barcum
/S/Lewis B. Kilbourne Chief Executive Officer and June 14, 1999
- ------------------------------------------
Lewis B. Kilbourne Director (principal executive
officer)
/S/Robert N. Baker President, Chief Operating June 14, 1999
- ----------------------------------------
Robert N. Baker Officer and Director
/S/Jimmy M. Wright Director June 14, 1999
- ---------------------------------------
Jimmy M. Wright
/S/Sue Hale Director June 14, 1999
- --------------------------------------
Sue Hale
/S/Andrew Kerner Vice President of Finance, June 14, 1999
- -------------------------------------
Andrew Kerner Chief Financial Officer
(principal financial and
accounting officer)
</TABLE>
7
<PAGE>
INDEX TO EXHIBITS
Item 27. Exhibits and Financial Statement Schedules
Exhibit No. Description
---------- -----------
1.1* Form of Underwriting Agreement between Barron Chase
Securities, Inc. and Registrant
1.2* Selected Dealer Agreement between Barron Chase Securities,
Inc. and selected dealers
2.1* Agreement and Plan of Merger dated May 8, 1996 by and among
Registrant, Vantage Capital Resources, Inc., John Simonelli,
Larry E. Howell, Robert L. Barcum, Robert N. Baker and David
B. North
2.2 Asset Purchase Agreement dated June 12, 1997 by and among
ijob, Inc., Human Technologies, Inc., David C. Mitchell and
Ron Beasley (filed as Exhibit 2.2 to Registrant's Annual
Report on Form 10-KSB for the year ending December 31, 1997
(the "1997 10-KSB") and incorporated herein by reference)
2.3 Asset Acquisition Agreement dated August 31, 1998 by and
between Registrant and The Netplex Group, Inc. (filed as
Appendix A to Definitive 14-C Information Statement dated
October 15, 1998 (the "1998 14-C") and incorporated herein
by reference)
2.4 First Amendment to Asset Acquisition Agreement dated
September 9, 1998 by and between Registrant and The Netplex
Group, Inc. (filed as Appendix A-2 to the 1998 14-C and
incorporated herein by reference)
2.5 Stock Purchase Agreement dated December 31, 1998 by and
among Registrant, DCM Company, Inc., David C. Mitchell and
ijob, Inc. (filed as Exhibit 2.5 to Registrant's Annual
Report on Form 10-KSB for the year ending December 31, 1998
(the "1998 10-KSB") and incorporated herein by reference)
2.6 Form of Agreement and Plan of Merger to be entered into by
and between Registrant and The viaLink Company (Delaware) at
the effective date of the reincorporation (filed as Appendix
D to Registrant's Definitive 14-A Proxy Statement dated
April 19, 1999 (the "1999 Proxy Statement") and incorporated
herein by reference)
3.1 Registrant's Certificate of Incorporation, as amended and
restated (filed as Exhibit 3.1 to Registrant's Registration
Statement on Form S-8 (Reg. No. 333-69203) (the "December
1998 Form S-8") and incorporated herein by reference)
3.2* Registrant's Bylaws
3.3 Form of Certificate of Incorporation of The viaLink Company
(Delaware) to be filed at the effective date of the
reincorporation (filed as Appendix E to 1999 Proxy Statement
and incorporated herein by reference)
3.4 Form on Bylaws of The viaLink Company (Delaware) to be filed
at the effective date of the reincorporation (filed as
Appendix F to 1999 Proxy Statement and incorporated herein
by reference)
4.1* Form of Certificate of Common Stock of Registrant
4.2* Form of Underwriter Warrant Agreement by and between Barron
Chase Securities, Inc. and Registrant
<PAGE>
Exhibit No. Description
---------- -----------
4.3* Form of Warrant Agreement by and between Liberty Bank &
Trust Company of Oklahoma City, N.A. and Registrant
4.4* Form of Certificate of Redeemable Common Stock Purchase
Warrant
4.5 Stock Option Agreement dated June 12, 1997 by and between
David C. Mitchell and Registrant (filed as Exhibit 4.9 to
the 1997 10-KSB and incorporated herein by reference)
4.6 Amendment to Stock Option Agreement dated June 11, 1999 by
and between David C. Mitchell and Registrant
4.7 Common Stock Purchase Warrant Agreement dated June 12, 1997
by and between Ron Beasley and Registrant (filed as Exhibit
4.10 to the 1997 10-KSB and incorporated herein by
reference)
4.8 Amendment to Common Stock Purchase Warrant Agreement dated
June 11, 1999 by and between Ron Beasley and Registrant
4.9 The viaLink Company (formerly Applied Intelligence Group,
Inc.) 1995 Stock Option Plan, as amended and restated
effective September 1, 1998 (filed as Exhibit 4.7 to
Registrant's Registration Statement on Form S-8 (Reg. No.
333-69203) and incorporated herein by reference)
4.10 Shareholder Agreement dated as of February 4, 1999 by and
between Registrant and Hewlett-Packard Company (filed as
Exhibit 4.1 to Registrant's Current Report on Form 8-K dated
February 4, 1999 (the "February 1999 8-K") and incorporated
herein by reference)
4.11 Promotional Shares Escrow Agreement dated November 19, 1996
by and among Registrant, Liberty Bank & Trust Company of
Oklahoma City, N.A., Robert L. Barcum, Robert N. Baker,
Russell L. Reinhardt, David B. North, John Simonelli and
Larry E. Howell (filed as Exhibit 4.12 to the 1998 10-KSB
and incorporated herein by reference)
4.12 Stock Option Agreement dated as of December 19, 1998 by and
between Registrant and John Simonelli, as amended and
restated (filed as Exhibit 4.13 to the 1998 10-KSB and
incorporated herein by reference)
4.13 Stock Option Agreement dated as of December 19, 1998 by and
between Registrant and Larry E. Howell, as amended and
restated (filed as Exhibit 4.14 to the 1998 10-KSB and
incorporated herein by reference)
4.14 Stock Option Agreement dated as of December 19, 1998 by and
between Registrant and Robert T. Kirk (filed as Exhibit 4.15
to the 1998 10-KSB and incorporated herein by reference)
4.15 Stock Option Agreement dated as of December 18, 1998 by and
between Registrant and Brian Herman (filed as Exhibit 4.16
to the 1998 10-KSB and incorporated herein by reference)
4.16 Stock Option Agreement dated as of December 19, 1998 by and
between Registrant and Eureka Holdings, Inc (filed as
Exhibit 4.17 to the 1998 10-KSB and incorporated herein by
reference)
4.17 Stock Option Agreement dated as of December 19, 1998 by and
between Registrant and Roger Lockhart (filed as Exhibit 4.18
to the 1998 10-KSB and incorporated herein by reference)
4.18 $8.00 Warrant to Purchase Common Stock of The viaLink
Company, dated as of May 3, 1999 issued by Registrant to
Ernst & Young U.S. LLP (filed as Exhibit 4.1 to Registrant's
Current Report on Form 8-K dated May 3, 1999 (the "May 1999
8-K") and incorporated herein by reference)
4.19 Registration Rights Agreement dated May 3, 1999 by and
between Registrant and Ernst & Young U.S. LLP (filed as
Exhibit 4.2 to the May 1999 8-K and incorporated herein by
reference)
5.1* Opinion of Dunn Swan & Cunningham, counsel to Registrant,
regarding the legality of the securities covered by this
registration statement
10.1 Note Purchase Agreement dated as of February 4, 1999 by and
between Registrant and Hewlett-Packard Company (filed as
Exhibit 10.1 to the February 1999 8-K and incorporated
herein by reference)
10.2* Lease dated October 3, 1994 by and between Registrant and
Oklahoma Christian Investment Corporation
10.3 Subordinated Secured Convertible Promissory Note dated
February 4, 1999 issued by Registrant in favor of Hewlett-
Packard Company (filed as Appendix C to the 1999 Proxy
Statement and incorporated herein by reference)
<PAGE>
Exhibit No. Description
---------- -----------
10.4 Security Agreement dated as of February 4, 1999 by and
between Registrant and Hewlett-Packard Company (filed as
Exhibit 10.3 to the February 1999 8-K and incorporated
herein by reference)
10.5* Form of Merger and Acquisition Fee Agreement by and between
Registrant and Barron Chase Securities, Inc.
10.6* Exchange Agreement dated October 14, 1996 by and among
Registrant, Robert L. Barcum, Robert N. Baker, Russell L.
Reinhardt, David B. North, John Simonelli, and Larry E.
Howell
10.7 Conveyance Agreement dated June 12, 1997 by and between
Registrant and ijob, Inc. (filed as Exhibit 10.47 to the
June 1997 10-QSB and incorporated herein by reference)
10.8 Earn-out Agreement dated September 30, 1998 by and between
Registrant and The Netplex Group, Inc (filed as Exhibit
10.49 to the 1998 14-C and incorporated herein by reference)
10.9 Administrative Services Agreement dated August 31, 1998 by
and between Registrant and The Netplex Group, Inc (filed as
Exhibit 10.51 to Registrant's Current Report on Form 8-K
dated October 16, 1998 (the "October 1998 8-K") and
incorporated herein by reference)
10.10 Sublease dated September 1, 1998 by and between Applied
Intelligence Group, Inc. and The Netplex Group, Inc. (filed
as Exhibit 10.52 to the October 1998 8-K and incorporated
herein by reference)
10.11 Software Remarketing and Reselling Agreement effective as of
September 1, 1998 by and between Registrant and The Netplex
Group, Inc. (filed as Exhibit 10.53 to the October 1998 8-K
and incorporated herein by reference)
10.12 Form of Indemnification Agreement dated February 9, 1998 by
and between Registrant and Registrant's executive officers
(filed as Exhibit 10.16 to the 1998 10-KSB and incorporated
herein by reference)
10.13 Employment Agreement dated October 1, 1998 by and between
Registrant and Lewis B. Kilbourne (filed as Exhibit 10.17 to
the 1998 10-KSB and incorporated herein by reference)
10.14 Employment Agreement dated October 1, 1998 by and between
Registrant and Robert N. Baker (filed as Exhibit 10.18 to
the 1998 10-KSB and incorporated herein by reference)
10.15 The viaLink Company (f/k/a Applied Intelligence Group, Inc.)
1998 Non-Qualified Stock Option Plan (filed as Exhibit 4.5
to Registrant's Registration Statement on Form S-8 (Reg. No.
333-47549) and incorporated herein by reference)
10.16 The viaLink Company (f/k/a Applied Intelligence Group, Inc.)
1998 Stock Grant Plan (filed as Exhibit 4.4 to Registrant's
Registration Statement on Form S-8 (Reg. No. 333-47547) and
incorporated herein by reference)
10.17 The viaLink Company (f/k/a Applied Intelligence Group, Inc.)
1997 Employee Stock Purchase Plan (filed as Exhibit 4.3 to
Registrant's Registration Statement on Form S-8 (Reg. No.
333-30073) and incorporated herein by reference)
10.18 The viaLink Company 1999 Stock Option/Stock Issuance Plan
(filed as Appendix A to the 1999 Proxy Statement and
incorporated herein by reference)
10.19 1999 Stock Option/Stock Issuance Plan Form of Stock Option
Agreement
10.20 1999 Stock Option/Stock Issuance Plan Form of Stock Issuance
Agreement
10.21 1999 Stock Option/Stock Issuance Plan Form of Automatic
Stock Option Agreement
10.22 The viaLink Company 1999 Employee Stock Purchase Plan (filed
as Appendix B to the 1999 Proxy Statement and incorporated
herein by reference).
10.23 Amended and Restated Alliance Agreement dated as of May 3,
1999 by and between Registrant and Ernst & Young LLP (filed
as Exhibit 10.1 to the May 1999 8-K and incorporated herein
by reference)
10.24 Master Services Agreement dated May 3, 1999 by and between
Registrant and Ernst & Young LLP (filed as Exhibit 10.2 to
the May 1999 8-K and incorporated herein by reference)
21.1 Subsidiaries of Registrant (filed as Exhibit 21.1 to the
1998 10-KSB and incorporated herein by reference)
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Dunn Swan & Cunningham (included in its opinion
filed as Exhibit 5.1)
24.1* Power of Attorney (see page II-7)
____________________
(*) Previously furnished as an Exhibit to this Registration Statement.
<PAGE>
EXHIBIT 4.6
AMENDMENT TO STOCK OPTION AGREEMENT
-----------------------------------
This Amendment to Stock Option Agreement is entered into as of this 11th
day of June, 1999 by and between The viaLink Company ("viaLink") and David C.
Mitchell ("Mitchell").
Whereas viaLink (f/k/a Applied Intelligence Group, Inc.) and Mitchell on
June 12, 1997 entered into a Stock Option Agreement, a copy of which is attached
hereto and incorporated herein by reference marked Exhibit A; and
Whereas viaLink and Mitchell desire to amend said Stock Option Agreement.
Whereupon, Mitchell and viaLink agree as follows:
1. Said Stock Option Agreement is amended by deleting the second sentence
of Section 1 thereof and replacing it with the following sentence: "This Option
may be exercised in whole or in part at any time or from time to time during the
period commencing June 11, 1999 (the "Commencement Date"), and ending on the
earlier of (i) October 12, 1999 or (ii) thirty (30) days after the effective
date of a Registration Statement relating to the resale of the shares underlying
the warrants granted herein by presentation and surrender to Company at its
principal office of this Option and the Purchase Form annexed hereto, duly
executed and accompanied by payment, in cash, certified or official bank check
payable to the order of Company in the amount of the Exercise Price for the
number of shares of Stock (or Option Securities) specified in such Form.
The viaLink Company
BY: /s/John M. Duck /s/David C. Mitchell
------------------------------------- -----------------------------------
David C. Mitchell
ITS: Vice President, Secretary & Treasurer
-------------------------------------
DATE: June 11, 1999 DATE: June 11, 1999
------------------------------------ -----------------------------
<PAGE>
EXHIBIT 4.8
AMENDMENT TO COMMON STOCK PURCHASE WARRANT AGREEMENT
----------------------------------------------------
This Amendment To Common Stock Purchase Warrant Agreement is entered into
as of this 11th day of June, 1999 by and between The viaLink Company ("viaLink")
and Ron Beasley ("Beasley").
Whereas viaLink (f/k/a Applied Intelligence Group, Inc.) and Beasley on
June 12, 1997 entered into a Common Stock Purchase Warrant Agreement, a copy of
which is attached hereto and incorporated herein by reference marked Exhibit A;
and
Whereas viaLink and Beasley desire to amend said Common Stock Purchase
Warrant Agreement.
Whereupon, Beasley and viaLink agree as follows:
1. Said Common Stock Purchase Warrant Agreement is amended by deleting the
second sentence of Section 1 thereof and replacing it with the following
sentence: "The Warrants may be exercised in whole or in part at any time or from
time to time during the period commencing June 11, 1999 (the "Commencement
Date"), and ending on the earlier of (i) October 12, 1999 or (ii) thirty (30)
days after the effective date of a Registration Statement relating to the resale
of the shares underlying the warrants granted herein by presentation and
surrender to Company at its principal office of the Warrants and Purchase Form
annexed hereto, duly executed and accompanied by payment, in cash, certified or
official bank check payable to the order of Company in the amount of the
Exercise Price for the number of shares of Stock (or Warrant Securities)
specified in such Form."
The viaLink Company
BY: /s/John M. Duck /s/Ron Beasley
------------------------------------- -----------------------------------
Ron Beasley
ITS: Vice President, Secretary & Treasurer
-------------------------------------
DATE: June 11, 1999 DATE: June 11, 1999
------------------------------------ -----------------------------
<PAGE>
Exhibit 10.19
THE VIALINK COMPANY
STOCK OPTION AGREEMENT
----------------------
RECITALS
- --------
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or of the
board of directors of any Parent or Subsidiary and consultants and other
independent advisors who provide services to the Corporation (or any Parent or
Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee, as of
---------------
the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The option shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. Option Term. This option shall have a maximum term of ten (10)
-----------
years measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. Limited Transferability. This option shall be neither
-----------------------
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee. However, if this option is designated a
Non-Statutory Option in the Grant Notice, then this option may be assigned in
whole or in part during Optionee's lifetime either as (i) a gift to one or more
family members of Optionee's Immediate Family, to a trust in which Optionee
and/or one or more such family members hold more than fifty percent (50%) of the
beneficial interest or an entity in which more than fifty percent (50%) of the
voting interests are owned by Optionee and/or one or more such family members,
or (ii) pursuant to a domestic relations order. The assigned portion shall be
exercisable only by the person or persons who acquire a proprietary interest in
the option pursuant to such assignment. The terms applicable to the assigned
portion shall be the same as those in effect for this option immediately prior
to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate.
4. Dates of Exercise. This option shall become exercisable for the
-----------------
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate, and the option shall
<PAGE>
remain exercisable for the accumulated installments until the Expiration Date or
sooner termination of the option term under Paragraph 5 or 6.
5. Cessation of Service. The option term specified in Paragraph 2
--------------------
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(i) Should Optionee cease to remain in Service for any
reason (other than death, Permanent Disability or Misconduct) while this
option is outstanding, then this option shall remain exercisable until the
earlier of (i) the expiration of the three (3)-month period measured from
-------
the date of such cessation of Service or (ii) the Expiration Date.
(ii) Should Optionee die while holding this option, then
Optionee's Beneficiary shall have the right to exercise this option until
the earlier of (A) the expiration of the twelve (12)-month period measured
from the date of Optionee's death or (B) the Expiration Date.
(iii) Should Optionee cease Service by reason of Permanent
Disability while this option is outstanding, then this option shall remain
exercisable until the earlier of (i) the expiration of the twelve (12)-
month period measured from the date of such cessation of Service or (ii)
the Expiration Date.
(iv) During the applicable post-Service exercise period,
this option may not be exercised in the aggregate for more than the number
of vested Option Shares for which the option is exercisable on the date of
Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the Expiration Date, this option shall
terminate and cease to be outstanding for any vested Option Shares for
which the option has not been exercised. However, this option shall,
immediately upon Optionee's cessation of Service for any reason, terminate
and cease to be outstanding to the extent this option is not otherwise at
that time exercisable for vested shares.
(v) Should Optionee's Service be terminated for
Misconduct or should Optionee engage in Misconduct while this option is
outstanding, then this option shall terminate immediately and cease to be
outstanding.
6. Special Acceleration of Option.
------------------------------
(a) In the event of a Change in Control, this option, to the
extent outstanding at that time but not otherwise fully exercisable, shall
automatically accelerate so that this option shall, immediately prior to the
effective date of the Change in Control, become exercisable for all of the
Option Shares at the time subject to this option and may be exercised for any or
all of those Option Shares as fully-vested shares of Common Stock. No such
acceleration of this option, however, shall occur if and to the extent: (i) this
option is, in connection with the Change in Control, assumed or otherwise
continued in full force and effect by the successor corporation (or parent
thereof) pursuant to the terms of the Change in Control or (ii) this option is
replaced with a cash incentive program of the successor corporation which
2
<PAGE>
preserves the spread existing at the time of the Change in Control on the Option
Shares for which this option is not otherwise at that time exercisable (the
excess of the Fair Market Value of those Option Shares over the aggregate
Exercise Price payable for such shares) and provides for subsequent pay-out in
accordance with the same option exercise schedule set forth in the Grant Notice.
(b) Immediately following the consummation of the Change in
Control, this option shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation (or parent thereof) or otherwise
expressly continued in full force and effect pursuant to the terms of the Change
in Control.
(c) If this option is assumed in connection with a Change in
Control, then this option shall be appropriately adjusted, immediately after
such Change in Control, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Change in Control
had the option been exercised immediately prior to such Change in Control, and
appropriate adjustments shall also be made to the Exercise Price, provided the
aggregate Exercise Price shall remain the same.
(d) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. Adjustment in Option Shares. Should any change be made to the
---------------------------
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. Stockholder Rights. The holder of this option shall not have any
------------------
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. Manner of Exercising Option. In order to exercise this option
---------------------------
with respect to all or any part of the Option Shares for which this option is at
the time exercisable, Optionee (or any other person or persons exercising the
option) must take the following actions:
(i) Execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
(A) cash or check made payable to the Corporation;
3
<PAGE>
(B) a promissory note payable to the Corporation,
but only to the extent authorized by the Plan Administrator in
accordance with Paragraph 13;
(C) shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date; or
(D) through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable instructions (I) to
a Corporation-approved brokerage firm to effect the immediate sale of
the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover
the aggregate Exercise Price payable for the purchased shares plus all
applicable income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (II) to the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise delivered to the
Corporation in connection with the option exercise.
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than Optionee)
have the right to exercise this option.
(iv) Make appropriate arrangements with the Corporation
(or Parent or Subsidiary employing or retaining Optionee) for the
satisfaction of all income and employment tax withholding requirements
applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. Compliance with Laws and Regulations.
------------------------------------
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
4
<PAGE>
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
11. Successors and Assigns. Except to the extent otherwise provided
----------------------
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee and Optionee's assigns and Beneficiaries.
12. Notices. Any notice required to be given or delivered to the
-------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
13. Financing. The Plan Administrator may, in its absolute discretion
---------
and without any obligation to do so, permit Optionee to pay the Exercise Price
for the purchased Option Shares by delivering a full-recourse promissory note
payable to the Corporation. The terms of any such promissory note (including the
interest rate, the requirements for collateral and the terms of repayment) shall
be established by the Plan Administrator in its sole discretion.
14. Construction. This Agreement and the option evidenced hereby are
------------
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
15. Governing Law. The interpretation, performance and enforcement of
-------------
this Agreement shall be governed by the laws of the State of Oklahoma without
resort to that State's conflict-of-laws rules.
16. Excess Shares. If the Option Shares covered by this Agreement
-------------
exceed, as of the Grant Date, the number of shares of Common Stock which may
without stockholder approval be issued under the Plan, then this option shall be
void with respect to those excess shares, unless stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock issuable
under the Plan is obtained in accordance with the provisions of the Plan.
17. Additional Terms Applicable to an Incentive Option. In the event
--------------------------------------------------
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:
(i) This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is
exercised for one or
5
<PAGE>
more Option Shares: (A) more than three (3) months after the date Optionee
ceases to be an Employee for any reason other than death or Permanent
Disability or (B) more than twelve (12) months after the date Optionee
ceases to be an Employee by reason of Permanent Disability.
(ii) No installment under this option shall qualify for
favorable tax treatment as an Incentive Option if (and to the extent) the
aggregate Fair Market Value (determined at the Grant Date) of the Common
Stock for which such installment first becomes exercisable hereunder would,
when added to the aggregate value (determined as of the respective date or
dates of grant) of the Common Stock or other securities for which this
option or any other Incentive Options granted to Optionee prior to the
Grant Date (whether under the Plan or any other option plan of the
Corporation or any Parent or Subsidiary) first become exercisable during
the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in
the aggregate. Should such One Hundred Thousand Dollar ($100,000)
limitation be exceeded in any calendar year, this option shall nevertheless
become exercisable for the excess shares in such calendar year as a Non-
Statutory Option.
(iii) Should the exercisability of this option be
accelerated upon a Change in Control, then this option shall qualify for
favorable tax treatment as an Incentive Option only to the extent the
aggregate Fair Market Value (determined at the Grant Date) of the Common
Stock for which this option first becomes exercisable in the calendar year
in which the Change in Control occurs does not, when added to the aggregate
value (determined as of the respective date or dates of grant) of the
Common Stock or other securities for which this option or one or more other
Incentive Options granted to Optionee prior to the Grant Date (whether
under the Plan or any other option plan of the Corporation or any Parent or
Subsidiary) first become exercisable during the same calendar year, exceed
One Hundred Thousand Dollars ($100,000) in the aggregate. Should the
applicable One Hundred Thousand Dollar ($100,000) limitation be exceeded in
the calendar year of such Change in Control, the option may nevertheless be
exercised for the excess shares in such calendar year as a Non-Statutory
Option.
(iv) Should Optionee hold, in addition to this option, one
or more other options to purchase Common Stock which become exercisable for
the first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options
shall be applied on the basis of the order in which such options are
granted.
18. Leave of Absence. The following provisions shall apply upon the
----------------
Optionee's commencement of an authorized leave of absence:
(i) The exercise schedule in effect under the Grant
Notice shall be frozen as of the first day of the authorized leave, and
this option shall not become exercisable for any additional installments of
the Option Shares during the period Optionee remains on such leave.
6
<PAGE>
(ii) Should Optionee resume active Employee status within
sixty (60) days after the start date of the authorized leave, Optionee
shall, for purposes of the exercise schedule set forth in the Grant
Notice, receive Service credit for the entire period of such leave. If
Optionee does not resume active Employee status within such sixty (60)-day
period, then no Service credit shall be given for the period of such
leave.
(iii) If this option is designated as an Incentive Option
in the Grant Notice, then the following additional provision shall apply:
(A) If the leave of absence continues for more than
ninety (90) days, then this option shall automatically convert to a
Non-Statutory Option at the end of the three (3)-month period measured
from the ninety-first (91st) day of such leave, unless Optionee's
reemployment rights are guaranteed by statute or by written agreement.
Following any such conversion of this option, all subsequent exercises
of this option, whether effected before or after Optionee's return to
active Employee status, shall result in an immediate taxable event,
and the Corporation shall be required to collect from Optionee the
income and employment withholding taxes applicable to such exercise.
(iv) In no event shall this option become exercisable for
any additional Option Shares or otherwise remain outstanding if Optionee
does not resume Employee status prior to the Expiration Date of the option
term.
7
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify The viaLink Company (the "Corporation") that I elect
to purchase _________ shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $ per share (the "Exercise Price")
pursuant to that certain option (the "Option") granted to me under the
Corporation's 1999 Stock Option/Stock Issuance Plan on ___________________.
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.
________________________________
Date
______________________________
Optionee
Address:______________________
______________________________
Print name in exact manner it is to appear on
the stock certificate: ______________________________
Address to which certificate is to be sent, if ______________________________
different from address above:
______________________________
Social Security Number:
Employee Number ______________________________
<PAGE>
APPENDIX
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Option Agreement.
---------
B. Beneficiary shall mean, in the event the Plan Administrator
-----------
implements a beneficiary designation procedure, the person designated by
Optionee, pursuant to such procedure, to succeed to Optionee's rights under the
option evidenced by this Agreement to the extent the option is held by Optionee
at the time of death. In the absence of such designation or procedure, the
Beneficiary shall be the personal representative of the estate of Optionee or
the person or persons to whom the option is transferred by will or the laws of
descent and distribution.
C. Board shall mean the Corporation's Board of Directors.
-----
D. Change in Control shall mean a change in ownership or control of
-----------------
the Corporation effected through any of the following transactions:
(a) a merger, consolidation or reorganization approved by the
Corporation's stockholders, unless securities representing more than fifty
percent (50%) of the total combined voting power of the voting securities of the
successor corporation are immediately thereafter beneficially owned, directly or
indirectly and in substantially the same proportion, by the persons who
beneficially owned the Corporation's outstanding voting securities immediately
prior to such transaction.
(b) any stockholder-approved transfer or other disposition of
all or substantially all of the Corporation's assets, or
(c) the acquisition, directly or indirectly by any person or
related group of persons (other than the Corporation or a person that directly
or indirectly controls, is controlled by, or is under common control with, the
Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's stockholders which
the Board recommends such stockholders to accept.
E. Code shall mean the Internal Revenue Code of 1986, as amended.
----
F. Common Stock shall mean the Corporation's common stock.
------------
G. Corporation shall mean The viaLink Company, a Delaware
-----------
corporation.
H. Employee shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
A-1
<PAGE>
I. Exercise Date shall mean the date on which the option shall have
-------------
been exercised in accordance with Paragraph 9 of the Agreement.
J. Exercise Price shall mean the exercise price per share as
--------------
specified in the Grant Notice.
K. Expiration Date shall mean the date on which the option expires
---------------
as specified in the Grant Notice.
L. Fair Market Value per share of Common Stock on any relevant date
-----------------
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as the
price is reported by the National Association of Securities Dealers on the
Nasdaq National Market or any successor system. If there is no closing
selling price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market for
the Common Stock, as such price is officially quoted in the composite tape
of transactions on such exchange. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
M. Grant Date shall mean the date of grant of the option as
----------
specified in the Grant Notice.
N. Grant Notice shall mean the Notice of Grant of Stock Option
------------
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
O. Immediate Family of Optionee shall mean Optionee's child,
----------------
stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse,
sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-
law, brother-in-law or sister-in-law, including adoptive relationships.
P. Incentive Option shall mean an option which satisfies the
----------------
requirements of Code Section 422.
Q. Misconduct shall mean the commission of any act of fraud,
----------
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any intentional wrongdoing by Optionee, whether by
omission or commission, which adversely
A-2
<PAGE>
affects the business or affairs of the Corporation (or any Parent or Subsidiary)
in a material manner. The foregoing definition shall not limit the grounds for
the dismissal or discharge of Optionee or any other individual in the Service of
the Corporation (or any Parent or Subsidiary).
R. Non-Statutory Option shall mean an option not intended to satisfy
--------------------
the requirements of Code Section 422.
S. Notice of Exercise shall mean the notice of exercise in the form
------------------
attached hereto as Exhibit I.
T. Option Shares shall mean the number of shares of Common Stock
-------------
subject to the option as specified in the Grant Notice.
U. Optionee shall mean the person to whom the option is granted as
--------
specified in the Grant Notice.
V. Parent shall mean any corporation (other than the Corporation) in
------
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
W. Permanent Disability shall mean the inability of Optionee to
--------------------
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which is expected to result in death
or has lasted or can be expected to last for a continuous period of twelve (12)
months or more.
X. Plan shall mean the Corporation's 1999 Stock Option/Stock
----
Issuance Plan.
Y. Plan Administrator shall mean either the Board or a committee of
------------------
the Board acting in its administrative capacity under the Plan.
Z. Service shall mean Optionee's performance of services for the
-------
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-
employee member of the board of directors or a consultant or independent
advisor.
AA. Stock Exchange shall mean the American Stock Exchange or the New
--------------
York Stock Exchange.
BB. Subsidiary shall mean any corporation (other than the
----------
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
A-3
<PAGE>
Exhibit 10.20
THE VIALINK COMPANY
STOCK ISSUANCE AGREEMENT
------------------------
AGREEMENT made this ______ day of ______________ 19__, by and between
The viaLink Company, a Delaware corporation, and
____________________________________, a Participant in the Corporation's 1999
Stock Option/Stock Issuance Plan.
All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix.
A. PURCHASE OF SHARES
------------------
1. Purchase. Participant hereby purchases ___________ shares of
--------
Common Stock (the "Purchased Shares") pursuant to the provisions of the Stock
Issuance Program at the purchase price of $______ per share (the "Purchase
Price").
2. Payment. Concurrently with the delivery of this Agreement to the
-------
Corporation, Participant shall pay the Purchase Price for the Purchased Shares
in cash or check payable to the Corporation and shall deliver a duly-executed
blank Assignment Separate from Certificate (in the form attached hereto as
Exhibit I) with respect to the Purchased Shares.
3. Stockholder Rights. Until such time as the Corporation exercises
------------------
the Repurchase Right, Participant (or any successor in interest) shall have all
the rights of a stockholder (including voting, dividend and liquidation rights)
with respect to the Purchased Shares, subject, however, to the transfer
restrictions of this Agreement.
4. Escrow. The Corporation shall have the right to hold the
------
Purchased Shares in escrow until those shares have vested in accordance with the
Vesting Schedule.
5. Compliance with Law. Under no circumstances shall shares of
-------------------
Common Stock or other assets be issued or delivered to Participant pursuant to
the provisions of this Agreement unless, in the opinion of counsel for the
Corporation or its successors, there shall have been compliance with all
applicable requirements of Federal and state securities laws, all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock is at the time listed for trading and all
other requirements of law or of any regulatory bodies having jurisdiction over
such issuance and delivery.
<PAGE>
B. TRANSFER RESTRICTIONS
---------------------
1. Restriction on Transfer. Except for any Permitted Transfer,
-----------------------
Participant shall not transfer, assign, encumber or otherwise dispose of any of
the Purchased Shares which are subject to the Repurchase Right.
2. Restrictive Legend. The stock certificate for the Purchased
------------------
Shares shall be endorsed with the following restrictive legend:
"The shares represented by this certificate are unvested and
subject to certain repurchase rights granted to the Corporation and
accordingly may not be sold, assigned, transferred, encumbered, or in any
manner disposed of except in conformity with the terms of a written
agreement dated _____________ between the Corporation and the registered
holder of the shares (or the predecessor in interest to the shares). A
copy of such agreement is maintained at the Corporation's principal
corporate offices."
3. Transferee Obligations. Each person (other than the Corporation)
----------------------
to whom the Purchased Shares are transferred by means of a Permitted Transfer
must, as a condition precedent to the validity of such transfer, acknowledge in
writing to the Corporation that such person is bound by the provisions of this
Agreement and that the transferred shares are subject to the Repurchase Right to
the same extent such shares would be so subject if retained by Participant.
C. REPURCHASE RIGHT
----------------
1. Grant. The Corporation is hereby granted the right (the
-----
"Repurchase Right"), exercisable at any time during the ninety (90)-day period
following the date Participant ceases for any reason to remain in Service, to
repurchase at the Purchase Price all or any portion of the Purchased Shares in
which Participant is not, at the time of his or her cessation of Service, vested
in accordance with the Vesting Schedule or the provisions of Paragraph C.5 of
this Agreement (such shares to be hereinafter referred to as the "Unvested
Shares").
2. Exercise of the Repurchase Right. The Repurchase Right shall be
--------------------------------
exercisable by written notice delivered to each Owner of the Unvested Shares
prior to the expiration of the ninety (90)-day exercise period. The notice
shall indicate the number of Unvested Shares to be repurchased and the date on
which the repurchase is to be effected, such date to be not more than thirty
(30) days after the date of such notice. The certificates representing the
Unvested Shares to be repurchased shall be delivered to the Corporation on or
before the close of business on the date specified for the repurchase.
Concurrently with the receipt of such stock certificates, the Corporation shall
pay to Owner, in cash or cash equivalent (including the cancellation of any
purchase-money indebtedness), an amount equal to the Purchase Price previously
paid for the Unvested Shares to be repurchased from Owner.
3. Termination of the Repurchase Right. The Repurchase Right shall
-----------------------------------
terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph C.2. In addition, the Repurchase Right shall
terminate and cease to be exercisable
2.
<PAGE>
with respect to any and all Purchased Shares in which Participant vests in
accordance with the following Vesting Schedule:
Participant shall acquire a vested interest in, and the Repurchase
Right shall lapse with respect to, the Purchased Shares in a series of
three (3) successive equal annual installments upon Participant's
completion of each year of Service over the three (3)-year period
measured from ____________________.
4. Recapitalization. Any new, substituted or additional securities
----------------
or other property (including cash paid other than as a regular cash dividend)
which is by reason of any Recapitalization distributed with respect to the
Purchased Shares shall be immediately subject to the Repurchase Right and any
escrow requirements hereunder, but only to the extent the Purchased Shares are
at the time covered by such right or escrow requirements. Appropriate
adjustments to reflect such distribution shall be made to the number and/or
class of securities subject to this Agreement and to the price per share to be
paid upon the exercise of the Repurchase Right in order to reflect the effect of
any such Recapitalization upon the Corporation's capital structure; provided,
--------
however, that the aggregate purchase price shall remain the same.
5. Change in Control.
-----------------
(a) Immediately prior to the consummation of any Change in
Control, the Repurchase Right shall automatically lapse in its entirety and the
Purchased Shares shall vest in full, except to the extent the Repurchase Right
is assigned to the successor corporation (or parent thereof) or otherwise
continues in full force and effect pursuant to the terms of the Change in
Control.
(b) To the extent the Repurchase Right remains in effect following
a Change in Control, such right shall apply to the new capital stock or other
property (including any cash payments) received in exchange for the Purchased
Shares in consummation of the Change in Control, but only to the extent the
Purchased Shares are at the time covered by such right. Appropriate adjustments
shall be made to the price per share payable upon exercise of the Repurchase
Right to reflect the effect of the Change in Control upon the Corporation's
capital structure; provided, however, that the aggregate purchase price shall
--------
remain the same. Any capital stock or other property (including cash payments)
issued or distributed with respect to the Purchased Shares may be held in
escrow.
(c) The Repurchase Right may also be subject to termination in
whole or in part on an accelerated basis, and the Purchased Shares subject to
immediate vesting, in accordance with the terms of any special Addendum attached
to this Agreement.
D. SPECIAL TAX ELECTION
--------------------
1. Section 83(b) Election. Under Code Section 83, the excess of the
----------------------
fair market value of the Purchased Shares on the date any forfeiture
restrictions applicable to such shares lapse over the Purchase Price paid for
such shares will be reportable as ordinary income
3.
<PAGE>
on the lapse date. For this purpose, the term "forfeiture restrictions" includes
the right of the Corporation to repurchase the Purchased Shares pursuant to the
Repurchase Right. Participant may elect under Code Section 83(b) to be taxed at
the time the Purchased Shares are acquired, rather than when and as such
Purchased Shares cease to be subject to such forfeiture restrictions. Such
election must be filed with the Internal Revenue Service within thirty (30) days
after the date of this Agreement. Even if the fair market value of the Purchased
Shares on the date of this Agreement equals the Purchase Price paid (and thus no
tax is payable), the election must be made to avoid adverse tax consequences in
the future. THE FORM FOR MAKING THIS ELECTION IS ATTACHED AS EXHIBIT II HERETO.
PARTICIPANT UNDERSTANDS THAT FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE
THIRTY (30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME AS THE
FORFEITURE RESTRICTIONS LAPSE.
2. FILING RESPONSIBILITY. PARTICIPANT ACKNOWLEDGES THAT IT IS
---------------------
PARTICIPANT'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY
ELECTION UNDER CODE SECTION 83(b), EVEN IF PARTICIPANT REQUESTS THE CORPORATION
OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
E. GENERAL PROVISIONS
------------------
1. Assignment. The Corporation may assign the Repurchase Right to
----------
any person or entity selected by the Board, including (without limitation) one
or more stockholders of the Corporation.
2. No Employment or Service Contract. Nothing in this Agreement or
---------------------------------
in the Plan shall confer upon Participant any right to continue in Service for
any period of specific duration or interfere with or otherwise restrict in any
way the rights of the Corporation (or any Parent or Subsidiary employing or
retaining Participant) or of Participant, which rights are hereby expressly
reserved by each, to terminate Participant's Service at any time for any reason,
with or without cause.
3. Notices. Any notice required to be given under this Agreement
-------
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.
4. No Waiver. The failure of the Corporation in any instance to
---------
exercise the Repurchase Right shall not constitute a waiver of any other
repurchase rights that may subsequently arise under the provisions of this
Agreement or any other agreement between the Corporation and Participant. No
waiver of any breach or condition of this Agreement shall be deemed to be a
waiver of any other or subsequent breach or condition, whether of like or
different nature.
4.
<PAGE>
5. Cancellation of Shares. If the Corporation shall make available,
----------------------
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
6. Participant Undertaking. Participant hereby agrees to take
-----------------------
whatever additional action and execute whatever additional documents the
Corporation may deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions imposed on either Participant or the
Purchased Shares pursuant to the provisions of this Agreement.
7. Agreement is Entire Contract. This Agreement constitutes the
----------------------------
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the terms of the Plan.
8. Governing Law. This Agreement shall be governed by, and construed
-------------
in accordance with, the laws of the State of Oklahoma without resort to that
State's conflict-of-laws rules.
9. Successors and Assigns. The provisions of this Agreement shall
----------------------
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and upon Participant, Participant's assigns and the legal
representatives, heirs and legatees of Participant's estate, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
5.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
THE VIALINK COMPANY
By: ________________________________
Title: ________________________________
Address: ________________________________
________________________________
________________________________
PARTICIPANT
Address: ________________________________
________________________________
6.
<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED _____________________ hereby sell(s), assign(s) and
transfer(s) unto The viaLink Company (the "Corporation"), ________________(____)
shares of the Common Stock of the Corporation standing in his or her name on the
books of the Corporation represented by Certificate No. _____________ herewith
and do(es) hereby irrevocably constitute and appoint ________________________
Attorney to transfer the said stock on the books of the Corporation with full
power of substitution in the premises.
Dated: ________________________
Signature__________________________
Instruction: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Participant.
<PAGE>
EXHIBIT II
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is _________
shares of the common stock of The viaLink Company
(3) The property was issued on _______________________.
(4) The taxable year in which the election is being made is the calendar year
________.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's employment with the issuer is terminated. The
issuer's repurchase right lapses in a series of installments over a three
(3)-year period ending on ____________________________.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $_____________ per share.
(7) The amount paid for such property is $_______________ per share.
(8) A copy of this statement was furnished to The viaLink Company for whom
taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on ______________________________.
_________________________________________________ _________________________
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Issuance Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Participant must retain two (2) copies of the completed form for filing with his
or her Federal and state tax returns for the current tax year and an additional
copy for his or her records.
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Issuance Agreement.
---------
B. Board shall mean the Corporation's Board of Directors.
-----
C. Change in Control shall mean a change in ownership or control of the
-----------------
Corporation effected through any of the following transactions:
(i) a merger, consolidation or reorganization approved by the
Corporation's stockholders, unless securities representing more than fifty
------
percent (50%) of the total combined voting power of the voting securities
of the successor corporation are immediately thereafter beneficially owned,
directly or indirectly and in substantially the same proportion, by the
persons who beneficially owned the Corporation's outstanding voting
securities immediately prior to such transaction.
(ii) any stockholder-approved transfer or other disposition of
all or substantially all of the Corporation's assets, or
(iii) the acquisition, directly or indirectly by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly
to the Corporation's stockholders which the Board recommends such
stockholders to accept.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
----
E. Common Stock shall mean the Corporation's common stock.
------------
F. Corporation shall mean The viaLink Company, a Delaware corporation.
-----------
G. Owner shall mean Participant and all subsequent holders of the
-----
Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Participant.
H. Parent shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
A-1.
<PAGE>
I. Participant shall mean the person to whom the Purchased Shares are
-----------
issued under the Stock Issuance Program.
J. Permitted Transfer shall mean (i) a gratuitous transfer of the
------------------
Purchased Shares, provided and only if Participant obtains the Corporation's
--------------------
prior written consent to such transfer, (ii) a transfer of title to the
Purchased Shares effected pursuant to Participant's will or the laws of
intestate succession following Participant's death or (iii) a transfer to the
Corporation in pledge as security for any purchase-money indebtedness incurred
by Participant in connection with the acquisition of the Purchased Shares.
K. Plan shall mean the Corporation's 1999 Stock Option/Stock
----
IssuancePlan.
L. Plan Administrator shall mean either the Board or a committee of the
------------------
Board acting in its administrative capacity under the Plan.
M. Purchase Price shall have the meaning assigned to such term in
--------------
Paragraph A.1.
N. Purchased Shares shall have the meaning assigned to such term in
----------------
Paragraph A.1.
O. Recapitalization shall mean any stock split, stock dividend,
----------------
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.
P. Repurchase Right shall mean the right granted to the Corporation in
----------------
accordance with Article C.
Q. Service shall mean the Participant's performance of services for the
-------
Corporation (or any Parent or Subsidiary) in the capacity of an employee,
subject to the control and direction of the employer entity as to both the work
to be performed and the manner and method of performance, a non-employee member
of the board of directors or a consultant.
R. Stock Issuance Program shall mean the Stock Issuance Program under the
----------------------
Plan.
S. Subsidiary shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
T. Vesting Schedule shall mean the vesting schedule specified in
----------------
Paragraph C.3, subject to acceleration (if any) in connection with a Change in
Control.
U. Unvested Shares shall have the meaning assigned to such term in
---------------
Paragraph C.1.
A-2.
<PAGE>
Exhibit 10.21
THE VIALINK COMPANY
AUTOMATIC STOCK OPTION AGREEMENT
--------------------------------
RECITALS
- --------
A. The Corporation has implemented an automatic option grant program
under the Corporation's 1999 Stock Option/Stock Issuance Plan pursuant to which
eligible non-employee members of the Corporation's Board will automatically
receive special option grants at designated intervals over their period of Board
service in order to provide such individuals with a meaningful incentive to
continue to serve as a member of the Board.
B. Optionee is an eligible non-employee Board member, and this
Agreement is executed pursuant to, and is intended to carry out the purposes of,
the Plan in connection with the automatic grant of a stock option to purchase
shares of the Corporation's Common Stock under the Plan.
C. The granted option is intended to be a non-statutory option which
does not meet the requirements of Section 422 of the Internal Revenue Code.
D. All capitalized terms in this Agreement, to the extent not
otherwise defined in the Agreement, shall have the meaning assigned to them in
the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee, as
---------------
of the Grant Date, a Non-Statutory Option to purchase up to the number of Option
Shares specified in the Grant Notice. The Option Shares shall be purchasable
from time to time during the option term specified in Paragraph 2 at the
Exercise Price.
2. Option Term. This option shall have a maximum term of ten (10)
-----------
years measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5, 6 or 7.
3. Limited Transferability. Except to the limited extent provided
-----------------------
below, this option shall be neither transferable nor assignable by Optionee
other than by will or by the laws of descent and distribution following
Optionee's death and may be exercised, during Optionee's lifetime, only by
Optionee. This option may be assigned in whole or in part during Optionee's
lifetime either as (i) as a gift to one or more members of Optionee's Immediate
Family, to a trust in which Optionee and/or one or more such family members hold
more than fifty percent (50%) of the beneficial interest or an entity in which
more than fifty percent (50%) of the voting interests are owned by Optionee
and/or one or more such family members, or (ii) pursuant to a domestic relations
order. The assigned portion shall be exercisable only by the person or persons
who acquire a proprietary interest in the option pursuant to such assignment.
The terms applicable to the assigned portion shall be the same as those in
effect for this option immediately prior to such assignment and shall be set
forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.
1.
<PAGE>
4. Exercisability/Vesting.
----------------------
(a.) This option shall be immediately exercisable for any or all
of the Option Shares, whether or not the Option Shares are vested in accordance
with the Vesting Schedule set forth in the Grant Notice, and shall remain so
exercisable until the Expiration Date or the sooner termination of the option
term under Paragraph 5, 6 or 7.
(b.) Optionee shall, in accordance with the Vesting Schedule set
forth in the Grant Notice, vest in the Option Shares in a series of installments
over his or her period of Board service. Vesting in the Option Shares may be
accelerated pursuant to the provisions of Paragraph 5, 6 or 7. In no event,
however, shall any additional Option Shares vest following Optionee's cessation
of service as a Board member.
5. Cessation of Board Service. The option term specified in
--------------------------
Paragraph 2 shall terminate (and this option shall cease to be outstanding)
prior to the Expiration Date should any of the following provisions become
applicable:
(i) Should Optionee cease to serve as a Board member for any
reason (other than death or Permanent Disability) while this option is
outstanding, then this option shall remain exercisable until the earlier of
-------
(i) the expiration of the twelve (12)-month period measured from the date
of such cessation of Board service or (ii) the Expiration Date.
(ii) Should Optionee die while holding this option, then
Optionee's Beneficiary shall have the right to exercise this option until
the earlier of (i) the expiration of the twelve (12)-month period measured
-------
from the date of Optionee's cessation of Board service or (ii) the
Expiration Date.
(iii) Should Optionee cease service as a Board member by reason
of death or Permanent Disability, then all Option Shares at the time
subject to this option but not otherwise vested shall immediately vest in
full so that this option may, during the post-service exercise period, be
exercised for any or all of the Option Shares as fully-vested shares of
Common Stock.
(iv) Following Optionee's cessation of Board service, this
option may not be exercised in the aggregate for more than the number of
Option Shares in which Optionee was vested on the date of such cessation of
Board service. Upon the expiration of the applicable exercise period or (if
earlier) upon the Expiration Date, this option shall terminate and cease to
be outstanding for any vested Option Shares for which the option has not
been exercised. However, this option shall, immediately upon Optionee's
cessation of Board service for any reason, terminate and cease to be
outstanding for any and all shares in which Optionee is not otherwise at
that time vested.
6. Change in Control/Hostile Take-Over.
-----------------------------------
(a.) In the event of a Change in Control or Hostile Take-Over,
all Option Shares at the time subject to this option but not otherwise vested
shall automatically vest so that this option shall, immediately prior to the
specified effective date for the Change in
2.
<PAGE>
Control or Hostile Take-Over, become fully exercisable for all of the Option
Shares at the time subject to this option and may be exercised for any or all of
those Option Shares as fully-vested shares of Common Stock. Immediately
following the consummation of the Change in Control, this option shall terminate
and cease to be outstanding, except to the extent assumed by the successor
corporation (or parent thereof) or otherwise expressly continued in full force
and effect pursuant to the terms of the Change in Control. In the event of a
Hostile Take-Over, this option shall remain exercisable until the expiration or
sooner termination of the option term.
(b.) If this option is assumed in connection with a Change in
Control, then this option shall be appropriately adjusted, immediately after
such Change in Control, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Change in Control
had the option been exercised immediately prior to such Change in Control, and
appropriate adjustments shall also be made to the Exercise Price, provided the
--------
aggregate Exercise Price shall remain the same.
(c.) Optionee shall have an unconditional right (exercisable
during the thirty (30)-day period immediately following the consummation of a
Hostile Take-Over) to surrender this option to the Corporation in exchange for a
cash distribution from the Corporation in an amount equal to the excess of (i)
the Option Surrender Value of the Option Shares at the time subject to the
surrendered option (whether or not Optionee is otherwise at the time vested in
those shares) over (ii) the aggregate Exercise Price payable for such shares.
This Paragraph 6(c) limited stock appreciation right shall in all events
terminate upon the expiration or sooner termination of the option term and may
not be assigned or transferred by Optionee.
(d.) To exercise the Paragraph 6(c) limited stock appreciation
right, Optionee must, during the applicable thirty (30)-day exercise period,
provide the Corporation with written notice of the option surrender in which
there is specified the number of Option Shares as to which the option is being
surrendered. Such notice must be accompanied by the return of Optionee's copy of
this Agreement, together with any written amendments to such Agreement. The cash
distribution shall be paid to Optionee within five (5) business days following
such delivery date, and neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with such option surrender
and cash distribution. Upon receipt of such cash distribution, this option shall
be cancelled with respect to the shares subject to the surrendered option (or
the surrendered portion), and Optionee shall cease to have any further right to
acquire those Option Shares under this Agreement. The option shall, however,
remain outstanding for the balance of the Option Shares (if any) in accordance
with the terms and provisions of this Agreement, and the Corporation shall issue
a new stock option agreement (substantially in the same form as this Agreement)
for those remaining Option Shares.
7. Adjustment in Option Shares. Should any change be made to the
---------------------------
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the number and/or
class of securities subject to this option and (ii) the Exercise Price in order
to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder; provided, however, that the aggregate Exercise Price shall
remain the same.
3.
<PAGE>
8. Stockholder Rights. The holder of this option shall not have any
------------------
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. Manner of Exercising Option.
---------------------------
(a.) In order to exercise this option for all or any part of the
Option Shares for which the option is at the time exercisable, Optionee (or any
other person or persons exercising this option) must take the following actions:
(i) Execute and deliver to the Secretary of the
Corporation a Notice of Exercise (or, to the extent that the option is
exercised for one or more unvested Option Shares, a Purchase Agreement) for
the Option Shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the
purchased shares in one or more of the following forms:
(A) cash or check made payable to the Corporation;
(B) shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date; or
(C) to the extent the option is exercised for vested
Option Shares, through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons exercising
this option) shall provide irrevocable instructions (I) to a
Corporation-approved brokerage firm to effect the immediate sale of
the vested shares purchased under the option and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate Exercise Price payable
for those shares plus all applicable income and employment taxes
required to be withheld by the Corporation by reason of such exercise
and (II) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete
the sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise (or Purchase
Agreement) delivered to the Corporation in connection with the option
exercise.
(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if other
than Optionee) have the right to exercise this option.
4.
<PAGE>
(iv) Make appropriate arrangements with the
Corporation for the satisfaction of all income and employment tax
withholding requirements applicable to the option exercise.
(b.) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares.
To the extent any such Option Shares are unvested, the certificates for those
Option Shares shall be endorsed with an appropriate legend evidencing the
Corporation's repurchase rights and may be held in escrow with the Corporation
until such shares vest.
(c.) In no event may this option be exercised for any fractional
shares.
10. No Impairment of Rights. This Agreement shall not in any way
-----------------------
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets. Nor shall this Agreement in any way be construed or interpreted so as
to affect adversely or otherwise impair the right of the Corporation or the
stockholders to remove Optionee from the Board at any time in accordance with
the provisions of applicable law.
11. Compliance with Laws and Regulations.
------------------------------------
(a.) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b.) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
However, the Corporation shall use its best efforts to obtain all such
applicable approvals.
12. Successors and Assigns. Except to the extent otherwise provided
----------------------
in Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Optionee and Optionee's assigns and Beneficiaries.
13. Notices. Any notice required to be given or delivered to the
-------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to
be given or delivered to Optionee shall be in writing and addressed to Optionee
at the address indicated below Optionee's signature line on the Grant Notice.
All notices shall be deemed effective upon personal delivery or upon deposit in
the U.S. mail, postage prepaid and properly addressed to the party to be
notified.
5.
<PAGE>
14. Construction/Governing Law. This Agreement and the option
--------------------------
evidenced hereby are made and granted pursuant to the automatic option grant
program in effect under the Plan and are in all respects limited by and subject
to the express terms and provisions of that program. The interpretation,
performance, and enforcement of this Agreement shall be governed by the laws of
the State Oklahoma without resort to that State's conflict-of-laws rules.
6.
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify The viaLink Company (the "Corporation") that I elect
to purchase __________ shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $___________ per share (the "Exercise
Price") pursuant to that certain option (the "Option") granted to me pursuant to
the automatic option grant program under the Corporation's 1999 Stock
Option/Stock Issuance Plan on __________________________.
Concurrently with the delivery of this Exercise Notice to the
Secretary of the Corporation, I shall hereby pay to the Corporation the Exercise
Price for the Purchased Shares in accordance with the provisions of my agreement
with the Corporation evidencing the Option and shall deliver whatever additional
documents may be required by such agreement as a condition for exercise.
Alternatively, I may utilize the special broker-dealer sale and remittance
procedure specified in my agreement to effect payment of the Exercise Price for
any Purchased Shares in which I am vested at the time of exercise.
_________________________
Date
________________________________
OPTIONEE
Address: ________________________________
________________________________
Print name in exact manner it is
to appear on the stock certificate: ________________________________
Address to which certificate is
to be sent, if different from
address above: ________________________________
Social Security Number: ________________________________
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Automatic Stock Option Agreement.
---------
B. Beneficiary shall mean, in the event the Plan Administrator
-----------
implements a beneficiary designation procedure, the person designated by
Optionee, pursuant to such procedure, to succeed to Optionee's rights under the
option evidenced by this Agreement to the extent the option is held by Optionee
at the time of death. In the absence of such designation or procedure, the
Beneficiary shall be the personal representative of Optionee's estate or the
person or persons to whom the option is transferred by will or the laws of
descent and distribution.
C. Board shall mean the Corporation's Board of Directors.
-----
D. Change in Control shall mean shall mean a change in ownership or
-----------------
control of the Corporation effected through any of the following transactions:
(a) a merger, consolidation or reorganization approved by the
Corporation's stockholders, unless securities representing more than fifty
------
percent (50%) of the total combined voting power of the voting securities
of the successor corporation are immediately thereafter beneficially owned,
directly or indirectly and in substantially the same proportion, by the
persons who beneficially owned the Corporation's outstanding voting
securities immediately prior to such transaction.
(b) any stockholder-approved transfer or other disposition of all
or substantially all of the Corporation's assets, or
(c) the acquisition, directly or indirectly by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly
to the Corporation's stockholders which the Board recommends such
stockholders to accept.
E. Code shall mean the Internal Revenue Code of 1986, as amended.
----
F. Common Stock shall mean the Corporation's common stock.
------------
G. Corporation shall mean The viaLink Company, a Delaware
-----------
corporation.
H. Exercise Date shall mean the date on which the option shall have
-------------
been exercised in accordance with Paragraph 9 of the Agreement.
A-1
<PAGE>
I. Exercise Price shall mean the exercise price payable per share as
--------------
specified in the Grant Notice.
J. Expiration Date shall mean the date on which the option term
---------------
expires as specified in the Grant Notice.
K. Fair Market Value per share of Common Stock on any relevant date
-----------------
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be
the closing selling price per share of Common Stock on the
date in question, as the price is reported by the National
Association of Securities Dealers on the Nasdaq National
Market or any successor system. If there is no closing
selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation
exists.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date
in question on the Stock Exchange determined by the Plan
Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite
tape of transactions on such exchange. If there is no
closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such
quotation exists.
L. Grant Date shall mean the date of grant of the option as
----------
specified in the Grant Notice.
M. Grant Notice shall mean the Notice of Grant of Automatic Stock
------------
Option accompanying this Agreement, pursuant to which Optionee has been informed
of the basic terms of the option evidenced hereby.
N. Hostile Take-Over shall mean:
-----------------
(a) the acquisition, directly or indirectly, by any person
or related group of persons (other than the Corporation or a person
that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership (within
the meaning of Rule 13d-3 of the 1934 Act) of securities possessing
more than thirty-five percent (35%) of the total combined voting power
of the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept, or
A-2
<PAGE>
(b) a change in the composition of the Board over a period
of thirty-six (36) consecutive months or less such that a majority of
the Board members ceases, by reason of one or more contested elections
for Board membership, to be comprised of individuals who either (A)
have been Board members continuously since the beginning of such
period or (B) have been elected or nominated for election as Board
members during such period by at least a majority of the Board members
described in clause (A) who were still in office at the time the Board
approved such election or nomination.
O. 1934 Act shall mean the Securities Exchange Act of 1934, as
--------
amended.
P. Non-Statutory Option shall mean an option not intended to satisfy
--------------------
the requirements of Code Section 422.
Q. Notice of Exercise shall mean the notice of exercise in the form
------------------
attached hereto as Exhibit I.
R. Option Shares shall mean the number of shares of Common Stock
-------------
subject to the option.
S. Option Surrender Value shall mean the Fair Market Value per share
----------------------
of Common Stock on the date the option is surrendered to the Corporation or, in
the event of a Hostile Take-Over effected through a tender offer, the highest
reported price per share of Common Stock paid by the tender offeror in effecting
such Hostile Take-Over, if greater.
T. Optionee shall mean the person to whom the option is granted as
--------
specified in the Grant Notice.
U. Permanent Disability shall mean the inability of Optionee to
--------------------
perform his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment which is expected to result in death
or has lasted or can be expected to last for a continuous period of twelve (12)
months or more.
V. Plan shall mean Corporation's 1999 Stock Option/Stock Issuance
----
Plan.
W. Purchase Agreement shall mean the stock purchase agreement (in
------------------
form and substance satisfactory to the Corporation) which must be executed at
the time the option is exercised for unvested Option Shares and which will
accordingly (i) grant the Corporation the right to repurchase, at the Exercise
Price, any and all of those Option Shares in which Optionee is not otherwise
vested at the time of his or her cessation of service as a Board member and (ii)
preclude the sale, transfer or other disposition of any of the Option Shares
purchased under such agreement while those Option Shares remain subject to the
repurchase right.
X. Stock Exchange shall mean the American Stock Exchange or the New
--------------
York Stock Exchange.
Y. Vesting Schedule shall mean the vesting schedule specified in the
----------------
Grant Notice, pursuant to which Optionee shall vest in the Option Shares in one
or more installments
A-3
<PAGE>
over his or her period of Board service, subject to acceleration in accordance
with the provisions of the Agreement.
A-4
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form SB-2
(File No. 333-5038-D) of our report dated February 22, 1999 relating to the
financial statements of The viaLink Company (formerly Applied Intelligence
Group, Inc.), which appears in such Registration Statement. We also consent to
the reference to us under the heading "Experts".
PricewaterhouseCoopers LLP
Oklahoma City, Oklahoma
June 14, 1999
