<PAGE>
As filed with the Securities and Exchange Commission on February 18, 2000
Registration No. 333-94755
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment
No. 2 to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ETINUUM, INC.
(Exact name of registrant as specified in its charter)
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Delaware 7389 84-1334615
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
5619 DTC Parkway, 12th Floor
Englewood, Colorado 80111-3017
(303) 357-3000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Timothy C. O'Crowley
Chief Executive Officer
5619 DTC Parkway, 12th Floor
Englewood, Colorado 80111-3017
(303) 357-3000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
Laurie P. Glasscock, Esq. Francis S. Currie, Esq.
G. James Williams, Jr., Esq. Davis Polk & Wardwell
Carin M. Kutcipal, Esq. 1600 El Camino Real
Chrisman, Bynum & Johnson, P.C. Menlo Park, California 94025
1900 Fifteenth Street (650) 752-2000
Boulder, Colorado 80302
(303) 546-1300
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.
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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. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, 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 prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<TABLE>
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<CAPTION>
Proposed Maximum Amount of
Aggregate Offering Price(1) Registration Fee
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<S> <C> <C>
Common Stock...................... $62,100,000 $16,395(2)
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</TABLE>
(1) Estimated pursuant to Rule 457(o) solely for the purpose of calculating the
amount of the registration fee.
(2) Of which the registrant has already paid $15,180.
This 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 Section 8(a), may
determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained in this prospectus is not complete and may be changed. +
+We may not sell these securities until the registration statement filed with +
+the Securities and Exchange Commission is effective. This prospectus is not +
+an offer to sell securities, and we are not soliciting an offer to buy these +
+securities, in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, Dated
PROSPECTUS
4,500,000 Shares
LOGO OF ETINUUM
Common Stock
This is the initial public offering of common stock by Etinuum, Inc. We are
selling 4,500,000 shares of our common stock at an estimated initial public
offering price between $10.00 and $12.00 per share.
--------
There is currently no public market for the common stock. We have applied to
list our common stock on the Nasdaq National Market under the symbol "ETIN."
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<TABLE>
<CAPTION>
Per Share Total
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<S> <C> <C>
Public offering price........................................... $ $
Underwriting discounts and commissions.......................... $ $
Proceeds, before offering expenses, to Etinuum.................. $ $
</TABLE>
The underwriters may also purchase up to 675,000 additional shares of common
stock from us at the public offering price, less the underwriting discount,
within 30 days from the date of this prospectus to cover over-allotments.
Delivery of the shares of common stock will be made on or about , 2000.
--------
Investing in the common stock involves risks.
See "Risk Factors" beginning on page 6.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Chase H&Q
Robertson Stephens
U.S. Bancorp Piper Jaffray
Wit SoundView
, 2000
<PAGE>
[Cover 1 is the portion of the cover visible when opening the front cover of
the prospectus. Reversed-out (white) copy over "Etinuum logo."
"Etinuum provides an integrated set of services that takes our clients from
concept to launch and operation of their e-commerce and other direct-to-
customer initiatives."]
<PAGE>
[The prospectus front cover is a gatefold; Cover 2 is the inside front cover
spread visible upon opening the gatefold cover. Four 4-color photographs, with
copy pertaining to each photo, laid out in the circle, to describe our service
offering. Beginning at the top of the page and moving clockwise, the
photographs and text are as follows:
PHOTO #1: This photo is of several people in a conference situation
demonstrating our strategic consulting services. PHOTO #1 COPY: Headline:
"Design"; Subhead: "Strategic Consulting"; "We help clients plan their e-
commerce and other direct-to-customer initiatives from concept to launch and
operation."
PHOTO #2: This photo is of two employees in a computer room. PHOTO #2 COPY:
Headline: "Build"; Subhead: "Technology Solutions"; "We customize and operate
Web-based software that we integrate with our clients' and their vendors'
existing systems.
PHOTO #3: This photo depicts an employee in a Communications Center on the
telephone with a client's customer. PHOTO #3 COPY: Headline: "Operate";
Subhead: "e-Operations"; "We provide communications services that manage our
clients' customer transactions and relationships via voice, e-mail, fax and
real-time online communications."
PHOTO #4: This photo shows several employees in a working conference session.
PHOTO #4 COPY: Headline: "Analyze"; Subhead: "Customer Knowledge"; "We offer
database marketing and analysis services to help our clients improve their
marketing efforts and customer relationships."]
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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Prospectus Summary.................................................. 1
Risk Factors........................................................ 6
Forward-Looking Statements.......................................... 14
Use of Proceeds..................................................... 14
Dividend Policy..................................................... 14
Capitalization...................................................... 15
Dilution............................................................ 16
Selected Historical and Pro Forma Financial Data.................... 18
Management's Discussion and Analysis of Financial Condition and
Results of Operations ............................................. 20
Business............................................................ 28
Management.......................................................... 40
Employee Benefit Plans.............................................. 48
Related Party Transactions.......................................... 50
Principal Stockholders.............................................. 58
Description of Capital Stock........................................ 60
Transfer Agent and Registrar........................................ 63
Shares Eligible for Future Sale..................................... 63
Plan of Distribution................................................ 64
Legal Matters....................................................... 67
Experts............................................................. 67
Where You Can Find More Information................................. 67
Index to Consolidated Financial Statements of Etinuum, Inc.......... F-1
Index to Unaudited Pro Forma Condensed Financial Information........ P-1
Index to Financial Statements of Acorn Information Services, Inc. .. A-1
</TABLE>
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Unless otherwise indicated, all references to "Etinuum," "we," "us" and
"our" refer to Etinuum, Inc., a Delaware corporation, and our predecessor
Colorado corporation.
All brand names and trademarks appearing in this prospectus are the
property of their respective holders.
i
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PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. This summary does not contain all of the information that you
should consider before investing in our common stock. You should read the
entire prospectus carefully, including the information under "Risk Factors"
beginning on page 6 and the financial statements beginning on page F-1, before
making an investment decision.
Our Company
Etinuum provides an integrated set of strategic, technological,
operational and analytical solutions that takes our clients from concept to
launch and operation of their e-commerce and other direct-to-customer sales and
marketing initiatives. Our clients are typically Fortune 1000 and emerging Web-
based companies that sell complex products or employ complicated sales
processes. Our ability to design, build, and operate e-commerce and other
associated direct-to-customer initiatives enables our clients to more
effectively market and sell to their customers. We provide clients access to
our strategic consultants, developers, Web-based processing technology, high-
level customer support personnel, communications services, and database
marketing and analysis services. Our major clients in 1999 included American
Express, Safeway, Sega and Sony. In addition, we have recently established
relationships with emerging Web-based companies, including Autoweb.com and
ImproveNet.
Our Market Opportunity
Our market is driven by the continued acceptance and rapid growth of the
Internet, which has dramatically changed the way businesses and consumers
communicate and conduct business. International Data Corporation, or IDC,
estimates that the actual number of Web buyers worldwide will increase from
nearly 31 million in 1998 to more than 182 million in 2003, and that the amount
of worldwide commerce conducted over the Internet will increase from
approximately $50 billion in 1998 to about $1.3 trillion in 2003. This dramatic
increase in the use of the Internet for commerce is creating significant new
opportunities and challenges for a broad spectrum of businesses.
In response to growing competitive pressures and the escalating rate of
technological innovation, many companies are outsourcing business functions to
access expertise, resources and technology. As a growing number of companies
offer more complex products and services online, demand has increased for
sophisticated outsourced service providers that use an integrated approach in
delivering technology solutions and specialized services. Additionally, the
delivery of these multiple services must be flexible and easy for the customer
to use and must enable the client to maintain brand recognition and customer
loyalty.
Our Services
Etinuum offers a comprehensive range of solutions for designing, building
and operating our clients' e-commerce and other direct-to-customer initiatives.
Direct-to-customer initiatives use a combination of Web sites, e-mail and other
Internet-based communications, telephone communications, fax and mail. Our four
service offerings are:
Strategic Consulting. We help our clients plan their e-commerce and other
direct-to-customer initiatives by determining their needs and objectives,
working with them to establish an overall program structure. We design an
integrated solution consisting of the required technology, customer
communication processes, data requirements and personnel skills.
Technology Solutions. We develop, customize and operate Web-based
technology platforms, comprised of Web-based software and hardware systems,
that enable us to rapidly deploy our clients' e-commerce and other direct-to-
customer initiatives. Our primary technology platform, the EtinuumWebDirect
System, incorporates the Web site interface for customers and our customer
1
<PAGE>
representatives, the product specifications and other reference materials, the
software applications to electronically process transactions and the customer
and client information databases and hardware systems, all of which can be
tailored to meet a client's specific needs. We integrate this technology
platform with our clients' and their vendors' existing systems to provide the
sharing of information.
e-Operations. We provide communications services, database management and
hosting that handle our clients' transactions with their customers via voice,
e-mail, fax and real-time online communications. These transactions include the
sale of complex products such as financial instruments for direct brokerage and
online trading firms and computer and electronic equipment for technology
manufacturers. Our infrastructure, including our computer systems, networking
equipment and communications centers, permits efficient and reliable operations
of our clients' complex direct-to-customer-initiatives.
Customer Knowledge. We offer sophisticated database marketing and analysis
services to help our clients improve their marketing efforts and customer
relationships through a better understanding of their customers' buying
processes and behaviors.
Our Strategy
Etinuum's strategy is to be a leading provider of integrated solutions to
companies developing e-commerce and other direct-to-customer initiatives that
involve the sale of complex products or the use of complicated sales processes.
We support our clients in both business-to-consumer and business-to-business
transactions. Key elements of our strategy are to:
. target clients that provide substantial growth opportunities;
. pursue clients in specialized markets that require sophisticated
services;
. promote our brand through expanded sales and marketing efforts;
. broaden and continue to strengthen our service offerings; and
. continue to hire, train and retain talented people.
Risk Factors
There are a number of risks and uncertainties that may affect our
business, financial condition and results of operations, including factors that
may affect our ability to successfully implement our strategy. Please see "Risk
Factors" beginning on page 6.
Our History
We incorporated in Colorado in March 1996 under the name Intek
Information, Inc. and reincorporated in Delaware in August 1996. In February
2000, we changed our name from Intek Information, Inc. to Etinuum, Inc.
Effective October 1, 1999, we acquired all of the outstanding capital stock of
Acorn Information Services, Inc., a Delaware corporation based in Connecticut
that provides database marketing and analysis services. Also effective October
1, 1999, we transferred software that we had developed to Spider Technologies,
Inc., a newly-formed wholly-owned subsidiary, and we then distributed all of
the stock of Spider to our stockholders. We have three wholly-owned
subsidiaries that are used to hold licenses to conduct operations in various
regulated industries. See "Business-Regulatory Matters."
Our principal executive offices are located at 5619 DTC Parkway, 12th
Floor, Englewood, CO 80111, and our telephone number is (303) 357-3000.
We maintain a Web site at www.etinuum.com and our subsidiary, Acorn,
maintains a Web site at www.acornis.com. Information contained on these Web
sites does not constitute part of this prospectus and is not incorporated by
reference in this prospectus.
2
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The Offering
<TABLE>
<S> <C>
Common stock offered by Etinuum............... 4,500,000 shares
Common stock to be outstanding after this
offering..................................... 18,136,384 shares
Use of proceeds............................... For general corporate purposes.
See "Use of Proceeds."
Proposed Nasdaq National Market symbol........ "ETIN"
</TABLE>
Unless otherwise noted, the information in this prospectus assumes that
all outstanding shares of preferred stock are converted into common stock upon
the closing of this offering and that the underwriters do not exercise their
option to purchase an additional 675,000 shares of common stock from us to
cover over-allotments, if any.
The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of December 31, 1999, plus
1,473,628 shares issuable to holders of our preferred stock as payment-in-kind
dividends through February 29, 2000, and 721,124 shares issuable to holders of
our Series F preferred stock assuming the sale of shares in this offering at an
initial offering price of $11.00 per share. See "Related Party Transactions -
Securities Issuances and Loans." It does not include the following:
. options to purchase 2,330,563 shares of common stock granted under our
1997 and 1998 stock plans at a weighted average exercise price of $6.28
per share;
. 4,750,000 shares of common stock available for future issuance under
our 2000 Stock Incentive Plan and our 2000 Employee Stock Purchase
Plan;
. a warrant to purchase 181,250 shares of common stock issued to Sony
Electronics, Inc. at an exercise price of $8.52 per share; and
. 527,778 shares reserved for contingent future issuance to the former
stockholders of Acorn.
Please see "Capitalization" for a more complete discussion regarding the
outstanding shares of our common stock, the options and warrant to purchase our
common stock and related matters.
3
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Summary Financial Information
The following table presents summary financial data. You should read this
information together with the financial statements and the notes to those
statements appearing elsewhere in this prospectus and the information under
"Selected Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Unaudited Pro Forma Condensed
Financial Infomation."
The unaudited pro forma condensed statement of operations information for
the year ended December 31, 1999, gives effect to our acquisition of Acorn and
the spin-off of Spider as if those transactions had occurred on January 1,
1999. The following transactions are assumed to have occurred on January 1,
1999, in the pro forma as adjusted per share data in the pro forma as adjusted
statements of operations data and on December 31, 1999, in the pro forma as
adjusted balance sheet data:
. the issuance of 4,500,000 shares in this offering and receipt by us of
net proceeds of approximately $44.5 million assuming an initial public
offering price of $11.00 per share and after deducting the estimated
underwriting discounts and commissions and estimated offering expenses;
. the automatic conversion of all shares of preferred stock outstanding
as of December 31, 1999 into 9,560,188 shares of common stock;
. the issuance of 1,333,433 shares of common stock to the holders of our
preferred stock as payment-in-kind dividends as of December 31, 1999;
and
. the issuance of 721,124 additional shares of common stock to the
holders of our Series F preferred stock assuming the sale of shares in
this offering at an initial offering price of $11.00 per share. See
"Related Party Transactions - Securities Issuances and Loans."
Additional shares of common stock will be issued to the holders of our
preferred stock as payment-in-kind dividends subsequent to December 31, 1999.
Assuming this offering closes by April 15, 2000, the payment-in-kind dividend
will accrue through February 29, 2000 and we will issue 140,195 additional
shares.
<TABLE>
<CAPTION>
Years Ended
December 31,
--------------------------------------------
1999
Inception ----------------------
(March 6, 1996) Pro forma
December 31, 1996 1997 1998 Actual as adjusted
----------------- --------- --------- --------- -----------
(unaudited)
(in thousands, except share data)
<S> <C> <C> <C> <C> <C>
Statements of Operations
Data:
Revenue............... $ 480 $ 9,546 $ 17,664 $ 24,699 $ 26,707
Gross profit.......... 269 1,779 4,455 7,713 8,743
Loss from operations.. (1,802) (12,084) (9,509) (11,919) (10,597)
Net loss applicable to
common stockholders.. $ (1,809) $ (13,226) $ (11,464) $ (25,235) $ (13,997)
Per share data:
Basic and diluted net
loss per share....... $ (1.07) $ (7.09) $ (6.14) $ (13.50) $ (0.90)
Weighted average
common shares........ 1,697,417 1,866,585 1,867,941 1,869,803 15,596,317
</TABLE>
4
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<TABLE>
<CAPTION>
December 31, 1999
---------------------
Pro forma
Actual as adjusted
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(unaudited)
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............................... $ 6,204 $52,239
Working capital......................................... 7,533 52,719
Total assets............................................ 26,378 71,762
Long-term borrowings, net of current portion............ 1,722 1,722
Total stockholders' equity (deficit).................... (41,997) 61,946
</TABLE>
5
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RISK FACTORS
You should carefully consider the risks and uncertainties described below
before making an investment decision. Our business, financial condition and
operating results could be adversely affected by any of the following factors,
in which event the trading price of our common stock could decline, and you
could lose part or all of your investment.
Risks Related to Our Business
The loss of any of our current major clients could cause our revenue to
decline.
A substantial majority of our revenue during the past two years has been
derived from on-going business with a few significant clients. If our
relationships with any of our major clients were to end, we would lose a
significant portion of our revenue. In 1999, Sony accounted for 27% of our
revenue and American Express, Safeway and Sega accounted for a total of 29% of
our revenue. Although we are continuing to provide services to Sega, we have
not finalized a new contract with it for those or future services. In addition,
American Express has reduced somewhat its level of services as compared to the
fourth quarter of 1999. We anticipate that our revenue will continue to be
concentrated with a limited number of clients and that the amount of revenue
from any particular client will vary from period to period.
Our arrangements with our clients may be cancelled with little or no penalty
and may not be indicative of our future business.
Our agreements with our clients generally provide for services and payment
on a month-to-month basis. Under most of our existing contracts, our clients
may reduce or cancel their agreements with us with little or no penalty. In
addition, we sometimes perform work for a client without a written agreement.
Consequently, you should not anticipate our future revenue based on the number
or identity of the clients we have, the level of services we have performed for
those clients in the past or the scope of our existing agreements with those
clients. See "Business-Our Clients" for further information regarding our
arrangements with our clients.
Our quarterly operating results may fluctuate, which could cause our stock
price to decline.
Our revenue and operating results may vary significantly from quarter-to-
quarter due to a number of factors. If our operating results are below market
expectations, the price of our common stock may decline. Factors that have
affected our operations in the past and that may affect our operations in the
future, and that could cause quarterly fluctuations, include:
. the beginning, ending or deferral of significant services for clients
during a quarter, particularly when we must add personnel and other
resources in advance of new client initiatives;
. variations in the number, size and scope of our clients' direct-to-
customer initiatives, which in the past have ranged from small pilot
programs involving only a few of our employees to nationwide programs
using over fifty new employees;
. the utilization of our employees and communications center facilities,
which can be affected significantly, for example, by reassigning or
terminating personnel following the completion of a client's
initiative or by opening a new facility in anticipation of future
business;
6
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. fluctuations in demand for our clients' products, which are beyond our
control but which directly affect our revenue as a substantial portion
of our client billings depends upon the time our personnel devote to
client's customers or, under a new contract with a major client, are
based on the client's sales generated from our operation of its
direct-to-customer initiative;
. expenses incurred in connection with acquisitions, such as our recent
acquisition of Acorn, which are part of our strategy to broaden and
expand our service offerings; and
. expenses related to our sales and marketing efforts, which are
expected to increase in 2000.
We are devoting significant time and money to expand our Strategic Consulting,
Technology Solutions and Customer Knowledge services, and if we are unable to
generate sufficient additional revenue from these efforts, our operating
results will be harmed.
We are expanding our Strategic Consulting, Technology Solutions and
Customer Knowledge professional services as part of our plan to increase our
revenue and operating margins in the future. For example, we recently acquired
Acorn to significantly enhance our database marketing and analysis
capabilities. If we are unable to generate enough additional revenue to cover
our increased costs associated with these activities, our margins and financial
results may be impaired.
Our e-Operations generate a substantial majority of our revenue and therefore a
decrease in its gross margins could have a significant negative effect on our
overall gross margins.
Our e-Operations have and are expected for the foreseeable future to be
our major source of revenue and therefore the gross margins for these services
have a substantial effect on our overall gross margins. We must continue to
rely on providing high-end, value-added services to maintain or improve gross
margins in this area of our business. There are relatively few competitive
barriers to providing communications center operations, as they do not
generally require a specialized labor force or facilities. For these reasons,
we may be vulnerable to competitive pressures in this area of our operations,
which could negatively affect our gross margins.
The IRS may challenge the valuation of Spider that we used in accounting for
the spin off and, if we were required to recognize a significant taxable
dividend, our operating results and financial condition could be harmed.
The value of Spider in the spin off was based on an independent third
party appraisal. If the IRS were to challenge our valuation method and require
us to recognize a taxable dividend, we could lose some or all of the future tax
benefits of our net operating loss carry forwards or recognize taxable income
if the tax resulting from the Spider spin off exceeded our net operating loss
carry forwards. Any of these events would negatively affect our financial
results and condition.
Several of our executive officers recently joined Etinuum and may take time to
become fully integrated into our business.
Ten of our fifteen executive officers joined us in 1999, some from other
industries. In addition, six of our new officers are located in California,
Connecticut or Massachusetts and do not have frequent face-to-face contact with
the other members of our management team. The combination of the need for a
number of our officers to continue developing expertise in our operations and
for our management team to become integrated may place a strain on our ability
to implement our strategies as rapidly and effectively as we would desire.
7
<PAGE>
If we do not successfully build a sales and marketing organization, we will
continue to strain our senior management personnel and may miss business
opportunities.
Most of our revenue to date has been generated by the sales efforts of our
senior management and key technical personnel. In the past, we have not been
able to pursue some new business opportunities because of our limited personnel
resources. We have only recently hired a director of marketing as well as two
dedicated sales personnel. Because of the intensely competitive employment
environment, we may not be successful in attracting and retaining the
additional personnel we need to build our sales and marketing organization.
If we do not successfully hire, train and retain sufficient personnel, we may
be unable to meet our obligations to existing clients or take on work for new
clients and we may incur unnecessary costs.
Some client initiatives have required that we hire a substantial number of
new employees for our e-Operations services in a relatively short period of
time. During 1999, we added approximately 300 employees in e-Operations. In
some cases, it may be difficult to hire and train sufficient personnel as
quickly as might be desired to meet a client's needs. It generally takes two to
five weeks to train a new employee. In addition, a substantial portion of our
services is for clients in regulated industries and may require that our
personnel working on behalf of these clients be licensed by governmental or
regulatory agencies. Some of our personnel must be extensively trained and pass
rigorous tests to obtain licenses, such as NASD Series 6, 7 and 63 broker
licenses. We have experienced, and may in the future experience, difficulty
getting personnel licensed as quickly as necessary to meet existing and new
clients' programs. This may harm our relationships with our current clients and
may limit our ability to take on new clients. Additionally, if we have higher
than anticipated turnover, we may have to absorb costs of training new
personnel in excess of the costs to be paid by our clients.
Our operations also require the services of highly-skilled employees, such
as database programmers, Web developers and personnel with advanced analytic
capabilities, for which competition is particularly intense, especially in
Internet-related fields. In addition, because our EtinuumWebDirect System is
unique, some new employees will require substantial training. In addition, we
face the issues of escalating recruitment and labor costs and expectations of
significant benefits.
If we do not successfully put in place the procedures, systems and personnel
necessary to manage and support our expansion, we could have difficulty
coordinating our business and financial operations.
Since the beginning of 1999, we have expanded our operations substantially
in several ways, including increasing our services offerings, opening a new
communications center in Kansas, acquiring Acorn and adding over 350 new
personnel. To manage the expansion of our business, we must:
. improve existing and implement new managerial, operational and
financial controls, reporting systems and procedures;
. maintain and expand our financial management information systems;
. hire additional personnel who are trained in managing these types of
systems; and
. improve communications among our management and operations personnel.
If we fail to address these issues, our operations and financial results
could be harmed because of the inability of our infrastructure to support our
levels of business activity.
8
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We plan to incur substantial expenses to build our brand awareness, and if we
are not successful our operating results and competitive position could be
harmed.
We believe that establishing our brand and reputation is critical for
attracting and retaining clients, particularly large established companies such
as American Express and Sony. In addition, we believe building brand awareness
is especially important for us because a number of our competitors have
established brand names and reputations. See "Business-Competition" for
information regarding our competitors. To promote our brand, we plan to
significantly increase our marketing expenses. If we are not successful in
building brand awareness, we may be unable to attract new clients and increase
our revenue sufficiently to cover our additional expenses.
Our recent transfer to Spider of software assets upon which we rely will lessen
our control over our primary technology platform and divert the attention of
some of our management and technical personnel.
To date, we have used our EtinuumWebDirect System as the technology
platform in the vast majority of solutions we have developed for our clients.
In November 1999, we transferred the proprietary software that we developed and
that is used in our EtinuumWebDirect System to a newly-formed subsidiary,
Spider. We then distributed all of the stock of Spider to our stockholders.
Although we have a 20-year non-exclusive license from Spider to use this
software, as well as other protections, we no longer
control the development of the software or the right to license it to third
parties. If Spider were to cease operations, or otherwise cause us to have to
take over development of its software, or if the Spider software does not meet
our requirements in the future so that we would need to develop new software,
we would incur significant costs and could experience substantial delays in
implementing solutions for our clients, which would harm our business. In
addition, Paul Tartre, president of our Technology Solutions group, will spend
40% of his time on Spider matters, and Timothy O'Crowley, our president and
chief executive officer, will be chairman of the board of directors of and a
consultant to Spider. These roles will divert time that these individuals would
otherwise spend on our matters.
Spider has financial obligations to us in connection with the spin-off, which
it may be unable to repay unless it is able to generate revenues or obtain
financing.
In connection with the spin-off, we distributed $1 million to Spider. We
also agreed to share some facilities, supplies and personnel with Spider, for
which it agreed to pay us specified fees. During the fourth quarter of 1999,
Spider's share of these expenses was approximately $525,000. In addition, we
paid salaries for Spider's employees of approximately $530,000 during that
quarter. We are continuing to pay all of these expenses on behalf of Spider. We
have accounted for the $1 million distribution as a long-term receivable, which
is to be repaid by Spider's minimum royalty obligation, and for the other
amounts due us as current receivables. Spider will have to generate revenue or
obtain third-party financing in order to pay its obligations to us. If Spider
was not able to pay its obligation to us, it would have a negative effect on
our results of operations in the period in which the losses are recognized. We
will evaluate on a quarterly basis whether, and to what extent to continue
funding Spider.
Federal, state and other agencies may require us to have licenses for some of
the activities we conduct on behalf of our clients. We have not always had all
the licenses we needed, which exposes us to possible actions for damages or
other penalties.
Some of our activities for financial services, mortgage broker and
insurance clients and relating to telephone contacts with customers are
regulated by federal, state and other regulatory agencies. Their regulations
may require that we and, in some cases, our employees who are involved in those
activities, be licensed. We have not always had all the licenses we needed.
This could expose us to regulatory or private actions for damages or penalties.
New regulations and modifications to existing regulations may be adopted at any
time. In addition, the content and geographical scope of our clients'
initiatives change from time to time, which may make other regulations
applicable. Some agreements with our clients require us to indemnify them if we
are not in compliance with applicable regulations. We cannot assure you that we
will be in compliance with all applicable regulations in the future.
9
<PAGE>
We may selectively acquire complementary businesses to broaden our services
offerings, but if we are not successful in integrating acquired companies or
identifying attractive acquisition candidates, our operations and financial
results could be harmed.
We recently acquired Acorn in Shelton, Connecticut to significantly
enhance our database marketing and analysis capabilities. The integration of
Acorn into our operations will require, among other things, educating our
personnel about Acorn's capabilities and establishing good communications
channels to overcome the challenges arising from its geographic separation from
our other facilities. If we are not successful in these efforts, we will not be
able to effectively market Acorn's capabilities to existing and potential
clients or realize the full economic benefits of the acquisition. We must also
carefully evaluate possible acquisition candidates as the acquisition process
can be costly and time consuming and involve unforeseen liabilities, which
could harm our operations and financial results.
A contract with a major client prohibits us from providing some services to
other clients, which may limit our potential client base and our ability to
take advantage of skills our personnel have developed through working on
particular initiatives.
We have a contract with a major client that currently prohibits us from
working on competing initiatives for other clients or allowing our employees
who have worked on the client's initiative to work on a competitor's
initiative. We may enter into contracts with similar provisions in the future.
We could pay substantial additional purchase consideration to the former
stockholders of Acorn.
In connection with our acquisition of Acorn, if Acorn achieves its earn-
out goals, we will pay substantial additional cash and stock consideration to
the former stockholders of Acorn. The non-cash amortization of this additional
purchase consideration could significantly affect our earnings over the next
five years.
Our limited operating history makes it difficult for you to evaluate our
business, prospects and an investment in our common stock.
Although we were incorporated in March 1996, we did not begin providing a
number of our current services to clients until mid-1997. Our experience with
some services we offer, such as the database marketing and analysis
capabilities we significantly enhanced in October 1999, are more limited.
Because of our limited operating history, we may encounter unexpected problems
and expenses. These uncertainties make it difficult for you to evaluate our
business, prospects and an investment in our common stock.
We have incurred losses since inception and expect to incur losses for the
foreseeable future.
We have incurred net losses of approximately $36.2 million for the period
from inception (March 6, 1996) through December 31, 1999. Our stockholders'
deficit was approximately $42.0 million at December 31, 1999. We expect to
incur losses for the foreseeable future. In particular, we anticipate that our
sales and marketing expenses will increase substantially in the near future as
we add personnel and expand our brand awareness and other marketing efforts. We
do not anticipate that revenue will grow sufficiently in the near term to
offset these and other costs.
Because our sales and implementation cycles vary significantly, it is difficult
to predict when and if we will receive revenue from any particular client.
The sales cycle for our services is variable, typically ranging between a
few weeks to several months and, occasionally, much longer. In addition, the
time required to structure and implement a program for a client may vary
depending upon the complexity of the client's needs. This variability makes it
difficult for us to forecast future revenue amounts and timing. For example, in
the past we have hired and trained personnel in anticipation of a new client
program that was subsequently deferred. These types of events can negatively
impact our operating results.
10
<PAGE>
A breach of our e-commerce security measures could reduce demand for our
services and require us to increase expenses to address the problem.
Our activities involve the storage and transmission of proprietary and
confidential information, such as brokerage account data, customer lists and
credit card numbers. A party who is able to circumvent our security measures
could misappropriate proprietary information or interrupt our operations. Any
breach of our security measures could reduce demand for our services, damage
our reputation and expose us to litigation and possible liability. Our security
measures may not prevent security breaches, and failure to prevent security
breaches may disrupt our operations. In addition, we may be required to expend
significant capital and other resources to protect against security breaches or
to address any problems they may cause.
Our business and services may be negatively affected by risks related to the
Year 2000 problem.
The "Year 2000" problems of our clients, their vendors, our internal
systems and companies on the Internet generally could negatively affect our
systems or operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Year 2000 Issue."
Risks Related to Our Industry
We anticipate that the market for our types of services will become
increasingly competitive, which could impair our market position and our
financial results.
We expect that a number of existing and new competitors will enter our
market to take advantage of the trends toward direct-to-customer marketing and
outsourcing. A number of companies currently offer one or more of the same
services that we do. Many of these companies, such as the consulting arms of
the Big Five accounting firms, have greater name recognition, marketing,
technical and financial resources, and access to capital than we have. We
believe that competition for Strategic Consulting and Technology Solutions
services will be particularly intense as companies that had been concentrating
on Year 2000 issues refocus their efforts. We also face competition from the
in-house capabilities of existing or potential clients, which could increase if
economic conditions decline and companies take or keep programs in-house to
avoid layoffs. There are relatively few barriers preventing competitors from
entering our market. We do not own any patented technology that precludes or
inhibits competitors from offering the same services we offer. While
competition in any form can have a negative effect on our business, we believe
the greatest competitive threat to us would occur if a company were to offer
the full range of services we do on a more cost-effective or timely basis.
While we are not aware of any such competitors, our industry is experiencing
rapid consolidation, which increases the possibility that such competition
would occur.
The proportion of our activities for our clients involving the Internet is
increasing and therefore our business is becoming more dependent on continued
growth in the use and improvement of the Internet.
An increasing percentage of our clients' customers are using Web sites, e-
mail and other Internet-based channels of communication. In addition, we are
offering more Internet-related services, such as Web site user interface
implementation, to our clients. As a result, our future success is becoming
increasingly dependent on the continued expansion of, and reliance of consumers
and businesses on, the Internet. If consumers have difficulties when buying
products on the Internet, as happened with a number of Web sites last holiday
season, they may be reluctant to use the Internet in the future. In addition,
the Internet may not be able to support an increased number of users or an
increase in the volume of data transmitted over it. The Internet has already
experienced outages and delays as a result of damage to portions of its
infrastructure, and recently the operations of several Web sites have been
deliberately disrupted by unknown third parties. There can be no assurance that
the infrastructure, products or services necessary to maintain and expand the
Internet will be developed, or that the Internet will remain a successful
commercial medium.
11
<PAGE>
Consumers' concerns and possible legislation about privacy of consumer
information on the Internet may adversely affect our Customer Knowledge
business.
An important feature of our Customer Knowledge services is the ability to
collect and analyze customer data to refine and measure the effectiveness of
marketing programs. Privacy concerns may cause consumers to stop visiting Web
sites that collect data concerning their backgrounds, interests and preferences
or to resist providing the personal data necessary to support this capability.
Privacy concerns may also inhibit market acceptance of the Internet as a means
of commerce, particularly where the personal data may be highly sensitive to
the consumer, such as brokerage account activity. Privacy concerns could be
heightened by legislative or regulatory requirements that mandate notification
to Internet users that the data captured on specified Internet sites may be
used by marketing entities to address product promotion and advertising to that
user. Other new legislation regarding commerce on the Internet, such as content
and state taxation, could also negatively affect consumers use of the Internet.
We can make no assurances that such legislation or regulatory requirements will
not be adopted.
Risks Related to the Offering
After the offering, three existing stockholders will own over 50% of the
outstanding common stock and could control or strongly influence actions
requiring the approval of stockholders, which could be detrimental to your
voting and economic interests as a stockholder.
After the offering, our chief executive officer and two major
stockholders, each of which is represented on our board of directors, will own
51% of the common stock. See "Principal Stockholders' for additional
information about our stock holders. If these stockholders were to act
together, they could
substantially influence our business and control some stockholder votes. In
addition, this concentration of stock ownership may discourage someone from
making a tender offer or bid to acquire us at a price per share higher than the
then current market price.
Our stock price, like that of many other Internet-related and technology
companies, may be extremely volatile after the offering, which could negatively
affect your investment.
The market prices of securities of many companies, particularly those in
businesses related to the Internet, have been experiencing extreme fluctuations
in recent years, often unrelated to the companies' operating performance. The
market price for our common stock following this offering may be similarly
volatile and could decline or fluctuate in response to a variety of factors,
including:
. changes in our relationships with our major customers, such as
American Express, Safeway, Sega and Sony;
. the announcement of new services or pricing policies by us or our
competitors;
. acquisitions or strategic alliances by us or others in our industry;
. quarterly variations in our or our competitors' results of operations;
. changes in earnings estimates or recommendations by securities
analysts regarding us or other companies in our industry; and
. announcements of technological innovations that render our
EtinuumWebDirect System or other capabilities outdated.
12
<PAGE>
We may issue equity securities or seek debt funding in connection with
acquisitions, hiring of new employees, or strategic relationships, which may be
dilutive to stockholders or impose operational restrictions.
If we raise additional funds, make acquisitions, grant options or stock to
employees or consultants or seek to strengthen strategic relationships, as we
have done with Sony, through the issuance of equity securities, it will reduce
the percentage ownership of our stockholders. These stockholders may experience
additional dilution in net book value per share, and any additional equity
securities may have rights, preferences and privileges senior to those of the
holders of common stock. In addition, debt financing, if available, may involve
restrictive covenants that limit our operating flexibility with respect to some
business matters.
The substantial number of shares that will be eligible for sale in the near
future may cause the market price of our common stock to decline.
A substantial number of shares of common stock will be available for sale
in the public market following this offering, which could adversely affect the
market price of our common stock. This includes up to 9,241,392 shares of
common stock held by our current stockholders that may be sold in compliance
with Rule 144 under the Securities Act, following the 180-day lock-up period
from the date the registration statement, of which this prospectus is a part,
is declared effective by the SEC. In addition, holders of 11,738,549 shares of
common stock have the right to request a year after this offering that we
register their shares for resale. See "Description of Capital Stock-
Registration Rights" and "Shares Eligible for Future Sale" for a more detailed
description of the eligibility of shares of our common stock for future sale.
We will have broad discretion with respect to the use of proceeds from this
offering and if the proceeds are not applied effectively, our results of
operations could suffer.
As of the date of this prospectus, we cannot specify any of the particular
uses of the net proceeds we will receive from this offering. Our management
will have significant flexibility in applying the net proceeds of this
offering. For example, we may use the proceeds to expand existing operations or
to acquire complementary businesses, which could have significantly different
effects on our future operations. If our management does not apply these funds
effectively, our results of operations could suffer. Please see "Use of
Proceeds" for more information on the use of proceeds from this offering.
Some provisions of our charter documents may have anti-takeover effects that
could discourage a change in control, even if an acquisition would be
beneficial to our stockholders.
Our certificate of incorporation, our bylaws and Delaware law contain
provisions that could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our stockholders. These provisions
include:
. staggered three-year terms for members of our board;
. authorizing the issuance of shares of undesignated preferred stock
without a vote of stockholders;
. allowing only the board to call a special meeting of stockholders;
. prohibiting stockholder action by written consent; and
. requiring supermajority approval of the stockholders for some actions.
13
<PAGE>
As a new investor, you will incur substantial dilution as a result of future
equity issuances.
We have issued options to acquire common stock at prices significantly
below the initial public offering price. To the extent outstanding options are
ultimately exercised, there will be further dilution to investors in this
offering.
FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this prospectus. There are
risks and uncertainties relating to these statements, and there can be no
guarantee that these statements will prove to be correct. Forward-looking
statements include assumptions as to how we may perform in the future. When we
use words like "believe," "could," "may," "will," "estimate," "continue,"
"seek," "anticipate," "intend," "expect," "predict," "potential," and "plan" or
similar expressions, we are making forward-looking statements.
We have based these statements on our current expectations about future
events. Although we believe that the expectations reflected in our forward-
looking statements are reasonable, we cannot guarantee that these expectations
actually will be achieved. In evaluating these statements, you should consider
various factors, including the risks set forth in the section entitled "Risk
Factors" beginning on page 6. These risk factors may cause actual results to
differ materially from any forward-looking statements.
USE OF PROCEEDS
Assuming an initial public offering price of $11.00 per share, we will
receive net proceeds of approximately $44.5 million from the sale of 4,500,000
shares of common stock in this offering, or approximately $51.4 million if the
underwriters exercise their over-allotment of 675,000 shares in full, after
deducting the estimated underwriting discounts and commissions and estimated
offering expenses payable by us.
We intend to use the net proceeds of this offering for general corporate
purposes, including capital expenditures for new equipment and facilities and
operational expenses, such as personnel and sales and marketing. We plan to
relocate our northern California communications center operations to a new
facility in mid-2000 and to open a new communications center in late 2000 or
early 2001. We do not currently have any commitments for capital equipment or
other costs related to these new facilities. In addition, we may, if
appropriate opportunities arise, use an undetermined portion of the net
proceeds to acquire or invest in companies offering services or products
complementary to ours. However, we currently have no commitments or agreements
with any third party regarding any such potential acquisition or investment.
Pending such uses, we will invest the net proceeds in investment grade,
interest-bearing securities.
DIVIDEND POLICY
We have never paid or declared cash dividends on our common stock. We
currently intend to retain any future earnings to fund the development and
growth of our business. We do not currently anticipate paying any cash
dividends in the foreseeable future.
14
<PAGE>
CAPITALIZATION
The following table shows our capitalization at December 31, 1999:
. on an actual basis;
. on an unaudited pro forma basis giving effect to the automatic
conversion upon the closing of this offering of all outstanding shares
of preferred stock into 9,560,188 shares of common stock and the
issuance of 1,333,433 shares of common stock to holders of our
preferred stock as payment-in-kind dividends accrued through December
31, 1999; and
. on an unaudited pro forma basis as adjusted to reflect the issuance of
4,500,000 shares of common stock in this offering and the receipt by
us of net proceeds of approximately $44.5 million assuming an initial
public offering price of $11.00 per share, after deducting the
estimated underwriting discounts and commissions and estimated
offering expense, and the issuance of 721,124 additional shares of
common stock to holders of our Series F preferred stock assuming the
sale of shares in this offering at an initial offering price of $11.00
per share. See "Related Party Transactions-Securities Issuances and
Loans."
<TABLE>
<CAPTION>
December 31, 1999
---------------------------------------
Pro forma
as
Actual Pro forma adjusted
----------- ------------ ------------
(unaudited)
(in thousands, except share data)
<S> <C> <C> <C>
Long-term borrowings, net of current
portion.............................. $ 1,722 $ 1,722 $ 1,722
----------- ----------- -----------
Convertible Preferred Stock, subject
to mandatory redemption; 79,000,000
shares authorized, 35,255,741 shares
issued and outstanding actual;
convertible into 10,893,621 common
shares; no shares issued and
outstanding pro forma and pro forma
as adjusted.......................... 59,408 -- --
----------- ----------- -----------
Stockholders' equity (deficit):
Common stock, 170,000,000 shares
authorized, 1,881,444 shares issued
and outstanding, actual; 100,000,000
shares authorized, pro forma and pro
forma as adjusted; 12,775,065 shares
issued and outstanding, pro forma;
17,996,189 shares issued and
outstanding, pro forma as adjusted
.................................... 1 2 2
Additional paid-in capital........... -- 59,407 103,942
Unearned compensation................ (1,266) (1,266) (1,266)
Accumulated deficit.................. (40,732) (40,732) (40,732)
----------- ----------- -----------
Total stockholders' equity
(deficit)........................ (41,997) 17,411 61,946
----------- ----------- -----------
Total capitalization.............. $ 19,133 $ 19,133 $ 63,668
=========== =========== ===========
</TABLE>
The outstanding share information shown in the table above excludes:
. options to purchase 2,330,563 shares of common stock granted under our
1997 and 1998 stock plans at a weighted average exercise price of
$6.28 per share;
. 4,750,000 shares of common stock available for future issuance under
our 2000 Stock Incentive Plan and our 2000 Employee Stock Purchase
Plan;
. a warrant to purchase 181,250 shares of common stock issued to Sony
Electronics Inc. at an exercise price of $8.52 per share; and
. 527,778 shares reserved for contingent future issuance to the former
stockholders of Acorn.
An additional 140,195 shares of common stock will be issued to the holders
of preferred stock as payment-in-kind dividends subsequent to December 31, 1999
through February 29, 2000.
For additional information about our stock plans, see "Employee Benefit
Plans," and for information about the warrant issued to Sony Electronics, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
15
<PAGE>
DILUTION
The unaudited pro forma net tangible book value of our common stock at
December 31, 1999 was approximately $14.6 million, or $1.08 per share of common
stock. The unaudited pro forma net tangible book value per share represents the
amount of our total tangible assets less total liabilities, divided by
13,496,189 shares of common stock outstanding after giving effect to:
. the conversion of all outstanding shares of preferred stock into
9,560,188 shares of common stock upon the closing of this offering;
. the issuance of 1,333,433 shares of common stock to holders of our
preferred stock as payment-in-kind dividends accrued through December 31,
1999; and
. the issuance of 721,124 additional shares of common stock to holders of
our Series F preferred stock assuming the sale of shares in this offering
at an initial offering price of $11.00 per share.
See "Related Party Transactions - Securities Issuances and Loans" for
additional information about our preferred stock issuances. It does not include
shares that we may issue in connection with the acquisition of Acorn upon
Acorn's achievement of specified contingencies.
After giving effect to this offering and the receipt of approximately
$44.5 million of net proceeds from this offering, based on an assumed initial
public offering price of $11.00 per share and after deducting the estimated
underwriting discounts and commissions and estimated offering expenses, our
unaudited pro forma as adjusted net tangible book value at December 31, 1999
would have been approximately $59.1 million, or $3.29 per share. This amount
represents an immediate increase in pro forma net tangible book value of $2.21
per share to existing stockholders and an immediate dilution of $7.71 per share
to purchasers of common stock in this offering. Dilution is determined by
subtracting unaudited pro forma as adjusted net tangible book value per share
after this offering from the amount of cash paid by a new investor for a share
of common stock. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............... $11.00
Unaudited pro forma net tangible book value per share at
December 31, 1999.......................................... $1.08
Increase in unaudited pro forma net tangible book value per
share attributable to new investors........................ 2.21
-----
Unaudited pro forma as adjusted net tangible book value per
share after this offering.................................. 3.29
------
Dilution per share to new investors........................... $ 7.71
======
</TABLE>
The following table summarizes as of December 31, 1999, on the unaudited
pro forma as adjusted basis described above, the number of shares of common
stock purchased from us, the total consideration paid to us, and the average
price per share paid by existing stockholders and by new investors who purchase
shares of common stock in this offering, before deducting the estimated
underwriting discounts and commissions and estimated offering expenses:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ -------------------- Price Per
Number Percent Amount Percent Share
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)..... 13,496,189 75% $55,819,000 53% $4.14
New investors(1)............. 4,500,000 25% 49,500,000 47% 11.00
---------- --- ------------ ---
Total...................... 17,996,189 100% $105,319,000 100%
========== === ============ ===
</TABLE>
- ------------------
16
<PAGE>
(1) If the underwriters' over-allotment option is exercised in full, sales in
this offering will reduce the number of shares of common stock held by the
existing stockholders to approximately 72% of the total shares of common
stock outstanding after the offering and will increase the number of shares
held by new investors to 5,175,000, or approximately 28% of the total
shares of common stock outstanding after the offering. See "Plan of
Distribution."
The above table assumes no exercise of any outstanding stock options or
warrants. As of December 31, 1999, there were options outstanding to purchase a
total of 2,330,563 shares of common stock with a weighted average exercise
price of $6.28 per share. In January 2000, we issued a warrant to Sony
Electronics to purchase 181,250 shares at $8.52 per share. If any of these
options or the warrant are exercised, there will be further dilution to new
public investors. Please see "Capitalization," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Employee Benefit
Plans," and Notes 10 and 13 of Notes to Consolidated Financial Statements for
additional information about the outstanding options and warrant.
17
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
You should read the following selected financial data in conjunction with
our financial statements and related notes, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Unaudited Pro
Forma Condensed Financial Information," included elsewhere in this prospectus.
In particular, please see the information under the subheading "Overview"
beginning on page 20 and the subheading "Pro Forma Results of Operations" for a
discussion of the effects of our acquisitions of Protocall New Business
Specialists Inc. and Acorn and our spin-off of Spider.
Historical Presentation
The historical statements of operations data set forth below are derived
from and qualified by reference to our financial statements included elsewhere
in this prospectus. The historical periods are not necessarily indicative of
results to be expected in any future period.
Pro Forma Presentation
The pro forma financial data have been derived from our unaudited pro
forma condensed financial statements which were prepared to illustrate the
effects of certain transactions and events and the application of the net
offering proceeds. The unaudited pro forma consolidated statements of
operations data for the year ended December 31, 1999 give effect to our
acquisition of Acorn and the spin-off of Spider as if those transactions had
occurred on January 1, 1999. The unaudited pro forma consolidated balance sheet
data give effect to the sale of 4,500,000 shares in this offering at an assumed
initial public offering price of $11.00 per share, after deducting the
estimated underwriting discounts and commissions and estimated offering
expenses, as if this offering had occurred on December 31, 1999. The following
transactions are assumed to have occurred on January 1, 1999 in the pro forma
as adjusted per share data in the consolidated statements of operations and on
December 31, 1999 in the unaudited pro forma consolidated balance sheet data:
. the issuance of 4,500,000 shares in this offering at an assumed
initial public offering price of $11.00 per share, after deducting the
estimated underwriting discounts and commissions and estimated
offering expenses;
. the automatic conversion of all shares of preferred stock outstanding
as of December 31, 1999 into 9,560,188 shares of common stock;
. the issuance of 1,333,433 shares of common stock to the holders of our
preferred stock as payment-in-kind dividends as of December 31, 1999;
and
. the issuance of 721,124 additional shares of common stock to the
holders of our Series F preferred stock assuming the sale of shares in
this offering at an initial offering price of $11.00 per share. See
"Related Party Transactions - Securities Issuances and Loans."
An additional 140,195 shares of common stock will be issued to the holders
of preferred stock as payment-in-kind dividends subsequent to December 31, 1999
through February 29, 2000.
18
<PAGE>
<TABLE>
<CAPTION>
Period from
March 6, 1996
(inception) Years Ended December 31,
to December 31, ------------------------------------------------
1996 1997 1998 1999
--------------- ---------- ---------- ------------------------
Pro forma
Actual as adjusted
----------- -----------
(unaudited)
(in thousands, except for share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations:
Revenue................. $ 480 $ 9,546 $ 17,664 $ 24,699 $ 26,707
Direct cost of servic-
es..................... (211) (7,767) (13,209) (16,986) (17,964)
---------- ---------- ---------- ----------- -----------
Gross profit............ 269 1,779 4,455 7,713 8,743
Operating expenses:
Selling, general and
administrative........ 2,046 10,464 9,312 15,020 15,129
Depreciation and amor-
tization.............. 25 2,941 3,755 3,533 3,933
Research and develop-
ment.................. -- 458 897 1,079 278
---------- ---------- ---------- ----------- -----------
Total operating ex-
penses................ 2,071 13,863 13,964 19,632 19,340
---------- ---------- ---------- ----------- -----------
Loss of operations...... (1,802) (12,084) (9,509) (11,919) (10,597)
---------- ---------- ---------- ----------- -----------
Other (expense) income:
Loss from Spider........ -- -- -- (1,055) (3,320)
Interest income........ 11 245 266 134 134
Interest expense....... (16) (30) (17) (150) (194)
Loss on disposal of
equipment and other... (2) (26) (270) (20) (20)
---------- ---------- ---------- ----------- -----------
(7) 189 (21) (1,091) (3,400)
---------- ---------- ---------- ----------- -----------
Net loss................ $ (1,809) $ (11,895) $ (9,530) $ (13,010) $ (13,997)
========== ========== ========== =========== ===========
Net loss applicable to
common stockholders:
Net loss............... $ (1,809) $ (11,895) $ (9,530) $ (13,010) $ (13,997)
Accretion of mandatorily
redeemable convertible
preferred stock........ (90) (469) (864) --
Cummulative dividends to
preferred
stockholders........... -- -- -- (11,361) --
Loss on repurchase of
Series A preferred
stock.................. -- (1,241) -- -- --
Loss on Series C pre-
ferred stock........... -- -- (1,465) -- --
---------- ---------- ---------- ----------- -----------
Net loss applicable to
common stockholders.... $ (1,809) $ (13,226) $ (11,464) $ (25,235) $ (13,997)
========== ========== ========== =========== ===========
Basic and diluted net
loss per share......... $ (1.07) $ (7.09) $ (6.14) $ (13.50) $ (0.90)
---------- ---------- ---------- ----------- -----------
Weighted average shares
outstanding--basic and
diluted................ 1,697,417 1,866,585 1,867,941 1,869,803 15,596,317
========== ========== ========== =========== ===========
Pro forma net loss per
share, assuming conver-
sion of preferred stock
and accrued dividends:
Basic and diluted net
loss per share........ $ (1.26)
===========
Weighted average common
shares outstanding--
basic and diluted..... 10,364,936
===========
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------
1996 1997 1998 1999
------- -------- -------- ---------------------
Pro forma
Actual as adjusted
-------- -----------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet
Data:
Cash and cash equivalents.. $ 441 $ 2,235 $ 3,752 $ 6,204 $52,239
Working capital............ 268 1,897 7,082 7,533 52,719
Total assets............... 1,296 17,086 18,644 26,378 71,762
Long-term borrowing, net of
current portion........... 47 20 7 1,722 1,722
Total stockholders' equity
(deficit)................. (1,219) (12,920) (22,990) (41,997) 61,946
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with Selected Historical
and Pro Forma Financial Data and the financial statements and notes appearing
elsewhere in this prospectus. This discussion and analysis contains forward-
looking statements that involve risks, uncertainties and assumptions. Our
actual results may differ materially from those anticipated in these forward-
looking statements as a result of certain factors, including, but not limited
to, those stated in the Risk Factors section and elsewhere in this prospectus.
Overview
We provide an integrated set of strategic, technological, operational and
analytical solutions that takes our clients from concept to launch and
operation of their e-commerce and other direct-to-customer sales and marketing
initiatives. Our clients are typically Fortune 1000 and emerging Web-based
companies that sell complex products or employ complicated sales processes, and
require sophisticated outsourced service providers to help them conduct their
direct-to-customer initiatives. Our services enable our clients to rapidly
capitalize on market opportunities, access sophisticated technology, use the
services of highly trained personnel and improve operating efficiencies.
We incorporated in Colorado in March 1996 and reincorporated in Delaware
in August 1996. Through February 1997, our operating activities consisted
primarliy of hiring personnel, setting up our Denver headquarters and San Diego
facilities, developing our Web-based software and establishing client
relationships. Our revenue during this period was derived primarily from
technology development services.
In February 1997, we acquired Protocall, a customer support company in
Livermore, California. The net purchase price of Protocall after assumption of
liabilities was approximately $6.7 million. We recorded an intangible asset of
$3.0 million for acquired customer relationships and $3.6 million as goodwill.
We are amortizing the customer relationship intangible amount over three years
and the goodwill amount over five years. As a result of the Protocall
acquisition, our communications center services expanded. We opened our Denver
communications center in April 1997 and our Hayward, California communications
center in May 1997.
We grew our business significantly in 1998. This growth came primarily
from expanding our communications center and technology development services to
existing clients and adding new clients. During 1999, we continued to expand
our e-Operations services, which include our communications center operations,
and our Technology Solutions services, as we increased services to our major
clients and, to a lesser extent, added new clients. We opened a large
communications center in Fort Scott, Kansas in June 1999 to support this growth
and planned future growth.
In October 1999, we acquired Acorn, which provides strategic consulting
and data analytic services to its clients. The initial purchase price for Acorn
after assumption of outstanding borrowings was approximately $2.0 million.
Approximately $493,000 of the purchase price was allocated to acquired goodwill
and $950,000 to acquired intangibles. Goodwill will be amortized on a straight-
line basis over five years and intangibles will be amortized on a straight-line
basis over three years. We also agreed to make significant future cash and
stock payments to the former stockholders of Acorn if Acorn meets specified
earnings targets over the next three years. The non-cash amortization of this
additional purchase consideration could significantly affect our earnings over
the next five years.
Effective October 1, 1999, we transferred the rights to the proprietary
software that we had developed and that is used in our EtinuumWebDirect System
to a newly-formed subsidiary, Spider. We then distributed the stock of Spider
to our stockholders. Fifteen of our technical personnel and four sales
personnel became employees of Spider. Spider is now primarily responsible for
research and development
20
<PAGE>
efforts with respect to the transferred software. As a result, our research and
development expenses for the fourth quarter of 1999 and on a pro forma basis
for 1999 were, and are expected to be for the foreseeable future, lower than
historical levels.
For federal income tax purposes, the distribution of the Spider shares to
our stockholders was a taxable event to us. The taxable gain was determined
based upon an independent valuation of Spider after applying minority and
liquidity discounts. This value and our capital gain for federal income tax
purposes was $4.5 million, which was offset by 1999 tax losses which exceeded
that amount. To the extent the IRS requires the valuation of Spider to be
increased and the taxable gain exceeds the tax operating loss for 1999, we
would owe alternative minimum taxes, the payment of which would adversely
affect our cash flow. Any increase in the valuation would also decrease our net
operating loss carryforward.
In connection with the spin-off, we distributed $1 million to Spider. We
also agreed to share some facilities, supplies and personnel with Spider, for
which it will pay us specified fees. We have accounted for the $1 million
distribution as a long-term receivable which is to be repaid by Spider's
minimum royalty obligation. If Spider is unable to generate sufficient revenue
to pay its obligations, we may not be able to recover the $1 million or the
costs incurred or to be incurred on its behalf pursuant to agreements entered
into in connection with the spin-off. This would have a negative effect on our
results of operations in the period in which the losses are recognized.
To date, a substantial majority of our revenue has come from our e-
Operations services and nearly all of the remainder has been from Technology
Solutions services. In the fourth quarter of 1999, we began billing for our
Strategic Consulting services, which we had previously provided primarily as a
way to attract new clients for Technology Solutions and e-Operations services.
We also significantly enhanced our database marketing and analysis services in
the fourth quarter through our acquisition of Acorn. These types of
professional services traditionally have higher gross margins than our e-
Operations services.
Substantially all of our revenue to date has been based on time and
expenses as incurred. Recently we entered into a long-term contract with a
major client under which our revenues will be based primarily upon a percentage
of the client's revenues generated from our operation of its direct-to-customer
initiative. We may enter into additional contracts with similar terms in the
future. In addition, we have recently entered into fixed-price agreements for
Strategic Consulting services. To date, revenue under these fixed-price
agreements has been immaterial.
Direct cost of services consists primarily of compensation and benefits to
our employees engaged in the direct delivery of professional services related
to the development, implementation and support of programs for our clients.
Direct cost of services also includes materials, training, telecommunication
expenses and equipment necessary for execution of our clients' programs. Under
our agreements with Spider, we are not required to pay license fees for
transferred software until November 2002, which will have a positive effect on
our direct cost of services until that time.
Research and development expenses consist of charges, including labor and
materials, related to the development and enhancement of software and
technology platforms used in providing services to our clients.
Selling, general and administrative expenses consist primarily of
salaries, commissions, benefits, and related expenses for personnel engaged in
sales and client support; salaries and related expenses of executive
management, human resources, finance and administrative personnel; expenses
related to our facilities; marketing and branding expenses, including trade
shows and promotional events; and other general corporate expenses.
In January 2000, we issued a warrant to purchase 181,250 shares of common
stock to Sony Electronics, following discussions with Sony that had begun in
early 1999 to further strengthen our strategic relationship with Sony. The
value of this warrant is approximately $1.1 million which will be charged to
21
<PAGE>
operations in the first quarter of 2000. Sony has been an important client
since late 1997 and our development of the EtinuumWebDirect system was funded
in part by revenue from our work for Sony.
Depreciation and amortization expenses consist of the depreciation of
equipment used in our operations including phone switches and computer
equipment at our facilities.
Interest income is earned on cash balances in our bank accounts and short-
term investments. Interest expense is incurred on our debt and capital lease
obligations.
The terms of the Series F preferred stock financing provide that the price
per share paid for the Series F preferred will not be more than one-half the
initial price per share in this offering. If it is, we must issue additional
shares of common stock to the Series F preferred holders so that the price of
the Series F preferred when converted to common stock effectively equals one-
half of the price paid by the public in this offering. In addition, a charge
will be recorded of $13.9 million to net loss applicable to common stockholders
in the quarter in which the closing occurs due to this beneficial conversion
feature.
Pro Forma Results of Operations
The pro forma information takes into account the acquistion of Acorn and
the spin-off of Spider as if those transactions had occurred on January 1,
1999. On a pro forma basis, Acorn contributed $2.9 million in revenue during
1999. In addition, on a pro forma basis, Acorn contributed $1.5 million in
gross profit, while incurring $2.1 million in operating expenses, resulting in
a loss for the year of $0.7 million.
During the first nine months of 1999, on a pro forma basis, Spider
incurred $1.2 million in expenses related to support services such as
accounting, payroll, human resources and insurance. Spider also incurred $1.1
million in research and development expenses related to the continued
development of the EtinuumWebDirect System. On a going-forward basis, research
and development expenses will not include the effect of Spider. For the full
year 1999, Spider's operating expenses on a pro forma basis were $3.3 million.
22
<PAGE>
Historical Results of Operations
The following table sets forth for the periods presented data from our
consolidated statements of operations as a percentage of revenues. This data,
other than the pro forma financial information, has been derived from our
audited financial statements and should be read in conjunction with the
financial statements and notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Period from
March 6, 1996
(inception) Years Ended December 31,
to December 31, ---------------------------------
1996 1997 1998 1999
--------------- ---- ---- -------------------
Pro forma
Actual as adjusted
------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenue....................... 100% 100% 100% 100% 100%
Direct cost of services....... (44) (81) (75) (69) (67)
---- ---- --- ---- ----
Gross profit.................. 56 19 25 31 33
Operating expenses:
Selling, general and
administrative............. 426 110 53 61 57
Depreciation and
amortization............... 5 31 21 14 13
Research and development.... -- 5 5 4 1
---- ---- --- ---- ----
Total operating expenses.. 431 146 79 79 72
---- ---- --- ---- ----
Loss from operations.......... (375) (127) (54) (48) (40)
---- ---- --- ---- ----
Other (expense) income:
Loss from Spider.............. -- -- -- (4) (12)
Interest income............. 2 3 2 1 1
Interest expense............ (3) -- -- (1) (1)
Loss on disposal of
equipment and other........ -- -- (2) -- --
---- ---- --- ---- ----
Net loss...................... (376)% (124)% (54)% (53)% (52)%
==== ==== === ==== ====
</TABLE>
Comparison of Years Ended December 31, 1997, 1998 and 1999
Revenue. Revenue increased 39.5% to $24.7 million in 1999, from $17.7
million in 1998. Over half of the increase was due to growth in initiatives for
major existing clients. We also increased revenue by adding new clients and, to
a lesser extent through having a higher average billing rate. Furthermore, our
acquisition of Acorn contributed an additional $0.9 million during the fourth
quarter of 1999. In 1999, we discontinued working with some clients whose
initiatives did not require the types of services on which we are focusing.
Revenue increased 86.3% to $17.7 million in 1998 from $9.5 million in 1997.
Slightly more than half of this increase was due to a full year of revenue from
our three largest clients, which we had added in late 1997. The balance came
from the addition of new clients and the expansion of our Technology Solutions
services.
Direct cost of services. Direct cost of services in 1999 was $17.0
million, or 68.8% of revenue, as compared to $13.2 million, or 74.8% of
revenue, in 1998. On a dollar basis, the increase in direct cost of services
was due to the increase in activities related to providing our services. Direct
cost of services in 1998 was $13.2 million or 74.8% of revenue compared to $7.8
million or 81.4% of revenue in 1997. This dollar increase resulted from costs
related to increased services to new and existing clients. The improvements as
a percentage of revenue in 1999 and 1998 over the respective prior years were
related primarily to allocating fixed direct costs against increased revenue.
Selling, general and administrative expenses. Selling, general and
administrative expenses were $15.0 million, or 60.8% of revenue, in 1999
compared to $9.3 million, or 52.7% of revenue, in 1998. A substantial majority
of this growth in selling, general and administrative expenses resulted from
hiring
23
<PAGE>
additional management and support personnel. We also incurred expenses in
connection with opening a new communications center in Fort Scott, Kansas and
moving our headquarters facility in June 1999. Our acquisition of Acorn in
October 1999 resulted in additional selling, general and administrative
expenses of $0.3 million. In addition, we incurred $0.4 million in compensation
expense related to incentive stock options. Selling, general and administrative
expenses in 1998 were $9.3 million, or 52.7% of revenue, compared to $10.5
million, or 109.6% of revenue, for 1997. This decrease was primarily a result
of the termination of several management personnel acquired in the Protocall
acquisition.
Depreciation and amortization expenses. Depreciation and amortization
expenses in 1999 were $3.5 million compared to $3.8 million in 1998. The
decrease in depreciation and amortization expenses was a result of the disposal
or full depreciation of certain equipment from the acquisition of Protocall.
Depreciation and amortization expenses in 1998 were $3.8 million compared to
$2.9 million in 1997. The increase of $0.8 million in 1998 compared to 1997
resulted from the depreciation of equipment in our Hayward facility for a full
year and new equipment added during the year.
Research and development. Research and development expenses in 1999 were
$1.1 million compared to $0.9 million in 1998. The increase in research and
development expenses was a result of continued development and support of the
EtinuumWebDirect System. In October 1999, we transferred the rights to the
software used in the EtinuumWebDirect System to Spider and we then distributed
all of the stock of Spider to our stockholders. Consequently, research and
development expenses in the fourth quarter of 1999 were negligible. Research
and development expenses increased in 1998 to $0.9 million from $0.5 million in
1997 due to the continued development and support of the EtinuumWebDirect
System.
Interest income. Interest income in 1999 was $0.1 million compared to $0.3
million in 1998 and $0.2 million in 1997. Fluctuations from year to year were
due to preferred stock financings and the investment of the proceeds in short-
term financial instruments.
Interest expense. Interest expense in 1999 was $0.2 million. Interest
expense in 1998 and 1997 was negligible. Interest expense in 1999 resulted from
our borrowings against our lines of credit and leases for office equipment and
furniture.
Loss on disposal of equipment and other expense. In early 1998, we
disposed of telecommunications equipment we considered no longer useful in our
operations. The result was a $0.3 million loss.
24
<PAGE>
Selected Unaudited Historical Quarterly Financial Data
The following table sets forth certain unaudited consolidated statements
of operations data for the eight quarters ended December 31, 1999. In our
opinion, the quarterly data include all adjustments, consisting only of normal
recurring adjustments, considered necessary for a fair presentation of such
information. Operating results for any quarter are not necessarily indicative
of results for any future period.
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- --------- -------- -------- -------- --------- --------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $ 3,402 $ 3,646 $ 4,989 $ 5,627 $ 5,432 $ 4,879 $ 5,567 $ 8,821
Direct cost of
services............... (3,086) (2,688) (3,404) (4,031) (3,638) (3,420) (4,296) (5,632)
------- ------- ------- ------- ------- ------- ------- -------
Gross profit............ 316 958 1,585 1,596 1,794 1,459 1,271 3,189
Operating expenses:
Selling, general and
administrative........ 2,213 2,143 2,445 2,511 2,911 3,182 3,864 5,063
Depreciation and
amortization.......... 1,070 1,056 770 859 765 775 875 1,118
Research and
development........... 154 189 224 330 328 344 389 18
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses.............. 3,437 3,388 3,439 3,700 4,004 4,301 5,128 6,199
------- ------- ------- ------- ------- ------- ------- -------
Loss from operations.... (3,121) (2,430) (1,854) (2,104) (2,210) (2,842) (3,857) (3,010)
------- ------- ------- ------- ------- ------- ------- -------
Other (expense) income:
Loss from Spider....... -- -- -- -- -- -- -- (1,055)
Interest (income)...... (26) (87) (108) (45) (14) (45) (23) (52)
Interest expense....... 1 13 1 1 5 6 8 131
Loss on disposal of
equipment and other... 269 1 -- 1 -- 1 11 8
------- ------- ------- ------- ------- ------- ------- -------
Net loss................ $(3,365) $(2,357) $(1,747) $(2,061) $(2,201) $(2,804) $(3,853) $(4,152)
======= ======= ======= ======= ======= ======= ======= =======
Basis and diluted net
loss per common share.. $ (1.86) $ (2.11) $ (1.00) $ (1.17) $ (1.25) $ (1.57) $ (2.13) $(8.55)(1)
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
(1) Of this loss per share $6.06 is attributable to the charge for cumulative
dividends accrued to the preferred stockholders.
Liquidity and Capital Resources
We have raised $51.0 million of equity capital to date from the sale of
common and preferred stock, net of offering expenses.
Cash and cash equivalents at the end of 1997, 1998 and 1999 were $2.2
million, $3.8 million, and $6.2 million, respectively. The increases in cash
were primarily from the net proceeds from the issuance of convertible preferred
stock of $22.8 million in 1997, $11.8 million in 1998 and $14.5 million in
1999. The proceeds were used primarily to fund operating activities, capital
expenditures and acquisitions.
Cash used in operations for 1997, 1998 and 1999 was $9.5 million, $9.0
million and $6.6 million, respectively. Our negative operating cash flow
resulted primarily from our net losses experienced over these periods. During
these periods we continued to develop our communication centers, hire key
management and other personnel and expand our technology infrastructure to
support our growth.
Cash used in investing activities was $9.0 million, $1.2 million and $7.4
million for 1997, 1998 and 1999, respectively. We have invested in
communication centers, expanded our technology resources and enhanced our
support infrastructure. In 1997, we acquired Protocall for $6.7 million, of
which $3.3 million was in cash. We also spent $5.6 million for computer and
communications equipment and facilities expansion, including the opening of a
communications center in Hayward, California. During 1999, we opened a
communications center in Fort Scott, Kansas and moved our headquarters
operations, which resulted in capital investments in computer systems, facility
expansion, furniture and fixtures. Effective October 1, 1999, we purchased
Acorn for initial consideration of $ 2.0 million, of which $0.6 million was in
cash.
25
<PAGE>
Our financing activities have generated cash of $20.3 million, $11.7
million and $16.5 million for 1997, 1998 and 1999, respectively. Net proceeds
from the sale of preferred equity have generated cash of $22.8 million, $11.8
million and $14.5 million for 1997, 1998 and 1999, respectively. In June 1999,
we obtained a two-year revolving line of credit from Silicon Valley Bank.
Borrowings under this secured line of credit bear interest at the bank's prime
rate plus 1.5%. The credit limit is based on 80% of the eligible accounts
receivable balance up to a maximum credit limit of $5.0 million. In September
1999, we obtained a 30-month, $2.5 million credit facility secured by the
capital assets at the Fort Scott communications center and a junior lien on
most of our other assets. In the fourth quarter of 1999, we drew $2.5 million
against this line to purchase equipment for use in the Fort Scott facility.
In March 1999, we received an $800,000 grant from the Kansas Department of
Commerce and Housing to offset costs for instruction, curriculum development,
training equipment, facilities and other expenses associated with our Fort
Scott facility. Under the terms of the grant, we are required to maintain
specified employee and wage levels in our Fort Scott facility until the third
quarter of 2001. We have earned $336,000 from this grant, of which the State of
Kansas has paid us $151,000. If there are insufficient funds available to fund
this grant in the future, we may not be reimbursed for expenses covered by the
grant until funds become available, if at all.
In addition, in April 1999, we received a $400,000 loan from the Kansas
Department of Commerce and Housing under the Kansas Economic Opportunity
Initiatives Fund. The loan is interest free and will be forgiven in equal
amounts over a five-year period provided that we meet and maintain specified
employee and wage levels and do not vacate our Fort Scott facility during this
period. If we fail to meet these requirements, or otherwise breach the
agreement, we must repay all or part of the amount of the loan plus 12%
interest.
We believe that the proceeds from this offering together with our cash and
borrowing capacity will be sufficient to fund our activities for at least the
next 12 months.
If the offering is not completed in a timely manner, we will need to
decrease our planned business expansion efforts or raise additional capital
through debt or private equity placements to fund our expansion efforts over
this period. There is no assurance that such alternative financing will be
available on terms acceptable to us, if at all. In addition, although there are
no commitments or agreements with any third party with respect to any
acquisition of other businesses, products or technologies, we may, from time to
time, evaluate potential acquisitions of other businesses, products or
technologies. In order to consummate potential acquisitions, we may need to
issue equity or debt securities and these issuances may be dilutive to existing
investors.
Without the proceeds from this offering, management believes that current
cash on hand, funds available under a current bank line of credit and other
sources of liquidity are sufficient to fund our operations through December 31,
2000. To fund our operations beyond December 31, 2000 without this offering, we
would be required to raise additional capital through debt or private equity
financings, consistent with our prior practices.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No.133,
"Accounting for Derivative Instruments and Hedging Activities"("SFAS No. 133").
The Company is required to adopt SFAS No. 133, as amended by SFAS No. 137, in
2001. SFAS No. 133 establishes methods of accounting for derivative financial
instruments and hedging activities related to those instruments, as well as
other hedging activities. Etinuum has not entered into any derivative financial
instruments or hedging activities. As a result, management believes adoption of
SFAS No. 133 will not have a material impact on the financial statements.
26
<PAGE>
In December 1999, the staff of the Securities and Exchange Commission
issued its Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition."
SAB No. 101 provides guidance on the measurement and timing of revenue
recognition in financial statements of public companies. Changes in accounting
policies to apply the guidance of SAB No. 101 must be adopted by recording the
cumulative effect of the change in the fiscal quarter ending March 31, 2000.
Management has not yet determined the effect SAB No. 101 will have, if any, on
its accounting policies or the amount of the cumulative effect to be recorded
from adopting SAB No. 101.
Quantitative and Qualitative Disclosures about Market Risks
Market risks represent the risk of loss that may impact our financial
position, operating results or cash flows due to adverse changes in financial
market prices and rates. We are exposed to market risks from changes in United
States interest rates. Historically, and as of December 31, 1999, we have not
used derivative instruments or engaged in hedging activities.
We had long-term borrowings (including current maturities) of $3.2 million
as of December 31, 1999. Of this amount, $2.3 million bears interest at a fixed
rate of 13.9%. The fair value of the fixed-rate debt would change approximately
$10,000 for a 0.50% change in the level of interest rates.
We temporarily invest our excess cash in money market funds. Changes in
interest rates would not significantly affect the fair value of these temporary
cash investments because they are repriced on a daily basis.
Inflation
As a result of the relatively low levels of inflation during the last
three years, inflation did not have a significant impact on our results of
operations for those periods.
Income Taxes
We have historically concluded that there exists substantial doubt as to
the recoverability of our deferred tax assets. As a result, we have recorded a
valuation allowance of $9.5 million against those deferred tax assets. Our view
as to the ultimate recoverability of our deferred tax assets may change in the
near term based principally upon the successful execution of our business plan.
Year 2000 Issue
The "Year 2000" issue has been a general term used to describe the various
problems that may result from the improper processing of dates and date-
sensitive calculations by computers and other machinery after December 31,
1999. These problems arise from the inability of hardware and software to
distinguish dates in the "2000's" from dates in the "1900's" and from other
sources such as the use of special codes and conventions in software that make
use of a date field. We have not experienced any significant disruptions from
the Year 2000 rollover; however, we recognize the need to continue to ensure
that our operations will not be adversely affected by still undiscovered Year
2000 software failures.
To date, we have not incurred any material costs directly associated with
Year 2000 compliance efforts. We do not expect the total cost of Year 2000
problems to be material to our business, financial condition or operating
results. We will continue to evaluate any new software and hardware systems
that we may acquire to determine whether they are Year 2000 compliant. Despite
our current assessment, we may not identify and correct all significant Year
2000 problems on a timely basis. If the representations made by our various
vendors regarding Year 2000 compliance are inaccurate, additional Year 2000
compliance efforts may involve significant time and expense, and unremedied
problems could harm our business.
In addition, the software and hardware systems of our clients, third-party
service companies and others outside of our control may not be Year 2000
compliant. If these systems are not Year 2000 compliant, a systemic failure
beyond our control could result, including Internet, telecommunications or
general electrical failure. These type of failures would significantly
interfere with our ability to provide our services to our clients. If these
failures were prolonged, our business would be harmed.
27
<PAGE>
BUSINESS
Overview
Etinuum provides an integrated set of solutions that takes our clients
from concept to launch and operation of their e-commerce and other direct-to-
customer initiatives. Our services allow both traditional and Web-based
companies to more effectively market and sell to their customers and to support
new and existing customers while reducing the investments they may otherwise
have to make in technology, facilities and personnel infrastructure. Our
comprehensive range of services includes:
. Strategic Consulting. We provide strategic program design, specifying
the necessary technology platforms, customer communication processes,
data requirements and personnel skills necessary for the client's
initiative;
. Technology Solutions. We design and implement the software and
hardware components needed to rapidly deploy our clients' initiatives
and to link our customized technology platforms with the clients' and
their vendors' systems;
. e-Operations. We operate technology systems and provide high-level
customer support personnel and communications services on behalf of
our clients, conducting sophisticated transactions with their
customers via voice, e-mail, fax and real-time online communications;
and
. Customer Knowledge. We collect and analyze data to help our clients
improve their marketing efforts and customer relationships through a
better understanding of their customers' buying processes and
behaviors.
We enable our clients to implement their e-commerce strategies and
introduce new products and services by providing comprehensive direct-to-
customer services which are integrated with our clients' systems and
transparent to their customers.
Industry Background
The acceptance and rapid growth of the Internet has dramatically changed
the way businesses and consumers communicate, obtain information, purchase
goods and services, and conduct business. International Data Corporation, or
IDC, estimates that the number of users who make purchases over the Web will
increase from nearly 31 million in 1998 to more than 182 million in 2003, and
that the amount of worldwide e-commerce conducted over the Web will increase
from $50 billion in 1998 to about $1.3 trillion in 2003. Both new Web-based
companies and traditional providers of goods and services are transforming
their business processes into e-commerce processes in an effort to lower costs,
improve customer service and increase productivity.
Increasing use of e-commerce and associated direct-to-customer
initiatives. Emerging Web-based companies established to take advantage of
Internet sales opportunities are proliferating. To meet competitive pressures
from these companies, traditional businesses are reevaluating their sales and
marketing methods and increasingly seeking to sell directly to customers
through e-commerce and associated direct-to-customer initiatives rather than
relying solely on intermediaries, such as wholesalers and retailers. Direct-to-
customer initiatives use a combination of Web sites, e-mail and other Internet-
based communications, telephone communications, fax and mail. Clients and
customers may transition between communication methods over time, or even
during single purchases. A customer may, for example, receive a product offer
through direct mail, access the company Web site for product information, call
a toll-free number to order products and receive an e-mail confirming shipment.
Direct-to-customer initiatives generally result in lower distribution
costs and better control over the customer experience and provide the basis for
future targeted marketing efforts. Direct sales can also
28
<PAGE>
provide companies with valuable end-user customer information, including buying
patterns, feature and function preferences and customer support requirements.
This information can be used to design better products, enhance marketing
programs and improve overall customer satisfaction.
Increasing complexity of direct-to-customer initiatives. The process of
establishing e-commerce and other direct-to-customer initiatives is becoming
more complex as a result of the increasing sophistication of the products and
services being offered and, in many cases, the need to integrate the
initiatives into the existing business models of large traditional companies.
Comprehensive Internet strategies must include strategic and technological
solutions that combine e-commerce and other direct-to-customer support
initiatives. Additionally, most direct-to-customer initiatives require several
alternative points of contact between a company and its customers, including
voice, e-mail, fax, real-time online communications and mail. Companies are
recognizing that the task of quickly and effectively designing, building and
operating these initiatives requires a specialized range and level of skills,
technology and infrastructure.
Growing trend to outsource. Many companies, whether implementing new, or
expanding existing, e-commerce and other associated direct-to-customer programs
often lack sufficient expertise, resources or the technical infrastructure to
move rapidly from concept to launch and operation. The skills and
infrastructure required to create and implement these initiatives are in short
supply, and the complexity of these efforts is increasing. This complexity, the
rapid pace of technological change and the difficulty of building in-house
resources are driving companies to outsource the development of their e-
commerce programs. IDC forecasts that the worldwide Internet services market
will grow from $7.8 billion in 1998 to $78.5 billion in 2003, representing a
five year compounded annual growth rate of 59%.
Typically, outsourcing service providers focus on only a subset of the
complete range of services required to take an e-commerce or other direct-to-
customer initiative from concept to launch and operation. As a growing number
of companies offer more complex products and services online, we believe that
demand has increased for more sophisticated outsourced service providers. These
companies are seeking service providers that can offer an integrated approach
to the technological and personnel services required to rapidly capitalize on
market opportunities.
The Etinuum Solution
We design, build and operate direct-to-customer solutions that integrate
and coordinate sophisticated e-commerce initiatives encompassing online and
offline components. Our services consist of Strategic Consulting, Technology
Solutions, e-Operations and Customer Knowledge. We typically initiate our
services with a strategic consulting engagement involving a team of our
management and technical personnel working with the client to plan its e-
commerce or other direct-to-customer initiatives. Based upon the specific
client's strategy, internal capabilities and existing systems and
infrastructure, we will define a program to use all or some of our services to
meet their specific needs. We believe our comprehensive integrated services
approach allows our clients to:
Quickly capitalize on direct-to-customer market opportunities. Our
approach and services enable our clients to rapidly implement their e-commerce
and other direct-to-customer initiatives and take advantage of market
opportunities without lengthy start-up and in-house integration efforts. We
believe the expertise and infrastructure we have developed allow us to rapidly
and cost-effectively integrate new e-commerce initiatives and traditional
direct-to-customer programs. This integration creates an initiative that is
consistent across the various customer contact points and that is linked across
our, our client's and its vendors' systems. We also believe our experience
working with companies offering sophisticated products, such as financial
instruments and computer and electronic equipment, and using complicated sales
processes, such as those found in regulated industries and business-to-business
transactions, provides our clients with a competitive advantage as they
implement direct-to-customer initiatives. We believe that our ability to
improve time-to-market is particularly important for our target market of large
traditional and new Web-based companies that face urgent competitive needs to
establish direct-to-customer initiatives.
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Access sophisticated technology. We use advanced software technology and
an infrastructure developed specifically for e-commerce and other direct-to-
customer initiatives to provide our integrated services to clients. Our
EtinuumWebDirect System enables effective transaction processing and customer
support across multiple communications channels, and provides personalization,
routing and management of customer interactions. It allows us and our clients
to rapidly deploy and maintain the technology across multiple geographic
locations, company divisions and hardware platforms. Our infrastructure
includes advanced networking technology that provides intra- and inter-company
communication, distribution of the EtinuumWebDirect System, and hosting and
data warehousing capabilities. The systems and infrastructure have been
developed to be scalable to meet our existing and potential clients' growth
needs.
Improve the customer experience. We enable our clients to provide their
customers with a positive consumer experience, thereby maintaining and
promoting brand loyalty. Through our use of advanced technology, we can
communicate directly with our clients' customers by voice, fax, e-mail, and
real-time online communications. Our personnel educate customers about, and
assist them in obtaining, our clients' products and services. We believe we
offer our clients a superior level of service, including availability of 24
hour, seven day a week communications center services.
Access the services of highly-trained personnel. We train our personnel to
deal with our clients' complex products and complicated sales processes, which
we believe creates the basis for long-term client relationships. Some of our
clients work in regulated industries and therefore our personnel often must be
licensed by federal, state or other regulatory agencies in order to serve those
clients' customers. For example, our employees who work with some financial
services products must be licensed by federal and state authorities to act as a
securities broker/dealer and must have Series 6, 7 and 63 licenses from the
NASD. We believe that providing these high-level services allows us to capture
sensitive aspects of business that have not traditionally been outsourced.
Reduce investment and improve operating efficiencies. We have made
significant investments in operations infrastructure, including technology
platforms, systems hardware, communications systems and highly-trained
personnel. This infrastructure provides clients with access to our economies of
scale and expertise to rapidly grow their direct-to-customer business while
limiting their additional fixed costs that may otherwise be necessary to create
and maintain their own infrastructure. Our clients have the flexibility to
scale their growth and to evolve the range of their direct-to-customer
initiatives, on a variable cost basis, preserving scarce capital resources for
other business-critical purposes.
The Etinuum Strategy
Our goal is to be a leading integrated services provider to companies
developing e-commerce or other direct-to-customer initiatives involving complex
products or sales techniques. Our strategies to achieve that goal are:
Target clients that provide substantial growth opportunities. We target
clients that we believe provide significant opportunities for growth. We direct
our marketing efforts toward Fortune 1000 and new Web-based companies with
which we can develop long-term relationships. We believe that our current
clients generally are, or are positioned to be, among the leaders in their
industries. We look to grow our business with our clients by offering them
additional services as their direct-to-customer initiatives grow and by
offering them new services as our capabilities expand.
Pursue clients in specialized markets that require sophisticated
services. We intend to focus our sales efforts on businesses in markets that
require complex solutions and skilled personnel. We believe our expertise with
sophisticated products, such as financial instruments, and with complicated
sales
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programs, such as those found in regulated industries, gives us a competitive
advantage in marketing to clients with similar products and programs. In
addition, we intend to use our expertise to target clients in specific
industries, such as financial services.
Promote our brand through expanded marketing efforts. We believe that
building brand awareness and our reputation as a leading e-commerce solutions
provider is critical for attracting and retaining clients. We believe that no
existing company has established a prominent brand presence and that there
exists a market opportunity to establish our brand as a leading provider of
integrated services to companies developing e-commerce and other direct-to-
customer initiatives. We intend to build our brand awareness through targeted
branding efforts, focused on decision makers in various vertical markets. We
also plan to develop additional relationships with management consulting,
accounting, marketing and other professional firms that work with potential
clients.
Broaden and continue to strengthen our service offerings. We plan to meet
the evolving needs of businesses using e-commerce and other direct-to-customer
initiatives by adding to and improving our services through internal
development and strategic acquisitions. We believe we currently offer a range
of services, from planning through operating direct-to-customer initiatives,
and a level of expertise in complex products and sales processes, that
differentiates us from our competitors. Our focus will continue to be on
providing high value-added services. For example, we acquired the database
marketing and analysis firm Acorn in October 1999 to complement our existing
service offerings. We will continue to evaluate selected acquisitions to
complement our service offerings and seek the personnel required to develop and
implement comprehensive e-commerce direct-to-customer initiatives.
Continue to hire, train and retain talented people. Our business involves
the delivery of sophisticated services that require consultants, technical
personnel and other highly-trained people. We believe that attracting and
retaining outstanding personnel is essential to our growth. We seek management,
marketing and technical personnel with expertise that will enhance our
operations and growth opportunities. In addition, we provide significant
training for our new and existing employees to allow them to increase their
skills and responsibilities.
Etinuum's Services
We provide an integrated service offering to companies that have or wish
to implement e-commerce and other direct-to-customer initiatives. We offer our
services on an outsourced basis using our technical and personnel resources to
deliver added value to our clients. Our services consist of Strategic
Consulting, Technology Solutions, e-Operations and Customer Knowledge. We
consult with our clients to select appropriate third-party vendors for other
services, such as handling product distribution and some creative aspects of
direct-to-customer initiatives. At our clients' request, we will coordinate the
activities of the third-party vendors to enhance the smooth operation of our
clients' initiatives. We continually evaluate which services we wish to offer
on an outsourced basis to most effectively serve our clients. Our current range
of integrated services consists of:
Strategic Consulting. Our Strategic Consulting services are focused on
helping our clients increase sales and reduce costs, maintain customer loyalty
and develop better business processes. Strategic consulting during the initial
phase of a client engagement gives us the opportunity to develop a close, long-
term relationship with the client and provides the opportunity to work with the
client from inception to launch and operation of its initiative. Through our
strategic consulting, we determine the clients' needs and objectives, then work
with the clients to establish an overall program structure and to determine how
the technology platforms, customer communications, data requirements and
necessary personnel will work together. Steps in this process include:
. generating strategic options that address the complete range of issues
involved in establishing direct-to-customer initiatives, including
channels, branding, partnerships, pricing, technology deployment and
customer strategies;
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. assessing the strategic options against the market opportunities, the
competitive environment, the client's overall business strategy, its
existing business processes and systems, available resources and
technologies, and timing requirements;
. determining the optimal client-specific strategic solution, including
the scope of the initiative and related initiatives, broad technical
requirements, timing and the parties responsible for each segment of
the initiative; and
. designing the overall initiative, including all deployment plans for
technology solutions, communications center operations and customer
data analysis. The planning includes implementation schedules, revenue
and cost structures, personnel requirements, technical partnerships
and operations management.
Our personnel also work with clients and third-party marketing experts to
design the clients' product launches and marketing campaigns. For some clients,
we may provide specialized consulting services regarding regulatory issues that
are applicable to the client's direct-to-customer initiative. For example, we
consult with clients in the financial services business regarding compliance
with federal and state regulations.
Technology Solutions. We provide comprehensive technology design and
implementation services to facilitate e-commerce and other direct-to-customer
initiatives. Our solutions enable our clients to do business directly with
their customers via voice, e-mail, fax and real-time online communications.
Most of our technology solutions include implementation of our EtinuumWebDirect
System, which incorporates a Web-based software solution that we initially
developed and now license from Spider on a long-term basis. See "Related Party
Transactions -- Spin-Off of Spider Technologies" for additional information
about our license arrangement. Our EtinuumWebDirect System is specifically
designed to facilitate direct-to-customer initiatives using a modular design
approach that permits flexible and rapid implementation to meet a client's
specific needs. Our Technology Solutions services include:
. evaluating technology platforms to meet the clients' specific
requirements;
. installing, customizing and integrating the EtinuumWebDirect System or
other third-party technology platforms;
. designing the creative aspects of our EtinuumWebDirect System user
interfaces;
. customizing and configuring applications, such as customer interfaces,
order entry systems and customer information systems;
. integrating the direct-to-customer technology platform with the
clients' existing systems and, in most cases, to the clients' vendors'
systems;
. testing and documenting the systems; and
. providing on-going enhancements and optimization of the comprehensive
technical solution.
e-Operations. We use our customer representatives and communications
services to operate our clients' e-commerce and other direct-to-customer
initiatives. We have made significant investments in our infrastructure, such
as technology platforms, systems hardware, communications systems and highly-
trained personnel. We have designed our infrastructure specifically for
efficient and reliable operations with complex products and sales processes.
Our e-Operations services include:
. managing the operations of our clients' direct-to-customer systems and
customer databases from our technology and communications centers;
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. communicating with our clients' customers through voice, e-mail, fax
and real-time online communications;
. providing hosting and data warehousing for our clients;
. coordinating the activities of third-party vendors; and
. conducting one-to-one marketing programs that we design as part of our
Customer Knowledge services, including the upfront customer data
acquisition and subsequent program execution.
Our communications centers provide a full range of interaction between our
clients and their customers with a focus on services that require high levels
of skills, expertise and technology. Our communications center personnel are
assigned to specific clients' initiatives and are given extensive training in
the client's products and services in order to provide sales assistance and
technical support to our clients' customers. By using highly-trained personnel,
we are able to provide added value to our clients, and we become an integral
part of their businesses.
For our largest clients, we have personnel at two or more communications
centers to assure coverage, redundancy and reliability. In addition, some
clients have their own personnel at our communications centers to provide
assistance for complex programs and to increase client coordination. We have
servers in the technology centers of our Colorado, California and Kansas
facilities. The availability of multiple servers provides redundancy and back-
up to our clients.
Customer Knowledge. We offer sophisticated database marketing and analysis
services that are focused on understanding customers' buying processes and
behaviors to help our clients improve their marketing efforts and customer
relationships. Our Customer Knowledge services include:
. using analytical methods to define and identify the target population
for clients, and to advise clients about capturing key customer
information and using external data sources to support detailed
profiles of their customers;
. analyzing the clients' customer and prospective customer information
to find patterns of purchasing behavior and tying them into the
clients' marketing objectives of improving sales effectiveness,
building customer loyalty or acquiring new customers;
. implementing a relationship marketing system for clients, using a
combination of a proprietary technology platform and off-the-shelf
tools. This system accepts customer contact marketing from all
channels, including Internet, e-mail, Web forms, business reply cards
and calls to communications centers, and integrates this data into a
single view of the customer;
. analyzing the effectiveness of the marketing channels and the
conversion rates so that adjustments can be made to improve sales and
marketing programs; and
. building meaningful and actionable reports that are accessible over
the Internet through secured interfaces to enable clients to have
real-time access to the entire marketing campaign lifecycle and make
the appropriate marketing decisions.
Our Clients
We have provided Strategic Consulting, Technology Solutions, e-Operations
and Customer Knowledge services to clients in various industries. These clients
are generally either large established
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companies or emerging Web-based companies. Set forth below is a representative
list of our clients and the types of services we have performed or are
contracted to perform for them.
<TABLE>
<CAPTION>
Types Of Services
--------------------------------------------
Strategic Technology Customer
Client Name Consulting Solutions e-Operations Knowledge
- ----------- ---------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
American Classic Voyages* X X
American Express X X X
Autoweb.com X X X
ImproveNet X X
Pitney-Bowes* X X
Rx Remedy* X
Safeway X X X
Sega X X X
Sony X X X
</TABLE>
- ------------------
* These companies were initially Acorn clients.
Etinuum provides strategic and operational consulting to help our clients
assess the strategic options for e-commerce and other direct-to-customer
initiatives, then helps define the necessary business processes, infrastructure
and technological requirements. After this assessment stage, Etinuum develops
and customizes the required Web-based platforms, Web site interfaces,
networking infrastructure and links to the client's systems. We can
contemporaneously help develop a communications strategy, and hire and train e-
Operations customer communications representatives. Our representatives handle
the marketing, sales and support for our client's customers through a mix of
communication channels including voice, e-mail, fax, and real time on-line
communications. Etinuum hosts various applications and also may manage the
client's customer databases. Customer transactions and contacts across all
communications channels are processed through our technology platform, and can
link to the client's and their vendors' systems, including inventory and
shipping systems. Etinuum can provide on-going database marketing and analysis
focused on understanding customers' buying processes and behaviors to help our
client improve its marketing efforts and customer relationships.
During the past two years, we have derived a substantial majority of our
revenues from ongoing business with a few significant clients. For 1999, Sony
accounted for approximately 27% of our revenue, Sega accounted for 12% and our
next two largest clients, American Express and Safeway, accounted for an
aggregate of approximately 18%. The same four clients accounted for
approximately 54% of our revenue in 1998. We anticipate that a significant
portion of our revenues will remain concentrated with a few clients, but will
vary among clients from period to period.
Generally our work is performed and clients are charged based on time and
expenses according to the terms of written agreements. Recently we entered into
a contract with a major client under which our revenue will be based primarily
upon a percentage of the client's revenues generated by our operation of their
direct-to-customer initiatives. In addition, we have recently entered into
fixed-price agreements for some strategic consulting services. In some
instances, we will perform work for a client following expiration of a contract
or while the terms of a letter of intent, new contract or contract extension
are being negotiated. In those cases, we would not have a binding agreement to
rely on should a dispute arise with a client regarding delivery of or payment
for our services. Our contracts are generally terminable by the client on 30-
days' written notice with little or no penalty.
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Sales and Marketing
We market our brand and integrated service offering to large companies
that are establishing or expanding their direct-to-customer initiatives and to
new companies formed to take advantage of commerce opportunities on the
Internet. Our marketing efforts will be focused on two primary objectives:
. educating potential clients and third-party influencers on e-commerce
and other direct-to-customer strategies, the effective application of
technology to direct-to-customer initiatives and the role of
electronic services and operations in meeting direct-to-customer
business objectives; and
. positioning our company and brand as an acknowledged leader in
designing, building and operating e-commerce initiatives for complex
products and sales processes.
We believe the importance of our brand and reputation will increase as new
competitors enter our market. We also believe that no existing company has
established a prominent brand presence as a provider of our range of integrated
services to companies developing sophisticated e-commerce and other direct-to-
customer initiatives and that there exists a market opportunity to establish
our brand as a leader in that market. We intend to build our brand awareness
through marketing, focused on decision makers in various vertical markets, with
an emphasis on specific vertical markets where our experience and services
provide special value-added benefits to our clients. We have recently
established a core group of sales and marketing personnel to concentrate on the
financial services industry, in which we have substantial expertise.
Our efforts will include vertically-targeted direct campaigns utilizing
database marketing, advertisements in selected publications, an interactive and
educational Web site, information pieces published for industry forums and
educational seminars for high-level decision makers. We will promote our
expertise in trade forums and publications, and directly to prospective
clients.
We also plan to develop additional relationships with management
consulting, accounting, marketing and other professional firms that work with
potential clients. We have existing relationships with many of these firms
through our management team, board of directors and investors. We intend to
bring greater focus to accessing these contacts and exploring a range of
partnerships, alliances and other formal relationships.
To expand our efforts in both sales and marketing, we have recently put in
place dedicated resources consisting of a head of sales and a head of
marketing, as well as two sales professionals. We intend to hire several
additional sales professionals over the next few months and to strengthen the
sales process. Prior to establishing this organization, our sales efforts had
been made primarily by senior management and key technical personnel. These
people will continue to be an important part of our sales and marketing
efforts.
We anticipate incurring significant additional sales and marketing
expenses in the foreseeable future. These increased expenses may not be offset
by increased revenues, causing an adverse affect on our financial results.
Competition
We compete in the growing market of companies that support businesses
involved in e-commerce and other direct-to-customer initiatives. Many companies
offer, on an individual basis, one or more of the same services we do. In
addition, many potential clients could elect to perform these services in-
house. Our primary potential competitors in the areas in which we provide
services include the following:
. Strategic Consulting: consulting firms such as AnswerThink, Diamond
Technology Partners, Luminant, Mitchell Madison and the consulting
arms of the Big Five accounting firms;
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. Technology Solutions: technology integrators, such as Andersen
Consulting, Cambridge Technology, iXL, Octane, Razorfish, Sapient,
Scient, Seibel, SilkNet, USWeb/CKS and Viant;
. e-Operations: customer support service companies, such as EDS, Perot
Systems, PFSWeb, Stream, and Teletech; and
. Customer Knowledge: data mining and analytics firms, such as Axciom,
Centrobe, Experian and Harte Hanks.
We believe that the principal competitive factor in our market is the
ability to provide a comprehensive range of high-end services to clients
quickly and cost effectively. We believe that the other competitive factors in
our market are operating performance and reliability, ease of implementation
and integration, and price. We believe that we compete favorably with respect
to these factors.
We anticipate that competition in our market will increase substantially.
We have no patents that preclude or inhibit others from offering the same
services that we do. Many of the companies with which we compete today in
limited areas, and other companies that may enter our market, have
significantly greater name recognition and marketing, technical and financial
resources than we have. If they or any other company were to offer comparable
services on a more cost-effective or timely basis than we do, our business and
financial results could suffer.
Technology
We provide our integrated services using Web-based software technology and
an infrastructure developed specifically for e-commerce and other direct-to-
customer initiatives. Our infrastructure incorporates advanced networking
technology that provides intra- and inter-company communications, including
hosting and distribution of our software technologies. We assure a high degree
of reliability through multiple Internet services and telecommunication
providers, redundant Web servers, back-up power supplies, multiple
communications centers and other measures.
Our technology solutions include our sophisticated EtinuumWebDirect System
that provides personalization, routing and management of customer interactions
across multiple channels including voice, e-mail, fax and real-time online
communications. The EtinuumWebDirect System supports most standardized
services, protocols and interfaces for integration into our clients' and their
vendors' existing systems. Our Web-based platform includes three primary
components:
. a Website interface for customers and our customer representatives
that provides product, company and customer information as well as
other data sources available through the Web to dynamically build
context-relevant information screens;
. software applications to electronically process transactions with
custom links to our clients' and their vendors' existing systems in
order to handle order entry, inventory control, payment management,
product configuration, fulfillment and shipping, and similar
functions; and
. a customer database segment that maintains client and customer
information for transaction requirements and is structured to support
personalized marketing initiatives.
The EtinuumWebDirect System incorporates software code that was
transferred to Spider. We have a 20-year non-exclusive license to use the
software and, in general, to sublicense it to our clients. See "Related Party
Transactions--Spin-off of Spider Technologies" for more information about the
spin-off of Spider.
Our Customer Knowledge group uses sophisticated technologies and
analytical methods to enable our clients to maximize their marketing and
customer retention programs. The group has designed and
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developed database marketing software in Java on an Oracle platform. In
addition, the group employs various analytical techniques that have been shown
to be more effective than standard methods.
Personnel and Training
At December 31, 1999, we had 704 full-time employees. Of these, 35 were in
executive, finance, sales and marketing, human resources and other
administrative positions in the Denver headquarters office; 62 were in the
technology, communications and consulting facility in San Diego; and 580 were
in communications center operations in Northern California, Denver and Fort
Scott, Kansas. Approximately 20% of the employees in our communications centers
are management and technical personnel. We also now have 27 employees in our
Shelton, Connecticut office, principally engaged in delivering our customer
knowledge and strategic consulting services. In addition, at any given time we
may have at our communications centers a substantial number of people from
temporary agencies. These people generally become our full-time employees
following a period of training and temporary employment with us.
Many of our employees are highly trained, not only in various
technologies, but in important aspects of our clients' businesses. For example,
some of our senior personnel who consult with financial services institutions
have previously worked in that industry. In addition, we provide training to
our communications center personnel specifically related to a client's product
or services. This training is generally covered by our agreements with the
client and may take several weeks or more. Using the same financial services
institutions example, the training may entail obtaining a Series 6, 7 or 63
license from the NASD. In some cases, we may cross-train personnel to cover
different clients' programs to provide back-up. Because our communications
center personnel are highly trained, we generally pay them more and bill their
services at higher rates than do traditional call center employers.
Our success depends on our ability to continue to attract, retain and
motivate intelligent, skilled employees. Competition for these people,
especially those with technical and management capabilities, is particularly
intense now because of the strong economy and resulting growth of business
opportunities. We are adopting a stock purchase plan and will be expanding our
stock option program to provide additional incentives to our employees. None of
our employees is represented by any collective bargaining unit, and we have
never had a work stoppage. We believe our relations with our employees are
good.
Facilities
Our headquarters are located in approximately 15,700 square feet of leased
office space in Englewood, Colorado. This space is used by our executive,
financial, marketing and human resources personnel. The lease extends through
June 2005. Our San Diego personnel are located in a leased facility comprising
12,600 square feet, approximately 40% of which we are sub-leasing to Spider.
The lease for this facility expires in August 2003 and may be renewed for five
years. Our Shelton, Connecticut personnel are located in a 7,200 square foot
office under a lease that expires in April 2003.
We operate communications centers in Hayward and Livermore, California,
Denver and Fort Scott, Kansas. The lease for our 7,565 square foot Hayward
facility expires in May 2000 and the lease for our 12,424 square foot Livermore
facility expires in April 2000. We plan to consolidate our Northern California
operations in another facility in the near future. We have signed a new lease,
with an eight-year term commencing on completion of the building, for a 21,254
square foot building in Livermore but intend to sublease it and lease another
facility. Until that facility is available, we are extending our existing
Livermore lease on a month-to-month basis. Our Denver communications center is
in a 21,600 square foot leased facility. The lease on this facility expires in
January 2001. In June 1999, we opened our new 35,000 square foot communications
center in Fort Scott, Kansas. The construction was financed by the City of Fort
Scott and leased to us through June 2005. Based upon our experience in Fort
Scott, we believe that we can furnish and staff a new communications center in
approximately 120 days.
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Regulatory Matters
We provide services to companies in the financial services, insurance and
mortgage lending industries. These industries are extensively regulated by
federal, state and other agencies. Although compliance with many of these
regulations is generally the responsibility of our clients, we and our
employees must also meet certain requirements.
Our customer communications for these clients include responding to
inquiries from our clients' existing or potential customers about the clients'
products or services, developing leads for product sales based on criteria
established by our clients and collecting data from our clients' customers.
Regulations that may affect these activities for our clients may be adopted or
changed at any time. In addition, as the content and geographical scope of our
clients' initiatives change from time to time, regulations that previously did
not apply may become applicable. We attempt to monitor these changes and to
obtain licenses or make filings as necessary. In many cases, however, it is
unclear whether a regulation or license requirement applies to a client's
programs. In those instances, we seek clarification from the regulating agency.
We have not always had all of the licenses we needed. We cannot assure you that
we will be in compliance with all applicable regulations at all times in the
future. Enforcement or private actions could be brought against us for failure
to obtain necessary licenses.
Financial services. We provide assistance in marketing various mutual
funds and other financial products through a wholly-owned subsidiary. This
subsidiary and some of its employees must be registered with the SEC and
licensed by the NASD and state securities commissions. Some of our employees
who assist in the sales of financial products must pass a series of exams and
meet continuing education requirements in order to maintain their licenses. We
believe that we and our employees engaged in these activities are currently
registered and licensed as required.
Insurance services. We provide assistance in the marketing of insurance
products through a wholly- owned subsidiary. We currently have a client that is
marketing medical supplement insurance products in one state. In the past, we
have assisted in marketing annuity products in a number of states. We and our
employees who assist in the sales of insurance products are required to be
licensed by various state insurance commissions for the particular type of
insurance product to be sold and to participate in regular continuing education
programs which are currently paid for by us. Our subsidiary and its employees
are currently licensed in the states in which we are marketing insurance
products. We may not have held all necessary licenses at all times in the past.
Mortgage broker services. We provide assistance in the marketing of
mortgage lender's products through a wholly-owned subsidiary. We are not
currently providing these services. In the past, we have provided assistance to
clients that marketed their mortgage lender products in a number of states.
Most states have laws and regulations governing the registration or licensing
and conduct of persons who, among other things, directly or indirectly solicit,
accept or offer to accept an application for a mortgage loan. Some states may
require that we have a local office or an employee who has experience in
mortgage brokerage activities or has completed the state's exam or both. We are
currently licensed or exempt from license requirements in a number of states,
and are in the process of renewing or applying for licenses in other states.
Enforcement or private actions could be brought against us for failure to
obtain a mortgage broker or lender license in states in which we assist in the
marketing of mortgage-related products.
Business qualification laws. Because it is often a condition to obtaining
various licenses and because we often provide services for our clients to
customers located throughout the United States, we and our subsidiaries have
registered to do business as a foreign corporation in each state in which we or
they conduct business. Failure to maintain registration in a jurisdiction in
which it is required could expose us or our subsidiaries to taxes and penalties
and limit our or their ability to conduct litigation in those states.
38
<PAGE>
Telephone contacts. Some of our communications center activities relating
to telephone calls to residential telephone subscribers and telemarketing
practices are regulated by the FCC, FTC and state agencies. Some states require
us to register under their telemarketing statutes. We believe we are currently
licensed, exempt from license requirements or in the process of obtaining a
license in those states that regulate our telemarketing activities.
Internet use. There is an increasing number of laws and regulations
pertaining to the Internet. In addition, a number of legislative and regulatory
proposals are under consideration by federal, state and foreign governments and
agencies. The requirement that we or our clients comply with any new
legislation or regulation, or any unanticipated application or interpretation
of existing laws, may decrease the growth in the use of the Internet, which
could in turn decrease the demand for our or our clients' products and
services, increase our cost of doing business or otherwise have a negative
effect on our business, results of operations and financial condition. In
addition, applicability to the Internet of existing laws governing issues such
as property ownership, copyrights and other intellectual property issues,
taxation, libel, obscenity and personal privacy is uncertain.
Legal Proceedings
From time to time, we may be involved in litigation incidental to the
conduct of our business. We are not currently party to any material legal
proceedings.
39
<PAGE>
MANAGEMENT
Executive Officers and Directors
Our executive officers and our board of directors, as the board will be
comprised upon the closing of this offering, are as follows:
<TABLE>
<CAPTION>
Name Age(1) Position(s)
- ---- ------ -----------
<S> <C> <C>
Timothy C. O'Crowley(2)...... 44 Chairman of the Board, Chief Executive
Officer and President
G. Daniel Adams, Jr. ........ 41 Executive Vice President - Corporate
Operations
Sunil Gupta, Ph.D............ 45 Managing Director - Strategic Consulting
Steven Q. Hansen............. 35 Chief Financial Officer and Senior Vice
President
Timothy S. Hardin............ 47 President - e-Operations
Donald P. Hearn.............. 54 President - Financial Services Division
Jay D. Kirksey............... 43 Senior Vice President - Human Resources
Peter H. Kowalchuk........... 50 Senior Vice President - Marketing and
Communications
Shoba Murali................. 43 President - Customer Knowledge
James F. "Pat" O'Crowley..... 46 Executive Vice President - Corporate
Development
Patrick F. O'Neal............ 53 Managing Director - Sales
Jerry L. Parker.............. 56 Chief Operations Officer - Technology
Solutions
Raja Ramnarayan, Ph.D........ 44 Vice President - Customer Knowledge
Venkat V. Sharma............. 45 Chief Executive Officer - Customer
Knowledge
Paul A. Tartre............... 40 President - Technology Solutions and Chief
Information Officer
Stephen S. Hyde(3)........... 52 Director
Steven F. Piaker(3).......... 37 Director
Harold W. Pote(2)............ 53 Director
Rick L. Weller(2)............ 42 Director
Eric R. Wilkinson(3)......... 43 Director
</TABLE>
- ------------------
(1) As of December 31, 1999
(2) Member of Compensation Committee
(3) Member of Audit Committee
Timothy C. O'Crowley founded Etinuum in 1996 and has been our chairman,
chief executive officer and president since that date. From 1994 to 1996, Mr.
O'Crowley was chief executive officer and a director of FundMark Investment
Company Services, Inc., a consulting firm to the institutional asset management
industry, and managing director of Eden Financial Group, a consulting firm to
the financial products distribution industry. Before joining these firms, Mr.
O'Crowley was employed by E. F. Hutton and Company in numerous senior
management positions. He serves as a director of our subsidiary Acorn, chairman
of the board of directors of and a consultant to Spider, and a director of
Northern Trust Bank of Colorado. See "Related Party Transactions - Spin-off of
Spider Technologies" for a description of Mr. O'Crowley's consulting agreement
with Spider.
G. Daniel Adams, Jr. joined Etinuum in November 1999 as executive vice
president - corporate operations . Mr. Adams was chief operations officer from
1997 to 1999 and chief financial officer from 1996 to 1997 for Switch
Manufacturing, a consumer recreational products manufacturer and marketer where
he
40
<PAGE>
managed all aspects of the company's operations and strategic alliances with
partners. From 1994 to 1996, Mr. Adams was senior director - operations with
Kenetech Corp., a publicly-traded energy provider and capital equipment
manufacturer. Prior to 1994, Mr. Adams was an executive with Black & Decker, a
management consultant with McKinsey & Company and an engineer at Schlumberger.
Sunil Gupta, Ph.D., joined Etinuum in October 1999 as vice president -
Customer Knowledge in conjunction with our acquisition of Acorn and became
managing director - Strategic Consulting in January 2000. Dr. Gupta was vice
president - interactive and analytical services for Acorn from July 1998 to
October 1999. He was a professor of marketing at the University of Michigan
Business School from 1990 to 1998 and at Columbia University's Graduate School
of Business from 1983 to 1990. Dr. Gupta has also consulted with several
companies, most recently in the area of Internet marketing.
Steven Q. Hansen joined Etinuum in November 1999 as senior vice president
and chief financial officer. Mr. Hansen was vice president and acting chief
financial officer from August to October 1999, vice president - finance from
November 1998 to October 1999, and senior director - financial planning and
analysis from March 1997 to November 1998 for Convergent Communications, Inc.,
a publicly-traded integrated communications provider. From 1996 to 1997, he was
a director of finance for ICG Communications, Inc., a public competitive local
exchange carrier. From 1994 to 1996, Mr. Hansen was manager of financial
operations - Rocky Mountain division, for Pepsi Cola Company.
Timothy S. Hardin joined Etinuum in June 1997 as senior vice president -
client services and became president - e-Operations in October 1999. From 1989
to 1997, Mr. Hardin was a co-founder and president of Telelink Systems, a
teleservices company. From 1993 to 1995, he was a co-founder and director of
marketing for Market Reach Ltd. in London, England, a sister teleservices
company to Telelink.
Donald P. Hearn joined Etinuum in April 1999 as president - financial
services division. From 1995 to January 1999, Mr. Hearn was chairman and chief
executive officer of Chase Global Funds Services Company, a subsidiary of Chase
Manhattan Bank. From 1990 to 1995, he was an executive vice president with U.S.
Trust of New York in their mutual funds division. Prior to 1994, Mr. Hearn held
senior positions with First Data Investor Services, the Boston Company and
Dalbar.
Jay D. Kirksey joined Etinuum in November 1997 as senior vice president -
human resources. From 1994 to 1997, Mr. Kirksey was vice president of human
resources for ADT Security Services, Inc., a residential and commercial
security company. From 1993 to 1994, he was director of human resources for
Alert Centre, Inc. and from 1989 to 1993 he was director of human resources for
United Technologies Corporation.
Peter H. Kowalchuk joined Etinuum in July 1999 as senior vice president -
marketing and communications. From 1993 to July 1999, Mr. Kowalchuk was
director of international communications for Otis Elevator Company, a
subsidiary of United Technologies Corporation.
Shoba Murali joined Etinuum in October 1999 as president - Customer
Knowledge in conjunction with our acquisition of Acorn. Ms. Murali was
president of Acorn from September 1996 to October 1999. From January 1994 to
August 1996, she was co-founder, managing partner and a director of Equinox
Solutions Inc., a systems integration company. Prior to 1994, Ms. Shoba served
as artificial intelligence senior product manager for Digital Equipment and was
corporate accounts system integrations manager for financial services clients.
James F. "Pat" O'Crowley III joined Etinuum in May 1999 as executive vice
president - corporate development. From 1996 to May 1999, Mr. O'Crowley was a
founder and managing director of Coalter Group International, a business
consulting firm focused on improving clients' sales and profitability. From
January 1998 through May 1999, Mr. O'Crowley consulted with Etinuum on
strategic and operational matters. From 1993 to 1996, he served as vice
president international of HON Industries, a publicly-traded manufacturer of
office furniture and pre-fabricated fireplaces, and general manager of HON
Export Limited.
41
<PAGE>
Prior to 1993, he served as director of operations and finance and as general
manager for Latin American and Asian Operations for Tenneco's J. I. Case. Prior
to 1989, Mr. O'Crowley held a variety of senior finance, operations, marketing
and business development positions at International Harvester and its successor
company, Navistar.
Patrick F. O'Neal joined Etinuum as a managing director in September 1996
and was named managing director - sales in July 1999. He served as a member of
our board of directors from March 1996 to January 2000. Mr. O'Neal is also a
director of Spider and president of our subsidiaries, Intek Teleservices, Inc.,
Intek Insurance Agency, Inc. and Brokerage Administrators Corp. He has been an
officer and managing director for Eden Financial Group and FundMark Investment
Company Services, Inc. from 1982 to the present. Eden and Fundmark
substantially ceased operations in early 1996. Mr. O'Neal was a national
product manager at E. F. Hutton and Company from 1981 to 1982.
Jerry L. Parker joined Etinuum in May 1999 as chief operating officer -
Technology Solutions. From December 1998 to May 1999, Mr. Parker consulted
with us regarding computer systems and integration. From 1996 to December 1998,
Mr. Parker was chief executive officer of SSDS, Inc., a computer systems and
networking integration company. From 1993 to 1996, Mr. Parker was senior vice
president of the commercial division of BDM Technologies, now a part of TRW,
Inc., where he was responsible for a division that provided system integration,
networking and technology consulting to Fortune 1000 companies.
Raja Ramnarayan, Ph.D, joined Etinuum in November 1999 as vice president -
Customer Knowledge in conjunction with our acquisition of Acorn. Dr.
Ramnarayan has been chief technology officer for Acorn since January 1997. He
was a principal consultant for Microsoft Corporation from 1996 to 1997 and an
engineering fellow for Honeywell from 1983 to 1996.
Venkat V. Sharma joined Etinuum in October 1999 as chief executive
officer - Customer Knowledge in conjunction with our acquisition of Acorn. Mr.
Sharma founded and became chief executive officer of Acorn in 1994. Prior to
1994, he held positions at 3M and J. Walter Thompson. Additionally, he founded
and was president of C4 Information Services, a private market research company
for the cable television and communications industries, in 1994, and founded
and was president of VSA Technologies, a mainframe computer outsourcing
company, from 1990 to 1994.
Paul A. Tartre joined Etinuum in 1996 as a managing director and chief
information officer. Mr. Tartre was named president - Technology Solutions in
August 1999. From 1987 to 1996, Mr. Tartre was senior vice president and chief
information officer for Eden Financial Services and FundMark Investment Company
Services. From 1983 to 1986, he was a software developer at NCR, and from 1986
to 1987 he was director of software development at Apricorn, Inc. Effective
November 1999, Mr. Tartre began to devote 40% of his time to Spider. See
"Related Party Transactions - Spin-Off of Spider Technologies" for more
detailed information about Mr. Tartre's continuing role with Spider.
Stephen S. Hyde has been a director since January 2000. Since September
1999, Mr. Hyde has been chairman of the board of DiabetesManager.Com, a
provider of diabetes management over the Internet. Since December 1986, he has
been chairman and president of IG Ventures, Ltd. From September 1978 to
December 1986, he was chairman of the board and chief executive officer of Peak
Health Care, Inc., a public HMO company that he founded. Prior to September
1978, Mr. Hyde was a financial advisor to the U.S. Department of Health and
Human Services, a consultant with the Health Management Group and a consultant
with Arthur Young & Company. He is a director of Les Vergers du Roi Corp., a
privately-held argricultural production and sales business.
Steven F. Piaker has been a director since May 1998. In 1994, Mr. Piaker
joined Conning & Company, an investment management and research firm focusing
on insurance and financial services industries, as vice president and became a
senior vice president in 1997, where he is responsible for helping to manage
all aspects of Conning's private equity business. Conning & Company is the
managing member of Conning Investment Partners V, LLC, which serves as the
general partner of Conning Capital Partners V,
42
<PAGE>
L.P. one of our major stockholders. Since November 1999, Mr. Piaker has served
as a director of Spider.
Mr. Piaker is a director of Answer Financial, Inc., Clark Bardes Holdings,
Inc., Health Right Inc., MedSpan, Inc., Intersections, Inc. and Sterling
Autobody, Inc.
Harold W. Pote has been a director since February 1999. Since 1993, Mr.
Pote has been a general partner of The Beacon Group, a private investment,
strategic advisory and wealth management firm, which is affiliated with one of
our major stockholders, The Beacon Group III-Focus Value Fund, LP. From 1984 to
1988, he was Chief Executive Officer of First Fidelity Bancorporation and
Fidelcor, Inc., a predecessor company. Since November 1999, Mr. Pote has served
as a director of Spider. Mr. Pote is also a director of Norfolk Southern Corp.,
the American Craft Museum, Drexel University, the President's Foreign
Intelligence Advisory Board and MCP Hahnemann School of Medicine.
Rick L. Weller has been a director since May 1998. From October 1997 to
January 1999, Mr. Weller was our chief financial officer. Since November 1999,
he has been chief operating officer for Ionex Telecommunications, Inc.,
competitive local exchange carrier. Since November 1999, Mr. Weller has served
as a director of Spider. In April 1999, Mr. Weller formed Compass Partners to
develop a telecommunications company. Compass Partners was instrumental in the
formation of Ionex Telecommunications, Inc. From January 1999 to March 1999,
Mr. Weller was chief financial officer for USA Global Link, Inc., an
international telecom entity. From January 1990 to September 1997, Mr. Weller
was vice president of Sprint Communications Corporation, where he was
responsible for financial management.
Eric R. Wilkinson has been a director since February 1997. Since 1994, Mr.
Wilkinson has been employed by The Beacon Group, where he is responsible for
the management of The Beacon Group III - Focus Value Fund, LP. From 1989 to
1994, he was a partner of Apax Partners & Cie Ventures S.A., a European private
equity firm, where Mr. Wilkinson shared responsibility for the firm's principal
investments. Prior to 1989, he was a partner of Bain & Company, the strategic
consulting firm. Since November 1999, Mr. Wilkinson has served as a director of
Spider. He is also a director of Doctors Health, Inc., Eyeweb Inc.,
International Components Corporation, National Century Financial Enterprises,
Inc., OnCare, Inc., The Identity Group, Inc. and director and president of
Generac Portable Products, Inc.
Officers serve at the discretion of the board of directors. Timothy
O'Crowley and James F. O'Crowley III are brothers.
Board Composition
Upon the closing of this offering, our board of directors will consist of
three classes that serve staggered three-year terms as follows:
<TABLE>
<CAPTION>
Class Expiration Members
----- ---------- -------
<S> <C> <C>
Class I...................... 2001 Stephen Hyde and Eric Wilkinson
Class II..................... 2002 Rick Weller and Steven Piaker
Class III.................... 2003 Timothy O'Crowley and Harold Pote
</TABLE>
Board Committees
Following the offering, our audit committee will consist of Stephen Hyde,
Steven Piaker and Eric Wilkinson and our compensation committee will consist of
Timothy O'Crowley, Harold Pote and Rick Weller.
The audit committee will select the independent public accountants to
audit our annual financial statements and will establish the scope and oversee
the annual audit. It will review our internal accounting procedures and review
other services provided by our independent accountants. The compensation
43
<PAGE>
committee will establish and review general policies relating to compensation
and determine the compensation for all officers of the company and any other
employee that the compensation committee may designate from time to time. It
will approve and administer our stock option plans, except with respect to
persons subject to Section 16 under the Securities Exchange Act of 1934, and
employee stock purchase plan. Our board may establish other committees from
time to time to facilitate the management of the business and affairs of our
company.
Director Compensation
Our directors have not received cash or stock compensation for their
services as directors in the past. Our directors have been and will be
reimbursed for all reasonable expenses incurred in connection with their
attendance at meetings of our board and committee meetings of the board. After
the closing of this offering, directors who are not officers or employees of
Etinuum or any of our subsidiaries will receive options for board service under
our 2000 Stock Incentive Plan. Upon the effectiveness of the registration
statement of which this prospectus is a part, each eligible director will
receive an option to purchase 10,000 shares of common stock. In the future,
each eligible director will receive an option to purchase 10,000 shares
immediately upon his or her initial election as a director. We will also grant
to each eligible director, immediately following each annual meeting of
stockholders, an additional option to purchase 5,000 shares of common stock if
that director has served continuously as a member of our board since the prior
annual meeting. The options have ten year terms. They will terminate one year
after the director ceases to provide services to us either as a director or
consultant. The initial 10,000 share options will vest immediately and the
annual 5,000 share options will vest one year after the date of grant. Options
will stop vesting if a director ceases to provide services to us either as a
director or a consultant. Option grants to directors are automatic and
nondiscretionary, and the exercise price of the options must equal the fair
market value of our common stock on the date of grant.
Compensation Committee Interlocks and Insider Participation
Before this offering, our board of directors did not have a compensation
committee and all compensation decisions were made by the full board. Timothy
O'Crowley and Harold Pote served as a committee authorized to make limited
grants of stock options. Timothy O'Crowley participated in deliberations of the
board of directors concerning executive compensation during 1999. After this
offering, our compensation committee will make all compensation decisions,
except that our board of directors will make compensation decisions with
respect to Timothy O'Crowley. Mr. O'Crowley is chairman of the board of, and a
consultant to, Spider and was its chief executive officer from October 1999 to
January 2000. Mr. Pote is a member of Spider's board. Spider does not have a
compensation committee. In addition, Steven Piaker and Eric Wilkinson are
members of both our and Spider's boards of directors. No other interlocking
relationship exists between our board of directors or compensation committee
and the board of directors or compensation committee of any other company.
44
<PAGE>
Executive Compensation
Summary Compensation Table
The following table shows all compensation for services rendered to us in
all capacities that was awarded to, earned by, or paid to, our chief executive
officer and our four next most highly compensated executive officers whose
total annual salary and bonus exceeded $100,000 during 1999, whom we refer to
in this prospectus collectively as the "Named Executive Officers." We have
entered into agreements relating to the employment of the Named Executive
Officers that provide in some circumstances for severance payments upon
termination, other than for cause, of their employment and for the acceleration
of the vesting of their stock options upon a change in control.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
-------------------- -------------
Number of
Securities
Underlying
Name and Principal Options All Other Annual
Positions Salary Bonus Granted Compensation
- ------------------ ---------- --------- ------------- ----------------
<S> <C> <C> <C> <C>
Timothy O'Crowley ......... $ 216,000 $ 35,000 137,500 $50,560(1)
Chairman of the Board,
Chief Executive Officer
and President
Paul Tartre ............... $ 190,000 $ 45,000 0 $ 4,967(2)
Chief Information Officer
and President -- Technol-
ogy Solutions
Frank Richards(3).......... $ 165,000 $ 58,875 75,000(4) $ 3,224(5)
Chief Operating Officer
Timothy Hardin ............ $ 156,875 $ 20,000 42,500 $ 2,266(2)
President -- e-Operations
Patrick O'Neal ............ $ 160,000 $ 15,000 75,000 $ 4,540(2)
Managing Director -- Sales
</TABLE>
- ------------------
(1) Includes life insurance premiums of $1,730 paid for the benefit of Mr.
O'Crowley and $3,830 in matching 401(k) contributions made by us. In
addition, during 1999, Mr. O'Crowley received $45,000 as chief executive
officer of Spider. Mr. O'Crowley resigned as chief executive officer of
Spider in January 2000.
(2) Represents matching 401(k) contributions made by us.
(3) On January 13, 2000, Mr. Richards' responsibilities with us changed and he
resigned as an officer and director.
(4) These options were canceled in January 2000 as part of an amendment to Mr.
Richards' employment agreement.
(5) Represents life insurance premiums of $1,064 paid for the benefit of Mr.
Richards and $2,160 in matching 401(k) contributions made by us.
45
<PAGE>
Option Grants in 1999
The following table sets forth information regarding stock options granted
to the Named Executive Officers during 1999. All of these stock options were
granted under our 1998 option plan.
<TABLE>
<CAPTION>
Potential
Percent of Realizable Value
Total at Assumed
Number of Options Annual Rates of Stock
Securities Granted to Exercise Appreciation for
Underlying Employees Price Option Term(1)
Options During Per Expiration ---------------------
Name Granted Period Share Date 5% 10%
---- ---------- ---------- -------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Timothy O'Crowley....... 137,500(2) 13.9% $6.44 2009 $ 406,688 $ 850,000
Frank Richards.......... 75,000(3) 7.6% $6.44 2009 1,548,750 3,637,500
Paul Tartre............. -- -- -- -- -- --
Timothy Hardin.......... 42,500(4) 4.3% $6.44 2009 741,200 1,741,225
Patrick O'Neal.......... 75,000(2) 7.6% $6.44 2009 1,548,750 3,637,500
</TABLE>
- ------------------
(1) These are hypothetical values using assumed annual rates of stock price
appreciation prescribed by the rules of the SEC.
(2) Vested on date of grant.
(3) These options were canceled in January 2000 as part of an amendment to Mr.
Richards' employment agreement.
(4) Vest over a 48 month period.
Aggregate Option Exercises and Option Values
The following table sets forth information with respect to the Named
Executive Officers concerning option exercises for 1999, and exercisable and
unexercisable options held at December 31, 1999:
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
December 31, 1999 December 31, 1999(1)
------------------------- -------------------------
Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Timothy O'Crowley....... -- -- 500,692 36,808 $2,092,841 $148,559
Frank Richards.......... -- -- 73,993 144,757 599,477 899,298
Paul Tartre............. -- -- 167,008 32,992 849,105 182,485
Timothy Hardin.......... -- -- 22,594 44,906 9,846 226,454
Patrick O'Neal.......... -- -- 152,849 122,151 771,146 602,454
</TABLE>
- ------------------
(1) The value of in-the-money options is based on an assumed initial public
offering price of $11.00 per share, less the per share exercise price,
multiplied by the number of shares underlying the option.
Employment Agreements
We entered into an employment agreement with Timothy O'Crowley dated
August 2, 1996, which was amended as of October 1, 1999, that provides for an
annual salary of $240,000 until August 1, 2002. After that date, the agreement
continues on a month-to-month basis. The base salary may be increased by the
board of directors. Mr. O'Crowley may terminate his employment voluntarily upon
100 days' notice to us or immediately for cause if we violate a material term
of the agreement or move our headquarters from the Denver metropolitan area. We
may terminate his employment at any time without cause upon 20 days' notice or
immediately for cause. If Mr. O'Crowley is terminated without cause or if he
terminates the agreement for cause, he is entitled to receive monthly payments
equal to his last base salary for a period of
46
<PAGE>
18 months. The payments are not reduced by compensation Mr. O'Crowley may
receive from other sources. In addition, some unexercised options vest and
become exercisable by Mr. O'Crowley on the date of termination by us without
cause. The options remain exercisable for the lesser of the maximum length of
time the option is exercisable and one year after the date of termination. We
also pay for life insurance on Mr. O'Crowley's life in the amount of $20
million, of which $10 million is to be used to repurchase Etinuum stock from
Mr. O'Crowley's estate and the balance of which will be payable to his
beneficiaries and $10 million will be payable to us, and an automobile
allowance of $6,000 per year. Pursuant to the agreement, the options to
purchase 400,000 shares of common stock granted on February 14, 1997, will vest
six months and one day after the effective date of this offering. Mr. O'Crowley
has a non-compete agreement covering a period of 18 months following
termination of his employment unless he is terminated without cause.
We entered into an employment agreement with Frank Richards dated February
14, 1997, which was amended as of October 1, 1999. On January 13, 2000, we
entered into a new amendment that supersedes the prior agreements. Under this
amendment, we agree to pay Mr. Richards a salary of $13,750 per month from
January 1, 2000 through September 30, 2000. In the event we have not completed
our public offering by September 30, 2000, Mr. Richards shall remain our
employee for three additional months and receive a salary of $13,750 per month
until December 31, 2000. If Mr. Richards is terminated without cause, or if Mr.
Richards terminates the agreement due to our actions, he is entitled to receive
his full salary for the remainder of the term of the agreement. The payments
are not reduced by compensation Mr. Richards may receive from other sources.
Mr. Richards has relinquished his options to purchase 75,000 shares of our
common stock which were granted on October 1, 1999 but retains his options to
purchase 143,750 shares of our common stock.
We entered into a letter agreement with Timothy Hardin dated April 18,
1997, governing his employment with us. Under the agreement, we agreed to pay
Mr. Hardin an initial annual salary of $125,000 and to grant him stock options
to purchase 25,000 of our common stock at an exercise price of $13.92 per
share. The options vest over a three-year period beginning April 1998. If Mr.
Hardin is terminated without cause, he is entitled to receive salary and full
benefits for six months from the date of termination.
47
<PAGE>
EMPLOYEE BENEFIT PLANS
1997 Stock Option Plan. In February 1997, our board of directors adopted
and our stockholders approved our 1997 Stock Option Plan. We reserved a total
of 1,243,052 shares for issuance under the 1997 plan. We increased this number
to 1,368,052 in August 1997, to 1,505,552 in May 1998, to 1,755,552 in October
1999 and to 2,455,552 in February 2000. As of December 31, 1999, options to
purchase 1,795 shares of our common stock had been exercised, options to
purchase 1,283,625 shares were outstanding with a weighted average exercise
price of $5.94, and options to purchase 470,132 shares were available for
future grant. Following the closing of this offering, no additional options
will be granted under the 1997 plan.
1998 Stock Option Plan. In May 1998, our board of directors adopted and
our stockholders approved our 1998 Stock Option Plan. We reserved a total of
864,417 shares for issuance under the 1998 plan. We increased this number to
1,564,417 in October 1999. As of December 31, 1999, no options to purchase
shares of our common stock had been exercised, options to purchase 1,046,938
shares were outstanding with a weighted average exercise price of $6.66, and
options to purchase 517,500 shares were available for future grant. Following
the closing of this offering, no additional options will be granted under the
1998 plan.
2000 Stock Incentive Plan. In January 2000, our board of directors adopted
and our stockholders approved our 2000 Stock Incentive Plan. We have reserved a
total of 2,750,000 shares for issuance under the 2000 Stock Incentive Plan. No
options have been granted under the 2000 plan as of January 14, 2000.
Our 1997, 1998 and 2000 option plans provide for the grant of both
incentive stock options that qualify under Section 422 of the Internal Revenue
Code and nonqualified stock options. We can grant incentive stock options only
to our employees. We can grant nonqualified stock options to employees,
directors and consultants. The exercise price of incentive stock options must
be at least equal to the fair market value of our common stock on the date of
grant or, in the case of incentive stock options granted to holders of more
than 10% of our voting stock, not less than 110% of the fair market value. The
exercise price of nonqualified stock options must be equal to 85% of the fair
market value of our common stock on the date of grant under the 1997 plan, 50%
of the fair market value under the 1998 plan and 85% of fair market value under
the 2000 plan. Options generally have a term of ten years from date of grant,
but incentive stock options granted to stockholders holding 10% or more of our
stock have a term of five years. The maximum term of options granted under our
option plans is ten years. Options granted under our option plans generally
expire three months after the termination of the optionee's employment or
service. However, in the case of death or disability, the options generally may
be exercised up to 12 months following the date of death or disability. Options
will generally terminate immediately upon termination of employment or service
for cause.
Under our 1997 and 1998 plans, in the event of a major corporate
transaction such as a merger, share exchange or sale, or disposition of all or
substantially all of our assets, the vesting schedules of all options that
would have vested during the 12 month period following the major corporate
transaction will be accelerated. Our board has the option to accelerate the
vesting of all other options prior to a major corporate transaction. Instead of
allowing an optionee to exercise his options, the board may, in its discretion,
require some or all of the plan participants to accept a cash payment in
consideration for the termination of the person's option. All stock options
will be automatically accelerated if a person's employment is terminated
without cause within one year following a change of control transaction. This
offering does not constitute a change of control as defined in our option
plans.
Under the 2000 plan, in the event of a change in control, including a
merger, sale of all or substantially all of our assets, share exchange, or a
change in the majority of the incumbent board, options which would vest within
12 months after the change in control will be accelerated and immediately
exercisable. The Board has discretion to accelerate all other options prior to
the change in control. In addition, the Board may cancel outstanding options
and require participants to accept cash payment for their canceled options at
the price per share to be received in the change in control event. The 2000
Stock
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<PAGE>
Incentive Plan for some matters will be administered by the Compensation
Committee of the board of directors consisting of two or more "outside
directors" as defined under section 162(m) of the Internal Revenue Code. The
2000 plan also provides for the automatic grant of options to non-employee
directors as discussed under "Management - Director Compensation."
2000 Employee Stock Purchase Plan. Our 2000 Employee Stock Purchase Plan
was adopted in January 2000 and will be effective upon the closing of this
offering. The 2000 Employee Stock Purchase Plan provides our employees with an
opportunity to purchase our common stock through accumulated payroll
deductions. A total of 2,000,000 shares of common stock have been reserved for
issuance under the purchase plan, none of which have been issued to date.
Our board of directors or a committee appointed by our board will
administer the purchase plan. The purchase plan will permit eligible employees
to purchase common stock through payroll deductions of up to 10% of an
employee's base compensation on each pay day during the offering period,
provided that no employee may purchase more than 1,500 shares or $25,000 worth
of stock in one calendar year. Any employee employed by us on a given
enrollment date is eligible to participate during that offering period,
provided that they remain employed by us for the duration of that offering
period, and if immediately after the grant, the employee will not own 5% or
more of our stock. Unless the board of directors or its committee determines
otherwise, the purchase plan will be implemented in a series of offering
periods, each approximately six months in duration. Offering periods will begin
on the first trading day on or after January 1 and June 1 of each year and
terminate on the last trading day in the period six months later. However, the
first offering period shall commence on the closing of this offering and
terminate on the last trading day of May 2000. The price at which common stock
will be purchased under the purchase plan is equal to 85% of the fair market
value of the common stock on the first day of the applicable offering period or
the last day of the applicable purchase period, whichever is lower. Employees
may end their participation in the offering period at any time, and
participation automatically ends on termination of employment. The board of
directors may amend, modify or terminate the purchase plan at any time as long
as the amendment, modification or termination does not impair vesting rights of
plan participants. The purchase plan will terminate on December 31, 2003,
unless terminated earlier in accordance with its provisions.
401(k) Plan. We sponsor a plan intended to qualify under Section 401 of
the Internal Revenue Code. All employees who are at least 21 years old are
eligible to make contributions to the 401(k) plan beginning the first day of
the month after the month they are hired. Participants may make pre-tax
contributions of up to 15% of their eligible earnings, not to exceed a
statutorily prescribed annual limit. After an employee has been with us for one
year, we make matching contributions on a discretionary basis on the basis of
$.50 for every $1 contributed by the employee, up to 6% of the employee's
annual salary. Each participant is fully vested in his or her contributions,
any of our matching contributions, and the investment earnings on either.
Contributions by the participants or us to the 401(k) plan, and the income
earned on these contributions, are generally not taxable to the participants
until withdrawn. Contributions by us, if any, will generally be deductible by
us when made. Contributions by us and the participants are held in trust, as
required by law. Individual participants may direct the 401(k) plan's trustee
to invest their accounts in authorized investment alternatives.
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RELATED PARTY TRANSACTIONS
Since our inception in February 1996, there has not been, nor is there
currently proposed, any transaction or series of similar transactions to which
we were or are to be party in which the amount involved exceeds $60,000, and in
which any director, executive officer, holder of more than 5% of our common
stock, or any member of the immediate family of any of the foregoing persons
had or will have a direct or indirect material interest other than compensation
agreements and other arrangements which are described in "Management" and the
transactions described below. We believe the terms of the agreements and loans
discussed in this section are as fair to us as we could have obtained from
unrelated third parties in arms-length negotiations.
Securities Issuances and Loans
In March 1996, we sold 1,582,143 shares of our common stock to Timothy
O'Crowley for $40,000 at $.025 per share. In August 1996, we sold 50,000 shares
of common stock to Patrick F. O'Neal, a Named Executive Officer, for $100,000
at $2.00 per share.
In August 1996, we sold 20,000 shares of Series A preferred stock for
$2,000,000 at $100 per share to Resource Bancshares Corporation. Resource
Bancshares sold 5,000 of these shares back to us for $1,741,000 at $348.20 per
share as part of the Series B preferred financing in February 1997 and
distributed 250 shares to affiliated persons. We issued warrants in connection
with this offering to Timothy O'Crowley and Resource Bancshares that were
cancelled as part of the Series B financing described below. As part of the
Series A transaction, Resource Bancshares was given the right to appoint two
(subsequently reduced to one) directors. This right will terminate upon the
closing of this offering. The 15,000 outstanding shares of Series A preferred
stock will be converted into 750,000 shares of common stock on the closing of
this offering.
Between February and April 1997, we sold 10,475,898 shares of Series B
preferred stock for $18.2 million at $1.741 per share, of which Beacon
purchased 9,615,738 shares and Stephen Hyde, a director, purchased 86,157
shares. Part of the consideration for Beacon's purchase was the retirement of
the $800,000 promissory note evidencing its loan to us in February 1997. A
portion of the proceeds were used to repurchase the shares of Series A
preferred stock from Resource Bancshares. As part of the Series B transaction,
Beacon was given the right to appoint two directors. This right will terminate
upon the closing of this offering. Beacon will be a holder of more than 5% of
our common stock upon the closing of this offering. In February 1997, we also
issued 1,863,270 shares of Series B preferred stock having a fair value of $3.2
million to the shareholders of Protocall as part of the Protocall acquisition.
Frank Richards, a Named Executive Officer, acquired 748,168 of these shares and
an incentive stock option to purchase 143,750 shares of our common stock at
$2.72 per share. During 1998 and 1999, 21,539 and 11,488 shares of Series B
preferred stock were returned to us by the former shareholders of Protocall as
adjustments for the price paid for Protocall in 1997. The 12,306,141
outstanding shares of Series B preferred stock will be converted into 3,076,535
shares of common stock upon the closing of this offering.
In November 1997, Beacon loaned us $1 million for an unsecured note
payable on demand and bearing interest at 15% per year. In December 1997,
Beacon loaned us $2 million for an unsecured note payable on demand and bearing
interest at 15% per year.
In December 1997, we sold 2,871,913 shares of Series C preferred stock to
Beacon for $5 million at $1.741 per share. A part of the proceeds were used to
repay the $3.0 million in loans made to us by Beacon plus accrued interest of
$16,000. Beacon also received a warrant to purchase up to 875,000 shares of our
common stock at $6.96 per share and a Series B anti-dilution warrant for the
purchase of an indeterminable number of Series B preferred shares. In May 1998,
Beacon exchanged these warrants for 3,500,000 shares of Series C preferred
stock and a new anti-dilution warrant, which will terminate upon the closing of
this offering, as part of the Series D preferred stock financing. The 6,371,913
outstanding shares of Series C preferred stock will be converted into 1,592,978
shares of common stock upon the closing of the offering.
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In December 1997, Timothy O'Crowley agreed to place into escrow 50,000
shares of his common stock. The shares were contingently transferable to
Resource Bancshares. The shares were to be returned to Mr. O'Crowley if, prior
to September 18, 1998, we received at least $15 million in net proceeds from
the sale of common stock at a price per share equal to at least $8.80. Since
this event did not occur, the shares were transferred to Resources Bancshares
in 1998.
In January 1998, Timothy O'Crowley granted an option to purchase 62,500
shares of his common stock to Paul Tartre at an exercise price of $6.96 per
share for a term of 10 years.
In April 1998, Beacon loaned us $1.4 million and Timothy O'Crowley,
Patrick O'Neal and Rick Weller each loaned us $100,000 for unsecured notes
payable on demand and bearing interest at 15% per year.
In May 1998, we sold 8,841,911 shares of Series D preferred stock for $12
million at $1.36 per share, of which Conning Capital Partners V purchased
8,823,529 shares. As part of this transaction, Conning was given the right to
appoint two directors. This right will terminate upon the closing of this
offering. Conning will be a holder of more than 5% of our common stock upon the
closing of this offering. A part of the proceeds were used to repay the loans
aggregating $1.7 million made to us by Beacon and Messrs. O'Crowley, O'Neal and
Weller plus accrued interest of $12,082. In addition, Conning and Beacon were
each granted a right to purchase up to $3 million of additional Series D
preferred stock at $1.36 per share through April 1999, which were not
exercised. The 8,841,911 outstanding shares of Series D preferred stock will be
converted into 2,210,478 shares of common stock upon the closing of this
offering.
Between April and September 1999, we sold 2,510,691 shares of Series E
preferred stock to unaffiliated investors for $4.04 million at $1.61 per share.
The 2,510,691 outstanding shares of Series E preferred stock will be converted
into 627,671 shares of common stock on the closing of this offering.
In November 1998, we loaned Frank Richards $29,028 bearing interest at 8%
per year. The note is unsecured and is due and payable on the earlier of
November 20, 2003 or whenever he may sell his stock under Rule 144 in an amount
equal to or greater than the principal balance. Mr. Richards may pay the note
with shares of our stock valued at the fair market value at the date of
payment.
In October 1999, we loaned $28,700 to Timothy O'Crowley and $33,000 to
Frank Richards to assist them in paying personal taxes incurred by each of them
as a result of their receipt of Spider stock in the spin-off. Each loan bears
interest at 7.75%. Mr. O'Crowley's loan is due in full on September 1, 2001 and
provides that one half of the loan is forgiven each year if they are still
employed at that time. Mr. Richard's loan is due on the earlier of November 30,
2003 or whenever he may sell his stock under Rule 144 in an amount equal to or
greater than the principal balance.
On November 23, 1999, we loaned $600,000 to Timothy O'Crowley, our CEO.
The loan is a full recourse note secured by 150,000 shares of Mr. O'Crowley's
common stock. The loan bears fixed interest at 10.5%. The loan was made to Mr.
O'Crowley for his personal business and family expenditures and was approved by
the Board as being more beneficial to Etinuum than having Mr. O'Crowley reduce
his equity interest in Etinuum by selling stock. The loan is due and payable in
full on November 23, 2000.
In November and December 1999, we sold 5,210,093 shares of Series F
preferred stock for $11,097,501 at $2.13 per share, of which Brinson Partners
purchased 3,755,869 shares. Brinson will hold more than 5% of our common stock
after the closing of this offering. The 5,210,093 outstanding shares of Series
F preferred stock will be converted into 1,302,523 shares of common stock upon
the closing of this offering, assuming no adjustment of the Series F preferred
stock conversion price. The conversion price, however, may be adjusted
depending on the public offering price per share of our common stock. The
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<PAGE>
following table sets forth the effect of the adjustment to the conversion price
on the number of shares of common stock to be issued based upon the high, mid
and low prices within the estimated public offering price range set forth on
the cover of this prospectus:
<TABLE>
<CAPTION>
Public
Offering Number of Shares of Common Stock
Price to be Issued Upon Converson
-------- --------------------------------
<S> <C>
$10.00 924,567
$11.00 721,124
$12.00 551,588
</TABLE>
Each series of preferred stock provides for the accrual of payment-in-kind
dividends from the date of issuance through February 29, 2000, assuming that
this offering closes by April 15, 2000. The following numbers of shares of
common stock will be issued as payment-in-kind dividends on the various series
of preferred stock:
<TABLE>
<CAPTION>
Name of Series Number of Shares
-------------- ----------------
<S> <C>
Series A................................................... 128,072
Series B................................................... 551,777
Series C................................................... 285,701
Series D................................................... 396,449
Series E................................................... 83,480
Series F................................................... 28,149
---------
Total.................................................... 1,473,628
=========
</TABLE>
Spin-Off of Spider Technologies
In October 1999, we transferred the proprietary software that is used in
our EtinuumWebDirect System to a newly-formed subsidiary named Spider
Technologies, Inc. We contributed $1 million in cash and some other assets,
primarily consisting of equipment recorded at less than $10,000, to Spider and
distributed 45,183,371 shares of Spider common and preferred stock pro-ratably,
on an as-converted to common basis, to our stockholders. We also exercised a
warrant for 1,000,000 shares of common stock of Spider that we paid to the
former Acorn stockholders. See "Acquisition of Acorn Information Services". The
spin-off was taxable to us, and the spin-off and its tax effects are shown in
our 1999 financial statements.
The general purpose of the spin-off was to allow Spider to be an
independent software development and licensing business. We retained the
professional services business that integrates the software with our clients'
and their vendors' systems for their direct-to-customer initiatives. We
incurred out-of-pocket costs of approximately $380,000 in the spin-off of
Spider. We believed we and our stockholders would benefit from the spin-off by
creating a separate company that would focus solely on software development,
allowing us to focus on our own core competencies. In addition, we believed
Spider would be in a better position to license to third parties than we would
be since we are an end user of the software and might be perceived as a
competitor by third parties, thus leading to higher quality software because of
possible increased revenue and user input to Spider. We further believed the
continuing development of the software would involve significant expenses and
negatively affect our financial results.
We entered into several agreements with Spider as a part of the spin-off,
which are described below. In general, each agreement provides that each party
will indemnify the other party if it violates the agreement. All of our
agreements with Spider were made in the context of a parent-subsidiary
relationship and were negotiated in the overall context of the spin-off. Spider
was represented by its own counsel in connection with these negotiations.
Although we generally believe that the terms of these agreements are arms-
length and consistent with fair market values, we cannot assure you that the
prices charged to or by us under these agreements are not higher or lower than
the prices that may be charged to or by unaffiliated third parties for similar
services or goods or that the other terms are the same as those that would be
agreed upon by unaffiliated parties.
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We have set forth below a summary description of the material terms of the
agreements involved in the spin-off. You should read the full text of these
agreements, which have been filed with the SEC as exhibits to the registration
statement of which this prospectus is a part.
Software Ownership. We transferred to Spider ownership of the
EtinuumWebDirect software code and related documentation, copyrights and
intellectual property rights. The source code and related documentation is from
time to time to be delivered to an independent escrow agent for delivery to us
if Spider breaches the agreement, goes out of business or abandons the
software. Abandonment exists if Spider:
. significantly fails to fulfill its maintenance and support obligations
(as explained below) for a period of 30 sequential days;
. is notified by us of a major error in the software that substantially
impairs the operation of the software, the problem continues for more
than one hour after we notify Spider, this occurs 25 days in a calendar
year, and it adversely affects us;
. substantially reduces the level of support for the software it develops
by not providing necessary error corrections so as to adversely affect
us; or
. announces it is going to discontinue developing, supporting or
maintaining the software.
If there is an abandonment, we can use the source code to provide direct-
to-customer outsourced services and, if the abandonment is of the third or
fourth type described above or Spider goes out of business, we can use the
source code for any purpose. In addition, we have the right to retain a copy of
the source code and documentation until May 2001 to allow us to make
corrections to the software. We lose this right if a competitor of Spider or
other entity that would jeopardize the confidentiality of the software acquires
control of us. We also have a security interest in current and future versions
of the software and related rights on which we can foreclose if Spider breaches
its agreements with us or fails to pay us royalties for 20 days.
If Spider wishes to sell the software or related rights prior to November
4, 2002, it must first offer them to us. It also cannot, prior to that date,
assign title or grant an exclusive license to the software to a competitor of
ours or voluntarily allow a competitor of ours to control it.
It is also a breach if a competitor involuntarily controls Spider. Spider
has further recently agreed for two years not to significantly engage in the
business of providing live human interaction, via e-mail, fax or telephone, on
behalf of a client and its customers who purchase goods or services of the
client. We will pay Spider $75,000 for this further agreement.
Control for these purposes means the direct or indirect ownership of 45%
or more of the party's outstanding stock or, in our case only, the power to
appoint a majority of our board.
License Arrangements. We have a 20-year worldwide, non-exclusive license
to use and integrate the object and source code of current and future versions
of the software. During that time, we can use the source code to develop
interfaces with hardware or other software and integrate the object code with
our and our clients' systems. Until November 4, 2000, we can generally
sublicense the software to our clients unless Spider wishes to directly license
to them, or those clients previously breached a license with Spider for the
software, or the country where the client is located or will use the software
is not a member of the Berne Convention.
We do not pay Spider a license fee to use the version of the software we
transferred to it or, until November 4, 2002, any new versions. After that
time, we will pay a "most favored nations" license fee for new versions.
In general, Spider owns all modifications to the software made by us or
our sublicensees.
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Maintenance and Support Services. Spider will provide us with maintenance
and support, technical support, installation and training services until
November 5, 2002. For maintenance and support services, we pay Spider an amount
to compensate Spider for services it provides to us or to our clients that
exceed those the Spider group provided to us prior to the spin-off. For
technical support services, we pay Spider its full employee costs plus 20%.
After November 5, 2002, Spider will provide maintenance and support on its
usual customer terms and may elect, at our request, to provide technical
support services.
In addition, at our request, Spider will host on its servers until
November 5, 2001, current and future versions of the software for operation by
us and our clients. For that service, we pay Spider what our clients existing
on November 5, 1999, pay us for the service, and for new customers after that
date we pay Spider its out-of-pocket costs for operating the server. After
November 5, 2001, Spider may continue to provide us and our clients with
hosting services at Spider's then current rates.
Spider may provide other maintenance and support services to our clients.
Royalty. Spider agreed to pay us royalties totaling $1.45 million plus
interest of 8% per year on the unpaid amount. The royalty rate equals 4% of
Spider's net revenues from the distribution and licensing of current and future
versions of the software. Spider does not have to pay us a royalty until it has
total net revenues of $5.5 million or receives $7.5 million from the sale of
equity or convertible debt securities, whichever occurs first. In any event,
the $1.45 million plus interest is due on the earlier of November 4, 2004, or
the sale of all or substantially all Spider's assets.
Shared Personnel and Resources. Under various agreements, we have
committed to share some of our personnel and resources with Spider for limited
periods of time. Paul Tartre, our President - Technology Solutions, and his
administrative assistant will spend 40% of their time on Spider matters, for
which we will be paid $124,080 a year. Our officers Timothy Hardin and Patrick
O'Neal will spend 5% and 20%, respectively, of their time on Spider business,
and Spider will reimburse us monthly for those percentages of our costs of
their employment. In addition, we expect that Timothy O'Crowley will remain
chairman of the board of Spider, and he will be a consultant to Spider for
strategic planning and financing advice for which he will be paid $90,000 per
year for two years. In general, other than Paul Tartre, neither we nor Spider
may solicit each others' employees for approximately one year.
We have also agreed to provide administrative services to Spider for
$10,417 a month, as well as to sublease 40% of our office space in San Diego
for 40% of our rent and other occupancy costs. Spider also pays us for
equipment and supplies it uses in that office. These agreements generally
terminate between October 2000 and August 2003.
Referrals. We have agreed to refer to Spider those of our clients that
wish to license current or future versions of the software and Spider will
refer to us companies that might wish to use our outsourced communications
center services. These arrangements are for three years and are non-exclusive.
We will pay each other industry-standard commissions on the revenues generated
by any referrals, and Spider will charge our clients standard license fees.
Infringement. In general, we are liable to Spider if we know the software
and documentation we delivered to Spider, or if a modification we made to the
software, infringes the rights of others or is not owned by us. In general,
Spider is liable to us if the software and documentation it develops infringes
the rights of others or is not owned by Spider, or if at any time a client of
ours makes a claim against us involving work done by Spider. The claims of each
party against the other are generally limited to a maximum of $5 million, and
no claim can be made for the first $500,000 of claims. However, this limitation
does not apply to claims for indemnification regarding infringement or
misappropriation or, in Spider's case, claims our clients make against us based
on Spider's work.
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Taxes. If in the future our or Spider's tax liability increases pursuant
to Section 482 of the Internal Revenue Code of 1986, the other party will pay
to the party whose liability was increased an amount equal to the reduction in
tax liability payable by the other party. No payment needs to be made until the
tax benefit actually results in a recognized tax savings to the other party on
a specific amount of tax then currently due and payable.
Termination. Spider can terminate the agreements, including the licenses,
and seek damages from us upon notice to us if we breach our obligations and
fail to materially cure such breach within specified time periods. We have the
right to foreclose on our security interest in the software and related rights,
terminate the agreement and seek recovery of damages from Spider upon notice to
Spider if:
. Spider willfully, recklessly or negligently, with the approval or
prior actual knowledge of senior management of Spider, breaches its
confidentiality obligations; or
. materially breaches any other provision of the agreement with the
exception of maintenance, support and hosting services, and fails to
cure a breach within specified time periods. If Spider materially
breaches its obligations regarding maintenance, support and hosting
services and does not cure the breach after notice, we have the right
to contract with a third party to obtain those services, seek recovery
of damages from Spider and terminate the agreement.
Stock Ownership and Board Representation
In connection with the spin-off of Spider, the following executive
officers, directors and principal stockholders received shares of common stock
or preferred stock of Spider:
<TABLE>
<CAPTION>
Number of Number of
Shares of Shares of
Common Preferred Percentage
Name Stock Stock Owned(1)
---- ---------- ---------- ----------
<S> <C> <C> <C>
Timothy O'Crowley.......................... 7,715,328 15.2%
Paul Tartre................................ 3,000,000 5.9
Frank Richards............................. 500,000 841,467 2.6
Patrick O'Neal............................. 700,000 1.4
Venkat Sharma.............................. 388,155 *
Shoba Murali............................... 304,095 *
Raja Ramnarayan............................ 185,250 *
Sunil Gupta................................ 100,000 *
Stephen Hyde............................... 98,650 *
The Beacon Group III -
Focus Value Fund, L.P. .................... 18,305,860 28.2
Conning Capital Partners V, L.P. .......... 10,102,941 19.9
---------- ---------- ----
Total.................................... 12,892,828 25,341,418 75.3%
========== ========== ====
</TABLE>
- ------------------
* Less than one percent
(1) The total shares of common stock and preferred stock outstanding at
November 6, 1999, the date of distribution, was 50,783,371 shares.
In addition, Timothy O'Crowley, Steven Piaker, Harold Pote, Rick Weller
and Eric Wilkinson, who are members of our board, and Patrick O'Neal and Paul
Tartre, two of our executive officers, are members of the board of Spider and
represent seven of the ten members of Spider's board.
Acquisition of Acorn Information Services
Effective October 1, 1999, we acquired all of the capital stock of Acorn
Information Services, Inc., a Delaware corporation based in Connecticut that
provides strategic consulting and data analytic services to help their clients
enhance their marketing efforts. Four of the five former Acorn stockholders
became executives of Acorn and us following the acquisition. Timothy O'Crowley
is currently the sole director of Acorn. In connection with the Acorn
transaction, we paid $100,000 of the fee incurred by the Acorn
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<PAGE>
stockholders for services provided by their investment banker Prospero LLC by
issuing 11,737 shares of our common stock to Prospero. A summary of the
acquisition and the agreements executed in connection with the acquisition is
provided below. We strongly urge you to read the entire agreements, which have
been filed with the SEC as exhibits to the registration statement of which this
prospectus is a part.
Stock Purchase and Contingent Earn-Out Provisions. The purchase price for
all of the outstanding Acorn capital stock was $950,000 at closing, including
acquisition costs of $100,000. In addition, we must make specified contingent
payments of cash and our common stock if Acorn meets at least 75% of specified
minimum earnings targets as of November 30, 2000, 2001 or 2002. During this
three year earn-out period, the cash portion of the contingent payments will be
made at the end of each anniversary date of the agreement and the common stock
portion will be issued at the end of the third anniversary date of the
agreement. The former Acorn stockholders will receive an aggregate amount of up
to $1.9 million in cash and 527,778 shares of our common stock.
The contingent earn-out consideration payable to the former Acorn
stockholders who are also employees of Acorn may not be received under some
circumstances if their employment ends before Acorn meets specified earnings
targets. When Acorn achieves these earnings targets, however, up to two of
these employees may leave Acorn. In addition, if Acorn sells substantially all
of its assets or stock to a third party, or if we become insolvent, the former
Acorn stockholders have a right of first refusal to purchase the stock or
assets of Acorn.
In connection with the Acorn transaction, we exercised our warrant to
purchase 1,000,000 shares of Spider common stock and delivered these shares to
the former Acorn stockholders. The shares must be returned to us if the earnout
conditions are not met. Each former Acorn stockholder is entitled to retain
four times the number of Spider shares as the number of shares of our common
stock that he or she is entitled to receive for the first year of the earn-out
period. We have the right to repurchase all of the forfeited Spider common
stock for $.013 per share. Further, if an employee stockholder's employment
terminates prior to the expiration of the earn-out period, we will have the
right to repurchase all of that stockholder's forfeited or unforfeited Spider
common stock at $.013 per share.
In addition, we agreed to make up to a total of $10.9 million of
economically justified (in our determination) capital contributions to Acorn
over the earn-out period to fund growth and ongoing business operations of
Acorn and to facilitate Acorn's achievement of the earnings targets. If Acorn
does not meet 100% of its earnings targets, our capital contributions will be
adjusted downward proportionately. If Acorn does not meet 75% of its targets,
we are not required to make any capital contribution. We have the final
determination as to the amount of our capital contributions.
In the event of a change in control of our capital stock during the earn-
out period, payment of the contingent earn-out earned for any annual periods
ending prior to the change in control and for the year in which a change in
control occurs will be accelerated. After the closing of this offering, the
cash and stock portions of the earn-out consideration payable in the first year
of the earn-out period will be paid within 30 days of our determination of
earn-out consideration payable for this period.
Employment Agreements. Each of the former Acorn stockholders who prior to
the transaction were Acorn employees entered into an employment agreement with
us and Acorn to provide services to us and Acorn. The employment agreements are
for an initial term of three years and provide for the assignment to Acorn of
all works and inventions developed on behalf of Acorn. With limited exceptions,
for not less than one year after a former Acorn stockholder's employment is
terminated, he or she cannot work for or provide services to a company that
competes with us or solicit other Acorn employees to leave Acorn's employ. The
employee stockholders (other than Mr. Sharma) will not be entitled to more than
12 months of severance pay upon termination of employment by the employee for
cause or by us without cause. Mr. Sharma will be entitled to 12 months of
severance pay plus, under some circumstances, up to an additional 12 months of
severance pay upon termination by him for cause or by us without cause.
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<PAGE>
Registration Rights Agreement. To mitigate the tax liability of the former
Acorn stockholders for their receipt of our common stock at the end of the
three year earn-out period, we agreed to provide the former Acorn stockholders
with:
. a loan equal to 25% of the value of our common stock held by the
former Acorn stockholders;
. an offer to repurchase 25% of our common stock held by the former
Acorn stockholders; or
. one demand registration for up to 50% of our stock held by the former
Acorn stockholders. The right of the former Acorn stockholders to
demand registration of a portion of their shares arises only if we
elect not to provide a loan or to repurchase shares of our common
stock.
Commercial Agreements
During 1996, we entered into transactions with Eden Financial Group, Inc.
or its subsidiaries. Timothy O'Crowley, Patrick O'Neal and Paul Tartre,
executive officers of Etinuum are stockholders of Eden Financial Group, Inc. We
paid a total of $115,000 for software applications developed by Eden Financial
Group, Inc. in the form of a note payable. The note was paid on December 15,
1997. We received $80,000 from Eden Financial Group, Inc. in return for
assuming various lease obligations of Eden Financial Group, Inc.
During 1997, we leased an aircraft from Mt. Evans Consulting, LLC, a
company partially-owned by Timothy O'Crowley. Rental payments were based upon
our usage of the aircraft. Amounts paid or accrued by us under the lease during
the year ended December 31, 1997, were $165,000. During 1998, the lease was
terminated.
From January 1998 through May 1999, Mr. Pat O'Crowley, our executive vice
president - corporate development, consulted with us on strategic planning and
operational matters, through his firm, Coalter Group International. In 1999,
Coalter Group International was paid $80,000 for these services.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table shows specified information with respect to beneficial
ownership of our common stock as of December 31, 1999, by each stockholder
known to us to be the beneficial owner of more than 5% of our common stock,
each of our directors, each of our Named Executive Officers and all executive
officers and directors as a group. The number of shares and percentages in the
table includes the shares issuable as payment-in-kind (PIK) dividends through
February 29, 2000.
Beneficial ownership is determined in accordance with the rules of the SEC
and represents sole or shared voting or sole or shared investment power with
respect to securities. Unless otherwise indicated below, the person and
entities named in the following table have sole voting and sole investment
power with respect to all shares beneficially owned, except for applicable
community property laws. Shares of common stock underlying options or warrants
that are currently exercisable or exercisable within 60 days of December 31,
1999, are deemed to be outstanding and to be beneficially owned by the person
holding the options or warrants for the purpose of computing the percentage
ownership of that person, but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person.
The following table assumes that the underwriters do not exercise their
over-allotment option to purchase up to 675,000 shares from us.
<TABLE>
<CAPTION>
Percent Owned
-----------------
Number Before After
Name and Address of Beneficial Owners of Shares Offering Offering
- ------------------------------------- --------- -------- --------
<S> <C> <C> <C>
The Beacon Group III - Focus Value Fund,
L.P. ....................................... 4,713,759(1) 34.6% 26.0%
399 Park Avenue
New York, NY 10022
Conning Capital Partners V, L.P. ............ 2,601,507(2) 19.1% 14.3%
CityPlace II, 9th Floor
185 Asylum Street
Hartford, CT 06103
Timothy O'Crowley............................ 2,066,333(3) 14.6% 11.1%
Etinuum, Inc.
5619 DTC Parkway, 12th Floor
Englewood, CO 80111-3017
Brinson Partners, Inc. ...................... 1,680,680(4) 12.3% 9.3%
209 South LaSalle Street
Chicago, IL 60604-1295
Frank Richards............................... 297,328(5) 2.2% 1.6%
Paul Tartre.................................. 178,888(6) 1.3% 1.0%
Patrick O'Neal............................... 222,016(7) 1.6% 1.2%
Timothy Hardin............................... 25,753(8) * *
Stephen Hyde................................. 25,402 * *
Steven Piaker................................ 0(9) * *
Harold Pote.................................. 0(10) * *
Rick Weller.................................. 0 * *
Eric Wilkinson............................... 0(11) * *
All officers and directors as a group, 20
persons(12)................................. 2,642,782(12) 17.9% 13.7%
</TABLE>
- ------------------
* Less than 1%.
58
<PAGE>
(1) Includes 716,847 shares issuable as a PIK dividend.
(2) Includes 395,625 shares issuable as a PIK dividend.
(3) Includes 537,501 shares underlying options that are exercisable within 60
days from December 31, 1999. Mr. O'Crowley is our Chief Executive
Officer.
(4) Includes 20,589 shares issuable as a PIK dividend and 721,124 shares
assuming an initial offering price of $11.00 per share. Brinson Partners,
Inc. is the managing member of Brinson Venture Management LLC, the
investment advisor to BVCF III, L.P., which has sole voting and investment
power over BVCF III, L.P.'s shares. The address of BVCF III L.P. is c/o
Brinson Partners, Inc.
(5) Includes 80,650 shares underlying options that are exercisable within 60
days from December 31, 1999 and 32,951 shares issuable as a PIK dividend.
(6) Represents shares underlying options that are exercisable within 60 days
from December 31, 1999.
(7) Includes 172,016 shares underlying options that are exercisable within 60
days from December 31, 1999.
(8) Represents shares underlying options that are exercisable within 60 days
from December 31, 1999.
(9) Does not include 2,601,507 shares held of record by Conning Capital
Partners V, L.P. Mr. Piaker is senior vice president of Conning & Conning.
Conning & Conning is the managing member of Conning Investment Partners V,
LLC, which serves as the general partner of Conning Capital Partners V,
L.P. Mr. Piaker disclaims beneficial ownership of the shares owned by
Conning Capital Partners V, L.P.
(10) Does not include 4,713,759 shares held of record by The Beacon Group III -
Focus Value Fund, L.P. The Beacon Group has voting and investment power
over shares owned of record by The Beacon Group III - Focus Value Fund,
L.P. Mr. Pote is a general partner of The Beacon Group and as such may be
deemed to be a beneficial owner of the shares shown as beneficially owned
by The Beacon Group III - Focus Value Fund, L.P. Mr. Pote disclaims
beneficial ownership of the shares owned by The Beacon Group III - Focus
Value Fund, L.P., and, accordingly, such shares are excluded from the
information in the table with respect to Mr. Pote.
(11) Does not include 4,713,759 shares held of record by The Beacon Group III -
Focus Value Fund, L.P. Mr. Wilkinson is employed by The Beacon Group. Mr.
Wilkinson disclaims beneficial ownership of the shares owned by The Beacon
Group III - Focus Value Fund, L.P.
(12) Includes 1,144,600 shares underlying options held by executive officers
and directors that are exercisable within 60 days from December 31, 1999.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
We are authorized to issue 170,000,000 shares of common stock and
79,000,000 shares of undesignated preferred stock. Upon the closing of this
offering, we will be authorized to issue 100,000,000 shares of common stock and
10,000,000 shares of undesignated preferred stock. The following description of
our capital stock is qualified in its entirety by our certificate of
incorporation and bylaws, which are included as exhibits to the registration
statement of which this prospectus is a part, and by the provisions of
applicable Delaware law.
Common Stock
As of December 31, 1999, there were 13,496,189 shares of common stock
outstanding, as adjusted to reflect
. the automatic conversion of all outstanding shares of preferred stock
into 9,560,188 shares of common stock;
. the issuance of 1,333,433 shares of common stock to the holders of our
preferred stock as payment-in-kind dividends; and
. the issuance of an additional 721,124 shares of common stock to the
holders of our Series F preferred stock assuming the sale of shares in
this offering at an initial offering price of $11.00 per share.
As of December 31, 1999, we had approximately 32 stockholders of record.
Holders of our common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may
be applicable to any outstanding preferred stock, the holders of common stock
are entitled to receive ratably any dividends our board of directors may
declare from time to time out of funds legally available for that purpose. See
"Dividend Policy." If we liquidate, dissolve or wind up our business, the
holders of common stock are entitled to share ratably in all assets remaining
after payment of liabilities and the distribution rights the of preferred
stock, if any. The common stock has no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock.
Preferred Stock
The board of directors has the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series, and
to designate the rights, preferences and privileges of each series, any or all
of which may be greater than the rights of the common stock. We cannot state
the actual effect of the issuance of any shares of preferred stock upon the
rights of holders of the common stock until the board of directors determines
the specific rights of the holders of such preferred stock. However, the
effects might include, among other things, restricting dividends on the common
stock, diluting the voting power of the common stock, reducing the market price
of the common stock, or impairing the liquidation rights of the common stock,
without further action by the stockholders. We could issue preferred stock
quickly with terms calculated to delay or prevent a change in control or make
removal of management more difficult. We have no present plans to issue any
shares of preferred stock.
Delaware Anti-Takeover Law and Certain Charter and Bylaw Provisions
Specific provisions of Delaware law and our certificate of incorporation
and bylaws could make it more difficult or prevent a change in control that a
stockholder might consider favorable by a tender offer, a proxy contest or
otherwise, and to remove incumbent officers and directors. These provisions are
intended to discourage coercive takeover practices and inadequate takeover bids
and to encourage persons seeking to acquire control of us to first negotiate
with us. We believe that the benefits of increased protection of our potential
ability to negotiate with the proponent of an unfriendly or unsolicited
proposal to acquire or restructure us outweigh the disadvantages of
discouraging takeover or acquisition proposals because, among other things,
negotiation of these proposals could result in an improvement of their terms.
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<PAGE>
Section 203 of the Delaware General Corporation Law prohibits us from
engaging in a "business combination" with an "interested stockholder" for a
period of three years following the date the person became an interested
stockholder, unless, with some exceptions, the "business combination" or the
transaction in which the person became an interested stockholder is approved in
a prescribed manner. A "business combination" includes a merger, a sale of 10%
or more of our assets or stock, or other transactions resulting in a financial
benefit to the interested stockholder. Generally, an "interested stockholder"
is a person who, together with affiliates and associates, owns, or within three
years prior to the determination of interested stockholder status, did own, 15%
or more of a corporation's voting stock. Section 203 does not restrict a
transaction by us with a person who owned stock before this public offering.
Section 203 permits companies to opt out of this provision, but we have elected
not to opt out. The applicability of this provision could prevent or delay a
takeover that you might consider favorable by an interested stockholder in a
transaction that the board of directors has not approved in advance, including
takeovers that might result in a premium over the market price for the shares
of common stock held by stockholders.
Our certificate of incorporation and bylaws, effective upon the closing
date of this offering, contain provisions that are intended to deter hostile
takeover attempts. Our certificate of incorporation and bylaws require that any
action to be taken by our stockholders must be taken at a duly called annual or
special meeting of the stockholders and may not be taken by a consent in
writing. In addition, special meetings of our stockholders may be called only
by the board of directors. Our certificate of incorporation and bylaws also
provide that, beginning upon the closing of this offering, our board of
directors will be divided into three classes, with each class serving staggered
three-year terms so that approximately one-third of the directors are elected
each year. Staggering the terms of our directors delays the time it would take
stockholders to replace a majority of the incumbent directors. Some amendments
of the certificate of incorporation and of the bylaws require the approval of
holders of at least 66 2/3% or 80% of the voting power of all outstanding
stock. In addition, our directors may only be removed with or without cause by
a vote of 80% of the stockholders. Our stockholders must give notice of
nominations or other business to be conducted at a stockholders meeting at
least 120 days before the date of our proxy statement sent to stockholders for
the prior year's annual meeting. These provisions may have the effect of
discouraging takeovers and tactics used in proxy fights or delaying changes in
control or our management.
Limitations on Directors' Liability and Indemnification
Our certificate of incorporation limits the personal liability of our
directors to us and our stockholders to the maximum extent permitted by
Delaware law. Delaware law provides that directors of a corporation will not be
personally liable for monetary damages for breach of their fiduciary duties as
directors, except liability for:
. any breach of their duty of loyalty to the corporation or its
stockholders;
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
. any transaction from which the director derived an improper personal
benefit.
The limitation of liability does not apply to liabilities of our directors
arising under the federal securities laws and does not affect the availability
of equitable remedies such as injunctive relief or rescission.
Our certificate of incorporation and bylaws also provide that we will
indemnify our directors and officers and may indemnify our employees and other
agents to the fullest extent permitted by law. We believe that indemnification
under our bylaws applies to negligent and grossly negligent acts of indemnified
parties. Our bylaws also permit us to secure insurance on behalf of any
officer, director, employee or other
61
<PAGE>
agent for any liability arising out of his or her actions in their capacity as
an officer, director, employee or other agent, regardless of whether the
certificate of incorporation or bylaws would permit indemnification. The
indemnification provisions in our bylaws and certificate of incorporation are
not exclusive of other rights of indemnification that may be available to our
directors or officers under any agreement or vote of stockholders or
disinterested directors.
In addition to the provisions in our bylaws, we have entered into
agreements to indemnify our directors, executive officers and some employees.
These agreements, among other things, indemnify our directors, executive
officers and these employees for judgments, fines, settlement amounts and
specified expenses, including attorneys' fees, incurred by them in any action
or proceeding, including any action by or on behalf of the company, arising out
of the person's services as a director, executive officer or controller of us,
any of our subsidiaries or any other company or enterprise to which the person
provides services at our request. We believe that these provisions and
agreements are necessary to attract and retain qualified persons as directors
and executive officers.
The limited liability and indemnification provisions in our certificate of
incorporation and bylaws may discourage stockholders from bringing a derivative
claim or other lawsuit against our directors or officers for breach of their
fiduciary duty, even though a derivative action, if successful, might otherwise
benefit us and our stockholders. In addition, the value of your investment in
our stock may decline to the extent we pay the costs of settlement or damage
awards against our directors and officers under these indemnification
provisions.
At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees in which indemnification is sought, nor
are we aware of any threatened litigation that may result in claims for
indemnification.
Registration Rights
After this offering, the holders of approximately 11,738,549 shares of
outstanding common stock and the former stockholders of Acorn who may receive
up to 527,778 shares of our common stock in the future, or their permitted
transferees, are entitled to rights to register those shares under the
Securities Act of 1933 at any time after 12 months following the closing of
this offering.
We have entered into an agreement that will be effective upon the closing
of this offering with Beacon, Conning, Brinson, Frank Richards, Timothy
O'Crowley and some other holders of our preferred stock. Under the agreement,
these stockholders, or their permitted transferees, may require, on three
occasions, and Brinson on one additional occasion, at any time one year after
this offering, that we file a registration statement at our expense under the
Securities Act with respect to the shares of common stock they acquire upon
conversion of their preferred stock, provided that the anticipated amount
offered would be at least $5 million. In addition, these stockholders and their
permitted transferees may, at any time one year after this offering, require
that we register their shares for public resale on Form S-3 or similar short-
form registration, provided that the value of the securities to be registered
is at least $2.5 million.
In addition, the stockholders whose shares are covered by to this
agreement have piggyback registration rights. If we propose to register any of
our common stock under the Securities Act, other than under employee benefit
plans or for acquisitions, these stockholders may require us to include all or
a portion of their stock in the registration. However, the managing
underwriter, if any, of the offering has rights to limit the amount of stock to
be sold by those stockholders.
We have also entered into an investor rights agreement with the former
stockholders of Acorn in connection with the acquisition of Acorn. Please see
"Related Party Transactions - Acquisition of Acorn Information Services" for
more information about the terms of this agreement.
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<PAGE>
All registration expenses incurred in connection with the above
registrations will be borne by us.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is American
Securities Transfer & Trust Company, Denver, Colorado.
SHARES ELIGIBLE FOR FUTURE SALE
General
The 4,500,000 shares of our common stock sold in this offering, or
5,175,000 shares if the underwriters exercise their over-allotment option in
full, will be freely tradable without restriction under the Securities Act,
except for any shares that may be acquired by an "affiliate" of ours as that
term is defined in Rule 144 under the Securities Act. Shares owned by our
affiliates will remain subject to the resale limitations of Rule 144.
The 13,496,189 shares of our common stock that will continue to be held
by existing stockholders after this offering constitute "restricted
securities" within the meaning of Rule 144 and will be eligible for sale in
the open market after this offering, to the extent permitted by contractual
lockup provisions and the applicable requirements of Rule 144, both of which
are described below. We have granted registration rights to some of our
stockholders. See "Description of Capital Stock- "Registration Rights."
Generally, Rule 144 provides that a person who has beneficially owned
"restricted" shares for at least one year will be entitled to sell on the open
market in brokers' transactions within any three month period a number of
shares that does not exceed the greater of:
. 1% of the then outstanding shares of common stock; and
. the average weekly trading volume in the common stock on the open
market during the four calendar weeks preceding such sale.
Sales under Rule 144 must also comply with post-sale notice requirements
and, in some cases, requirements regarding the availability of current public
information about us.
In the event that any person who is deemed to be an affiliate purchases
shares of our common stock pursuant to this offering or acquires shares of our
common stock pursuant to one of our employee benefit plans, the shares held by
such person are required under Rule 144 to be sold in brokers' transactions
and sales must comply with, the volume limitations described above. Shares
properly sold in reliance upon Rule 144 to persons who are not affiliates are
thereafter freely tradable without restriction.
Sales of substantial amounts of our common stock in the open market, or
the availability of such shares for sale, could adversely affect the price of
our common stock.
We, our directors and executive officers, and almost all of our
stockholders have agreed that, without the prior written consent of Chase
Securities Inc. on behalf of the underwriters, they will not, with some
exceptions, during the period ending 180 days after the date of this
prospectus, sell or otherwise dispose of any shares of common stock. See "Plan
of Distribution."
An aggregate of 8,769,969 shares of our common stock are reserved for
issuance under our stock option and employee stock purchase plans. We intend
to file a registration statement on Form S-8 covering the issuance of shares
of our common stock pursuant to these plans. Accordingly, the shares issued
pursuant to these stock option plans will be freely tradable, subject to the
restrictions on resale by Affiliates under Rule 144.
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<PAGE>
PLAN OF DISTRIBUTION
We have entered into an underwriting agreement with the underwriters named
below. Chase Securities Inc., Robertson Stephens, Inc., U.S. Bancorp Piper
Jaffray Inc. and SoundView Technology Group, Inc. are acting as representatives
of the underwriters.
The underwriting agreement provides for the purchase of a specific number
of shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specified number of shares but is not responsible for the commitment
of any other underwriter to purchase shares. Under the terms and conditions of
the underwriting agreement, each underwriter has severally agreed to purchase
the number of shares of common stock set forth opposite its name below.
<TABLE>
<CAPTION>
Number
Underwriters of Shares
------------ ---------
<S> <C>
Chase Securities Inc..............................................
Robertson Stephens, Inc. .........................................
U.S. Bancorp Piper Jaffray Inc. ..................................
SoundView Technology Group, Inc...................................
---------
Total............................................................. 4,500,000
=========
</TABLE>
This is a firm commitment underwriting. This means that the underwriters
have agreed to purchase all of the shares offered by this prospectus, other
than those covered by the over-allotment option described below, if any are
purchased. Under the underwriting agreement, if an underwriter defaults in its
commitment to purchase shares, the commitments of non-defaulting underwriters
may be increased or the underwriting agreement may be terminated, depending on
the circumstances. We have agreed to indemnify the underwriters against
specified civil liabilities under the Securities Act, or to contribute to
payments the underwriters may be required to make in respect of such
liabilities.
The representatives have advised us that the underwriters propose to offer
the shares directly to the public at the public offering price that appears on
the cover page of this prospectus. In addition, the representatives may offer
some of the shares to securities dealers at such price less a concession of
$ per share. The underwriters may also allow to dealers, and such dealers
may reallow, a concession not in excess of $ per share to other dealers.
After the shares are released for sale to the public, the representatives may
change the offering price and other selling terms at various times.
The underwriters have informed us that the underwriters will not allow
discretionary account sales of the shares of common stock offered by this
prospectus.
We have granted the underwriters an over-allotment option. This option,
which is exercisable for up to 30 days after the date of this prospectus,
permits the underwriters to purchase a maximum of 675,000
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<PAGE>
additional shares from us to cover over-allotments. If the underwriters
exercise all or part of this option, they will purchase shares covered by the
option at the public offering price that appears on the cover page of this
prospectus, less the underwriting discount. If this option is exercised in
full, the total price to the public will be $56.9 million and the net proceeds
to us will be approximately $51.4 million assuming an offering price of $11.00
per share. The underwriters have severally agreed that, to the extent the over-
allotment option is exercised, they will each purchase a number of additional
shares proportionate to the underwriter's initial amount reflected in the above
table.
The following table provides information regarding the amount of the
discount to be paid to the underwriters by us. Such amount is shown assuming
both no exercise and full exercise of the underwriters' option to purchase
additional shares and assuming an offering price of $11.00.
<TABLE>
<CAPTION>
Paid by Us
-------------------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per share......................................... $ 0.77 $ 0.77
Total............................................. $3,465,000 $3,984,750
</TABLE>
We estimate that the total expenses of the offering, excluding the
underwriting discount, will be approximately $1.5 million.
We have agreed to indemnify each underwriter against all liabilities to
which they may become subject under the federal securities laws or other law,
including reimbursement of expenses, arising out of:
. any untrue statement or alleged untrue statement of a material fact
contained in the registration statement, including the prospectus, or
the omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements not misleading,
except that there is no indemnification for specific information
furnished by the underwriters; and
. the directed share program under which the underwriters have reserved
for sale up to 225,000 shares for our officers, directors, employees
and associates.
This includes contribution to any payments which may be made by the
underwriters in the event that indemnification is not available.
Our executive officers and directors, and almost all of our stockholders
have agreed to a 180-day lock up with respect to 9,241,392 shares of common
stock that they beneficially own, including securities that are convertible
into shares of common stock and securities that are exchangeable or exercisable
for shares of common stock. This means that, with some exceptions, for a period
of 180 days following the date of this prospectus, such persons may not offer,
sell, pledge or otherwise dispose of these securities without the prior written
consent of Chase Securities Inc.
The underwriters have reserved for sale up to 225,000 shares for
employees, directors and some other persons associated with us. These reserved
shares will be sold at the public offering price that appears on the cover of
this prospectus. The number of shares available for sale to the general public
in the offering will be reduced to the extent reserved shares are purchased by
these persons. The underwriters will offer to the general public, on the same
terms as other shares offered by this prospectus, any reserved shares that are
not purchased by these persons.
Wit Capital Corporation, an affiliate of SoundView Technology Group, Inc.,
is administering the directed share program as it relates to our employees and
directors, and Chase Securities Inc. is administering the program as it relates
to other persons associated with us. We provided to Wit Capital Corporation and
Chase Securities Inc. a list of persons we would like to participate in the
directed share program. After reviewing the prospective list of participants,
Wit Capital Corporation and Chase Securities Inc. will distribute letters to
their prospective participants asking if those persons would like to submit
indications of interest to participate in the program. These communications
will be accompanied or proceeded by a prospectus that meets the requirements of
Section 10 of the Securities Act. If there are indications of interest by
prospective participants to purchase, in aggregate, more than the number of
shares allocated to the program, then we will determine who can participate and
to what extent.
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<PAGE>
Prior to this offering, there has been no public market for the common
stock. Consequently the offering price for the common stock will be determined
by negotiations between us and the underwriters and is not necessarily related
to our asset value, net worth or other established criteria of value. The
factors considered in such negotiations, in addition to prevailing market
conditions, will include the history of and prospects for the industry in which
we compete, an assessment of our management, our prospects, our capital
structure, prevailing market conditions, our results of operations in recent
periods and several other factors as may be deemed relevant.
Rules of the SEC may limit the ability of the underwriters to bid for or
purchase shares before the distribution the shares is completed. However, the
underwriters may engage in the following activities in accordance with the
rules:
. Stabilizing transactions. The representatives may make bids or
purchases for the purpose of pegging, fixing or maintaining the
price of the shares, so long as stabilizing bids do not exceed a
specified maximum.
. Over-allotments and syndicate covering transactions. The
underwriters may create a short position in the shares by selling
more shares than are set forth on the cover page of this
prospectus. If a short position is created in connection with the
offering, the representatives may engage in syndicate covering
transactions by purchasing shares in the open market. The
representatives may also elect to reduce any short position by
exercising all or part of the over-allotment option.
. Penalty bids. If the representatives purchase shares in the open
market in a stabilizing transaction or syndicate covering
transaction, they may reclaim a selling concession from the
underwriters and selling group members who sold those shares as
part of this offering.
Stabilization and syndicate covering transactions may cause the price of
the shares to be higher than it would be in the absence of such transactions.
The imposition of a penalty bid might also have an effect on the price of the
shares if it discourages resales of the shares.
Neither we nor the underwriters make any representation or prediction as
to the effect that the transactions described above may have on the price of
the shares. These transactions may occur on the Nasdaq National Market or
otherwise. If such transactions are commenced, they may be discontinued without
notice at any time.
One or more members of the underwriting selling group may make copies of
the preliminary prospectus available over the Internet to customers through its
or their Web sites. The representatives expect to allocate a limited number of
shares to such member or members of the selling group for sale to brokerage
account holders.
The Wallach Company, a member of the NASD, has advised us in connection
with this offering, for which we paid it $150,000. The Wallach Company also
acted as placement agent in connection with our Series F preferred stock
financing in November and December 1999, for which we paid it $537,375 in cash.
Market Street Partners, an investment partnership owned by the partners of The
Wallach Company, purchased 164,319 shares of our Series F preferred stock for
$349,999 at $2.13 per share.
A prospectus in electronic format is being made available on an Internet
Web site maintained by Wit Capital Corporation. In addition, other dealers
purchasing shares from SoundView Technology, Inc. in this offering have agreed
to make a prospectus in electronic format available on Web sites maintained by
each of these dealers. Other than the prospectus in electronic format, the
information on Wit Capital Corporation's Web site and any information contained
on any other Web site maintained by Wit Capital Corporation is not part of this
prospectus or the registration statement of which this prospectus forms a part,
has not been approved or endorsed by us or any underwriter in its capacity as
underwriter and should not be relied upon by investors.
66
<PAGE>
LEGAL MATTERS
Chrisman, Bynum & Johnson, P.C. of Boulder, Colorado, will pass upon the
validity of the shares of common stock offered by us. Davis Polk & Wardwell of
Menlo Park, California, will pass upon legal matters in connection with this
offering for the underwriters. A limited liability company comprised of
partners of Chrisman, Bynum & Johnson, P.C. will own 18,011 shares of our
common stock upon conversion of the shares of Series F preferred stock
purchased by it assuming an offering price of $11.00 per share and the issuance
of the payment-in-kind dividend through February 29, 2000.
EXPERTS
The financial statements and schedules of Etinuum, Inc. included in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
The financial statements of Acorn Information Services, Inc. as of and for
the year ended December 31, 1998 included in this prospectus have been so
included in reliance on the report (which contains an explanatory paragraph
relating to the Company's ability to continue as a going concern as described
in Note 2 to the financial statements) of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, Washington,
D.C. 20549, a registration statement on Form S-1 under the Securities Act of
1933, with respect to the common stock offered hereby. This prospectus does not
contain all of the information set forth in the registration statement and the
exhibits and schedules. Items are omitted in accordance with the rules and
regulations of the SEC. For further information with respect to us and our
common stock offered hereby, reference is made to the registration statement
and the exhibits and schedules filed as a part thereof. Statements contained in
this prospectus as to the contents of any contract or any other document
referred to are not necessarily complete, and, in each instance, if such
contract or document is filed as an exhibit, reference is made to the copy of
such contract or document filed as an exhibit to the registration statement,
each such statement being qualified in all respects by such reference to such
exhibit. The registration statement, including exhibits and schedules, may be
inspected without charge at the public reference facilities maintained by the
SEC in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
SEC's regional offices located at the North Western Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, NY 10048. You may obtain information about the
SEC's public reference facilities by calling the SEC at 1-800-SEC-0330. Copies
of all or any part of the registration statement may be obtained from such
office after payment of fees prescribed by the SEC. 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.
As a result of this offering, we will have to comply with the full
informational requirements of the Securities Exchange Act of 1934. We will
fulfill our obligations with respect to such requirements by filing periodic
reports and other information with the SEC. We intend to furnish our
stockholders with annual reports containing consolidated financial statements
certified by an independent public accounting firm. We also maintain a Web site
at http://www.etinuum.com. Our Web site and the information contained on it or
connected to it shall not be deemed to be incorporated into this prospectus or
the registration statement of which it forms a part.
67
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants.................................... F-2
Consolidated Financial Statements:
Audited Consolidated Balance Sheets at December 31, 1998 and 1999......... F-3
Audited Consolidated Statements of Operations for Each of the Three Years
in the Period Ended December 31, 1999.................................... F-4
Audited Consolidated Statements of Stockholders' Equity (Deficit) for Each
of the Three Years in the Period Ended December 31, 1999................. F-5
Audited Consolidated Statements of Cash Flows for Each of the Three Years
in the Period Ended December 31, 1999.................................... F-6
Notes to Consolidated Financial Statements.................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Etinuum, Inc.:
We have audited the accompanying consolidated balance sheets of ETINUUM,
INC., formerly known as Intek Information, Inc., (a Delaware corporation) and
subsidiaries at December 31, 1998 and 1999, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Etinuum,
Inc. and subsidiaries at December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Denver, Colorado,
January 13, 2000.
F-2
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
----------------
1998 1999
------- -------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................... $ 3,752 $ 6,204
Restricted certificates of deposit............ 135 407
Receivables, net of allowances of $411 and
$464, respectively--
Trade......................................... 4,375 5,218
Unbilled...................................... 1,689 1,108
Related party notes receivable................ -- 690
Prepaid expenses and other.................... 229 906
------- -------
Total current assets......................... 10,180 14,533
PROPERTY AND EQUIPMENT, net.................... 5,052 7,982
GOODWILL AND OTHER INTANGIBLES, net............ 3,314 2,808
OTHER ASSETS................................... 98 1,055
------- -------
Total assets................................. $18,644 $26,378
======= =======
<CAPTION>
Pro Forma
Stockholders'
December 31, Equity at
---------------- December 31,
1998 1999 1999
------- ------- -------------
(Unaudited)
(Note 2)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable.............................. $ 1,410 $ 1,668
Accrued expenses.............................. 1,109 3,381
Customer deposits............................. 230 237
Deferred revenue.............................. 336 --
Current borrowings............................ 13 1,316
Due to former Acorn stockholders.............. -- 200
Related party notes payable................... -- 198
------- -------
Total current liabilities.................... 3,098 7,000
DEFERRED RENT.................................. 89 245
LONG-TERM BORROWINGS, net of current portion... 7 1,722
------- -------
Total liabilities............................ 3,194 8,967
------- -------
COMMITMENTS AND CONTINGENCIES
CONVERTIBLE PREFERRED STOCK SUBJECT TO
MANDATORY REDEMPTION, $.001 par value,
79,000,000 shares authorized (Note 9)......... 38,440 59,408 $ --
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.0001 par value, 170,000,000
shares authorized, 1,868,087, 1,881,444 and
12,775,065 (unaudited pro forma) shares issued
and outstanding............................... 1 1 1
Additional paid-in capital..................... 243 -- 59,408
Unearned compensation.......................... -- (1,266) (1,266)
Accumulated deficit............................ (23,234) (40,732) (40,732)
------- ------- -------
Total stockholders' equity (deficit)......... (22,990) (41,997) $17,411
------- ------- =======
Total liabilities and stockholders' equity
(deficit)................................... $18,644 $26,378
======= =======
</TABLE>
The accompanying notes to financial statements
are an integral part of these consolidated balance sheets.
F-3
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1997 1998 1999
--------- --------- ----------
<S> <C> <C> <C>
REVENUE..................................... $ 9,546 $ 17,664 $ 24,699
DIRECT COST OF SERVICES..................... (7,767) (13,209) (16,986)
--------- --------- ----------
GROSS PROFIT................................ 1,779 4,455 7,713
--------- --------- ----------
OPERATING EXPENSES:
Selling, general and administrative....... 10,464 9,312 15,020
Depreciation and amortization............. 2,941 3,755 3,533
Research and development.................. 458 897 1,079
--------- --------- ----------
Total operating expenses................ 13,863 13,964 19,632
--------- --------- ----------
LOSS FROM OPERATIONS........................ (12,084) (9,509) (11,919)
--------- --------- ----------
OTHER (EXPENSES) INCOME:
Loss from Spider.......................... -- -- (1,055)
Interest income........................... 245 266 134
Interest expense.......................... (30) (17) (150)
Loss on disposal of equipment and other... (26) (270) (20)
--------- --------- ----------
189 (21) (1,091)
--------- --------- ----------
NET LOSS.................................... $ (11,895) $ (9,530) $ (13,010)
========= ========= ==========
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS:
Net loss.................................... $ (11,895) $ (9,530) $ (13,010)
Accretion of mandatorily redeemable
convertible preferred stock................ (90) (469) (864)
Cumulative dividends to preferred
stockholders............................... -- -- (11,361)
Loss on repurchase of Series A preferred
stock...................................... (1,241) -- --
Loss on Series C preferred stock Exchange
Agreement.................................. -- (1,465) --
--------- --------- ----------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS.. $ (13,226) $ (11,464) $ (25,235)
========= ========= ==========
BASIC AND DILUTED NET LOSS PER SHARE........ $ (7.09) $ (6.14) $ (13.50)
========= ========= ==========
WEIGHTED AVERAGE SHARES OUTSTANDING--
BASIC AND DILUTED......................... 1,866,585 1,867,941 1,869,803
========= ========= ==========
UNAUDITED PRO FORMA NET LOSS PER SHARE,
assuming conversion of preferred stock and
accrued dividends:
Basic and diluted net loss per share...... $ (1.26)
==========
Weighted average common shares
outstanding--basic and diluted........... 10,364,936
==========
</TABLE>
The accompanying notes to financial statements
are an integral part of these consolidated statements.
F-4
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Stock Additional
---------------- Paid-In Unearned Accumulated
Shares Amount Capital Compensation Deficit Total
--------- ------ ---------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, December 31,
1996................... 1,857,142 $ 1 $ 589 $ -- $ (1,809) $ (1,219)
Accretion of preferred
stock to liquidation
and redemption value.. -- -- (90) -- -- (90)
Loss on repurchase of
Series A preferred
stock................. -- -- (1,241) -- -- (1,241)
Issuance of common
stock as consulting
fee for Series B
preferred stock
offering.............. 10,770 -- 29 -- -- 29
Warrant for common
stock granted in
connection with the
Series C preferred
stock offering........ -- -- 1,496 -- -- 1,496
Net loss............... -- -- -- -- (11,895) (11,895)
--------- --- ------- ------- -------- --------
BALANCES, December 31,
1997................... 1,867,912 1 783 -- (13,704) (12,920)
Accretion of preferred
stock to liquidation
and redemption value.. -- -- (469) -- -- (469)
Loss on Series C
preferred stock
Exchange Agreement.... -- -- (1,465) -- -- (1,465)
Warrant granted in
connection with Series
C preferred stock
Exchange Agreement.... -- -- 1,235 -- -- 1,235
Deemed contribution
from majority common
stockholder........... -- -- 157 -- -- 157
Exercise of stock
options for cash...... 175 -- 2 -- -- 2
Net loss............... -- -- -- -- (9,530) (9,530)
--------- --- ------- ------- -------- --------
BALANCES, December 31,
1998................... 1,868,087 1 243 -- (23,234) (22,990)
Accretion of preferred
stock to liquidation
and redemption value.. -- -- (864) -- -- (864)
Exercise of stock
options for cash...... 1,620 -- 8 -- -- 8
Reduction of redemption
and liquidation
value ................ -- -- 3,098 -- -- 3,098
Beneficial conversion
feature............... -- -- 2,624 -- -- 2,624
Issuance of common
stock in connection
with Acorn
acquisition........... 11,737 -- 100 -- -- 100
Cumulative dividends to
preferred
stockholders.......... -- -- (6,873) -- (4,488) (11,361)
Unearned compensation.. -- -- 1,664 (1,664) -- --
Amortization of
unearned
compensation.......... -- -- -- 398 -- 398
Net loss............... -- -- -- -- (13,010) (13,010)
--------- --- ------- ------- -------- --------
BALANCES, December 31,
1999................... 1,881,444 $ 1 $ -- $(1,266) $(40,732) $(41,997)
========= === ======= ======= ======== ========
</TABLE>
The accompanying notes to financial statements
are an integral part of these consolidated statements.
F-5
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1997 1998 1999
-------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss......................................... $(11,895) $(9,530) $(13,010)
Adjustments to reconcile net loss to net cash
used in operating activities--
Depreciation and amortization.................. 2,941 3,755 3,533
Provision for bad debts........................ 88 323 269
Loss from Spider............................... -- -- 1,055
Amortization of discount....................... -- -- 20
Loss on disposal of equipment.................. -- 269 --
Stock compensation expense..................... -- -- 398
Changes in assets and liabilities--
Receivables.................................. (1,442) (3,191) 127
Prepaids and other assets.................... (144) (67) (954)
Accounts payable............................. 130 (246) 19
Accrued expenses............................. 865 (654) 2,160
Other........................................ (48) 299 (228)
-------- ------- --------
Net cash used in operating activities............ (9,505) (9,042) (6,611)
-------- ------- --------
Cash flows from investing activities:
Purchase of property and equipment............... (5,550) (1,195) (4,352)
Payments made on behalf of Spider................ -- -- (1,055)
Restricted cash.................................. (125) (10) (272)
Cash paid in purchase of Protocall, net of cash
acquired and refunded........................... (3,315) 37 101
Cash paid in purchase of Acorn, net of cash
acquired........................................ -- -- (637)
Cash advanced to Acorn prior to acquisition...... -- -- (450)
Related party loans.............................. -- -- (690)
Software development costs....................... -- -- (66)
-------- ------- --------
Net cash used in investing activities............ (8,990) (1,168) (7,421)
-------- ------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock........... -- 2 8
Proceeds from issuance of preferred stock, net of
offering costs.................................. 22,839 11,837 14,485
Repurchase of Series A preferred stock........... (1,741) -- --
Net borrowings on revolving line of credit....... 100 (100) --
Borrowings....................................... -- -- 2,513
Repayment of borrowings.......................... (769) (12) (271)
Proceeds from related party borrowings........... 3,000 1,700 --
Repayment of related party borrowings............ (3,140) (1,700) --
Proceeds from contingent grant................... -- -- 400
Deferred offering costs.......................... -- -- (651)
-------- ------- --------
Net cash provided by financing activities........ 20,289 11,727 16,484
-------- ------- --------
Net increase in cash and cash equivalents........ 1,794 1,517 2,452
Cash and cash equivalents, beginning of year..... 441 2,235 3,752
-------- ------- --------
Cash and cash equivalents, end of year........... $ 2,235 $ 3,752 $ 6,204
======== ======= ========
Supplemental disclosures of cash flow
information:
Cash paid for interest........................... $ 29 $ 17 $ 125
======== ======= ========
Property and equipment acquired through
incurrence of capital lease obligations......... $ 32 $ -- $ --
======== ======= ========
</TABLE>
The accompanying notes to financial statements
are an integral part of these consolidated statements.
F-6
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(1) Organization and Nature of Business
Etinuum, Inc. ("Etinuum" or the "Company"), formerly known as Intek
Information, Inc., is a provider of Strategic Consulting, Technology Solutions,
e-Operations and Customer Knowledge services in connection with e-commerce and
other direct-to-customer initiatives of business enterprises. The Company
operates communications centers in California, Colorado and Kansas, with
additional operations in Connecticut and headquarters in Englewood, Colorado.
Etinuum incorporated as a Colorado corporation on March 6, 1996 and
reincorporated as a Delaware corporation on August 2, 1996.
In February 1997, Etinuum acquired, 100% of the common stock of Protocall
New Business Specialists, Inc. ("Protocall"). Protocall, a communications
center service operation, was located in Northern California. As a result of
the Protocall acquisition, the Company expanded its e-Operations, Technology
Solutions and Strategic Consulting services.
In March 1999, Etinuum formed a wholly-owned subsidiary, Spider
Technologies, Inc. ("Spider"). Spider was formed to pursue the development and
sales of a Web-based technology originally developed by Etinuum. Effective
October 1, 1999, Etinuum distributed all of the stock of Spider to its
stockholders.
In October 1999, Etinuum acquired 100% of the common stock of Acorn
Information Services, Inc. ("Acorn"). Acorn is a data analytics company based
in Connecticut. As a result of the acquisition of Acorn, the Company's services
expanded to include database marketing and analysis services.
Etinuum's business is subject to significant risks. Etinuum incurred net
losses of $36,244 for the period from inception, March 6, 1996, through
December 31, 1999, and projects that net losses will continue to be incurred
through 2000 or longer, while management pursues its plan to grow the business
and add clients and contracts with the goal of achieving profitability.
Etinuum's ability to achieve profitable operations is subject to significant
risks and uncertainties including, but not limited to, Etinuum's success in
marketing its services and managing its operations and competitive factors.
Etinuum's plans also include growth through acquisitions of complementary
companies. There is no guarantee that Etinuum will ever achieve profitable
operations, that it will be successful in identifying and consummating the
acquisition of desirable companies or that if acquired, Etinuum will
successfully assimilate those businesses into its operations. Etinuum's
operations are also subject to various forms of regulation.
(2) Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Etinuum and
its subsidiaries, all of which are wholly-owned. All material intercompany
accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported
F-7
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Cash and Cash Equivalents
For the purposes of the statements of cash flows, Etinuum considers all
cash and investments with an original maturity of 90 days or less to be cash
equivalents.
Concentration of Credit Risk
Financial instruments that potentially subject Etinuum to significant
concentrations of credit risk consist primarily of cash and cash equivalents,
accounts and notes receivable. Etinuum has no off-balance sheet concentrations
of credit risk. Etinuum maintains its cash balances in the form of bank demand
deposits and money market accounts with financial institutions that management
believes are creditworthy. Accounts receivable are typically unsecured and are
derived from transactions with and from customers located within the United
States. Etinuum performs ongoing credit evaluations of its customers and
maintains reserves for potential credit losses.
As discussed in Note 11, a significant portion of Etinuum's revenue is
derived from a limited number of customers. Additionally, those customers
account for a significant portion of billed and unbilled accounts receivable.
Intangible Assets
<TABLE>
<CAPTION>
December 31,
Estimated ---------------
Life 1998 1999
--------- ------- ------
<S> <C> <C> <C>
Customer relationships and intellectual property.... 3 years $ 3,000 $3,950
Goodwill............................................ 5 years 3,548 3,920
------- ------
6,548 7,870
Accumulated amortization............................ (3,234) (5,062)
------- ------
$ 3,314 $2,808
======= ======
</TABLE>
Amortization of goodwill and other intangibles was $1,509, $1,725 and
$1,828 for the years ended December 31, 1997, 1998 and 1999, respectively.
Property and Equipment
All additions, including betterments to existing facilities, are recorded
at cost. Maintenance and repairs are charged to expense as incurred. When
assets are retired or otherwise disposed of, the cost of the assets and the
related accumulated depreciation are removed from the accounts. Any gain or
loss is reflected in other income (expense) in the year of disposition.
Depreciation is computed on the straight-line method based on the
estimated useful lives of the assets, as follows:
<TABLE>
<S> <C>
Computer equipment and software................................ 1.5--5 years
Furniture and fixtures......................................... 1.5--7 years
</TABLE>
Leasehold improvements are amortized over the shorter of their economic
life or the remaining term of the related lease.
F-8
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
Deferred Rent
Etinuum recognizes rent expense ratably over the life of the lease
regardless of the timing or amount of periodic payments.
Reverse Stock Split
Effective January 14, 2000, Etinuum declared a 4 for 1 reverse stock split
on Etinuum's common stock. Common stock amounts and per share amounts have been
adjusted retroactively to give effect to the stock split. The conversion price
for the preferred stock has been adjusted to reflect the 4 for 1 reverse stock
split.
Stock-Based Compensation
The Company accounts for its stock-based employee compensation agreements
using the intrinsic value method under which no compensation is generally
recognized for equity instruments granted to employees with an exercise price
equal to or greater than the fair market value of the underlying stock. Equity
instruments granted to non-employees are recorded at fair value on the date
they become non-forfeitable.
Comprehensive Income
Comprehensive income includes all changes in equity (net assets) during a
period from non-owner sources. Since inception, comprehensive loss has been the
same as net loss.
Revenue Recognition
Etinuum's revenues are derived principally from contracts for direct-to-
customer services and technology design and implementation projects billed at
negotiated rates. Etinuum recognizes revenue as services are performed for its
clients based on contractual arrangements for hours incurred and transactions
processed. Unbilled accounts receivable represents revenues earned for services
rendered that are typically billed to the customer in the following month.
Etinuum periodically enters into fixed fee contracts for Strategic
Consulting services that are accounted for under the percentage of completion
method. At December 31, 1998 and 1999, no such contracts were in-progress.
Direct Cost of Services
Direct cost of services includes payroll and benefits of employees for
time incurred for providing services for customers, telephone costs and other
variable costs associated with generating revenue. All other fixed expenses
incurred, including rent expense for customer care centers, are included in
selling, general and administrative expense in the accompanying consolidated
statements of operations. Depreciation of
F-9
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
property and equipment used to provide services to customers and amortization
of goodwill and other intangibles are shown as a separate line item within the
accompanying consolidated statements of operations.
Advertising Cost
Etinuum expenses advertising costs as incurred. For the years ended
December 31, 1997, 1998 and 1999, Etinuum had advertising expenses of $196,
$132 and $456, respectively.
Advances to Spider
The Company records a valuation allowance and a corresponding charge to
income against the net assets distributed to Spider and receivables from Spider
for shared costs because realization of the advances are principally dependent
on the operating results of Spider. The amount of the charge is equal to the
net loss incurred by Spider subsequent to the spin-off. The Company will
continue to recognize a valuation allowance until the advances are written down
to zero. Net advances to Spider were zero at December 31, 1999. It is
reasonably possible that additional losses related to Spider will be incurred
in an amount equal to shared support costs to be incurred on Spider's behalf.
Asset Impairment
Etinuum reviews its long-lived assets held and used in operations for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing the review
for recoverability, management estimates the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of
the expected future cash flows (undiscounted and without interest charges) is
less than the carrying amount of the asset, the asset is reduced to its
estimated fair value by recognizing an impairment loss.
Capitalized Software Costs
Software development costs for new software products are expensed as
incurred until technological feasibility is established. Software development
costs incurred subsequent to the establishment of technological feasibility and
prior to general release are capitalized. During 1999, Etinuum capitalized $66
of software development costs. These costs will be amortized over a three-year
period. Amortization commences when the product is available for general
release to customers. Capitalized software costs are stated at the lower of
cost or net realizable value. There was no amortization expense incurred during
1999 as none of the products which had established technological feasibility
were available for general release to customers.
Income Taxes
The current provision for income taxes represents actual or estimated
amounts payable or refundable on tax returns filed or to be filed for each
year. Deferred tax assets and liabilities are recorded for the estimated future
tax effects of temporary differences between the tax basis of assets and
liabilities and amounts reported in the consolidated balance sheets. Deferred
tax assets are also recognized for net operating loss and tax credit
carryovers. The overall change in deferred tax assets and liabilities for the
period measures the deferred tax expense or benefit for the period. Effects of
changes in enacted tax laws on deferred tax assets and liabilities are
reflected as adjustments to tax expense in the period of enactment. The
measurement of deferred tax assets may be reduced by a valuation allowance
based on judgmental assessment of available evidence if deemed more likely than
not that some or all of the deferred tax assets will not be realized.
Net Loss Per Share
Basic net loss per share is computed by dividing net loss available to
common stockholders for the period by the weighted average number of common
shares outstanding for the period. Diluted net loss per share is computed by
dividing the net loss for the period by the weighted average number of common
and
F-10
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
potential common shares outstanding during the period if the effect of the
potential common shares is dilutive. Etinuum has excluded the weighted average
effect (using the treasury stock method) of common stock issuable upon
conversion of all convertible preferred stock and stock options from the
computation of diluted earnings per share as the effect of all such securities
is anti-dilutive for all periods presented. The shares excluded are as follows:
<TABLE>
<CAPTION>
Convertible
Preferred Stock
Stock Options
----------- -------
<S> <C> <C>
December 31,
1997.................................................. 13,288,043 --
1998.................................................. 26,202,683 95,840
1999.................................................. 33,962,909 355,755
</TABLE>
Pro Forma Stockholders' Equity (Unaudited)
Effective upon the closing of Etinuum's planned initial public offering,
the outstanding shares of all Etinuum's preferred stock will automatically
convert into 10,893,621 shares of common stock as of December 31, 1999,
including 1,333,433 shares for the preferred stock dividends accrued (Note 9).
The effects of these transactions have been reflected in unaudited pro forma
stockholders' equity on the balance sheet at December 31, 1999.
Pro Forma Net Loss Per Share (Unaudited)
Pro forma net loss per share for the year ended December 31, 1999 is
computed using the weighted average number of common shares outstanding, and
the pro forma effects of the assumed conversion of all Etinuum's convertible
preferred stock, including preferred stock dividends accrued, into shares of
Etinuum's common stock as if such conversion occurred on January 1, 1999, or at
the date of original issuance or declaration if later. The resulting pro forma
adjustments include an increase in the weighted average shares used to compute
basic and diluted net loss per share of 8,495,133 shares for the year ended
December 31, 1999, and the elimination of all charges to adjust net loss to net
loss applicable to common stockholders. The pro forma effects of these
transactions are unaudited.
Segment Information
Etinuum operates in one business segment and does not internally report
the results of operations of the different services it provides to its
customers. Additionally, the different services provided are typically under
one agreement and are not differentiated to the client.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts and notes
receivable, accounts payable and accrued liabilities approximate fair value due
to the short-term nature of these assets and liabilities. The interest rates on
Etinuum's variable rate borrowings are adjusted regularly to reflect current
market rates. The majority of the Company's fixed rate borrowings have been
funded within the last fiscal quarter of 1999 or recorded at fair value in
connection with the acquistion of Acorn. Accordingly, the carrying amounts of
Etinuum's borrowings approximate fair value. Financial instruments also consist
of convertible preferred stock subject to mandatory redemptions, whose fair
value at December 31, 1998 and 1999 approximated their redemption and
liquidation value, except for the Series F preferred stock issued in 1999. The
fair value of the Series F preferred stock is approximately $22 million because
of its beneficial conversion feature.
F-11
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." Etinuum is required to adopt SFAS No. 133,
as amended by SFAS No. 137, in fiscal 2001. SFAS No. 133 establishes methods of
accounting for derivative financial instruments and hedging activities related
to those instruments as well as other hedging activities. Etinuum has not
entered into any derivative financial instruments or hedging activities. As a
result, management believes adoption of SFAS No. 133 will not have a material
impact on the financial statements.
In December 1999, the staff of the Securities and Exchange Commission
issued its Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition."
SAB No. 101 provides guidance on the measurement and timing of revenue
recognition in financial statements of public companies. Changes in accounting
policies to apply the guidance of SAB No. 101 must be adopted by recording the
cumulative effect of the change in the fiscal quarter ending March 31, 2000.
Mangagement has not yet determined the effect SAB No. 101 will have on its
accounting policies or the amount of the cumulative effect to be recorded from
adopting SAB No. 101, if any.
(3) Property and Equipment
Property and equipment consisted of the following at December 31, 1998 and
1999:
<TABLE>
<CAPTION>
December 31,
----------------
1998 1999
------- -------
<S> <C> <C>
Computer equipment and software........................... $ 3,463 $ 4,672
Furniture and fixtures.................................... 1,352 2,300
Leasehold improvements.................................... 506 1,230
Telephone equipment....................................... 3,016 5,003
------- -------
8,337 13,205
Less-accumulated depreciation............................. (3,285) (5,223)
------- -------
$ 5,052 $ 7,982
======= =======
</TABLE>
Depreciation expense for the years ended December 31, 1997, 1998 and 1999,
was $1,432, $2,030 and $1,705, respectively.
(4) Acquisitions
Protocall
On February 14, 1997, Etinuum purchased all of the common stock of
Protocall for 1,863,270 shares of Series B preferred stock valued at $3,244,
cash of $3,239 and acquisition costs of $180. The acquisition was accounted for
under the purchase method of accounting.
The purchase price was allocated to the acquired assets and liabilities as
follows:
<TABLE>
<S> <C>
Current assets...................................................... $1,684
Property and equipment.............................................. 1,604
Goodwill and other intangibles...................................... 6,623
------
Total assets........................................................ 9,911
Current liabilities assumed......................................... (3,248)
------
$6,663
======
</TABLE>
F-12
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
Subsequent to closing, Etinuum received a total of $196 in cash and stock
held in escrow from the former Protocall stockholders as a purchase price
adjustment which has been recorded as a reduction to goodwill and other
intangibles in the accompanying consolidated balance sheets.
The following unaudited pro forma information details the estimated effect
of the Protocall acquisition assuming it had occurred on January 1, 1997:
<TABLE>
<CAPTION>
Etinuum
Year Ended 1997
December 31, 1997 Pro Forma
----------------- -----------
(Unaudited)
<S> <C> <C>
Revenue...................................... $ 9,546 $ 11,009
Net loss applicable to common stockholders... $(13,226) $(13,520)
Basic and diluted net loss per share......... $ (7.09) $ (7.24)
</TABLE>
The pro forma financial data presented above does not purport to represent
what Etinuum's results of operations would actually have been if the
transaction in fact had occurred on January 1, 1997, and is not necessarily
representative of Etinuum's results of operations for any future period.
Acorn
Effective October 1, 1999, Etinuum purchased all of the common stock of
Acorn. The purchase was accounted for under the purchase method of accounting.
The initial consideration consisted of cash of $550, $200 in short-term
payables, $100 from the issuance of 11,737 shares of Etinuum's common stock,
and acquisition costs of $100. The purchase agreement also includes a three-
year contingent earn-out of up to $1,900 in cash and up to 527,778 shares of
Etinuum common stock. The contingent earn-out will be recorded as additional
purchase price consideration (additional goodwill) when and if the annual goals
are achieved. The contingent earn-out is based on Acorn's annual targets of
earnings before interest, taxes, depreciation and amortization and will be
earned as follows:
<TABLE>
<CAPTION>
Contingent Earn-Out
--------------------
Cash Stock
--------- ----------
<S> <C> <C>
Year 1................................................. $ 600 250,000
Year 2................................................. 600 166,667
Year 3................................................. 700 111,111
--------- ----------
Total earn-out......................................... $ 1,900 527,778
========= ==========
</TABLE>
Additionally, Etinuum transferred 1,000,000 shares of Spider common stock
to the former Acorn stockholders. The former Acorn stockholders are entitled to
retain a proportionate number of Spider shares during year 1 of the earn-out
period. Etinuum will receive any forfeited Spider shares at the end of year 1
if the earn-out provision is not fully met.
If Acorn achieves less than 100% but greater than 75% of its performance
targets, the above amounts will be adjusted for not achieving the estimated
targets. If Acorn achieves less than 75% of its performance targets for any
annual measurement period, then no earn-out payment will be made for that
period.
The purchase price allocation is subject to adjustment based upon the
final determination of the fair value of the assets acquired and liabilites
assumed. The contingent earn-out could result in additional goodwill and
because the stock based earn-out will be recorded based upon the fair value of
Etinuum's stock at the time of issuance, such additional goodwill could be
substantial. Goodwill will be amortized over five years. Any additional
goodwill recorded as a result of the earn-out will be amortized prospectively
over the remaining amortization period.
F-13
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
The initial purchase price of Acorn was allocated to the acquired assets
and liabilities as follows:
<TABLE>
<S> <C>
Cash................................................................. $ 13
Other assets......................................................... 687
Property and equipment............................................... 312
Goodwill and other intangibles....................................... 1,443
-----
Total assets....................................................... 2,455
Current liabilities.................................................. (429)
Amounts advanced by Etinuum to Acorn................................. (450)
Borrowings assumed................................................... (626)
-----
$ 950
=====
</TABLE>
The following unaudited pro forma information details the estimated
effect of the Acorn acquisition assuming it had occurred on January 1, 1998:
<TABLE>
<CAPTION>
Etinuum
Year Ended 1998
December 31, 1998 Pro Forma
----------------- -----------
(Unaudited)
<S> <C> <C>
Revenue...................................... $ 17,664 $ 20,476
Net loss applicable to common stockholders... $(11,464) $(11,636)
Basic and diluted net loss per share......... $ (6.14) $ (6.19)
<CAPTION>
Etinuum
Year Ended 1999
December 31, 1999 Pro Forma
----------------- -----------
(Unaudited)
<S> <C> <C>
Revenue...................................... $ 24,699 $ 26,707
Net loss applicable to common stockholders... $(25,235) $(26,222)
Basic and diluted net loss per share......... $ (13.50) $ (13.95)
</TABLE>
The pro forma financial data presented above does not purport to
represent what Etinuum's results of operations would actually have been if the
transaction in fact had occurred on January 1, 1998, and are not necessarily
representative of Etinuum's results of operations for any future period.
(5) Spider Spin-off
Effective October 1, 1999, Etinuum distributed 100% of the shares of
Spider to its stockholders on a pro-rata basis. In connection with the
transaction, Etinuum distributed $1 million in cash and technology that is
currently under development. Etinuum has the right to receive $1,450 in
royalty payments plus accrued interest at 8% over the next five years
resulting from the spin-off. The royalty payments are due by Spider regardless
of its future operations. Additionally, Etinuum has received a five-year
warrant to purchase 1,000,000 shares of Spider's common stock at an exercise
price of $0.013 per share. Etinuum exercised this warrant during the fourth
quarter of 1999 for $13 and the shares were transferred to the former Acorn
stockholders. As a condition of the spin-off, Etinuum will be allowed to
utilize the Spider technology for three years without any fee or royalty due
to Spider. Thereafter, Etinuum will pay for the use of the technology at its
most favored nations pricing if Etinuum chooses to continue to utilize the
Spider software. The realization of the advances to Spider is principally
dependent upon Spider's operating results and its ability to raise additional
capital subsequent to its spin-off. Etinuum will continue to recognize
Spider's net losses until all advances are reduced to zero.
F-14
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
During 1999, a valuation allowance of $1,055 was recognized by a charge to
operations reducing the advances to zero. Etinuum has no funding commitments or
guarantees in favor of Spider beyond the recorded receivable; however, it is
reasonably possible that Etinuum will recognize additional losses on Spider for
future shared costs.
In connection with the spin-off of Spider, Etinuum has reduced the
mandatory redemption value of their preferred shares by $0.13 per share. The
excess of the carrying value of the preferred shares over the revised
redemption value of $3,098 has been credited to additional paid-in capital.
(6) Borrowings
Notes payable and capital lease obligations consisted of the following at
December 31, 1998 and 1999:
<TABLE>
<CAPTION>
1998 1999
---- -------
<S> <C> <C>
Equipment loan............................................... $ -- $ 2,297
Revolving credit facilities.................................. -- 225
Related party notes.......................................... -- 198
Contingent grant............................................. -- 400
Capital lease obligations.................................... 20 191
---- -------
Total notes payable and capital lease obligations............ 20 3,311
Less--Unamortized discount on contingent grant............... -- (75)
Less--Current portion........................................ (13) (1,514)
---- -------
$ 7 $ 1,722
==== =======
</TABLE>
Lines-of-Credit
In 1997, Etinuum had a line-of-credit facility with a bank that provided
for maximum borrowings of $100. The line-of-credit expired in 1998.
During 1999, Etinuum entered into a revolving credit facility agreement
that provides for maximum borrowings of $5,000 or 80% of eligible receivables,
as defined by the agreement ($3,079 at December 31, 1999). This facility
matures on May 31, 2001 and bears interest at prime plus 1.5% (10.0% at
December 31, 1999). Principal and interest are payable monthly.
The borrowings under the line-of-credit are collateralized by receivables
and other assets of Etinuum. This facility requires Etinuum to maintain, among
other restrictions, a tangible net worth of $8,000 as defined in the agreement.
As of December 31, 1999, Acorn had an agreement with a bank for a $50
line-of-credit facility. At December 31, 1999, $50 was outstanding under this
line-of-credit. Interest accrues on outstanding borrowings at 12.5% per annum.
Interest is payable monthly and principal is payable upon demand.
As of December 31, 1999, Acorn had an agreement with a bank to provide a
$175 line of credit facility. At December 31, 1999, Acorn had outstanding
borrowings of $175 under this line. This obligation is collateralized by
certain assets of Acorn. Interest accrues at a per annum rate of 1% over the
bank's prime rate (9.5% at December 31, 1999). Principal and interest are
payable monthly.
Related Party Notes Payable
As of December 31, 1999, Acorn had notes totaling $198 to certain former
stockholders and officers of Acorn. The notes bear interest at a rate of 10%
per annum and are payable on demand.
F-15
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
Equipment Facility
In September 1999, Etinuum entered into an equipment facility, which
provides for maximum borrowings of approximately $2,500 to allow for the
purchase of equipment to be used at Etinuum's communications center in Kansas.
This facility matures on March 5, 2002 and bears interest at 13.9%. Etinuum
paid $99 upon entering into the agreement as its first principal payment.
During 1999, Etinuum borrowed $2,513 to purchase equipment. The borrowings
under the equipment facility are collateralized by the related equipment
acquired.
Contingent Grant
In April of 1999, the Kansas Department of Commerce and Housing provided
Etinuum $400 as an incentive to open a communications center in Kansas. The
grant was received in the form of a non-interest-bearing note, which will be
forgiven over five years if certain prescribed employment and average salary
levels are maintained. Etinuum has discounted the note by $95 to reflect its
effective borrowing rate of 9.75%. The loan was used to purchase equipment to
be used at the Kansas location. As this loan is forgiven, Etinuum will adjust
the basis of the equipment purchased. If the levels of employment and average
salaries prescribed in the agreement are not maintained, the outstanding
portion of the loan, as defined in the agreement, plus penalties are due within
thirty days.
The future minimum principal payments on long-term borrowings are as
follows:
<TABLE>
<CAPTION>
Capital
Equipment Lease Contingent
Loan Obligations Grant Other Total
--------- ----------- ---------- ----- ------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
2000..................... $ 940 $109 $ 80 $423 $1,552
2001..................... 1,068 84 80 -- 1,232
2002..................... 289 7 80 -- 376
2003..................... -- 3 80 -- 83
2004..................... -- -- 80 -- 80
------ ---- ---- ---- ------
2,297 203 400 423 3,323
Less-payments representing
interest.................. -- (12) (75) -- (87)
------ ---- ---- ---- ------
$2,297 $191 $325 $423 $3,236
====== ==== ==== ==== ======
</TABLE>
F-16
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
(7) Income Taxes
Components of the income tax provision applicable to federal and state
income taxes are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Current benefit:
Federal........................................ $ -- $ -- $ --
State.......................................... -- -- --
------- ------- -------
Total........................................ -- -- --
------- ------- -------
Deferred benefit
Federal........................................ (3,728) (2,888) (1,778)
State.......................................... (601) (457) (455)
------- ------- -------
Total........................................ (4,329) (3,345) (2,233)
------- ------- -------
Total tax benefit............................ (4,329) (3,345) (2,233)
------- ------- -------
Valuation allowance.............................. 4,329 3,345 2,233
------- ------- -------
Net tax benefit.............................. $ -- $ -- $ --
======= ======= =======
</TABLE>
The reconciliation of income tax computed at the U.S. federal statutory
tax rate (35%) to Etinuum's effective income tax rates are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Expected tax benefit........................... $(4,163) $(3,336) $(4,554)
State tax benefit.............................. (421) (320) (455)
Disallowance of meals and entertainment ex-
penses........................................ 30 10 23
Amortization of goodwill....................... 225 276 463
Taxable gain on Spider spin-off................ -- -- 1,710
Losses on Spider............................... -- -- 406
Other.......................................... -- 25 174
Change in valuation allowance.................. 4,329 3,345 2,233
------- ------- -------
Provision for income taxes..................... $ -- $ -- $ --
======= ======= =======
</TABLE>
At December 31, 1999, Etinuum had approximately $23,000 of net operating
loss carryforwards that begin to expire in 2012.
Etinuum recognized a taxable gain of $4.5 million upon its spin-off of
Spider. The amount of the gain was determined by an independent valuation of
Spider. It is reasonably possible that the amount of the gain could change in
the foreseeable future. Furthermore, the Tax Reform Act of 1986 contains
provisions that may limit the net operating loss carry forwards available for
use in any given year if certain events occur, including significant changes
in ownership interests.
F-17
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1998 and
1999 were as follows:
<TABLE>
<CAPTION>
December 31,
----------------
1998 1999
------- -------
<S> <C> <C>
Current deferred tax assets:
Bad debt allowance........................................ $ 156 $ 179
Vacation accrual.......................................... 53 103
Accrued bonus............................................. 79 308
Accrued severance and wages............................... 113 --
Customer deposits, deferred revenue and other............. 215 293
------- -------
616 883
------- -------
Non-current deferred tax assets:
Deferred rent............................................. 34 93
Net operating loss carryforward........................... 7,248 9,313
------- -------
7,282 9,406
------- -------
Total deferred tax assets................................. 7,898 10,289
------- -------
Non-current deferred tax liability:
Depreciation.............................................. (224) (431)
Acquired intangibles...................................... (412) (363)
------- -------
Total deferred tax liabilities............................ (636) (794)
------- -------
Net deferred tax asset.................................... 7,262 9,495
Valuation allowance....................................... (7,262) (9,495)
------- -------
$ -- $ --
======= =======
</TABLE>
Because Etinuum has incurred losses since its inception, management
determined a valuation allowance was necessary for the entire deferred tax
asset balance. It is reasonably possible that Etinuum's view of the
realizability of its deferred tax assets could change in the near future based
upon the successful execution of its business plan.
(8) Commitments and Contingencies
Leases
Etinuum leases office facilities and various equipment under operating
leases that expire through fiscal 2009. The total rental expense for office
facilities and equipment for the years ended December 31, 1997, 1998 and 1999
was $463, $888 and $1,294, respectively.
F-18
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
Minimum future cash flow commitments under the above leases are as
follows:
<TABLE>
<S> <C>
Year ended December 31-
2000............................................................... $1,792
2001............................................................... 1,448
2002............................................................... 1,378
2003............................................................... 1,180
2004............................................................... 1,060
Thereafter........................................................... 2,640
------
$9,498
======
</TABLE>
Grant
Etinuum received a grant from the Kansas Department of Commerce and
Housing in connection with opening a communications center in Fort Scott,
Kansas. The grant was to reimburse Etinuum for certain costs incurred relating
to the opening of the customer care center, including training and project
administration. The grant is for up to $800, through November 2008. The grant
requires Etinuum to maintain certain minimum employment and average salary
levels as prescribed in the agreement. The reimbursements have been applied
against the eligible costs incurred in the accompanying statement of
operations. Through December 31, 1999, Etinuum has earned $336 from this grant
which has reduced selling, general and administrative expense. At December 31,
1999, Etinuum recorded a receivable for $185 for reimbursements of costs
incurred.
Etinuum has also received a $400 contingent grant from the Kansas
Department of Commerce and Housing in the form of a non-interest bearing loan
(Note 6).
Litigation
Etinuum is periodically involved in litigation arising in the ordinary
course of business. Management is of the opinion that the ultimate resolution
of any such matters will not have a material adverse effect on Etinuum's
financial position or results of operations.
(9) Convertible Preferred Stock Subject to Mandatory Redemption
In November 1999, Etinuum amended its Certificate of Incorporation to
increase the number of authorized shares of common and preferred stock to
170,000,000 and 79,000,000, respectively, and to accrue cumulative preferred
stock dividends of .145 preferred share for each share of the Series A, B, C
and D Stock and 0.1 preferred share for each share of the Series E Stock owned
on October 15, 1999. The declaration resulted in 4,676,464 shares (as converted
for Series A Stock) of preferred stock accrued on October 15, 1999. After
October 15, 1999, the cumulative dividend became 6% per annum on the stated
value of the Series A Stock and 8% per annum on the stated value of the Series
B, C, D, E and F Stock through July 31, 2001. This resulted in an additional
657,269 shares (as converted for Series A Stock) of preferred stock accrued
through December 31, 1999.
Preferred stock may be issued in series with such designations,
preferences, rights and limitations as the Board of Directors may deem
appropriate. The Series A, B, C, D, E and F Stock rank on a parity basis with
respect to dividends and rights upon liquidation. Each series of preferred
stock votes together with the common stock on all matters as if converted into
common shares. Other terms of each series of preferred stock, as amended on
November 19, 1999, are described below.
F-19
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
Reverse Stock Split
Subsequent to year-end, Etinuum declared a 4 for 1 reverse stock split on
Etinuum's common stock. Common stock amounts and per share amounts have been
adjusted retroactively to give effect to the stock split. The conversion price
for the preferred stock has been adjusted to reflect the 4 to 1 reverse spilt
stock.
Conversion of Preferred Stock into Common Stock
Each share of Series A Stock is convertible at the option of the holders
into 50 shares of common stock. Accrued but unpaid dividends on the Series A
Stock may also be converted into common stock at the same effective conversion
ratio. All outstanding Series A Stock, including unpaid dividends,
automatically converts into common stock upon completion of an initial public
offering of common stock for aggregate proceeds of at least $20,000 and a per
share price of $4.44 (three times the conversion price per share).
Each share of Series B, C, D, E and F Stock is initially convertible at
the option of the holders into 0.25 shares of common stock (subject to
adjustment for certain events). The Series C, D, E and F conversion ratio and
the conversion ratio for certain Series B stockholders will be adjusted if
Etinuum issues or sells common stock or equivalents at a price less than their
stated conversion prices then in effect. Accrued but unpaid dividends on Series
B, C, D, E and F Stock may also be converted into common stock at the same
effective conversion ratio. All outstanding Series B, C, D, E and F Stock,
including unpaid dividends, automatically converts into common stock (4 for 1)
upon completion of an initial public offering of common stock for aggregate
proceeds of at least $25,000 and a per share price of at least $12.00, or, if
following any public offering, the aggregate market capitalization of shares
not held by officers, directors, employees and affiliates exceeds $25,000 and a
per share market price of at least $12.00 is maintained for 20 consecutive
trading days.
Mandatory Redemption and Accretion to Liquidation Values
The holders of at least two-thirds of each series of preferred stock,
voting as a separate series, may require Etinuum to redeem their shares at any
time on or after February 20, 2003, for the redemption values described in each
separate series. Offering costs for each series of preferred stock were
initially offset against the proceeds from each offering.
Periodic charges to net loss applicable to common stockholders are being
recognized to accrete the value of each series of preferred stock to its
liquidation and redemption value as of February 20, 2003.
F-20
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
A summary of Etinuum's mandatorily redeemable, convertible preferred stock
is presented in the table below:
<TABLE>
<CAPTION>
Series A Series B Series C Series D Series E
-------------- ------------------- ------------------ ----------------- ----------------
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ---------- ------- ---------- ------ --------- ------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances,
December 31,
1996........... 20,000 $1,951 -- $ -- -- $ -- -- $ -- -- $ --
Repurchase of
Series A
preferred
stock.......... (5,000) (500) -- -- -- -- -- -- -- --
Issuance of
Series B
mandatorily
redeemable,
convertible
preferred stock
for cash, net
of issuance
costs of $319.. -- -- 10,475,898 17,920 -- -- -- -- -- --
Issuance of
Series B
mandatorily
redeemable,
convertible
preferred
stock, as
consideration
for purchase of
Protocall...... -- -- 1,863,270 3,244 -- -- -- -- -- --
Issuance of
Series C
mandatorily
redeemable,
convertible
preferred stock
for cash, net
of issuance
costs of
$1,606......... -- -- -- -- 2,871,913 3,394 -- -- -- --
Accretion to
liquidation and
redemption
value.......... -- 12 -- 66 -- 12 -- -- -- --
------ ------ ---------- ------- ---------- ------ --------- ------- --------- ------
Balances,
December 31,
1997........... 15,000 1,463 12,339,168 21,230 2,871,913 3,406 -- -- -- --
Modification of
terms on the
existing Series
C preferred
stock in
connection with
the Exchange
Agreement...... -- -- -- -- (2,871,913) (3,535) -- -- -- --
Issuance of new
Series C
mandatorily
redeemable,
convertible
preferred stock
in Exchange
Agreement...... -- -- -- -- 6,371,913 5,000 -- -- -- --
Issuance of
Series D
mandatorily
redeemable,
convertible
preferred stock
for cash, net
of issuance
costs of
$1,423......... -- -- -- -- -- -- 8,841,911 10,602 -- --
Adjustment to
Series B
preferred stock
as
consideration
for purchase of
Protocall...... -- -- (21,539) (38) -- -- -- -- -- --
Deemed
contribution
from majority
common
stockholder.... -- -- -- -- -- (157) -- -- -- --
Accretion to
liquidation and
redemption
value.......... -- 9 -- 72 -- 140 -- 248 -- --
------ ------ ---------- ------- ---------- ------ --------- ------- --------- ------
Balances,
December 31,
1998........... 15,000 1,472 12,317,629 21,264 6,371,913 4,854 8,841,911 10,850 -- --
Issuance of
Series E
mandatorily
redeemable
convertible
preferred stock
for cash, net
of issuance
costs of $52... -- -- -- -- -- -- -- -- 2,510,683 3,990
Issuance of
Series F
mandatorily
redeemable
convertible
preferred stock
for cash, net
of issuance
costs of $603.. -- -- -- -- -- -- -- -- -- --
Reduction of
redemption and
liquidation
value -- (368) -- (1,472) -- (717) -- (253) -- (288)
Beneficial
conversion
feature -- -- -- -- -- -- -- -- -- --
Adjustment to
Series B
preferred stock
as
consideration
for purchase of
Protocall...... -- -- (11,488) (20) -- -- -- -- -- --
Accrued
dividends...... -- 1,018 -- 4,301 -- 2,227 -- 3,090 -- 633
Accretion to
liquidation and
redemption
value.......... -- 6 -- 53 -- 35 -- 279 -- 13
------ ------ ---------- ------- ---------- ------ --------- ------- --------- ------
Balances,
December 31,
1999........... 15,000 $2,128 12,306,141 $24,126 6,371,913 $6,399 8,841,911 $13,966 2,510,683 $4,348
====== ====== ========== ======= ========== ====== ========= ======= ========= ======
<CAPTION>
Series F
-----------------
Shares Amount
--------- -------
<S> <C> <C>
Balances,
December 31,
1996........... -- $ --
Repurchase of
Series A
preferred
stock.......... -- --
Issuance of
Series B
mandatorily
redeemable,
convertible
preferred stock
for cash, net
of issuance
costs of $319.. -- --
Issuance of
Series B
mandatorily
redeemable,
convertible
preferred
stock, as
consideration
for purchase of
Protocall...... -- --
Issuance of
Series C
mandatorily
redeemable,
convertible
preferred stock
for cash, net
of issuance
costs of
$1,606......... -- --
Accretion to
liquidation and
redemption
value.......... -- --
--------- -------
Balances,
December 31,
1997........... -- --
Modification of
terms on the
existing Series
C preferred
stock in
connection with
the Exchange
Agreement...... -- --
Issuance of new
Series C
mandatorily
redeemable,
convertible
preferred stock
in Exchange
Agreement...... -- --
Issuance of
Series D
mandatorily
redeemable,
convertible
preferred stock
for cash, net
of issuance
costs of
$1,423......... -- --
Adjustment to
Series B
preferred stock
as
consideration
for purchase of
Protocall...... -- --
Deemed
contribution
from majority
common
stockholder.... -- --
Accretion to
liquidation and
redemption
value.......... -- --
--------- -------
Balances,
December 31,
1998........... -- --
Issuance of
Series E
mandatorily
redeemable
convertible
preferred stock
for cash, net
of issuance
costs of $52... -- --
Issuance of
Series F
mandatorily
redeemable
convertible
preferred stock
for cash, net
of issuance
costs of $603.. 5,210,093 10,495
Reduction of
redemption and
liquidation
value -- --
Beneficial
conversion
feature -- (2,624)
Adjustment to
Series B
preferred stock
as
consideration
for purchase of
Protocall...... -- --
Accrued
dividends...... -- 92
Accretion to
liquidation and
redemption
value.......... -- 478
--------- -------
Balances,
December 31,
1999........... 5,210,093 $8,441
========= =======
</TABLE>
F-21
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
Series A Stock
In August and November of 1996, Etinuum issued a total of 20,000 shares of
Series A Convertible Preferred Stock, $.001 par value, and received net
proceeds of $1,951.
The Series A Stock is entitled to a preference in liquidation. The
liquidation or redemption price is $74 per share plus the amount of any
cumulative unpaid dividends (as amended). Effective November 19, 1999, Etinuum
amended its Certificate of Incorporation to provide for cumulative stock
dividends equal to .145 shares for each share of Series A Stock outstanding on
October 15, 1999. Subsequent to October 15, 1999, the cumulative dividend rate
becomes 6% per annum on the stated value through July 31, 2001. The dividends
resulted in 2,390 shares of preferred stock accrued on December 31, 1999.
Series B Stock
During 1997, Etinuum issued 12,339,168 shares of Series B Convertible
Preferred Stock, $.001 par value. Series B Stock issued for cash between
February and August of 1997 (10,475,898 shares at $1.741 per share) provided
net proceeds to Etinuum of $17,920. The offering costs included 10,770 shares
of common stock issued as a consulting fee that was valued at $29. A portion of
those proceeds was used to repurchase and retire 5,000 shares of Series A Stock
for $1,741, which resulted in a loss to the common stockholders of $1,241. The
consideration for the February 1997 acquisition of Protocall described in Note
4 included 1,863,270 shares of Series B Stock. During 1998 and 1999, Etinuum
received 21,539 and 11,488 shares of Series B Stock from escrow, as adjustments
to the Protocall acquisition, respectively.
The Series B Stock has a stated value per share of $1.611 (as amended).
The Series B Stock is generally entitled to a preference in liquidation at a
liquidation or redemption price of the greater of (i) $1.611 for each share of
common stock into which the Series B Stock could be converted, plus all accrued
and unpaid dividends, or (ii) the per share amount the holders would have
received if all shares of Series B Stock had been converted into common stock
immediately prior to such liquidation or redemption, plus all accrued and
unpaid dividends. Effective November 19, 1999, Etinuum amended its Certificate
of Incorporation to provide for cumulative stock dividends equal to .145 shares
for each share of Series B Stock outstanding on October 15, 1999. Subsequent to
October 15, 1999, the cumulative dividend rate becomes 8% per annum on the
stated value through July 31, 2001. The dividends resulted in 2,019,233 shares
of preferred stock accrued on December 31, 1999.
Series C Stock and Exchange Agreement
In December 1997, Etinuum issued 2,871,913 shares of Series C Convertible
Preferred Stock, $.001 par value to The Beacon Group III--Focus Value Fund,
L.P. for net proceeds of $4,890, or $1.741 per share. Proceeds were used in
part to repay loans advanced to Etinuum by Beacon during November and December
1997 in the aggregate amount of $3,000, plus accrued interest of $16. At the
date of the Series C Stock closing, Beacon received a five-year warrant to
purchase up to 875,000 shares of common stock at $6.96 per share. This warrant
was not assigned any value as the exercise price of the warrant was
significantly higher than the fair market value of the common stock on the
grant date. The warrant was subsequently cancelled in connection with the
Exchange Agreement discussed below. Beacon also received a warrant which
adjusts its Series B conversion ratio if Etinuum issues or sells common stock
or equivalents at a price less than the Series B Stock conversion price
(initially, $1.741 per share). This warrant was valued at $1,496 and has been
included in the offering costs of the Series C Stock. Additional offering costs
of $110 in cash was incurred in connection with this offering.
An Exchange Agreement was executed on May 7, 1998, simultaneous with the
Series D Stock closing (see Series D Stock below). Beacon surrendered both
warrants obtained at the time of the Series C Stock
F-22
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
closing and was issued 3,500,000 shares of additional Series C Stock and a new
warrant. The Exchange Agreement was accounted for at estimated fair value and
resulted in a charge to the common stockholders of $1,465. The exchange lowered
Beacon's effective per share cost of its Series C Stock to $.7847 and reduced
the average cost to Beacon of all shares of Series B and Series C Stock held by
Beacon to $1.36 per share, the same per share price paid by Conning for the
Series D Stock. The new warrant adjusts Beacon's conversion ratio in the Series
B Stock if Etinuum issues or sells common stock or equivalents at a price less
than the Series D Stock conversion price (initially, $1.36 per share).
The Series C Stock has a stated value per share of $.6547 (as amended).
The Series C Stock is entitled to a preference in liquidation at a liquidation
or redemption price of the greater of (i) $.6547 for each share of common stock
into which the Series C Stock could be converted, plus all accrued and unpaid
dividends, or (ii) the per share amount the holders would have received if all
shares of Series C Stock had been converted into common stock immediately prior
to such liquidation or redemption, plus all accrued and unpaid dividends.
Effective November 19, 1999, Etinuum amended its Certificate of Incorporation
to provide for cumulative stock dividends equal to .145 shares for each share
of Series C Stock outstanding on October 15, 1999. Subsequent to October 15,
1999, the cumulative dividend rate becomes 8% per annum on the stated value
through July 31, 2001. The dividends resulted in 1,045,525 shares of preferred
stock accrued on December 31, 1999.
In December 1997, in connection with the Series C Stock offering,
Etinuum's Chief Executive Officer agreed to place into escrow 50,000 shares of
his Etinuum common stock. The shares were contingently transferable to the
holder of Etinuum's Series A Stock as consideration for consenting to certain
corporate transactions related to the Series C Stock financing. The shares were
to be returned to the Chief Executive Officer if, prior to September 18, 1998,
Etinuum received at least $15,000 in net proceeds from issuance of its common
stock or equivalents at a price per share of at least $8.80. As this event did
not occur, the shares were transferred in September 1998 to the Series A Stock
holder, and Etinuum reflected the value of the escrowed shares as a
contribution to capital and a cost of the Series C Stock financing of $157.
Series D Stock
On May 7, 1998, Etinuum issued 8,823,529 shares of Series D Convertible
Preferred Stock to Conning Insurance Capital Limited Partnership for net
proceeds $11,812, or $1.36 per share. In connection therewith, Etinuum amended
and restated its Certificate of Incorporation and executed an Exchange
Agreement with Beacon. An additional 18,382 Series D shares were issued in
November 1998 for $25, resulting in total shares issued of 8,841,911. Proceeds
were used in part to repay loans advanced to Etinuum during April 1998 by
Beacon ($1,400) and certain officers of Etinuum (in the aggregate, $300), plus
accrued interest. In addition, Conning and Beacon were each granted warrants to
purchase up to $3,000 of additional Series D Stock (in the aggregate, 4,411,764
shares) at $1.36 per share through April 1999. The value of these warrants at
the date of grant was $1,235 using the Black-Scholes pricing model, assuming
volatility of 65%, risk-free interest rate of 5.4%, no expected dividends and a
life of one year. The value of the warrants has been included in the offering
costs of the Series D Stock. None of the warrants were exercised in 1998 or
1999.
The Series D Stock has a stated value per share of $1.23 (as amended). The
Series D Stock is generally entitled to a preference in liquidation at a
liquidation or redemption price of the greater of (i) $1.23 for each share of
common stock into which the Series D Stock could be converted, plus all accrued
and unpaid dividends, or (ii) the per share amount the holders would have
received if all shares of Series D Stock had been converted to common stock
immediately prior to such liquidation or redemption, plus all accrued and
unpaid dividends. Effective November 19, 1999, Etinuum amended its Certificate
of Incorporation
F-23
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
to provide for cumulative stock dividends equal to .145 shares for each share
of Series D Stock outstanding on October 15, 1999. Subsequent to October 15,
1999, the cumulative dividend rate becomes 8% per annum on the stated value
through July 31, 2001. The dividend resulted in 1,450,810 shares of preferred
stock accrued on December 31, 1999.
Series E Stock
On April 16, 1999, Etinuum issued 2,484,472 shares of Series E Convertible
Preferred Stock, $.001 par value for net proceeds of $3,948, or $1.61 per
share. An additional 26,211 shares of Series E Stock were issued within 180
days of initial closing for $42, resulting in total shares issued of 2,510,683.
The Series E Stock has a stated value per share of $1.48 (as amended). The
Series E Stock is generally entitled to a preference in liquidation at a
liquidation or redemption price of the greater of (i) $1.48 for each share of
common stock into which the Series E Stock could be converted, plus all accrued
and unpaid dividends, or (ii) the per share amount the holders would have
received if all shares of Series E Stock had been converted to common stock
immediately prior to such liquidation or redemption, plus all accrued and
unpaid dividends. Effective November 19, 1999, Etinuum amended its Certificate
of Incorporation to provide for cumulative stock dividends equal to .1 share
for each share of Series E Stock outstanding on October 15, 1999. Subsequent to
October 15, 1999, the cumulative dividend rate becomes 8% per annum on the
stated value through July 31, 2001. The dividends resulted in 297,098 shares of
preferred stock accrued on December 31, 1999.
Series F Stock
In November and December of 1999, Etinuum issued 5,210,093 shares of
Series F Convertible Preferred Stock, $.001 par value for net proceeds of
$10,495, or $2.13 per share. The net proceeds are to be used for working
capital purposes, a related party loan and to fund acquisitions.
The Series F Stock has an initial stated value per share of $2.13.
Cumulative dividends will accrue at 8% of the stated value per annum. The
dividends resulted in 43,129 shares of preferred stock accrued on December 31,
1999. The Series F Stock is generally entitled to a preference in liquidation
at a liquidation or redemption price of the greater of (i) $2.13 for each share
of common stock into which the Series F Stock could be converted, plus all
accrued and unpaid dividends, or (ii) the per share amount the holders would
have received if all shares of Series F Stock had been converted to common
stock immediately prior to such liquidation or redemption, plus all accrued and
unpaid dividends.
The Series F conversion ratio will be adjusted if Etinuum issues or sells
common stock or equivalents at a price less than its stated conversion price
then in effect. If the public offering price of common stock issued in
Etinuum's initial public offering is less than two times the conversion price,
the conversion price is adjusted to 50% of the public offering price. Further,
if an initial public offering is not consummated before July 31, 2000, then the
Series F conversion ratio will be reduced to 75% of the otherwise applicable
conversion price. The minimum 25% beneficial conversion feature of $2,624 has
reduced the Series F preferred stock carrying value and will be accreted
through July 31, 2000. If an initial public offering were to occur prior to
July 31, 2000, an additional charge of approximately $14,000 would be
recognized by Etinuum. Accrued but unpaid dividends on Series F Stock may also
be converted into common stock at the same effective conversion ratio.
F-24
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
(10) Stock Option Plans
Etinuum's 1997 Stock Option Plan was approved by the stockholders on
February 3, 1997, as amended subsequent to year end, to increase the reserve by
700,000 to a total of 2,455,552 shares of common stock for issuance upon
exercise of options granted under this plan.
Etinuum also adopted the 1998 Stock Option Plan effective May 7, 1998 as
amended, to reserve 1,564,417 common shares for issuance upon exercise of
options granted under this plan.
Generally options have been granted at an exercise price deemed at least
equal to or greater than the fair market value of Etinuum's common stock at the
date of grant and vest over periods ranging from 36 to 48 months as determined
by the Board of Directors. Options generally have a term of ten years from date
of grant, except for incentive stock options granted to stockholders holding
10% or more of Etinuum's stock outstanding, in which case the term is five
years. Under the Stock Plans, the Board of Directors has the discretion to set
the exercise price and to accelerate the vesting periods of options.
During 1999, options for 811,000 shares of common stock were granted with
exercise prices below fair market value. Etinuum will recognize $1,664 as
compensation expense over the vesting period of the options, ranging from three
to four years from the grant date. In 1999, $398 of compensation was
recognized.
The following table summarizes the activity relating to options:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------
1997 1998 1999
------------------- ------------------- -------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Stock Options:
Options outstanding, at
beginning of period... -- -- 1,312,394 $6.44 1,710,544 $6.07
Granted................ 1,321,887 $ 6.44 483,375 5.56 1,111,000 6.64
Exercised.............. -- -- (175) 8.00 (1,620) 5.05
Terminated............. (9,493) 7.04 (85,050) 9.20 (489,361) 6.44
--------- ------ --------- ----- --------- -----
Options outstanding, at
end of period......... 1,312,394 $ 6.44 1,710,544 $6.07 2,330,563 6.28
--------- ------ --------- ----- --------- -----
Options exercisable, at
end of period......... -- $ -- 670,883 $5.61 1,214,480 $5.96
========= ====== ========= ===== ========= =====
Weighted average fair
value of options
granted during the
period................ $ 0.96 $1.68 $2.72
====== ===== =====
</TABLE>
The total fair value of options granted was computed to be approximately
$1,283, $813 and $3,022 for the years ended December 31, 1997, 1998 and 1999,
respectively. For purposes of the fair value pro forma disclosures, these
amounts will be amortized ratably over the vesting period of the options.
Cumulative compensation cost recognized in pro forma net income or loss with
respect to options that are forfeited prior to vesting is adjusted as a
reduction of pro forma compensation expense in the period of forfeiture. Pro
forma stock-based compensation, net of the effect of forfeitures and tax, was
approximately $357, $503 and $1,156 for the years ended December 31, 1997, 1998
and 1999, respectively.
If the fair value method were used to account for employee stock option
grants, Etinuum's net loss applicable to common stockholders and loss per share
would have been increased to the following pro forma amounts:
F-25
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net loss applicable to common stockholders:
As reported............................... $(13,226) $(11,464) $(25,235)
======== ======== ========
Pro forma................................. $(13,583) $(11,967) $(26,391)
======== ======== ========
Net loss per share:
As reported............................... $ (7.09) $ (6.14) $ (13.50)
======== ======== ========
Pro forma................................. $ (7.28) $ (6.41) $ (14.11)
======== ======== ========
</TABLE>
The fair value of each option grant was determined using the minimum value
method, under which no volatility was assumed. The assumptions used to
determine the fair value of each option grant are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rates......................... 6.17% 5.52% 5.91%
Expected dividend yield rates.................... 0.00% 0.00% 0.00%
Expected lives................................... 4 years 4 years 4 years
Expected volatility.............................. 0.001% 0.001% 0.001%
</TABLE>
The following table summarizes information about the stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------- --------------------
Weighted
Average Weighted- Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
--------------- ----------- ----------- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
$2.71 to $4.08...... 479,702 7.37 years $ 2.72 436,515 $ 2.72
$5.45 to $6.44...... 911,003 9.50 years $ 3.84 172,135 $ 6.25
$6.97 to $9.00...... 822,101 8.26 years $ 4.93 514,639 $ 7.02
$13.92 to $15.60.... 117,757 7.89 years $13.52 91,191 $15.14
</TABLE>
(11) Major Customers
A significant portion of Etinuum's revenue is derived from a limited
number of customers. To the extent that any significant customer uses less of
Etinuum's services or terminates its relationship with Etinuum, Etinuum's
revenues could decline substantially and seriously harm Etinuum's business and
results of operations. Additionally, certain of Etinuum's contracts with its
customers, including its largest customer, are on a month-to-month basis.
Etinuum's sales to customers in excess of 10% of revenues for the years ended
December 31, 1997, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Customer A................................. -- -- $3,486 20% $6,788 27%
Customer B................................. $3,304 35% -- -- $2,930 12%
Customer C................................. -- -- $2,021 12% -- --
Customer D................................. -- -- $1,919 11% -- --
</TABLE>
F-26
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
Etinuum's accounts receivable balances, billed and unbilled, from
customers in excess of 10% of the accounts receivable balance at December 31,
1997, 1998 and 1999, are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Customer A................................. $ 895 27% $1,253 19% $1,867 27%
Customer B................................. $1,409 43% -- -- $ 733 11%
Customer E................................. -- -- $ 653 10% -- --
</TABLE>
(12) Related Party Transactions
Lease
During 1997, Etinuum leased an aircraft from Mt. Evans Consulting, LLC, a
company owned by the Etinuum's Chief Executive Officer. Etinuum had no minimum
commitments under this lease. Rental payments were based on Etinuum's usage of
the aircraft. Amounts paid or accrued by Etinuum under this lease agreement
during the year ended December 31, 1997 were $165. During 1998, the lease was
terminated.
Employment Agreements
In conjunction with the purchase of Protocall, Etinuum entered into
employment agreements with several employees of Protocall. The agreements
provide that one year of salary be paid in the event of involuntary
termination. In December 1997, Etinuum elected to terminate certain employees
that were employed under the agreements. In accordance with the agreements,
Etinuum accrued approximately $407 at December 31, 1997 that was charged to
selling, general and administrative expense in the accompanying consolidated
statements of operations.
Related Party Loans
On November 23, 1999, in connection with the Series F Stock issuance,
Etinuum loaned its Chief Executive Officer $600. The note is full recourse to
the personal assets of the Chief Executive Officer, including his stock in
Etinuum. The note bears interest at prime plus 1.5% (10.0% at December 31,
1999) and matures one year from issuance or earlier depending on the successful
registration of Etinuum's stock with the Securities and Exchange Commission.
In 1999, Etinuum executed a note with a key employee for $28 bearing
interest at 8% per year. The note is unsecured and matures in November 2003.
Etinuum has loaned certain key management a total of $62 in 1999 to allow
for a partial payment of taxes and to be used for various other purposes.
Principal and accrued interest are due in full on September 1, 2001. One half
of the loan can be forgiven each year if they are still employed at that time.
The loans bear interest at 7.75%.
Other Transactions
Etinuum maintains life insurance on the Chief Executive Officer in the
amount of $20,000. In the event of the Chief Executive Officer's death, the
first $10,000 of insurance proceeds are to be applied to repurchase shares from
the Chief Executive Officer's estate with the remaining proceeds benefiting his
estate, and the second $10,000 of insurance proceeds is paybable to Etinuum.
F-27
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands, except per share amounts)
In January 1998, Etinuum's Chief Executive Officer granted an option to a
key employee to purchase 62,500 shares of Etinuum common stock owned by the
Chief Executive Officer for $6.96 per share. The option has a stated life of
ten years and is fully exercisable. No compensation expense has been recognized
for this transaction as the exercise price was greater than the fair market
value on the date of grant.
(13) Subsequent Events
Employee Stock Purchase Plan
Etinuum has adopted the 2000 Employee Stock Purchase Plan on January 13,
1999. The plan will be implemented in eight semiannual offerings of 250,000
shares of stock for an aggregate of 2,000,000 available shares to be sold under
the plan. Eligible employees can withhold up to 10% of their base salary to be
used to purchase shares under the plan. Employees can purchase shares for the
lesser of 85% of the closing price at the beginning or ending of the purchase
period or a price set by the Board of Directors if the stock is not publicly
traded.
2000 Stock Incentive Plan
Etinuum has adopted the 2000 Stock Incentive Plan on January 13, 1999 to
reserve 2,750,000 shares of common shares for issuance upon exercise of options
granted under this plan.
Warrant
In January 2000, Etinuum granted a warrant to a major customer to purchase
181,250 shares of common stock at an exercise price of $8.52 per share. The
value of the warrant at the date of grant was approximately $1.1 million. The
value was determined using the Black-Scholes pricing model, assuming volatility
of 65%, a risk free interest rate of 6.3%, no expected dividends and a
contractual life of three years. The warrant vested immediately upon issuance.
F-28
<PAGE>
INDEX TO UNAUDITED PRO FORMA
CONDENSED FINANCIAL INFORMATION
<TABLE>
<S> <C>
Unaudited Pro Forma Condensed Financial Information Basis of
Presentation............................................................. P-2
Pro Forma Condensed Balance Sheet Information (unaudited) at December 31,
1999..................................................................... P-3
Pro Forma Condensed Statement of Operations Information (unaudited) for
the year ended December 31, 1999......................................... P-4
Notes to Unaudited Pro Forma Condensed Financial Information.............. P-5
</TABLE>
P-1
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
BASIS OF PRESENTATION
The following unaudited pro forma condensed financial information gives
effect to (a) the spin-off by Etinuum of Spider, (b) the acquisition of all the
outstanding common stock of Acorn, and (c) the closing of Etinuum's initial
public offering. The acquisition of Acorn was accounted for using the purchase
method of accounting. The unaudited pro forma condensed financial information
is derived from the historical financial statements of Etinuum, Spider and
Acorn.
The unaudited pro forma condensed balance sheet information reflects the
automatic conversion of all shares of our preferred stock into common stock
upon completion of this offering. The unaudited pro forma condensed balance
sheet information also reflects our receipt of the estimated net proceeds of
$44.5 million from 4,500,000 shares of common stock included in this offering
at an assumed initial public offering price of $11.00 per share, after
deducting estimated underwriting discounts and expenses of $5 million.
The unaudited pro forma condensed statement of operations information
gives effect to the Spider spin-off and the Acorn acquisition as if they had
occurred on January 1, 1999. The purchase accounting adjustments made in
connection with the development of the pro forma financial information are
preliminary and have been made solely for purposes of developing such pro forma
financial information and may not be representative of actual future results.
Because the acquisition of Acorn includes a contingent earn-out, future
adjustments to reflect the acquisition of Acorn may be material.
In connection with the spin-off of Spider, Etinuum has advanced $1 million
to Spider. The $1 million will be repaid in the form of an unconditional
royalty payment due from Spider to Etinuum. Further, Spider has agreed to share
certain selling, general and administrative costs with Etinuum. The ability of
Spider to repay the $1 million advance and the shared costs is principally
dependent upon Spider's future operations. Etinuum will therefore recognize a
valuation allowance against the amounts due from Spider in an amount equal to
Spider's net loss subsequent to the spin-off. As a result, the reductions in
Etinuum's selling, general and administrative costs reflected in the unaudited
pro forma condensed statement of operations may not materialize if Spider is
unable to fund its share of the costs.
The unaudited pro forma condensed financial information should be read in
conjunction with the separate historical financial statements of Etinuum and
Acorn included in this registration statement. You should not rely upon the
unaudited pro forma condensed financial information as an indication of the
results of future operations or financial position that would have been
achieved if the transactions described above had taken place on the dates
indicated.
P-2
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
PRO FORMA CONDENSED BALANCE SHEET
(UNAUDITED)
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
Pro Forma
Etinuum (1) Adjustments Pro Forma
----------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets........................... $ 14,533 (6) $ 46,035 $ 60,568
Property and equipment, net.............. 7,982 -- 7,982
Goodwill and other intangibles, net...... 2,808 -- 2,808
Other assets............................. 1,055 (7) (651) 404
-------- -------- --------
Total assets......................... $ 26,378 $ 45,384 $ 71,762
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities...................... $ 7,000 (7) $ 849 $ 7,849
Deferred rent............................ 245 -- 245
Long-term borrowings..................... 1,722 -- 1,722
-------- -------- --------
Total liabilities.................... 8,967 849 9,816
-------- -------- --------
Convertible preferred stock subject to
mandatory redemption.................... 59,408 (4) 13,938 --
(5) (73,346) --
Stockholders' Equity (Deficit):
Common stock........................... 1 (5) 1 2
Additional paid-in capital............. -- (6) 46,035 103,942
(4) (13,938)
(5) 73,345
(7) (1,500)
Unearned compensation.................. (1,266) -- (1,266)
Retained earnings (deficit)............ (40,732) -- (40,732)
-------- -------- --------
Total stockholders' equity
(deficit)........................... (41,997) 103,943 61,946
-------- -------- --------
Total liabilities and stockholders'
equity (deficit).................... $ 26,378 $ 45,384 $ 71,762
======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma condensed financial information.
P-3
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Pro Forma Offering Pro Forma
Etinuum(1) Acorn(2) Adjustments Combined Adjustments Adjusted
---------- -------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUE................. $ 24,699 $ 2,008 $ -- $ 26,707 $ -- $ 26,707
DIRECT COST OF
SERVICES............... (16,986) (978) -- (17,964) -- (17,964)
---------- ------- ------- ---------- ----------- -----------
GROSS PROFIT............ 7,713 1,030 -- 8,743 -- 8,743
---------- ------- ------- ---------- ----------- -----------
OPERATING EXPENSES:
Selling, general and
administrative........ 15,020 1,313 (3) (1,204) 15,129 -- 15,129
Depreciation and
amortization.......... 3,533 88 (2) 312 3,933 -- 3,933
Research and
development........... 1,079 260 (3) (1,061) 278 -- 278
---------- ------- ------- ---------- ----------- -----------
Total operating
expenses.............. 19,632 1,661 (1,953) 19,340 19,340
---------- ------- ------- ---------- ----------- -----------
LOSS FROM OPERATIONS.... (11,919) (631) 1,953 (10,597) -- (10,597)
LOSS FROM SPIDER........ (1,055) -- (3) (2,265) (3,320) -- (3,320)
OTHER (EXPENSES)
INCOME................. (36) (44) -- (80) -- (80)
---------- ------- ------- ---------- ----------- -----------
NET LOSS................ (13,010) (675) (312) (13,997) -- (13,997)
Accretion of mandatorily
redeemable convertible
preferred stock........ (864) -- -- (864) (8) 864 --
Cummulative dividends to
preferred
stockholders........... (11,361) -- -- (11,361) (8) 11,361 --
Series F Beneficial
Conversion Charge...... -- -- -- -- (4) 13,938 --
-- -- -- -- (4) (13,938) --
---------- ------- ------- ---------- ----------- -----------
NET LOSS APPLICABLE TO
COMMON STOCKHOLDERS.... $ (25,235) $ (675) $ (312) $(26,222) $ 12,225 $ (13,997)
========== ======= ======= ========== =========== ===========
BASIC AND DILUTED:
Net loss per share..... $ (13.50) $ (13.95) $ (0.90)
========== ========== ===========
Weighted average
shares................ 1,869,803 10,257 1,880,060 (8) 13,716,257 15,596,317
========== ======= ========== =========== ===========
</TABLE>
See accompanying notes to unaudited pro forma financial information.
P-4
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO UNAUDITED PRO FORMA CONDENSED
FINANCIAL INFORMATION
(1) Historical Financial Statements
Amounts represent the historical consolidated balance sheet of Etinuum as
of December 31, 1999 and the historical statement of operations of Etinuum for
the year ended December 31, 1999.
(2) Acquisition of Acorn
Effective October 1, 1999, Etinuum purchased all of the common stock of
Acorn. The operations of Acorn have been included in Etinuum's historical
statement of operations from that date. The unaudited results of operations
for Acorn for the nine months ended September 30, 1999, have been included in
the Acorn column.
The purchase was accounted for under the purchase method of accounting
for initial consideration of cash of $550, $200 payable to the former Acorn
stockholders, $100 from the issuance of 11,737 shares of Etinuum's common
stock, and acquisition costs of $100. The purchase agreement also includes a
three-year contingent earn-out of up to $1,900 in cash and up to 527,778
shares of Etinuum common stock. The contingent earn-out will be recorded as
additional purchase price consideration additional goodwill when and if the
annual goals are achieved. The contingent earn-out is based on Acorn's annual
targets of earnings before interest, taxes, depreciation and amortization and
could be earned as follows:
<TABLE>
<CAPTION>
Contingent Earn-
Out
----------------
Cash Stock
------- --------
<S> <C> <C>
Year 1..................................................... $ 600 250,000
Year 2..................................................... 600 166,667
Year 3..................................................... 700 111,111
------- --------
Total earn-out........................................... $ 1,900 527,778
======= ========
</TABLE>
If Acorn achieves less than 100% but greater than 75% of its performance
targets, the above amounts will be reduced for not achieving the estimated
targets. If Acorn achieves less than 75% of its performance targets for any
annual measurement period, then no earn-out payment will be made for that
period.
Additionally, Etinuum will transfer 1,000,000 shares of Spider to the
former Acorn stockholders if the earn-out conditions are met in Year One.
The initial purchase price of Acorn was allocated to the acquired assets
and liabilities as follows:
<TABLE>
<S> <C>
Initial consideration:
Cash.............................................................. $ 550
Stock............................................................. 100
Advances to Acorn prior to acquisition.............................. 450
Transaction costs................................................... 100
Due to Acorn stockholders........................................... 200
------
Total initial consideration..................................... 1,400
Allocated to:
Property and equipment............................................ (312)
Identifiable intangibles.......................................... (950)
Current working capital deficit................................... 355
------
Goodwill............................................................ $ 493
======
</TABLE>
P-5
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS--
(Continued)
Goodwill will be amortized on a straight-line basis over five years. The
customer list and intellectual property acquired, will be amortized on a
straight-line basis over three years. Annual amortization included in the
unaudited pro forma statement of operations information is $415; an increase of
$312 over the amounts included in the historical financial information.
The contingent earn-out will be recorded using the fair value of Etinuum's
stock when payment becomes probable. Assuming the estimated initial offering
price of $11.00 per share, the additional goodwill from Acorn could approximate
$5.8 million. This would result in an additional $1.2 million in annual
amortization. This amount is presented to illustrate the significance of the
future adjustments to Acorn's purchase price on Etinuum's earnings. This should
not be viewed as a projection of the earn-out expected to be paid to the former
Acorn shareholders. The ultimate amount of the Acorn earn-out (if any) will
depend upon Acorn's actual future performance and Etinuum's stock price at the
time the additional shares are distributed to the former Acorn's shareholders.
(3) Spin-off of Spider
Effective October 1, 1999, Etinuum distributed 100% of the shares of
Spider to its stockholders on a pro rata basis. In connection with the
transaction, Etinuum agreed to distribute $1,000 in cash and research and
development relating to the technology that is currently under development to
Spider. Etinuum has the right to receive an unconditional royalty of $1,450
from Spider plus accrued interest at 8% over the next five years resulting from
the spin-off. The royalty payments are due by Spider regardless of its future
operations.
The costs directly attributable to the operations of Spider prior to the
spin-off, including payroll and payroll benefits for employees that became
Spider employees as a result of the spin-off, are shown as a reduction of
Etinuum's historical research and development costs. These costs were $1,061
for the nine-month period ended September 30, 1999. Spider is also charged for
certain shared support services for payroll, financial reporting, accounting
and tax, human resources, treasury and insurance and risk management services
under a transition support agreement. These costs would have been $1,204 for
the nine-month period ended September 30, 1999, and are shown as a reduction of
Etinuum's historical selling, general and administrative costs.
The repayment of the unconditional royalty obligation and Spider's ability
to fund its shared support costs are principally dependent upon the future
success of Spider's operations or its ability to raise capital. Etinuum will
provide a valuation allowance against any amounts due from Spider because of
this uncertainty. The amount of the valuation allowance to be charged against
income in any period will be equal to the lesser of (1) Spider's loss for the
period or (2) the amount due from Spider. As a result, the reduction in
research and development costs and the shared support costs discussed above
have been shown as a loss of $2,265 from Spider in the unaudited pro forma
statement of operations information.
As a condition of the spin-off, Etinuum will be allowed to utilize the
Spider technology for three years without any fee or royalty due to Spider.
Thereafter, Etinuum will pay for the use of the technology at its most favored
nations pricing if Etinuum chooses to continue to utilize the Spider software.
No amount has been reflected in the unaudited pro forma statement of operations
information for this future royalty because the amount is not reasonably
determinable at this time and it is uncertain whether Etinuum will continue to
use the Spider technology beyond the three year period.
P-6
<PAGE>
ETINUUM, INC. AND SUBSIDIARIES
(f.k.a. Intek Information, Inc.)
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS--
(Continued)
(4) Guaranteed Return to Series F Stockholders
The holders of the Series F stock have been guaranteed a minimum return
of 100%, upon successful completion of the offering. This guaranteed return
has been reflected as a $13,938 charge to net loss applicable to common
stockholders and an increase in the Series F preferred stock. Based upon the
assumed initial offering price of $11.00 per share, approximately 721,124
additional shares of common stock will need to be issued to the Series F
preferred stockholders to achieve this return.
(5) Conversion of Preferred Stock to Common upon the Completion of the
Offering
Etinuum's preferred stock will automatically convert to common stock upon
the successful completion of the offering.
(6) Initial Public Offering
Etinuum plans to issue 4,500,000 common shares in its initial public
offering. The estimated offering price is $11.00 per share. This will result
in proceeds of $46,035, net of the 7% underwriters discount.
(7) Offering Costs
Total offering costs, other than the underwriters discount, have been
estimated at $1,500. Etinuum has $651 in deferred offering costs included in
its December 31, 1999, historical balance sheet. The remaining $849 has been
reflected as a current liability in the accompanying unaudited pro forma
condensed balance sheet information.
(8) Net Loss Per Share
Pro forma net loss per share for the year ended December 31, 1999 assumes
the offering occured on January 1, 1999. Pro forma net loss per share is
computed using the pro forma net loss divided by the weighted average number
of common shares outstanding, including the pro forma effects of the
following:
<TABLE>
<S> <C> <C>
.Shares issued in the initial public offering........... 4,500,000 shares
.Conversion of all Etinuum's convertible preferred
stock.................................................. 8,207,418 shares
.Dividends paid in kind on preferred stock.............. 287,715 shares
.Additional shares issued to Series F stockholders...... 721,124 shares
----------
Total additional shares............................... 13,716,257 shares
==========
</TABLE>
The charges to adjust net loss to net loss applicable to common
stockholders have been eliminated.
P-7
<PAGE>
ACORN INFORMATION SERVICES, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants.................................... A-2
Financial Statements:
Balance Sheet as of December 31, 1998.............................. A-3
Statement of Income for the Year Ended December 31, 1998........... A-4
Statement of Changes in Stockholders' Equity for the Year Ended
December 31, 1998................................................. A-5
Statement of Cash Flows for the Year Ended December 31, 1998....... A-6
Notes to Financial Statements........................................ A-7--A-11
</TABLE>
A-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Acorn Information Services, Inc.
In our opinion, the accompanying balance sheet and the related statements of
income, changes in stockholders' equity and of cash flows present fairly, in
all material respects, the financial position of Acorn Information Services,
Inc. at December 31, 1998, and the results of its operations and its cash flows
for the year, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit 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 audit provides a reasonable basis for the
opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company's working capital deficiency and limited
availability to capital financing raises substantial doubt about its ability to
continue as a going concern. Management's plan in regard to these matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
PricewaterhouseCoopers LLP
Stamford, Connecticut
June 28, 1999, except for
the second and third paragraphs
of Note 10 referencing the
proposed acquisition by
Etinuum, Inc.,
which is as of July 16, 1999
A-2
<PAGE>
ACORN INFORMATION SERVICES, INC.
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash............................................................... $ 10,111
Accounts receivable................................................ 681,175
Loan receivable from employees .................................... 5,820
Other assets....................................................... 6,556
----------
Total current assets............................................. 703,662
Capitalized software................................................. 172,000
Fixed assets, net (Note 4)........................................... 244,533
Other assets......................................................... 17,877
----------
$1,138,072
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................... $ 107,519
Accrued sales tax.................................................. 43,969
Other accrued expenses............................................. 51,497
Deferred revenue................................................... 150,000
Current portion of capital lease obligations....................... 54,883
Line of credit facility............................................ 119,065
Deferred tax liability............................................. 100,677
Notes payable--related party (Notes 5 & 6)......................... 197,800
----------
Total current liabilities........................................ 825,410
Capital lease obligations.......................................... 59,648
----------
Total liabilities................................................ 885,058
----------
Commitments (Note 9)
Stockholders' equity:
Class A common stock, no par value, 10,000 shares authorized;
1,800 shares issued and outstanding............................... 151,000
Class B common stock, no par value, 10,000 shares authorized;
no shares issued and outstanding.................................. --
Retained earnings.................................................. 102,014
----------
Total stockholders' equity....................................... 253,014
----------
Total liabilities and stockholders' equity......................... $1,138,072
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-3
<PAGE>
ACORN INFORMATION SERVICES, INC.
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
Revenues:
Consulting........................................................ $2,812,226
----------
Costs and expenses:
Cost of revenues.................................................. 876,082
Sales and marketing............................................... 348,765
General and administrative........................................ 955,482
Research and development.......................................... 242,707
----------
2,423,036
----------
Income from operations........................................... 389,190
Interest expense.................................................... 53,051
----------
Income before income taxes....................................... 336,139
Provision for income taxes (Note 8)................................. 91,871
----------
Net income....................................................... $ 244,268
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-4
<PAGE>
ACORN INFORMATION SERVICES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Common stock Treasury stock Retained Total
----------------- ---------------- earnings stockholders'
Shares Amount Shares Amount (deficit) equity (deficit)
------ --------- ------ --------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1998................... 1,800 $ 51,000 -- $ -- $(142,254) $(91,254)
Transfer of stock....... (45) -- 45 -- -- --
Issuance of stock....... 45 100,000 (45) -- -- 100,000
Repurchase of stock..... (45) (100,000) 45 100,000 -- --
Issuance of stock....... 45 100,000 (45) (100,000) -- --
Net income.............. -- -- -- -- 244,268 244,268
----- --------- --- --------- --------- --------
Balance at December 31,
1998................... 1,800 $ 151,000 -- -- $ 102,014 $253,014
===== ========= === ========= ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-5
<PAGE>
ACORN INFORMATION SERVICES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
INCREASE (DECREASE) IN CASH
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income........................................................ $ 244,268
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation.................................................... 89,218
Changes in operating assets and liabilities:
Accounts receivable............................................. (489,659)
Loan receivable from employees.................................. (3,575)
Other assets.................................................... (4,579)
Accounts payable................................................ 18,100
Accrued sales tax............................................... 36,556
Other accrued expenses.......................................... 36,358
Deferred revenue................................................ 150,000
Deferred tax liability.......................................... 91,871
---------
Net cash provided by operating activities........................... 168,558
---------
Cash flows from investing activities:
Purchase of property and equipment................................ (87,719)
Capitalized software.............................................. (172,000)
---------
Net cash used in investing activities............................... (259,719)
---------
Cash flows from financing activities:
Principal payments on capital lease obligations................... (48,145)
Proceeds from line of credit...................................... 320,000
Principal payments on line of credit.............................. (271,435)
Proceeds from notes payable....................................... 276,634
Principal payments of notes payable............................... (276,634)
Issuance of common stock.......................................... 200,000
Repurchase of common stock........................................ (100,000)
---------
Net cash provided by financing activities........................... 100,420
---------
Net increase in cash................................................ 9,259
Cash--beginning of year............................................. 852
---------
Cash--end of year................................................... $ 10,111
=========
Supplemental disclosure of cash flow information:
Income taxes paid................................................. $ 5,720
=========
Interest paid..................................................... $ 31,438
=========
Supplemental disclosure of noncash financing activity:
During 1998, the Company entered into capital lease obligations to
purchase $106,675 of furniture and fixtures and computer
equipment.
</TABLE>
The accompanying notes are an integral part of these financial statements.
A-6
<PAGE>
ACORN INFORMATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
1. Nature of the Business
Acorn Information Services, Inc. (formerly Acorn Information Systems,
Inc.) ("Acorn" or the "Company") was incorporated in Conneticut in 1994. Acorn
develops and manages database marketing programs and interactive marketing
solutions for Fortune 1000 companies throughout the United States. Acorn has
developed expertise in the following areas: program management; marketing
database design; database operations; and analytical services.
2. Basis of Preparation
For the year ended 1998, the Company had a working capital deficiency and
had net cash outflows for operating and investing activites. The Company has
limited availability to capital financing. The Company has funded its
operations through shareholder loans and available lines of credit. It is
management's intention to continue to fund the Company's operating loss through
additional shareholder loans in order to meet its strategic objectives. The
Company believes that sufficient funding will be available to meet its planned
business objectives, including anticipated cash needs for working capital for a
reasonable period of time. However, there can be no assurance the Company will
be able to obtain sufficient funds to continue operations. As a result of the
foregoing, there exists substantial doubt about the Company's ability to
continue as a going concern. These financial statements do not include any
adjustments relating to the recoverability of carrying amount of recorded
assets or the amounts of liabilities that might result from the outcome of this
uncertainty.
3. Summary of Significant Accounting Policies
Revenue Recognition and Deferred Revenue
Revenue is derived from consulting services performed relating to software
development and consulting for customers. Revenue from consulting services is
recognized when the services are provided. Revenue generated from fixed fee
custom development contracts is primarily recognized using the percentage of
completion method. Due to the inherent uncertainties in the estimation process,
it is at least reasonably possible that estimates for cost to complete projects
in progress may be revised. Such revisions are recognized in the period in
which the revisions are determined. Revenue is deferred to the extent that cash
is received or fees are billed prior to satisfying obligations to customers.
Losses on contracts are recognized when determinable.
Fixed Assets
Fixed assets are stated at cost and depreciated using the straight-line
method over the estimated useful lives of the assets. Assets held under capital
leases are amortized over the shorter of the lease life or the estimated useful
life of the assets. Maintenance and repair costs are expensed as incurred.
Capitalized Software Costs
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed," software development costs for new software products are expensed as
incurred until technological feasibility is established. Software development
costs incurred subsequent to the establishment of technological feasibility and
prior to general release are capitalized. During 1998, the Company capitalized
$172,000 of software development costs. These costs will be amortized over a
three-year period. Amortization commences when the product is available for
general release to customers. Capitalized software costs are stated at the
lower of cost or net realizable value. There was no amortization expense
incurred during 1998 as none of the products which had established
technological feasibility were available for general release to customers.
A-7
<PAGE>
ACORN INFORMATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Concentration of Credit Risk and Significant Customers
Financial instruments which potentially expose the Company to
concentration of credit risk consist primarily of trade accounts receivable.
The Company sells its services to various companies in the United States across
several industries. The Company performs ongoing credit evaluations of its
customers to ensure reserves for potential credit losses are not warranted.
At December 31, 1998, two of the Company's customers accounted for
approximately 45% and 32% of the Company's accounts receivable and two
customers accounted for approximately 37% and 25% of the Company's revenues for
the year then ended, respectively. No other customer exceeded 10% of revenues.
Financial Instruments
The carrying amounts of the Company's financial instruments, which include
cash, accounts receivable, accounts payable and accrued expenses, capital lease
obligations and line of credit, approximate their fair market values at
December 31, 1998.
Use of Estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses at and during the reporting periods of the
financial statements. Actual results could differ from these estimates.l
4. Fixed Assets
Fixed assets consist of the following at December 31, 1998:
<TABLE>
<CAPTION>
Estimated
useful
life
(years)
----------
<S> <C> <C>
Furniture and fixtures................................. $ 45,882 5
Computer equipment..................................... 263,763 3
Leasehold improvements................................. 79,537 Lease life
---------
389,182
Accumulated depreciation............................... (144,649)
---------
$ 244,533
=========
</TABLE>
Depreciation expense for the year ended December 31, 1998 was $89,218.
The balances presented above for furniture and fixtures, computer
equipment and leasehold improvements include assets acquired under capital
leases of $30,206, $138,204 and $35,940, respectively. Accumulated amortization
on assets under capital leases totaled $56,481 as of December 31, 1998.
5. Related Party Transactions
During 1996, the Company issued promissory notes to certain officers and
shareholders of the Company totaling $113,800 (Note 6).
During 1997, the Company issued $84,000 of notes to certain officers and
shareholders of the Company for services rendered.
During 1998, the Company was advanced $276,634 by officers and
shareholders of the Company. Such advances were repaid by the Company during
1998. Interest expense related to these advances totaled $3,375 during 1998.
A-8
<PAGE>
ACORN INFORMATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. Debt
Line of Credit Facilities
On March 26, 1996, the Company entered into an agreement with a bank for a
$50,000 line of credit facility (the "Agreement"). At December 31, 1998, the
Company had no outstanding borrowings under the Agreement. This obligation was
guaranteed by certain shareholders of the Company. Under the terms of the
agreements, interest accrues on outstanding borrowings at 12.5% per annum,
interest is payable monthly and principal is payable upon demand. Interest
expense under this credit note totaled $5,174 during 1998.
On November 8, 1997, the Company entered into an agreement with a bank to
provide a $175,000 line of credit facility (the "Agreement"). At December 31,
1998, the Company had outstanding borrowings of $119,065 under the Agreement.
This obligation is guaranteed by certain shareholders of the Company and is
collateralized by all assets of the Company and expires in November 1999.
Interest accrues at a per annum rate of 1% over the bank's prime rate.
Principal and interest are payable monthly. Interest expense under this credit
note totaled $10,579 during 1998.
Notes Payable
During 1997, the Company issued notes totaling $84,000 to certain
shareholders of the Company for services rendered by the shareholders. The
notes bear interest at a rate of 10% per annum and is payable on demand.
Interest expense relating to these notes totaled $8,400 during 1998.
On December 31, 1996, the Company issued $113,800 of promissory notes to
certain officers and shareholders of the Company. The notes are payable on
demand and bear interest at 10% per annum. Interest expense relating to the
notes totaled $11,380 during 1998.
7. Common Stock
Each share of Class A common stock entitles the holder to one vote on all
matters submitted to a vote of the Company's stockholders. The Class B common
stock is non-voting, except as otherwise provided for in the Company's articles
of incorporation. Common stockholders are entitled to receive dividends, if
any, as may be declared by the board of directors on a share-for-share basis,
regardless of the class of common stock held.
During 1998, certain shareholders of the Company entered into treasury
stock sales and repurchase transactions. These transactions were recorded as
treasury stock and were accounted for under the cost method. There were no
outstanding treasury shares at December 31, 1998.
8. Income Taxes
The provision for income taxes for the year ended December 31, 1998 is as
follows:
<TABLE>
<S> <C>
Current tax expense:
U.S. federal....................................................... $ --
State and local.................................................... 816
-------
Total current........................................................ 816
-------
Deferred tax expense:
U.S. federal....................................................... 74,385
State and local.................................................... 16,670
-------
Total deferred....................................................... 91,055
-------
Total provision...................................................... $91,871
=======
</TABLE>
A-9
<PAGE>
ACORN INFORMATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company's net deferred tax assets (liabilities) are comprised of the
following at December 31, 1998:
<TABLE>
<S> <C>
Deferred tax assets:
Accounts payable............................................... $ 61,769
Net operating loss............................................. 45,441
Deferred revenue............................................... 43,492
Research and development credits............................... 16,831
Fixed assets................................................... 6,099
---------
173,632
Deferred tax liability:
Accounts receivables........................................... (274,309)
---------
Net deferred tax liability....................................... $(100,677)
=========
</TABLE>
At December 31, 1998, the Company has federal net operating loss
carryforwards of $112,724 and state net operating loss carryforwards of
$113,474. The federal losses will expire in 2012 through 2018 and the state
losses will expire in 2002 and 2003. Additionally, at December 31, 1998, the
Company has federal research and development credits of $16,831 available to
offset future tax liability. These credits will expire in 2018. If certain
substantial changes in the Company's ownership should occur, there would be an
annual limitation on the amount of the net operating loss and research and
development credit carryforwards which can be utilized.
9. Commitments
The Company has entered into noncancelable operating leases for office
space, automobiles and computer equipment and capital leases for furniture and
fixtures, computer equipment and leasehold improvements. The Company's future
minimum lease commitments under these leases are as follows:
<TABLE>
<CAPTION>
Operating Capital
leases leases
--------- --------
<S> <C> <C>
1999..................................................... $182,948 $ 64,457
2000..................................................... 155,457 35,567
2001..................................................... 140,241 18,670
2002..................................................... 134,506 6,598
2003..................................................... 11,209 2,647
-------- --------
Total.................................................... $624,361 127,939
========
Less--Amount representing interest....................... 13,408
--------
Present value of future minimum lease payments........... $114,531
========
</TABLE>
Rent expense under the noncancelable operating leases was approximately
$135,430 for the year ended December 31, 1998.
10. Subsequent Event
During the first quarter of 1999, the Company created a newly formed
Delaware corporation (Acorn Information Services, Inc.) which merged with the
existing Connecticut corporation (Acorn Information Systems, Inc.). In
connection with the merger, the number of authorized shares was reduced from
20,000 (10,000 Class A and 10,000 Class B) to 10,000 (5,000 Class A and 5,000
Class B) and the per share par value was increased from none to $0.01. All
outstanding shares of Acorn Information Systems, Inc. were converted into Acorn
Information Services, Inc. shares at a ratio of one-to-one.
A-10
<PAGE>
ACORN INFORMATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
In July 1999, the Company signed a letter of intent to enter into a
proposed acquisition by Etinuum, Inc. ("Etinuum"). In connection with the
proposed acquisition, the Company received a bridge loan in the amount of
$200,000 from Etinuum. The bridge loan bears interest at a rate of 12% per
annum and will be payable on demand if the acquisition is not successfully
completed or on December 4, 1999. If the acquisition is successfully completed,
the proceeds received by the Company will be reduced by the amount of the
bridge loan.
Also in connection with the proposed acquisition, the Company received
$225,000 from Etinuum for working capital purposes. If the proposed acquisition
is successfully completed the amount will be forgiven. If the proposed
acquisition is not consummated, the amount will be payable on October 3, 1999.
The loan bears no interest.
A-11
<PAGE>
ACORN INFORMATION SERVICES, INC.
BALANCE SHEETS
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
September 30,
-------------
1998 1999
-------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................................... $ 126 $ 13
Trade receivables, net......................................... 287 658
Prepaid expenses and other..................................... 9 8
----- -------
Total current assets........................................... 422 679
----- -------
PROPERTY AND EQUIPMENT, net..................................... 212 312
OTHER ASSETS.................................................... 18 21
----- -------
Total assets................................................... $ 652 $ 1,012
===== =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses.......................... $ 174 $ 351
Deferred revenue............................................... -- 55
Current borrowings............................................. 87 759
----- -------
Total current liabilities...................................... 261 1,165
LONG-TERM BORROWINGS, net of current portion.................... -- 340
----- -------
Total liabilities.............................................. 261 1,505
----- -------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Class A common stock, no par value, 10,000 shares authorized,
1,800 shares issued and outstanding............................ 51 151
Class B common stock, no par value, 10,000 shares authorized, no
shares issued and outstanding.................................. -- --
Retained earnings (deficit)..................................... 340 (644)
----- -------
Total stockholders' equity (deficit)........................... 391 (493)
----- -------
Total liabilities and stockholders' equity (deficit)........... $ 652 $ 1,012
===== =======
</TABLE>
The accompanying notes to financial statements
are an integral part of these unaudited balance sheets.
A-12
<PAGE>
ACORN INFORMATION SERVICES, INC.
STATEMENTS OF OPERATIONS
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine-Month
Period Ended
September 30,
--------------
1998 1999
------ ------
<S> <C> <C>
REVENUE........................................................ $2,144 $2,008
DIRECT COST OF SERVICES........................................ (606) (978)
------ ------
GROSS PROFIT................................................... 1,538 1,030
------ ------
OPERATING EXPENSES:
Selling, general and administrative.......................... 889 1,313
Depreciation and amortization................................ 115 88
Research and development..................................... 243 260
------ ------
Total operating expenses................................... 1,247 1,661
------ ------
INCOME (LOSS) FROM OPERATIONS.................................. 291 (631)
OTHER EXPENSES................................................. (29) (44)
------ ------
262 (675)
PROVISION FOR TAXES............................................ 92 --
------ ------
NET INCOME (LOSS).............................................. $ 170 $ (675)
====== ======
</TABLE>
The accompanying notes to financial
statements are an integral part of these unaudited statements.
A-13
<PAGE>
ACORN INFORMATION SERVICES, INC.
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine-Month
Period Ended
September 30,
--------------
1998 1999
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net cash provided by (used in) operating activities............. 253 (164)
------ ------
Cash flows from investing activities:
Purchase of property and equipment.............................. (202) (50)
------ ------
Net cash used in investing activities........................... (202) (50)
------ ------
Cash flows from financing activities:
Proceeds from debt.............................................. 90 284
Repayments of debt and capital leases........................... (16) (67)
------ ------
Net cash provided by financing activities....................... 74 217
------ ------
Net increase in cash and cash equivalents....................... 125 3
Cash and cash equivalents, beginning of period.................. 1 10
------ ------
Cash and cash equivalents, end of period........................ $ 126 $ 13
====== ======
</TABLE>
The accompanying notes to financial statements
are an integral part of these unaudited statements.
A-14
<PAGE>
ACORN INFORMATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
(1) Organization and Nature of Business
Acorn Information Services, Inc. was incorporated in Connecticut in 1994.
Acorn develops and manages database marketing programs and interactive
marketing solutions for Fortune 1000 companies throughout the United States.
Acorn has developed expertise in the following areas: program management,
marketing database design, database operations and analytical services.
(2) Unaudited Interim Financial Statements
The interim financial statements have been prepared by Acorn pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures relating to the interim periods normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, the accompanying unaudited condensed
financial statements of the interim periods contain all adjustments necessary
to present fairly the financial position of Acorn as of September 30, 1999 and
1998 and the results of operations and cash flows for the periods presented.
All such adjustments are of a normal recurring nature. The results of
operations for the nine-month period ended September 30, 1999 and 1998 are not
necessarily indicative of the results that may be achieved for a full fiscal
year and cannot be used to indicate financial performance for the entire year.
(3) Summary of Significant Accounting Policies
Revenue Recognition
Revenue is derived from consulting services performed relating to software
development and consulting for customers. Revenue from consulting services is
recognized when the services are provided. Revenue generated from fixed fee
custom development contracts is primarily recognized using the percentage of
completion method. Due to the inherent uncertainties in the estimation process,
it is at least reasonably possible that estimates for cost to complete projects
in progress may be revised. Such revisions are recognized in the period in
which the revisions are determined. Revenue is deferred to the extent that cash
is received or fees are billed prior to satisfying obligations to customers.
Losses on contracts are recognized when determinable.
Fixed Assets
Fixed assets are stated at cost and depreciated using the straight-line
method over the estimated useful lives of the assets. Assets held under capital
lease are amortized over the shorter of the lease life or the estimated useful
life of the assets. Maintenance and repair costs are expensed as incurred.
Use of Estimates
The preparation of Acorn's financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses at and during the reporting periods of the
financial statements. Actual results could differ from these estimates.
A-15
<PAGE>
[The inside back cover shows a list of representative Etinuum clients. At the
top of the page is the wording "Etinuum Clients." The "Etinuum logo" is in the
center of the page with the clients' names displayed around the logo.]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4,500,000 Shares
[LOGO OF ETINUUM]
Common Stock
------------
PROSPECTUS
------------
Chase H&Q
Robertson Stephens
U.S. Bancorp Piper Jaffray
Wit SoundView
------------
, 2000
------------
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
which is contained in this prospectus. We are offering to sell, and seeking
offers to buy, shares of common stock only in jurisdictions where offers and
sales are permitted. The information contained in this prospectus is accurate
only as of the date of this prospectus, regardless of the time of delivery of
this prospectus or of any sale of our common stock.
No action is being taken in any jurisdiction outside the United States to
permit a public offering of the common stock or possession or distribution of
this prospectus in any such jurisdiction. Persons who come into possession of
this prospectus in jurisdictions outside the United States are required to
inform themselves about and to observe any restrictions as to this offering and
the distribution of this prospectus applicable to that jurisdiction.
Through and including , 2000, the 25th day after commencement of the
offering, all dealers effecting transactions in the common stock, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the obligations of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The expenses to be paid by the registrant in connection with this offering
are as follows. All amounts other than the Securities and Exchange Commission
registration fee, the NASD filing fee and the Nasdaq National Market
application fee are estimates.
<TABLE>
<S> <C>
Registration fee............................................. $ 16,395
National Association of Securities Dealers, Inc. fee......... 5,755
NASDAQ National Market listing fee........................... 5,000
Legal fees and expenses...................................... 500,000
Accounting fees and expenses................................. 400,000
Printing and engraving expenses.............................. 350,000
Blue Sky fees and expenses................................... 25,000
Miscellaneous fees and expenses.............................. 197,850
----------
Total...................................................... $1,500,000
==========
</TABLE>
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, and permits a corporation to grant indemnity to current or former
directors and executive officers, and others acting in similar capacities at
the request of the company. This permitted indemnification may extend beyond
the scope of that provided under Delaware law, including under certain
circumstances for liabilities (including reimbursement for expenses incurred)
arising under the Securities Act of 1933, as amended (the "Securities Act").
As permitted by the Delaware General Corporation Law, our Amended and
Restated Certificate of Incorporation, which will become effective upon the
closing of this offering, includes a provision that eliminates the personal
liability of our directors for monetary damages for breach of fiduciary duty as
a director, except for liability (i) for any breach of the director's duty of
loyalty to us or our stockholders, (ii) for acts or omissions not in good faith
or that involve intentional misconduct or a knowing violation of law, (iii)
under section 174 of the Delaware General Corporation Law regarding unlawful
dividends and stock purchases, or (iv) for any transaction from which the
director derived an improper personal benefit. Our Amended and Restated
Certificate of Incorporation permits indemnification of current and former
directors and executive officers to the maximum extent allowed by applicable
law.
Our Bylaws provide that, to the full extent allowed by Delaware General
Corporation Law, (i) we will indemnify our directors and officers, provided
that any indemnified officer and director acted in good faith and in a manner
which such officer and director reasonably believed to be in or not opposed to
our best interests, (ii) we may indemnify our other employees and agents, (iii)
we will advance expenses, as incurred, to our directors and officers in
connection with a legal proceeding, subject to certain very limited exceptions;
and (iv) we may purchase and maintain insurance on behalf of any director or
officer against any liability asserted against them in such capacity. The
rights conferred in the Bylaws are not exclusive of indemnification provided by
law, agreement or otherwise.
As permitted by Delaware General Corporation Law, we intend to enter into
indemnification agreements with each of our current directors and officers to
give such directors and officers additional contractual assurances regarding
the scope of the indemnification set forth in our Amended and Restated
Certificate of Incorporation and to provide additional procedural protections.
These agreements provide for
II-1
<PAGE>
indemnification against claims and liabilities arising as a result of their
service as directors or officers of Etinuum and the advancement of expenses
incurred by them in defending or litigating such claims. We believe that these
agreements, and the indemnification provisions in our Amended and Restated
Certificate of Incorporation and Bylaws, are sufficiently broad to permit
indemnification against claims involving the negligence or gross negligence of,
and violations of the Securities Act by, the covered directors and officers.
At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees regarding which indemnification is sought,
nor are we aware of any threatened litigation that may result in claims for
indemnification.
We have also, with approval by our Board of Directors, obtained directors'
and officers' liability insurance for our current officers and directors.
Please refer to Section 7 of the Underwriting Agreement, Exhibit 1.1
hereto, which provides for the indemnification of officers, directors and
controlling persons of Etinuum against certain liabilities. See also the
undertakings set out in response to Item 17 below.
Please refer to the following documents filed as exhibits to this
registration statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement
3.2 Form of Amended and Restated Certificate of Incorporation of the
Registrant to be effective upon the closing of the offering made
pursuant to this Registration Statement
3.4 Form of Amended and Restated Bylaws of the Registrant to be
effective upon the closing of the offering made pursuant to this
Registration Statement
10.29 Form of Indemnification Agreement
</TABLE>
Item 15. Recent Sales of Unregistered Securities.
All sales of common stock made pursuant to the exercise of stock options
were made in reliance on Rule 701 under the Securities Act or on Section 4(2)
of the Securities Act.
All other sales of our securities were made in reliance on Section 4(2) of
the Securities Act and/or Regulation D promulgated under the Securities Act.
These sales were made without general solicitation or advertising. Each
purchaser was an accredited investor as defined in Rule 501(a) of the
Securities Act with access to all relevant information necessary to evaluate
the investment and represented to us that the shares were being acquired for
investment and not for resale.
Since December 1, 1996, we have issued unregistered securities as
described below:
<TABLE>
<C> <S>
February 1997: 10,190,120 shares of Series B preferred stock sold to
three accredited investors for $1.741 per share in
reliance on Section 4(2) of the Securities Act as a
private offering to a limited number of purchasers.
1,863,270 shares of Series B preferred stock issued to
eight shareholders of Protocall as part of the Protocall
acquisition.1
April-May, 1997: 285,778 shares of Series B preferred stock to nine
accredited investors at an average price of $1.74 per
share in reliance on Section 4(2) of the Securities Act
as a private offering to a limited number of purchasers.
December 1997: 2,871,913 shares of Series C preferred stock to Beacon
Group III-Focus Value Fund, L.P. at $1.741 per share in
reliance on Section 4(2) of the Securities Act as a
private offering to a limited number of purchasers.
Series No. 1 warrant issued to Beacon under Section 4(2)
to purchase up to 3,500,000 shares of Series C preferred
stock at $1.741 per share for five years./2/
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
Series B anti-dilution warrant issued to Beacon under
Section 4(2) for the purchase of an indeterminable number
of Series B preferred shares./2/
May 1998: 8,823,529 shares of Series D preferred stock issued to
Conning Capital Limited Partnership V and 18,382 shares
issued to another accredited investor for $1.36 per share
under Regulation D.
Conning and Beacon were each granted a right to purchase up
to $3,000,000 of additional Series D preferred stock at
$1.36 per share under Section 4(2) through April 1999,
which was not exercised.
Issued to Beacon 3,500,000 shares of Series C preferred
stock and a Series NB-1 warrant to acquire additional
shares of common stock under Section 4(2) in exchange for
the Series No. 1 and B warrants issued to it in December,
1997.
April 1999: 2,510,691 shares of Series E preferred stock to five
accredited investors for $1.61 per share under Regulation
D.
November 1999: 11,737 shares of common stock issued to Prospero Holdings
LLC in connection with the Acorn acquisition under
Regulation D.
5,210,093 shares of Series F preferred stock to 7
accredited investors at $2.13 per share under Regulation D.
January 2000: Issued a warrant to purchase 181,250 shares of our common
stock at $8.52 per share to Sony Electronics, Inc under
Section 4(2).
</TABLE>
- ------------------
/1/During 1999 and 1998, 11,488 and 21,539 shares of Series B preferred stock
were returned to us as adjustments for the price paid for Protocall in 1997.
/2/Beacon surrendered both warrants at the time of the Series D preferred
stock closing.
Item 16. Exhibits and Financial Statement Schedules.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
1.1* Form of Underwriting Agreement
3.1+ Amended and Restated Certificate of Incorporation dated November 22,
1999
3.2+ Form of Amended and Restated Certificate of Incorporation of the
Registrant to be effective upon the closing of the offering made
pursuant to this Registration Statement
3.3+ Restated Bylaws of the Registrant
3.4+ Form of Amended and Restated Bylaws of the Registrant to be
effective upon the closing of the offering made pursuant to this
Registration Statement
4.1 Form of the Registrant's Common Stock Certificate
4.2+ Amended and Restated Shareholders' and Voting Agreement dated as of
January 14, 2000
4.3+ Registration Rights Agreement between the Registrant, the former
Acorn shareholders and Prospero L.L.C. dated October 30, 1999
4.3.1+ Amendment No. 2 Registration Rights Agreement between the
Registrant, the former Acorn shareholders and Prospero L.L.C.
4.4+ Series A Purchase Agreement between the Registrant and Resource
Bancshares Corporation dated August 2, 1996
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
4.5+ Series B Purchase Agreement between the Registrant and The Beacon
Group III-Focus Value Fund, L.P., Squam Lake Investors II, L.P. and
Bain & Company dated as of February 3, 1997
4.5.1+ Amendment to Series B Purchase Agreement between the Registrant and
The Beacon Group III-Focus Value Fund, L.P., Squam Lake Investors
II, L.P. and Bain & Company
4.6+ Series C Purchase Agreement between the Registrant and The Beacon
Group III-Focus Value Fund, L.P. dated December 22, 1997
4.6.1+ Amendment to Series C Purchase Agreement between the Registrant and
The Beacon Group III-Focus Value Fund, L.P.
4.7+ Series D Purchase Agreement by and among the Registrant, Conning
Capital Limited Partnership V, The Beacon Group III-Focus Value
Fund, L.P. and Certain Other Investors dated as of May 7, 1998
4.7.1+ Amendment to Series D Purchase Agreement between the Registrant,
Conning Capital Limited Partnership V, The Beacon Group III-Focus
Value Fund, L.P. and Certain Other Investors
4.8+ Series E Preferred Stock Purchase Agreement by and among the
Registrant and U.S. Information Technology Financing, L.P.,
Encompass Group, Inc., Trans Cosmos USA, Inc. and Certain Other
Parties dated as of April 16, 1999
4.8.1+ Amendment to Series E Preferred Stock Purchase Agreement by and
among the Registrant and U.S. Information Technology Financing,
L.P., Encompass Group, Inc., Trans Cosmos USA, Inc. and Certain
Other Parties
4.9+ Series F Preferred Stock Purchase Agreement by and among the
Registrant and BVCF IV, L.P. and Certain Other Parties dated as of
November 19, 1999
4.9.1+ Amendment to Series F Preferred Stock Purchase Agreement by and
among the Registrant and BVCF IV, L.P. and Certain Other Parties
4.10+ Amended and Restated Registration Rights Agreement dated January 14,
2000
4.11+ Letter Agreement by certain stockholders of the Registrant dated
January 14, 2000
5.1 Opinion of Chrisman, Bynum & Johnson, P.C.
10.1+ 1997 Restated Stock Option Plan
10.2+ 1998 Restated Stock Option Plan
10.3+ 2000 Stock Incentive Plan
10.4+ 2000 Employee Stock Purchase Plan
10.5+ Contribution Agreement dated October 27, 1999, between the
Registrant and Spider Technologies, Inc.
10.6+ Distribution Plan between the Registrant and Spider Technologies,
Inc. dated November 5, 1999
10.7.1+ Promissory Note dated October 1, 1999, by Timothy C. O'Crowley
10.7.2+ Promissory Note Dated October 1, 1999, by Franklin D. Richards
10.7.3+ Promissory note and pledge agreement of Timothy C. O'Crowley dated
November 23, 1999
10.7.4+ Promissory Note dated November 20, 1998 by Franklin D. Richards
10.8+ Sublease and Resource Sharing Agreement between the Registrant and
Spider Technologies, Inc. effective October 1, 1999
10.9+ Amended and Restated Software Assignment and Grant-Back License,
Maintenance and Support Agreement between the Registrant and Spider
Technologies, Inc. effective November 4, 1999
10.9.1+ Intellectual Property Security Agreement between the Registrant and
Spider Technologies, Inc. dated November 5, 1999
10.9.2+ Agreement Regarding Matters between the Registrant and Spider
Technologies, Inc.
10.10+ Transition Support Agreement between the Registrant and Spider
Technologies, Inc. dated November 4, 1999
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
10.11+ Separation Agreement between the Registrant and Spider Technologies,
Inc. effective October 1, 1999
10.12+ Tax Separation Agreement between the Registrant and Spider
Technologies, Inc. effective
October 1, 1999
10.13* Consulting Agreement between Spider Technologies, Inc. and Timothy
O'Crowley
10.14+ Second Restated and Amended Management Employment Agreement of
Timothy O'Crowley
10.15+ Second Amended and Restated Employment Agreement of Franklin D.
Richards
10.16+ Building Lease between the Registrant and the City of Fort Scott,
Kansas dated March 8, 1999 (Fort Scott)
10.16.1+ Addendum No. 1 to Building Lease between Registrant and the City of
Fort Scott, Kansas dated March 8, 1999 (Fort Scott)
10.17+ Lease between the Registrant and M&S California Fund, L.P. dated
June 17, 1997 (San Diego)
10.17.1+ First Amendment to Office Building Lease between the Registrant and
M&S California Fund, L.P. dated 10.17.2
10.18+ Office Lease between the Registrant and Westmark Terrace Tower II,
Inc. dated June 9, 1999 (DTC)
10.18.1+ First Amendment to Lease between the Registrant and Westmark Terrace
Tower II dated June 1, 1999 (DTC)
10.19+ Lease of Office Space between the Registrant and Brookfield Republic
Inc. dated November 15, 1996 (Republic Plaza)
10.19.1+ First Amendment and Lease of Additional Office Space between the
Registrant and Brookfield Republic Inc. dated October 17, 1997
(Republic Plaza)
10.20+ Office Lease between the Registrant and The Equitable Life Assurance
Society dated March 5, 1997 (Hayward)
10.20.1+ Commencement of Term Agreement between the Registrant and The
Equitable Life Assurance Society dated May 2, 1997 (Hayward)
10.20.2+ Estoppel Certificate of the Registrant to ATC Partners LLC dated
September 24, 1998 regarding Office Lease with The Equitable Life
Assurance Society (Hayward)
10.21+ Industrial/ Commercial Multi-Tenant Lease between the Registrant and
Livermore Airway Business Park dated January 14, 1999 (Livermore)
10.22+ Industrial/ Commercial Multi-Tenant Lease between the Registrant and
Livermore Airway Business Park dated January 30, 1999 (Livermore)
10.23+ Commercial Lease between Acorn Information Services, Inc. and Lot 4
LLC dated January 5, 1998 (Shelton)
10.23.1+ First Amendment of Lease between Acorn Information Services, Inc.
and Lot 4 LLC dated April 20, 1998 (Shelton)
10.24+ Loan and Security Agreement between the Registrant and Silicon
Valley Bank dated June 10, 1999
10.24.1 Exhibits to Loan and Security Agreement between the Registrant and
Silicon Valley Bank dated June 10, 1999
10.25+ Master Loan and Security Agreement between the Registrant and
Charter Financial, Inc. dated August 26, 1999
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
10.25.1 Exhibits to Master Loan and Security Agreement between the
Registrant and Charter Financial, Inc. dated August 26, 1999
10.26+ Agreement and Plan of Reorganization between the Registrant and
Protocall New Business Specialists, Inc. dated February 3, 1997
10.27++ Share Purchase Agreement between Registrant, Acorn Information
Services, Inc. and the Shareholders of Acorn Information Services,
Inc. dated October 30, 1999
10.27.1 Exhibits to Share Purchase Agreement between Registrant, Acorn
Information Services, Inc. and the Shareholders of Acorn Information
Services, Inc. dated October 30, 1999
10.28+ Master Service Agreement between the Registrant and Sony
Electronics, Inc. dated May 1, 1997
10.28.1+ Addendum A to Master Service Agreement between the Registrant and
Sony Electronics, Inc. dated April 1, 1999
10.28.2+ Warrant issued to Sony Electronics, Inc. dated January 14, 2000
10.29+ Form of Indemnification Agreement
10.30+ Kansas Economic Opportunity Initiatives Fund Loan Agreement and
Promissory Note
10.31+ Agreement Among the Registrant, Fort Scott Community College and the
Kansas
Department of Commerce and Housing dated March 15, 1999
21.1+ Subsidiaries of the Registrant
23.1 Consent of Chrisman, Bynum & Johnson (included in Exhibit 5.1)
23.2 Consent of Arthur Andersen LLP
23.3 Consent of PricewaterhouseCoopers LLP
24.1+ Power of Attorney (see Page II-5 of this Registration
Statement)
27.1+ Financial Data Schedule
</TABLE>
- ------------------
+Confidential treatment requested as to certain portions of this exhibit.
* To be supplied by amendment.
+ Previously filed.
Item 17. Undertakings.
We hereby undertake to provide to the underwriters at the closing
specified in the underwriting Agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons
pursuant to the provisions described under Item 14 above, or otherwise, we have
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of our 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.
II-6
<PAGE>
We hereby undertake that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Amendment to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Englewood, State
of Colorado, on the 18th day of February 2000.
ETINUUM, INC.
By: /s/ TIMOTHY C. O'CROWLEY
Timothy C. O'Crowley
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
Name Title Date
/s/ TIMOTHY C. O'CROWLEY Chairman of the
- ------------------------------------- Board, President, February 17,
Timothy C. O'Crowley Chief Executive 2000
Officer and
Director (Principal
Executive Officer)
/s/ STEVEN Q. HANSEN Chief Financial
- ------------------------------------- Officer (Principal February 17,
Steven Q. Hansen Financial and 2000
Accounting Officer)
/s/ STEVEN Q. HANSEN, POA Director February 17,
- ------------------------------------- 2000
Steven S.S. Hyde
/s/ STEVEN Q. HANSEN, POA Director February 17,
- ------------------------------------- 2000
Steven F. Piaker
/s/ STEVEN Q. HANSEN, POA Director
- ------------------------------------- February 17,
Harold W. Pote 2000
/s/ STEVEN Q. HANSEN, POA Director
- ------------------------------------- February 17,
Rick L. Weller 2000
/s/ STEVEN Q. HANSEN, POA Director
- ------------------------------------- February 17,
Eric R. Wilkinson 2000
II-8
<PAGE>
EXHIBIT 4.1
NUMBER SHARES
[LOGO] CUSIP 458137
SEE REVERSE FOR
CERTAIN DEFINITIONS
INTEK INFORMATION, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
$.0001 PAR VALUE COMMON STOCK
THIS CERTIFIES THAT ***************SPECIMEN*****************is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK $.0001 PAR VALUE OF
INTEK INFORMATION, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon the surrender of this Certificate properly
endorsed.
This Certificate is not valid until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
/s/ G. Daniel Adams, Jr. [Corporate Seal] /s/ Timothy C. O'Crowley
President
COUNTERSIGNED:
AMERICAN SECURITIES TRANSFER & TRUST COMPANY
1675 Broadway, Suite 1480
Denver, Colorado 80202
By_______________________________________________
Transfer Agent and Registrar Authorized Signature
<PAGE>
[BACK OF CERTIFICATE]
INTEK INFORMATION, INC.
TRANSFER FEE: $6.00 PER NEW CERTIFICATE
The Corporation shall furnish, without charge, to each shareholder who
requests, a full statement of the powers, designations, preferences, limitations
and relative rights of the shares of each class of stock or series thereof and
the variations in the relative rights and preferences between the shares of each
series, and the qualifications, limitations or restrictions of such preferences
or such rights and the authority of the board of directors to fix and determine
the relative rights and preferences of subsequent series.
________________________________________________________________________________
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT--__________
Custodian________
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act _________________________
in common (State)
Additional abbreviations may also be used though not in the above list.
________________________________________________________________________________
For Value Received, _________________________________________ hereby sell,
assign and transfer unto_______________________________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(Please print or typewrite name and address of assignee)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Shares of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
Attorney to transfer the said stock on the books of the within named
Corporation with full power of substitution in the premises.
Dated __________________________________ X
------------------------------------
____________________________________
SIGNATURE MUST BE GUARANTEED BY A NOTICE: The signature of this
assignment must correspond with the
name as written upon the face of the
COMMERCIAL BANK OR TRUST COMPANY certificate in every particular,
without alteration or enlargement or
any change whatever.
OR MEMBER FIRM OF ONE OF THE FOLLOWING
EXCHANGES: NEW YORK STOCK
EXCHANGE, PACIFIC STOCK EXCHANGE,
AMERICAN STOCK EXCHANGE, MIDWEST
STOCK EXCHANGE.
<PAGE>
Exhibit 5.1
February 14, 2000
Intek Information, Inc.
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
Re: Registration Statement on Form S-1
Gentlemen:
We have acted as counsel to Intek Information, Inc. (the "Company") in
connection with the preparation and filing of a Registration Statement on Form
S-1 (the "Registration Statement") registering under the Securities Act of 1933,
as amended, an aggregate of 5,175,000 shares (the "Shares") of common stock of
the Company ("Common Stock"). As such, we have examined the Registration
Statement, the Company's Articles of Incorporation and Bylaws (as amended), and
minutes of meetings of the Company's Board of Directors.
Based upon the foregoing, and assuming that the Shares will be sold in
accordance with the Registration Statement at a time when effective, we are of
the opinion that, the shares of Common Stock will be validly issued, fully paid
and non-assessable securities of the Company.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the references to our firm in the Prospectus which is made a
part of the Registration Statement.
Sincerely,
CHRISMAN, BYNUM & JOHNSON, P.C.
s/s Chrisman, Bynum & Johnson, P.C.
<PAGE>
Exhibit 10.24.1
Silicon Valley Bank
Schedule to
Loan and Security Agreement
Borrower: Intek Information, Inc.
Address: 370 17th Street, Suite 3950
Denver, Colorado 80202
Date: June 10, 1999
This Schedule forms an integral part of the Loan and Security Agreement between
Silicon Valley Bank and the above-borrower of even date.
================================================================================
1. CREDIT LIMIT
(Section 1.1): An amount not to exceed the lesser of: (i)
$5,000,000 at any one time outstanding (the
"Maximum Credit Limit"); or (ii) 80% of the
amount of Borrower's Eligible Receivables (as
defined in Section 8 above).
Letter of Credit Sublimit
(Section 1.5): $500,000
================================================================================
2. INTEREST.
Interest Rate (Section 1.2):
A rate equal to the "Prime Rate" in effect from
time to time, plus 1.50% per annum. Interest
shall be calculated on the basis of a 360day
year for the actual number of days elapsed.
"Prime Rate" means the rate announced from time
to time by Silicon as its "prime rate;" it is a
base rate upon which other rates charged by
Silicon are based, and it. is not necessarily
the best rate available at Silicon. The interest
rate applicable to the Obligations shall change
on each date there is a change in the Prime
Rate.
Minimum Monthly Interest
(Section 1.2): N/A.
================================================================================
3. FEES (Section 1-4):
Loan Fee: $25,000, payable concurrently herewith.
-1-
<PAGE>
Silicon Valley Bank Schedule to Loan and Security Agreement
--------------------------------------------------------------------------
Collateral Monitoring
Fee: $1,000 per calendar month, payable in arrears
(prorated for any partial calendar month at the
beginning and at termination of this Agreement).
Unused Line Fee. In the event, in any calendar month (or portion
thereof at the beginning and end of the term
hereof), the average daily principal balance of the
Loans outstanding during the month is less than the
amount of the Maximum Credit, Borrower shall pay
Silicon an unused line fee in an amount equal to 0.
125% per annum on the difference between the amount
of the Maximum Credit and the average daily
principal balance of the Loans outstanding during
the month, which unused line fee shall be computed
and paid monthly, in arrears, on the first day of
the following month.
================================================================================
4. MATURITY DATE
(Section 6. 1): Two years from the date of this Agreement.
================================================================================
5. FINANCIAL COVENANTS
(Section 5. 1): Borrower shall comply with the following
covenant(s). Compliance shall be determined as of
the end of each month, except as otherwise
specifically provided below:
Minimum Tangible
Net Worth: Borrower shall maintain a Tangible Net Worth of not
less than $8,000,000.
Definitions. For purposes of the foregoing financial covenant(s),
the following terms shall have the following
meanings:
"Liabilities" shall have the meaning ascribed
thereto by generally accepted accounting principles.
"Tangible Net Worth" shall mean the excess of total
assets over total liabilities, determined in
accordance with generally accepted accounting
principles, with the following adjustments:
(A) there shall be excluded from assets: (i)
notes, accounts receivable and other obligations
owing to the Borrower from its officers or other
Affiliates, and (ii) all assets which would be
classified as intangible assets under generally
accepted accounting principles, including without
limitation goodwill, licenses, patents,
trademarks, trade names, copyrights, capitalized
software and organizational costs, licenses and
franchises; and
(B) there shall be excluded from liabilities: all
indebtedness which is subordinated to the
Obligations under a subordination agreement in
form specified by Silicon or by language in the
instrument evidencing the indebtedness which is
acceptable to Silicon in its discretion.
-2-
<PAGE>
Silicon Valley Bank Schedule to Loan and Security Agreement
------------------------------------------------------------------------------
6. REPORTING.
(Section 5.3):
Borrower shall provide Silicon with the following:
1. Transaction reports, schedules and assignments of all
Receivables, and schedules of collections, all on
Silicon's standard forms, by Tuesday of each week
(with respect to the preceding week), and at any time
that any Loans are requested hereunder.
2. Monthly Receivable agings, aged by invoice date,
within fifteen days after the end of each month.
3. Monthly accounts payable agings, aged by invoice
date, and outstanding or held check registers, if
any, within fifteen days after the end of each month.
4. Monthly reconciliations of Receivable agings (aged by
invoice date), transaction reports, and general
ledger, within fifteen days after the end of each
month.
5. Monthly perpetual inventory reports for the Inventory
valued on a first-in, first-out basis at the lower of
cost or market (in accordance with generally accepted
accounting principles) or such other inventory
reports as are reasonably requested by Silicon, all
within fifteen days after the end of each month.
6. Monthly unaudited financial statements, as soon as
available, and in any event within thirty days after
the end of each month.
7. Monthly Compliance Certificates, within thirty days
after the end of each month, in such form as Silicon
shall reasonably specify, signed by the Chief
Financial Officer of Borrower, certifying that as of
the end of such month Borrower was in full compliance
with all of the terms and conditions of this
Agreement, and setting forth calculations showing
compliance with the financial covenants set forth in
this Agreement and such other information as Silicon
shall reasonably request, including, without
limitation, a statement that at the end of such month
there were no held checks.
8. Quarterly unaudited financial statements, as soon as
available, and in any event within forty-five days
after the end of each fiscal quarter of Borrower.
9. Annual operating budgets (including income
statements, balance sheets and cash flow statements,
by month) for the upcoming fiscal year of Borrower
within thirty days prior to the end of each fiscal
year of Borrower.
10. Annual financial statements, as soon as available,
and in any event within 120 days following the end of
Borrower's fiscal year, certified by independent
certified public accountants acceptable to Silicon.
================================================================================
7. COMPENSATION
(Section 5.5):
-3-
<PAGE>
Silicon Valley Bank Schedule to Loan and Security Agreement
------------------------------------------------------------------------------
================================================================================
8. BORROWER INFORMATION:
Prior Names of
Borrower
(Section 3.2): None
Prior Trade
Names of Borrower
(Section 3.2): None
Existing Trade
Names of Borrower
(Section 3.2): Intek; Intek Teleservices.
Other Locations and
Addresses (Section 3.3): See Representations and Warranties of
Borrower dated March 4, 1999 (the
"Representations and Warranties").
Material Adverse
Litigation (Section 3.10): Borrower has filed a lawsuit against Davox
Corporation in Denver District Court
regarding the breach of contract of Davox in
the provision of certain software, equipment
and services. Davox countersued, and the
action is currently pending. Borrower
believes that if it successful, Borrower may
recover up to $500,000 from Davox, and if
Davox is successful, Borrower may owe up to
$500,000 to Davox.
================================================================================
9. OTHER COVENANTS
(Section 5. 1): Borrower shall at all times comply with the
following additional covenant(s):
(1) Banking Relationship. Borrower shall at
all times maintain its primary banking
relationship with Silicon.
(2) Subsidiaries. Borrower hereby
represents and warrants that:
(a) the Spider Subsidiary (as defined in
Section 2.1 of this Agreement") and
the Regulated Subsidiaries (as
defined in Section 5.5 of this
Agreement) constitute all
subsidiaries of the Borrower; and
(b) each of the Regulated Subsidiaries is
subject to statutory net worth
requirements, pursuant to state or
federal law, which requirements would
require the assets of the Regulated
Subsidiaries to be increased, in
respect of the amount of any
obligations guaranteed by the
Regulated Subsidiaries, except that
to the extent that the states in
which Intek Insurance, Inc., holds
insurance agent licenses do not have
minimum net
-4-
<PAGE>
Silicon Valley Bank Schedule to Loan and Security Agreement
-----------------------------------------------------------------------------
worth requirements, but do have financial
information submission requirements, such
guarantee by Intek Insurance, Inc., would
likely have a material adverse effect on the
regulatory standing of Intek Insurance, Inc.
(3) Landlord Agreements. Within 90 days following
the execution of this Agreement, Borrower
shall use its best efforts to cause its
landlords, with respect to each of the
locations set forth in the Representations
and Warranties at which Borrower or its
subsidiaries maintain any assets, to execute
a Landlord Agreement on Silicon's standard
form, and Borrower shall cause said Landlord
Agreement to continue in full force and
effect at all times during the term of this
Agreement.
Borrower: Silicon:
INTEK INFORMATION. INC. SILICON VALLEY BANK
By _______________________________ By ___________________________
President or Vice President
Title ________________________
By _______________________________
Secretary or Ass't Secretary
-5-
<PAGE>
--------------------------------------------------------
SILICON VALLEY BANK
Certified Resolution and Incumbency Certificate
Borrower. Intek Information, Inc.,
a corporation organized under the
laws of the State of Delaware
Date: June 2, 1999
I, the undersigned, Secretary or Assistant Secretary of the above-named
borrower, a corporation organized under the laws of the state set forth above,
do hereby certify that the following is a full, true and correct copy of
resolutions duly and regularly adopted by the Board of Directors of said
corporation as required by law, and by the by-laws of said corporation, and that
said resolutions are still in full force and effect and have not been in any way
modified, repealed, rescinded, amended or revoked.
RESOLVED, that this corporation borrow from Silicon Valley Bank ("Silicon"),
from time to time, such sum or sums of money as, in the judgment of the
officer or officers hereinafter authorized hereby, this corporation may
require.
RESOLVED FURTHER, that any officer of this corporation be, and he or she is
hereby authorized, directed and empowered, in the name of this corporation,
to execute and deliver to Silicon, and Silicon is requested to accept, the
loan agreements, security agreements, notes, financing statements, and other
documents and instruments providing for such loans and evidencing and/or
securing such loans, with interest thereon, and said authorized officers are
authorized from time to time to execute renewals, extensions and/or
amendments of said loan agreements, security agreements, and other documents
and instruments.
RESOLVED FURTHER, that said authorized officers be and they are hereby
authorized, directed and empowered, as security for any and all indebtedness
of this corporation to Silicon, whether arising pursuant to this resolution
or otherwise, to grant, transfer, pledge, mortgage, assign, or otherwise
hypothecate to Silicon, or deed in trust for its benefit, any property of any
and every kind, belonging to this corporation, including, but not limited to,
any and all real property, accounts, inventory, equipment, general
intangibles, instruments, documents, chattel paper, notes, money, deposit
accounts, furniture, fixtures, goods, and other property of every kind, and
to execute and deliver to Silicon any and all grants, transfers, trust
receipts, loan or credit agreements, pledge agreements, mortgages, deeds of
trust, financing statements, security agreements and other hypothecation
agreements, which said instruments and the note or notes and other
instruments referred to in the preceding paragraph may contain such
provisions, covenants, recitals and agreements as Silicon may require and
said authorized officers may approve, and the execution thereof by said
authorized officers shall be conclusive evidence of such approval.
RESOLVED FURTHER, that Silicon may conclusively rely upon a certified copy of
these resolutions and a certificate of the Secretary or Ass't Secretary of
this corporation as to the officers of this corporation and their offices and
signatures, and continue to conclusively rely on such certified copy of these
resolutions and said certificate for all past, present and future
transactions until written notice of any change hereto or thereto is given to
Silicon by this corporation by certified mail, return receipt requested.
-1-
<PAGE>
Silicon Valley Bank Certified Resolution and Incumbency Certificate
------------------------------------------------------------------------------
The undersigned further hereby certifies that the following persons are the
duly elected and acting officers of the corporation named above as borrower and
that the following are their actual signatures:
NAMES OFFICE(S) ACTUAL SIGNATURES
Patrick O'Neal Exec. VP & Managing Director
- --------------------- ----------------------------- --------------------------
- --------------------- ----------------------------- --------------------------
- --------------------- ----------------------------- --------------------------
IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary or Assistant
Secretary on the date set forth above.
Secretary or Assistant Secretary
--------------------------------
-2-
<PAGE>
Silicon Valley Bank
NOTICE OF SECURITY INTEREST
June 2, 1999
Certified Mail, Return Receipt Requested
Key Bank of Colorado
5950 Willow Drive
Englewood, Colorado 80111
Re: INTEK INFORMATION, INC.
Ladies and Gentlemen:
Notice is hereby given that your above-named customer has granted a
security interest in all of its present and future deposit accounts maintained
with your institution, general and special, and of every other kind, to Silicon
Valley Bank, 3003 Tasman Drive, Santa Clara, California 95054.
Please contact the undersigned at 408-654-1070, if you have any questions
about this matter.
Sincerely yours,
Silicon Valley Bank
By /s/ Milad I. Hanna
-------------------------------
Title Vice President
-------------------------------
INTEK INFORMATION. INC.
By /s/ illegible
-------------------------------
Title Managing Director
-------------------------------
-1-
<PAGE>
RECORDING REQUESTED BY
AND WHEN RECORDED, MAIL TO:
Michael Mergenthaler, Esq.
Levy, Small & Lallas
815 Moraga Drive
Los Angeles, California 90049
- --------------------------------------------------------------------------------
LANDLORD AGREEMENT
THIS LANDLORD AGREEMENT is made by BROOKFIELD REPUBLIC, INC. ("Owner")
whose address is ________________________ in favor of SILICON VALLEY - BANK
("Lender") with an address at 3003 Tasman Drive, Santa Clara, California 95054,
and affects the real property described on Exhibit "A" hereto, commonly known as
370 17th STREET, SUITES 2200, 2300 AND 3950, DENVER, COLORADO 80202 (the "Real
Property" or the "Premises") in connection with the Lender entering into a Loan
and Security Agreement and other agreements related thereto (hereinafter
collectively referred to as the "Agreements") with INTEK INFORMATION, INC.
(jointly and severally "Borrower"), which Agreements, among other things, were
given by Borrower to Lender for the purpose of securing the repayment of all
obligations and the performance of all duties now or hereafter owing by Borrower
to Lender, of every kind and description (collectively the "Obligations"). This
Waiver does not amend any of the terms of the Agreements and reference is made
to the Agreements for further information as to their terms.
Pursuant to the Agreements, Lender has loaned or may hereafter loan monies
to Borrower secured by, among other collateral, Borrower's now-owned and
hereafter acquired goods, merchandise, inventory, equipment, furniture,
furnishings, fixtures, trade fixtures, machinery and tools, together with all
additions, substitutions, replacements, and improvements to the same
(hereinafter referred to as "Goods"), which Goods are or are to be located on
and may be affixed to the Premises or improvements thereon.
Owner agrees as follows:
1. Goods Remain Personal Property. The Goods shall at all times be and
remain personal property, and the Goods shall not be deemed a fixture or part of
the Real Property. Owner disclaims any interest in the Goods and will not assert
any statutory or possessory lien against any of the Goods.
2. Notice of Default. Owner will send to Lender, at its address above, a
copy of any written notice Owner sends to Borrower of a default by Borrower in
the lease obligations of Borrower to Owner, at the same time as it sends such
notice to Borrower, and Owner will allow Lender, at Lender's option, thirty (30)
days from Lender's receipt of such notice in which to cure or request Borrower
to cure such default or to take possession of the Premises in accordance with
paragraph 3 below.
3. License to Lender. Owner grants Lender a license, as set forth below,
to enter into possession of the Premises to do any or all of the following with
respect to the Goods: assemble them, have them appraised, display them, sever
them, remove them, maintain them, prepare them for sale or lease, repair them,
lease them, and transfer and/or sell them at one or
<PAGE>
more public auctions or private sales. Lender shall have the foregoing rights
for a period of up to ninety (90) days (at Lender's discretion), following
Lender obtaining possession of the Premises either by Borrower or Owner placing
Lender in possession of the Premises or abandonment of the Premises by Borrower
to Lender or otherwise, but in no event shall Lender be under any obligation to
take possession of the Premises. Any extensions of the foregoing period shall be
with the written consent of Owner. Lender shall repair, at its cost, any damage
to the Premises caused by the Lender or its agents. Owner further grants Lender
a license to enter the Premises at any time to inspect the Goods.
4. Rent Payable By Lender. If the rent payable from the Borrower to the
Owner has not been paid for a period during which Lender is in actual physical
possession of the Premises pursuant to Paragraph 3 above, then Owner may
condition Lender's right to take or keep possession of the Premises upon Lender
agreeing, in writing, to pay such rent which was payable by Owner (prorated on a
daily basis) for the actual number of days Lender is in physical possession of
the Premises, up to 90 days (or such longer period as may be agreed to in
writing between Owner and Lender). In the event Lender is only in possession of
a portion of the Premises, the rent payable by Lender shall be prorated based on
the proportion that the portion of the Premises occupied by the Lender bears to
the total Premises. No agreement by Lender to pay such rent shall be binding on
Lender unless set forth in a written agreement signed by Lender.
5. General. This Waiver and Consent shall continue until such time as all
of the Obligations have been paid and performed in full. This Waiver and Consent
shall be governed and controlled by, and interpreted under, the laws of the
State of California and shall inure to the benefit of, and be binding upon, the
successors, heirs and assigns of Owner and Lender.
DATED: _________, 1999
"Owner":
BROOKFIELD REPUBLIC, INC.
By
------------------------------
Title
---------------------------
INTEK INFORMATION, INC.
By /s/ illegible
------------------------------
Title Managing Director
---------------------------
[Add Legal Description]
<PAGE>
STATE OF ___________________)
)ss
COUNTY OF___________________)
On _______________________, 19__, before me, _____________________________
__________________________________________________, Notary Public, personally
appeared ____________________________________________________, personally known
to me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
Witness my hand and official seal.
-----------------------------------------
(Seal)
-3-
<PAGE>
RECORDING REQUESTED BY
AND WHEN RECORDED, MAIL TO:
Michael Mergenthaler, Esq.
Levy, Small & Lallas
815 Moraga Drive
Los Angeles, California 90049
- --------------------------------------------------------------------------------
LANDLORD AGREEMENT
THIS LANDLORD AGREEMENT is made by LIVERMORE AIRWAY BUSINESS PARK
("Owner") whose address is _____________________________________________ in
favor of SILICON VALLEY BANK ("Lender") with an address at 3003 Tasman Drive,
Santa Clara, California 95054, and affects the real property described on
Exhibit "A" hereto, commonly known as 396 EARHART WAY, LIVERMORE, CALIFORNIA
94550 (the "Real Property" or the "Premises") in connection with the Lender
entering into a Loan and Security Agreement and other agreements related thereto
(hereinafter collectively referred to as the "Agreements") with INTEK
INFORMATION, INC. (jointly and severally "Borrower"), which Agreements, among
other things, were given by Borrower to Lender for the purpose of securing the
repayment of all obligations and the performance of all duties now or hereafter
owing by Borrower to Lender, of every kind and description (collectively the
"Obligations"). This Waiver does not amend any of the terms of the Agreements
and reference is made to the Agreements for further information as to their
terms.
Pursuant to the Agreements, Lender has loaned or may hereafter loan monies
to Borrower secured by, among other collateral, Borrower's now-owned and
hereafter acquired goods, merchandise, inventory, equipment, furniture,
furnishings, fixtures, trade fixtures, machinery and tools, together with all
additions, substitutions, replacements, and improvements to the same
(hereinafter.referred to as "Goods"), which Goods are or are to be located on
and may be affixed to the Premises or improvements thereon.
Owner agrees as follows:
1. Goods Remain Personal Property. The Goods shall at all times be and
remain personal property, and the Goods shall not be deemed a fixture or part of
the Real Property. Owner disclaims any interest in the Goods and will not assert
any statutory or possessory lien against any of the Goods.
2. Notice of Default. Owner will send to Lender, at its address above, a
copy of any written notice Owner sends to Borrower of a default by Borrower in
the lease obligations of Borrower to Owner, at the same time as it sends such
notice to Borrower, and Owner will allow Lender, at Lender's option, thirty (30)
days from Lender's receipt of such notice in which to cure or request Borrower
to cure such default or to take possession of the Premises in accordance with
paragraph 3 below.
3. License to Lender. owner grants Lender a license, as set forth below,
to enter into possession of the Premises to do any or all of the following with
respect to. the Goods: assemble them, have them appraised, display them, sever
them, remove them, maintain them, prepare them for sale or lease, repair them,
lease them, and transfer and/or sell them at one or
<PAGE>
more public auctions or private sales. Lender shall have the foregoing rights
for a period of lip to ninety (90) days (at Lender's discretion), following
Lender obtaining possession of the Premises either by Borrower or Owner placing
Lender in possession of the Premises or abandonment of the Premises by Borrower
to Lender or otherwise, but in no event shall Lender be under any obligation to
take possession of the Premises. Any extensions of the foregoing period shall be
with the written consent of Owner. Lender shall repair, at its cost, any damage
to the Premises caused by the Lender or its agents. Owner further grants Lender
a license to enter the Premises at any time to inspect the Goods.
4. Rent Payable By Lender. If the rent payable from the Borrower to the
Owner has not been paid for a period during which Lender is in actual physical
possession of the Premises pursuant to Paragraph 3 above, then Owner may
condition Lender's right to take or keep possession of the Premises upon Lender
agreeing, in writing, to pay such rent. which was payable by Owner (prorated on
a daily basis) for the actual number of days Lender is in physical possession of
the Premises, up to 90 days (or such longer period as may be agreed to in
writing between Owner and Lender). In the event Lender is only in possession of
a portion of the Premises, the rent payable by Lender shall be prorated based on
the proportion that the portion of the Premises occupied by the Lender bears to
the total Premises. No agreement by Lender to pay such rent shall be binding on
Lender unless set forth in a written agreement signed by Lender.
5. General. This Waiver and Consent shall continue until such time as all
of the Obligations have been paid and performed in full. This Waiver and Consent
shall be governed and controlled by, and interpreted under, the laws of the
State of California and shall inure to the benefit of, and be binding upon, the
successors, heirs and assigns of Owner and Lender.
DATED: ___________, 1999
"Owner":
LIVERMORE AIRWAY BUSINESS PARK
By
---------------------------
Title
------------------------
INTEK INFORMATION, INC.
By
---------------------------
Title Managing Director
------------------------
[Add Legal Description]
-2-
<PAGE>
STATE OF_____________________)
)ss.
COUNTY OF____________________)
On ____________________________ 199_, before me,__________________________
________________________________________________, Notary Public, personally
appeared personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
Witness my hand and official seal.
----------------------------------
(Seal)
-3-
<PAGE>
RECORDING REQUESTED BY
AND WHEN RECORDED, MAIL TO:
Michael Mergenthaler, Esq.
Levy, Small & Lallas
815 Moraga Drive
Los Angeles, California 90049
- --------------------------------------------------------------------------------
LANDLORD AGREEMENT
THIS LANDLORD AGREEMENT is made by SOUTHLAND OFFICE ASSOCIATES, LLC
("Owner") whose address is _____________________________________________________
in favor of SILICON VALLEY BANK ("Lender") with an address at 3003 Tasman Drive,
Santa Clara, California 95054, and affects the real property described on
Exhibit "A" hereto, commonly known as 24301 SOUTHLAND DRIVE, SUITE 300, HAYWARD,
CALIFORNIA 94545 (the "Real Property" or the "Premises") in connection with the
Lender entering into a Loan and Security Agreement and other agreements related
thereto (hereinafter collectively referred to as the "Agreements") with INTEK
INFORMATION, INC. (jointly and severally "Borrower"), which Agreements, among
other things, were given by Borrower to Lender for the purpose of securing the
repayment of all obligations and the performance of all duties now or hereafter
owing by Borrower to Lender, of every kind and description (collectively the
"Obligations"). This Waiver does not amend any of the terms of the Agreements
and reference is made to the Agreements for further information as to their
terms.
Pursuant to the Agreements, Lender has loaned or may hereafter loan monies
to Borrower secured by, among other collateral, Borrower's now-owned and
hereafter acquired goods, merchandise, inventory, equipment, furniture,
furnishings, fixtures, trade fixtures, machinery and tools, together with all
additions, substitutions, replacements, and improvements to the same
(hereinafter referred to as "Goods"), which Goods are or are to be located on
and may be affixed to the Premises or improvements thereon.
Owner agrees as follows:
1. Goods Remain Personal Property. The Goods shall at all times be and
remain personal property, and the Goods shall not be deemed a fixture or part of
the Real Property. Owner disclaims any interest in the Goods and will not assert
any statutory or possessory lien against any of the Goods.
2. Notice of Default. Owner will send to Lender, at its address above, a
copy of any written notice Owner sends.to Borrower of a default by Borrower in
the lease obligations of Borrower to Owner, at the same time as it sends such
notice to Borrower, and Owner will allow Lender, at Lender's option, thirty (30)
days from Lender's receipt of such notice in which to cure or request Borrower
to cure such default or to take possession of the Premises in accordance with
paragraph 3 below.
3. License to Lender. Owner grants Lender a license, as set forth below,
to enter into possession of the Premises to do any or all of the following with
respect to the Goods: assemble them, have them appraised, display them, sever
them, remove them, maintain them, prepare them for sale or lease, repair them,
lease them, and transfer and/or sell them at one or
<PAGE>
more public auctions or private sales. Lender shall have the foregoing rights
for a period of up to ninety (90) days (at Lender's discretion), following
Lender obtaining possession of the Premises either by Borrower or Owner placing
Lender in possession of the Premises or abandonment of the Premises by Borrower
to Lender or otherwise, but in no event shall Lender be under any obligation to
take-possession of the Premises. Any extensions of the foregoing period shall be
with the written consent of Owner. Lender shall repair, at its cost, any damage.
to the Premises caused by the Lender or its agents. Owner further grants Lender
a license to enter the Premises at any time to inspect the Goods.
4. Rent Payable By Lender. If the rent payable from the Borrower to the
Owner has not been paid for a period during which Lender is in actual physical
possession of the Premises pursuant to Paragraph 3 above, then Owner may
condition Lender's right to take or keep possession of the Premises upon Lender
agreeing, in writing, to pay such rent which was payable by Owner (prorated on a
daily basis) for the actual number of days Lender is in physical possession of
the Premises, up to 90 days (or such longer period as may be agreed to in
writing between Owner and Lender). In the event Lender is only in possession of
a portion of the Premises, the rent payable by Lender shall be prorated based on
the proportion that the portion of the Premises occupied by the Lender bears to
the total Premises. No agreement by Lender to pay such rent shall be bindin- on
Lender unless set forth in a written agreement signed by Lender.
5. General. This Waiver and Consent shall continue until such time as all
of the Obligations have been paid and performed in full. This Waiver and Consent
shall be governed and controlled by, and interpreted under, the laws of the
State of California and shall inure to the benefit of, and be binding upon, the
successors, heirs and assigns of Owner and Lender.
DATED: ________________, 2000
"Owner":
SOUTHLAND OFFICE ASSOCIATES, LLC
By_____________________________
INTEK INFORMATION, INC. Title__________________________
By____________________________________
Managing Director
Title ________________________________
[Add Legal Description]
-2-
<PAGE>
STATE OF____________________________ )
) ss.
COUNTY OF___________________________ )
On ___________________________, 200__, before me,__________________________
_____________________________________________, Notary Public, personally
appeared personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
Witness my hand and official seal.
________________________________________
(Seal)
-3-
<PAGE>
RECORDING REQUESTED BY
AND WHEN RECORDED, MAIL TO:
Michael Mergenthaler, Esq.
Levy, Small & Lallas
815 Moraga Drive
Los Angeles, California 90049
- -------------------------------------------------------------------------------
- -
LANDLORD AGREEMENT
THIS LANDLORD AGREEMENT is made by M & S CALIFORNIA FUND, LLP ("Owner")
whose address is ___________________ in favor of SILICON VALLEY BANK ("Lender")
with an address at 3003 Tasman Drive, Santa Clara, California 95054, and affects
the real property described on Exhibit "A" hereto, commonly known as 1455 FRAZEE
ROAD, SUITE 220, SAN DIEGO, CALIFORNIA 92108 (the "Real Property" or the
"Premises") in connection with the Lender entering into a Loan and Security
Agreement and other agreements related thereto (hereinafter collectively
referred to as the "Agreements") with INTEK INFORMATION, INC. (jointly and
severally "Borrower"), which Agreements, among other things, were given by
Borrower to Lender for the purpose of securing the repayment of all obligations
and the performance of all duties now or hereafter owing by Borrower to Lender,
of every kind and description (collectively the "Obligations"). This Waiver does
not amend any of the terms of the Agreements and reference is made to the
Agreements for further information as to their terms.
Pursuant to the Agreements, Lender has loaned or may hereafter loan monies
to Borrower secured by, among other collateral, Borrower's now-owned and
hereafter acquired goods, merchandise, inventory, equipment, furniture,
furnishings, fixtures, trade fixtures, machinery and tools, together with all
additions, substitutions, replacements, and improvements to the same
(hereinafter referred to as "Goods"), which Goods are or are to be located on
and may be affixed to the Premises or improvements thereon.
Owner agrees as follows:
1. Goods Remain Personal Property. The Goods shall at all times be and
remain personal property, and the Goods shall not be deemed a fixture or part of
the Real Property. Owner disclaims any interest in the Goods and will not assert
any statutory or possessory lien against any of the Goods.
2. Notice of Default. Owner will send to Lender, at its address above, a
copy of any written notice Owner sends to Borrower of a default by Borrower in
the lease obligations of Borrower to Owner, at the same time as it sends such
notice to Borrower, and Owner will allow Lender, at Lender's option, thirty (30)
days from Lender's receipt of such notice in which to cure or request Borrower
to cure such default or to take possession of the Premises in accordance with
paragraph 3 below.
3. License to Lender. Owner grants Lender a license, as set forth below, to
enter into possession of the Premises to do any or all of the following with
respect to the Goods: assemble them, have them appraised, display them, sever
them, remove them, maintain them, prepare them for sale or lease, repair them,
lease them, and transfer and/or sell them at one or
<PAGE>
more public auctions or private sales. Lender shall have the foregoing rights
for a period of up to ninety (90) days (at Lender's discretion), following
Lender obtaining 0 possession of the Premises either by Borrower or Owner
placing Lender in possession of the Premises or abandonment of the Premises by
Borrower to Lender or otherwise, but in no event shall Lender be under any
obligation to take possession of the Premises. Any extensions of the foregoing
period shall be with the written consent of Owner. Lender shall repair, at its
cost, any damage to the Premises caused by the Lender or its agents. Owner
further grants Lender a license to enter the Premises at any time to inspect the
Goods.
4. Rent Payable By Lender. If the rent payable from the Borrower to the
Owner has not been paid for a period during which Lender is in actual physical
possession of the Premises pursuant to Paragraph 3 above, then Owner may
condition Lender's right to take or keep possession of the Premises upon Lender
agreeing, in writing, to pay such rent which was payable by Owner (prorated on a
daily basis) for the actual number of days Lender is in physical possession of
the Premises, up to 90 days (or such longer period as may be agreed to in
writing between Owner and Lender). In the event Lender is only in possession of
a portion of the Premises, the rent payable by Lender shall be prorated based on
the proportion that the portion of the Premises occupied by the Lender bears to
the total Premises. No agreement by Lender to pay such rent shall be binding- on
Lender unless set forth in a written agreement signed by Lender.
5. General. This Waiver and Consent shall continue until such time as all
of the Obligations have been paid and performed in full. This Waiver and Consent
shall be governed and controlled by, and interpreted under, the laws of the
State of California and shall inure to the benefit of, and be binding upon, the
successors, heirs and assigns of Owner And Lender.
DATED:______________, 1999
"Owner":
M & S CALIFORNIA FUND, LLP
By__________________________
INTEK INFORMATION, INC. Title_______________________
By______________________________
Title Managing Director
___________________________
[Add Legal Description]
-2-
<PAGE>
STATE OF______________________ )
) ss.
COUNTY OF_____________________ )
On________________________________ , 200_, before me, _________________________
_____________________________________________Notary Public, personally appeared
_________________________________________________________________________ ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same. in, his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
Witness my hand and official seal.
________________________________
(Seal)
-3-
<PAGE>
Silicon Valley Bank
NOTICE OF SECURITY INTEREST
June 2, 1999
Certified Mail, Return Receipt Requested
Key Bank of Colorado
5950 Willow Drive
Englewood, Colorado 80111
Re: INTEK INFORMATION, INC.
Ladies and Gentlemen:
Notice is hereby given that your above-named customer has granted a
security interest in all of its present and future deposit accounts maintained
with your institution, general and special, and of every other kind, to Silicon
Valley Bank, 3003 Tasman Drive, Santa Clara, California 95054.
Please contact the undersigned at 408-654-1070, if you have any questions
about this matter.
Sincerely yours,
Silicon Valley Bank
By______________________________________
Title___________________________________
INTEK INFORMA110N. TNC.
By:_____________________________________
Managing Director
Title __________________________________
-1-
<PAGE>
Silicon Valley Bank
NOTICE OF SECURITY INTEREST
June 2, 1999
Certified Mail, Return Receipt Requested
Wells Farm Bank
4495 lst Street
Livermore, CA 94550
Re: INTEK INFORMATION, INC.
Ladies and Gentlemen:
Notice is hereby given that your above-named customer has granted a
security interest in all of its present and future deposit accounts maintained
with your institution, general and special, and of every other kind, to Silicon
Valley Bank, 3003 Tasman Drive, Santa Clara, California 95054.
Please contact the undersigned at 408-654-1070, if you have any questions
about this matter.
Sincerely yours,
Silicon Valley Bank
By _____________________________________
Title___________________________________
INTEK INFORMAIION, INC.
By
___________________________________
Title Managing Director
________________________________
-1-
<PAGE>
Exhibit 10.25.1
Security Agreement
Intek information, Inc. (herein called "Debtor") and Charter Financial, Inc.
(herein called "Secured Party") hereby agree as follows:
1. Debtor grants to Secured Party a security interest in the following
(together, the "Collateral"):
A. All of Debtor's now owned or hereafter acquired goods and
tangible personal property, including without limitation all
machinery, equipment, furniture, fixtures and vehicles,
wheresoever the same may be situated, together with all
accessories, attachments, substitutions, replacements, renewals,
additions, alterations, betterments, repair and proceeds
(including, without limitation, insurance proceeds) of foregoing.
B. All of Debtor's accounts (including, without limitation, all
accounts receivable, chattel paper, and inventory; and
C. All additions, substitutions, replacements and proceeds of the
foregoing.
2. Said Security interest shall always secure: (a) all of Debtor's
present and future indebtedness to Secured Party of every kind, including,
without limitation, indebtedness arising In connection with any leases of
personal property, loans and notes and whether or not such obligations are held
by Secured Party or assigned to a third party assignee (in which case the
assignee shall have the rights of Secured Party to the extent of the obligations
so assigned); (b) all other existing debts and liabilities of Debtor to Secured
Party; (c) all future advances made by Secured Party to or for the account of
Debtor, including advances for rent, insurance, storage, repairs to and
maintenance of the Collateral, taxes, and discharge of any other lien, security
interest or encumbrance; (d) all other indebtedness, liabilities, undertakings
and obligations, however created direct or contingent (including guarantees),
arising or acquired by Secured Party, which Debtor may now or hereafter owe to
Secured Party; (e) all costs and expenses incurred in the collection of any of
the foregoing, including reasonable attorneys' fees, as hereinafter mentioned;
and (f) without limiting any of the foregoing, all undertakings, guarantees,
debts, liabilities and obligations of Debtor to Secured Party.
3. Until default hereunder, Debtor shall be entitled to possession of the
Collateral, which shall be kept only at the following addresses unless Debtor
obtains the prior written consent of Secured Party:
. 5619 DTC Parkway, I2th Floor, Englewood, CO 80111
. 1455 Frazee Road. Suite 220, San Diego, CA 92108
. 396 Earhart Drive, Livermore, CA 94550
. 24301 Southland Drive, Suite 300, Hayward, CA 94545
. 4500 Campbell Road, Fort Scott, KS 66701
4. Debtor warrants, covenants, and agrees that: (1) Debtor is the sole
owner of the Collateral free from any lien, security interest or encumbrance
(other than the security interest of silicon Valley Bank, its successors and
assigns or any replacement thereof (the "Bank")), has the right to grant Secured
Party a security interest therein, and will defend the Collateral against the
claims and demands of all persons; (2) Debtor shall not sell (except items of
Collateral with a fair market value of less than $10,000.00 sold in the ordinary
course of Debtor's business), lease, encumber, remove, conceal or grant or
permit any further security interest in the Collateral, nor part with possession
of any thereof, nor permit the same to be used for hire nor in violation of any
law or ordinance, provided however, that upon Secured Party's prior written
consent, which consent shall not be unreasonably withheld, Debtor shall be
permitted to lease or share usage of Collateral with the New Company (as defined
In the Rider to Master Loan and Security Agreement No. 4339 of even date
herewith); (3) Debtor shall maintain the Collateral in good condition and repair
at Debtor's sole expense; (4) Debtor will pay all taxes levied on the
Collateral, and will make due and timely payment or deposit of all Federal,
State, and local taxes, assessments or contributions required by law and will
execute and deliver to Secured Party, on demand. appropriate Certificates
attesting to the payment or deposit
1
<PAGE>
notwithstanding the foregoing, Debtor shall have the right to dispute any such
taxes provided that Debtor retains an adequate reserve therefor in accordance
with generally accepted accounting principles; (5) No financing statement
covering the Collateral, or any part thereof, is on file in any public office
(other than the financing statement of the Bank), and Debtor's present or
hereafter acquired Collateral is and shall not be or become subject to any
purchase-money or other lien or security interest except in favor of Secured
Party or the Bank; (6) Debtor shall procure and maintain insurance on the
Collateral for the full term of this security agreement, against the risks of
fire, theft and such other risks as Secured Party may require (including the
risk of collision in case any part of the Collateral is a motor vehicle) by
insurers satisfactory to Secured Party, and shall deliver to Secured Party a
fully paid policy or policies of insurance properly endorsed in favor of Secured
Party. The Debtor hereby irrevocably appoints the Secured Party as its
attorney-in-fact, to institute any action or proceeding necessary or proper for
the recovery and collection of any moneys that may become due under the
aforesaid policies of insurance and to discharge, compound or release any claims
and to execute, acknowledge and deliver any instruments under said policies of
insurance and further to endorse the name of the Debtor to any check, draft or
other instrument given in payment or in liquidation of any claim under the said
policies of insurance, and to perform every other act and thing under said
policies of insurance, notwithstanding the forgoing, in the event that the
Collateral is destroyed or damaged and, in the sole discretion of Debtor (so
long as no Event of Default has occurred hereunder, otherwise at the discretion
of Secured Party), such destruction or damage can be repaired, Debtor shall, at
its expense, promptly effect such repairs and institute any action or proceeding
necessary or proper for the recovery and collection of any moneys that may
become due under the aforesaid policies of insurance; (7) Debtor will permit
Secured Party to inspect the Collateral at any time; (8) Loss, theft, damage,
destruction or seizure of the Collateral shall not relieve the Debtor from the
payment of any indebtedness secured hereby; (9) The Collateral is not now and
will not hereafter be so affixed to realty as to become a part thereof or a
fixture except as may be set forth on the schedule annexed; (10) The execution
and delivery hereof, if Debtor is a corporation, has been duly authorized by all
necessary action of Debtor's directors and shareholders; (11) Secured Party is
authorized to execute on Debtor's behalf and file, at Debtor's cost, such
financing statements and other instruments or documents as may be necessary to
perfect and protect Secured Party's security interest; and (12) in case of
Debtor's default in performing any warranty, covenant or undertaking hereunder,
Secured Party may (but shall not be obliged to procure the performance thereof
and add the cost thereof, with interest, to the indebtedness secured hereby.
5. The occurrence of any of the following events or conditions shall, at
the option of Secured Party and without notice or demand, constitute an event of
default hereunder; (1) Default in the due payment of any indebtedness secured
hereby; or (2) Failure of Debtor to perform any covenant or undertaking on
Debtor's part herein or in any other agreement now existing or hereafter made
with Secured Party, or now or hereafter held by Secured Party; or (3) Breach of
any warranty or falsity of any representation made by Debtor to Secured Party;
or (4) Attachment or seizure of or levy upon the Collateral unless such
attachment, seizure or levy is released within five (5) days; or (5) Institution
of any proceeding by or against Debtor or Debtor's business under any bankruptcy
or insolvency statute, or Debtor's assignment for benefit of creditors, or the
appointment of a receiver for the Debtor or the Collateral, or the filing of a
tax lien notice against Debtor by any taxing authority; or (6) Reasonable
insecurity of Secured Party; or (7) Loss, theft, substantial damage,
destruction, sale, encumbrance, concealment, removal, or forfeiture of the
Collateral or any material portion thereof.
6. Upon the occurrence of any event of default, Secured Party may declare
all Debtor's indebtedness secured hereby immediately due and payable, and
thereupon Secured Party shall have the right to take possession of the
Collateral and shall have all other rights and remedies of a Secured Party under
the Uniform Commercial Code. Unless the Collateral is perishable or threatens to
decline speedily in value or is of a type of customarily sold on a recognized
market. Secured Party shall give Debtor reasonable notice of the time and place
of any public sale thereof or of the time after which any private sale or other
intended disposition thereof is to be made. Debtor agrees that the requirements
of reasonable notice shall be met if notice is mailed to Debtor at the address
of Debtor shown above not less than five (5) days prior to the sale or other
disposition. Secured Party may require Debtor to assemble the Collateral and
make it available to Secured Party at a place to be designated by Secured Party
which is reasonably convenient to both parties. Secured Party is authorized to
maintain, sell, or dispose of the Collateral on the premises of the Debtor.
Secured Party's rights and remedies shall be cumulative and not alternative.
Debtor agrees that Secured Party may be the purchaser at any public or private
sale.
2
<PAGE>
7. If Debtor defaults hereunder or if any of the Secured Party's rights
hereunder are challenged or contested or if Debtor fails to make payment of any
of its obligations when required of it, or fails to make any payment required by
this Agreement or commits any breach of this Agreement, or any present or future
supplement hereto, or any other agreement between Debtor and Secured Party
and/or upon termination of this agreement, the Debtor will repay upon demand all
of its obligations then owing to Secured Party, whether due or not, and in
addition thereto upon the occurrence of any of the above contingencies Secured
Party is hereby given the unqualified right to retain counsel for any of the
following purposes (1) to protect its interest in this Security Agreement (ii)
to protect, assemble, sell, or foreclose any of the equipment chattels,
inventory, instruments, documents, chattel paper, general intangibles or other
collateral now or hereafter pledged to it (iii) to collect any money which may
become due under this or any other Security Agreement or any obligation from
Debtor, or any guarantor, or anyone else against whom Secured Party may have any
direct or contingent claim pursuant to the terms hereunder or pursuant to the
terms of any guarantee or assignment or Security Agreement (iv) to otherwise
seek in any manner to protect, defend and enforce Secured Party's rights
hereunder or elsewhere contained, or collect any moneys or obligations due
Secured Party from Debtor. If Secured Party retains counsel for any of the
purposes aforementioned, Debtor agrees to pay reasonable counsel fees and such
counsel fees and all disbursements incurred by Secured Party including but not
limited to all costs, charges, premiums, fees of Court and Public officers and
other disbursements and expenses incurred by Secured Party in connection with
the enforcement, proceeding, collection, sale or suit involving any of the
aforementioned purposes shall be paid by Debtor on demand; and the amount
thereof shall be added to the indebtedness secured by this Security Agreement
and shall be secured by the lien given Secured Party by this and any other
security instrument in the same manner as if said amount were a part of the
principal sum due from Debtor to Secured Party.
8. That the Debtor as further additional collateral security, by these
presents assigns to the Secured Party all of the Debtor's present and future
rights to any and all payments, checks and drafts, now made or hereafter to be
made by any insurance company pursuant to any contract of insurance or indemnity
now or hereafter in existence regardless of whether or not the Secured Party is
named as Secured Party and/or Mortgagee, and/or Loss Payee in said present or
future insurance policy or policies. The rights given to the Secured Party
hereunder are coupled with an interest and cannot be revoked by the Debtor. Each
present and future insurance carrier is hereby authorized and directed to make
all payments, drafts and checks payable to Debtor so long as no Event of Default
has occurred hereunder, otherwise to Secured Party with the same force and
effect as if the same were paid directly to the Debtor.
9. (a) That as further additional collateral security for the repayment of
all present and future obligations of Debtor to Secured Party, the Debtor agrees
that any security interest (including the security interest created hereunder)
and/or mortgage and/or pledge of any property, whether of like or unlike nature,
which Secured Party may now or hereafter have in, to and of any of Debtor's
present or future property or assets, of any type or nature, shall at all times
be and remain additional collateral for the prompt fulfillment by Debtor of all
its present and future obligations hereunder or elsewhere contained.
(b) The words, "debts", "liabilities", "indebtedness", "obligations", or
"undertakings", whether singular or plural, whether capitalized or not and
whether used alone or collectively, whenever used herein shall be deemed to
include without limitation all loans, advances, debts, liabilities,
undertakings, obligations, guarantees, covenants and duties owing by Debtor to
Secured Party or Secured Party's subsidiaries, of every kind and description
(whether or not evidenced by any note or other instrument and whether or not for
the payment of money), direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, including without limitation any
undertaking, guarantee, debt, liability or obligation owing from Debtor to
others which Secured Party or Secured Party's subsidiaries may have obtained by
assignment or otherwise, and further including without limitation, all interest,
fees, charges, expenses and attorneys' fees chargeable to Debtor's account or
incurred by Secured Party or Secured Party's subsidiaries in connection with
Debtor's account whether provided for herein or elsewhere or in any other
agreement between Debtor and Secured Party.
10. This Security Agreement shall be made, construed and enforced according
to the laws of the State of New York. Waiver of any default shall not constitute
waiver of any subsequent or other default. All
3
<PAGE>
rights of Secured Party shall inure to the benefit of its successors and
assigns, and all obligations of Debtor shall bind his or its heirs, executors,
personal representatives, successors and assigns.
11. So long as Debtor is indebted to Secured Party. Debtor will make no
loans, advances and guarantees to or for anyone, nor shall Debtor purchase the
stock or assets of any other business, nor shall Debtor purchase any of its own
stock without first obtaining the written consent of Secured Party. Furthermore,
as long as Debtor is indebted to Secured Party, Debtor will not terminate any
Security Agreement that it may now have or hereafter enter into with Secured
Party. All security interests now or hereafter held by Secured Party, whether of
like or unlike nature, shall always remain as collateral for all present and
future obligations of Debtor to Secured Party and Secured Party shall be under
no obligation to terminate any of its liens or security interests or surrender
any collateral until all obligations of Debtor to Secured Party are paid to
Secured Party in full. In the event of litigation over any matter connected with
this Agreement or resulting from transactions hereunder, the right to a trial by
jury is hereby waived by both parties.
12. Nothing herein contained shall be deemed to change, vacate, modify or
terminate any of the obligations of Debtor to Secured Party, or extend the time
of payment of any of said obligations wheresoever or however said obligations
arise, or decrease or impair any rights or remedies Secured Party may have under
any other lien or security instrument or any collateral therein mentioned.
13. This Security Agreement shall be deemed to have been made in New York
County, N.Y. and shall be governed by the laws of the State of New York except
for local recording statutes. As part of the consideration for Secured Party
executing this Security Agreement, Debtor agrees that all actions or proceedings
arising directly or indirectly from this Security Agreement shall be litigated
in courts having situs within the State of New York and the Debtor hereby
consents to the jurisdiction of any local, state or federal court located within
the State of New York and waives any claim that such forum is inconvenient, and
further waives personal service of any and all process upon Debtor herein, and
consents that all such service of process shall be made by certified mail,
return receipt requested, directed to Debtor at the address hereinabove stated,
and service so made shall be complete two (2) days after the same shall have
been posted as aforesaid.
Dated: August 26, 1999
------------------------
Debtor: Inteck Information, Inc.
/s/ Timothy O'Crowley
By: Timothy O'Crowley, President & Secretary
------------------------------------------
(Name & Title)
Secured Party: Charter Financial, Inc.
By: /s/ Signature
------------------------------------------
(Name and Title)
4
<PAGE>
Security Agreement
THIS SECURITY AGREEMENT is entered into this 26th day of August, 1999, by and
between Charter Financial, Inc. (hereinafter "Secured Party") and Intek
Teleservices, Inc. (hereinafter "Debtor")
WHEREAS Intek Information, Inc. (hereinafter "Obligor") desires to enter or has
entered into certain leases of personal property, loans and/or security
agreements and/or other agreements (hereinafter collectively, the "Agreement")
with Secured Party; and
WHEREAS Secured Party has required, as a condition of entering into the
Agreement, that Debtor pledge the Collateral (as defined below) as additional
collateral security for the payment and performance of Obligor under the
Agreement and for all other indebtedness and obligations of Obligor of every
kind to Secured Party;
NOW THEREFORE, in order to induce the Secured Party to enter into the Agreement
and in consideration of $10.00 and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Secured Party and
Debtor hereby agree as follows;
1. Debtor grants to Secured Party a security interest in the
following (together, the "Collateral"), insofar as and to the
extent that the value of such assets exceeds the difference
between $250,000 and the fair market value of any and all other
assets of every kind and nature, whether tangible or intangible
which are owned by Debtor which are not included in the following
definition of "Collateral":
A. All of Debtor's now owned or hereafter acquired goods and
tangible personal property, including without limitation all
machinery, equipment, furniture, fixtures and vehicles,
wheresoever the same may be situated, together with all
accessories, attachments, substitutions, replacements,
renewals, additions. alterations, betterments, repair and
proceeds (including, without limitation, insurance proceeds)
of foregoing.
B. All of Debtor's accounts (including, without limitation, all
accounts receivable, chattel paper, and inventory; and
and all additions, substitutions, replacements and proceeds of
the foregoing.
2. Said Security interest shall always secure: (a) all of Obligor's
present and future indebtedness to Secured Party of every kind, including,
without limitation, indebtedness arising in connection with any leases, of
personal property, loans and notes and whether or not such obligations are held
by Secured Party or assigned to a third party assignee (in which case the
assignee shall have the rights of Secured Party to the extent of the obligations
so assigned); (b) all other existing debts and liabilities of Obligor to Secured
Party; (c) all future advances made by Secured Party to or for the account of
Debtor, including advances for rent, insurance, storage, repairs to and
maintenance of the Collateral, taxes, and discharge of any other lien, security
interest or encumbrance; (d) all other indebtedness, liabilities, undertakings
and obligations, however created direct or contingent (including guarantees),
arising or acquired by Secured Party, which Obligor may now or hereafter owe to
Secured Party; (e) all costs and expenses incurred in the collection of any of
the foregoing, including reasonable attorneys' fees, as hereinafter mentioned;
and (f) without limiting any of the foregoing, all undertakings, guarantees,
debts, liabilities and obligations of Obligor to Secured Party.
<PAGE>
3. Until default hereunder, Debtor shall be entitled to possession of the
Collateral, which shall be kept only at the following addresses unless Debtor
obtains the prior written consent of Secured Party:
. 5619 DTC Parkway, 12th Floor, Englewood, CO 80111
. 1455 Frazee Road, Suite 220, San Diego, CA 92108
. 396 Earhart Drive, Livermore, CA 94550
. 24301 Southland Drive, Suite 300, Hayward, CA 94545
. 4500 Campbell Road, Fort Scott, KS 66701
4. Debtor warrants, covenants, and agrees that: (1) Debtor is the sole owner
of the Collateral free from any lien, security interest or encumbrance (other
than the security interest of Silicon Valley Bank, its successors and assigns or
any replacement thereof (the "Bank")), has the right to grant Secured Party a
security interest therein, and will defend the Collateral against the claims and
demands of all persons; (2) Debtor shall not sell (except items of Collateral
with a fair market value of less than $10,000.00 sold in the ordinary course of
Debtor's business), lease, encumber, remove, conceal or grant or permit any
further security interest in Collateral, nor part with possession of any
thereof, nor permit the same to be used for hire nor in violation of any law or
ordinance, provided however, that upon Secured Party's prior written consent,
which consent shall not be unreasonably withheld, Debtor shall be permitted to
lease or share usage of Collateral with the New Company (as defined in the Rider
to Master Loan and Security Agreement No. 4339 of even dated herewith); (3)
Debtor shall maintain the Collateral in good condition and repair at Debtor's
sole expense; (4) Debtor will pay all taxes levied on the Collateral, and will
make due and timely payment or deposit of all Federal, State, and local taxes,
assessments or contributions required by law and will execute and deliver to
Secured Party, on demand, appropriate Certificates attesting to the payment or
deposit thereof, notwithstanding the foregoing, Debtor shall have the right to
dispute any such taxes provided that Debtor retains an adequate reserve therefor
in accordance with generally accepted accounting principles; (5) No financing
statement covering the Collateral, or any part thereof, is on file in any public
office (other than the financing statement of the Bank), and Debtor's present or
hereafter acquired Collateral is and shall not be or become subject to any
purchase-money or other lien or security interest except in favor of Secured
Party or the Bank; (6) Debtor shall procure and maintain insurance on the
Collateral for the full term of this security agreement, against the risks of
fire, theft and such other risks as Secured Party may require (including the
risk of collision in case any part of the Collateral is a motor vehicle) by
insurers satisfactory to Secured Party, and shall deliver to Secured Party a
fully paid policy or policies of insurance properly endorsed in favor of
Secured Party. The Debtor hereby irrevocably appoints the Secured Party as its
attorney-in-fact, to institute any action or proceeding necessary or proper for
the recovery and collection of any moneys that may become due under the
aforesaid policies of insurance and to discharge, compound or release any claims
and to execute, acknowledge and deliver any instruments under said policies of
insurance and further to endorse the name of the Debtor to any check, draft or
other instrument given in payment or in liquidation of any claim under the said
policies of insurance, and to perform every other act and thing under said
policies of insurance, notwithstanding the foregoing, in the event that the
Collateral is destroyed or damaged and, in the sole discretion of Debtor (so
long as no Event of Default has occurred hereunder, otherwise at the discretion
of Secured Party), such destruction or damage can be repaired, Debtor shall, at
its expense, promptly effect such repairs and institute any action or proceeding
necessary or proper for the recovery and collection of any moneys that may
become due under the aforesaid policies of insurance; (7) Debtor will permit
Secured Party to inspect the Collateral at any time; (8) Loss, theft, damage,
destruction or seizure of the Collateral shall not relieve the Debtor from the
payment of any indebtedness secured hereby; (9) The Collateral is not now and
will not hereafter be so affixed to realty as to become a part thereof or a
fixture except as may be set forth on the schedule annexed; (10) The execution
and delivery hereof, if Debtor is a corporation, has been duly authorized by all
necessary action of Debtor's directors and shareholders; (11) Secured party is
authorized to execute on Debtor's behalf and file, at Debtor's cost, such
financing statements and other instruments or documents as may be necessary to
perfect and protect Secured Party's security interest; and (12) in case of
Debtor's default in performing any warranty, covenant or undertaking hereunder,
Secured Party may (but shall not be obliged to) procure the performance thereof
and add the cost thereof, with interest, to the indebtedness secured hereby.
2
<PAGE>
5. The occurrence of any of the following events or conditions shall, at
the option of Secured Party and without notice or demand, constitute an event of
default hereunder; (1) Default in the due payment of any indebtedness secured
hereby; or (2) Failure of Debtor to perform any covenant or undertaking on
Debtor's part herein or in any other agreement now existing or hereafter made
with Secured Party, or now or hereafter held by Secured Party; or (3) Failure of
Obligor to perform any covenant or undertaking on Obligor's part under the
Agreement or any other default by Obligor under the Agreement or any other
agreement now existing or hereafter made with Secured Party, or now or hereafter
held by Secured Party; or (4) Breach of any warranty or falsity of any
representation made by Debtor or Obligor to Secured Party; or (5) Attachment or
seizure of or levy upon the Collateral unless such attachment, seizure or levy
is released within five (5) days; or (6) Institution of any proceeding by or
against Debtor or Debtor's business under any bankruptcy or insolvency statute,
or Debtor's assignment for benefit of creditors, or the appointment of a
receiver for Debtor or the Collateral, or the filing of a tax lien notice
against Debtor by any taxing authority; or (7) Reasonable insecurity of Secured
Party; or (8) Loss, theft, substantial damage, destruction, sale, encumbrance,
concealment, removal or forfeiture of the Collateral or any material portion
thereof.
6. Upon the occurrence of any event of default hereunder or under the
Agreement, Secured Party may declare all Obligor's indebtedness secured hereby
immediately due and payable, and thereupon Secured Party shall have the right to
take possession of the Collateral and shall have all other rights and remedies
of a Secured Party under the Uniform Commercial Code. Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Secured Party shall give Debtor reasonable notice
of the time and place of any public sale thereof or of the time after which any
private sale or other intended disposition thereof is to be made. Debtor agrees
that the requirements of reasonable notice shall be met if notice is mailed to
Debtor at the address of Debtor shown above not less than five (5) days prior to
the sale or other disposition. Secured Party may require Debtor to assemble the
Collateral and make it available to Secured Party at a place to be designated by
Secured Party which is reasonably convenient to both parties. Secured Party is
authorized to maintain, sell, or dispose of the Collateral on the premises of
the Debtor. Secured Party's rights and remedies shall be cumulative and not
alternative. Debtor agrees that Secured Party may be the purchaser at any public
or private sale.
7. If Debtor defaults hereunder or if any of the Secured Party's rights
hereunder are challenged or contested, or if Obligor defaults on any of its
obligations under or commits any breach of the Agreement or any other agreement
between Obligor and Secured Party, and/or upon termination of this Agreement,
then upon the occurrence of any of the above contingencies, Secured Party is
hereby given the unqualified right to retain counsel for any of the following
purposes (1) to protect its interest in this Security Agreement (ii) to protect,
assemble, sell, or foreclose any of the equipment chattels, inventory,
instruments, documents, chattel paper, general intangibles or other collateral
now or hereafter pledged to it (iii) to collect any money which may become due
under this Agreement (iv) to otherwise seek in any manner to protect, defend and
enforce Secured Party's rights hereunder or elsewhere contained, or collect any
moneys or obligations due Secured Party from Obligor. If Secured Party retains
counsel for any of the purposes aforementioned, Debtor agrees to pay reasonable
counsel fees and such counsel fees and all disbursements incurred by Secured
Party including but not limited to all costs, charges, premiums, fees of Court
and Public officers and other disbursements and expenses incurred by Secured
Party in connection with the enforcement, proceeding, collection, sale or suit
involving any of the aforementioned purposes shall be paid by Debtor on demand;
and the amount thereof shall be added to the indebtedness secured by this
Security Agreement and shall be secured by the lien given Secured Party by this
security instrument.
8. That the Debtor as further additional collateral security, by these
presents assigns to the Secured Party all of the Debtor's present and future
rights to any and all payments, checks and drafts, now made or hereafter to be
made by any insurance company pursuant to any contract of insurance or indemnity
how or hereafter in existence regardless of whether or not the Secured Party is
named as Secured Party and/or Mortgagee, and/or Loss Payee in said present or
future insurance policy or policies. The rights given to the Secured Party
hereunder are coupled with an interest and cannot be revoked by the Debtor. Each
present
3
<PAGE>
and future insurance carrier is hereby authorized and directed to make all
payments, drafts and checks payable to Debtor so long as no Event of Default has
occurred hereunder, otherwise to Secured Party with the same force and effect as
if the same were paid directly to the Debtor.
9. (a) That as further additional collateral security for the repayment of
all present and future obligations of Obligor to Secured Party, the Debtor
agrees that any security interest (including the security interest created
hereunder) and/or mortgage and/or pledge of any property, whether of like or
unlike nature, which Secured Party may now or hereafter have in, to and of any
of Debtor's present or future property or assets, of any type or nature, shall
at all times be and remain additional collateral for the prompt fulfillment by
Obligor of all its present and future obligations hereunder or elsewhere
contained.
(b) The words, "debts", "liabilities", "indebtedness", "obligations", or
"undertakings", whether singular or plural, whether capitalized or not and
whether used alone or collectively, whenever used herein shall be deemed to
include without limitation all loans, advances, debts, liabilities,
undertakings, obligations, guarantees, covenants and duties owing by Obligor to
Secured Party or Secured Party's subsidiaries, of every kind and description
(whether or not evidenced by any note or other instrument and whether or not for
the payment of money), direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, including without limitation any
undertaking, guarantee, debt, liability or obligation owing from Obligor to
others which Secured Party or Secured Party's subsidiaries may have obtained by
assignment or otherwise, and further including without limitation, all interest,
fees, charges, expenses and attorneys' fees chargeable to Obligor's account or
incurred by Secured Party or Secured Party's subsidiaries in connection with
Obligor's account whether provided for herein or elsewhere or in any other
agreement between Obligor and Secured Party.
10. This Security Agreement shall be made, construed and enforced according
to the laws of the State of New York. Waiver of any default shall not constitute
waiver of any subsequent or other default. All rights of Secured Party shall
inure to the benefit of its successors and assigns, and all obligations of
Debtor shall bind his or its heirs, executors, personal representatives,
successors and assigns.
11. So long as Obligor is indebted to Secured Party, Debtor will make no
loans, advances and guarantees to or for anyone, nor shall Debtor purchase the
stock or assets of any other business, nor shall Debtor purchase any of its own
stock without first obtaining the written consent of Secured Party. Furthermore,
as long as Obligor is indebted to Secured Party, Debtor will not terminate any
Security Agreement that it may now have or hereafter enter into with Secured
Party. All security interests now or hereafter held by Secured Party, whether of
like or unlike nature, shall always remain as collateral for all present and
future obligations of Obligor to Secured Party and Secured Party shall be under
no obligation to terminate any of its liens or security interests or surrender
any collateral until all obligations of Obligor to Secured Party are paid to
Secured Party in full. In the event of litigation over any matter connected with
this Agreement or resulting from transactions hereunder, the right to a trial by
jury is hereby waived by both parties.
12. Nothing herein contained shall be deemed to change, vacate, modify or
terminate any of the obligations of Obligor to Secured Party, or extend the time
of payment of any of said obligations wheresoever or however said obligations
arise, or decrease or impair any rights or remedies Secured Party may have under
any other lien or security instrument or any collateral therein mentioned.
13. This Security Agreement shall be deemed to have been made in New York
County. N.Y. and shall be governed by the laws of the State of New York except
for local recording statutes. As part of the consideration for Secured Party
executing this Security Agreement. Debtor agrees that all actions or proceedings
arising directly or indirectly from this Security Agreement shall, be litigated
in courts having situs within the State of New York and the Debtor hereby
consents to the jurisdiction of any local, state or federal court located within
the State of New York and waives any claim that such forum is, inconvenient, and
further waives personal service of any and all process upon Debtor herein, and
consents that all such service of
4
<PAGE>
process shall be made by certified mail, return receipt requested, directed to
Debtor at the address hereinabove stated, and service so made shall be complete
two (2) days after the same shall have been posted as aforesaid.
Dated: August 26, 1999
-------------------------------
Debtor: Intek Teleservices, Inc. Secured Party: Charter Financial, Inc.
By: /s/ Timothy O'Crowley By: [ILLEGIBlE SIGNATURE]
---------------------------------- -----------------------------------
Timothy O'Crowley Charter Financial, Inc.
President and Secretary Vice President
Main Document - Security Agreement - Additional Collateral Pledged by 3rd Party
on Behalf of Obligor
5
<PAGE>
Delivery Receipt and Acceptance Certificate
-------------------------------------------
RE: Rental Schedule No. 01 to Master Loan and Security Agreement No. 4339 dated
August 26, 1999 (The "Agreement") by and between Charter Financial, Inc.,
as Secured Party, and Intek information Inc., as Debtor
The undersigned hereby represents and warrants:
1. It received possession of all of the personal property described on
Schedule "A" attached hereto on September 28, 1999.
------------------
2. All of the personal property described on the attached Schedule "A" is in
good condition and has been accepted by the undersigned.
3. The Secured Party named above has performed and satisfied all covenants and
conditions to be performed and satisfied by it on or prior to the date
hereof under the above-referenced Agreement between the undersigned and
said Secured Party.
4. As of the date hereof, there has occurred no Event of Default as defined in
the aforesaid Agreement or any event with which the giving of notice or
lapse of time, or both, would constitute an Event of Default.
5. The undersigned has no claim or defense whatsoever against or with respect
to the Secured Party named above or otherwise arising under or relating to
the aforesaid Agreement.
6. The payments due under said Agreement are $98,444.00 per month for thirty
(30) months commencing on 10/5/99.
-------
The undersigned has been advised that the Secured Party named above may assign
the aforesaid Agreement, for value, and makes the foregoing representations and
warranties in order to induce the Assignee to accept such assignment, and agrees
that such Assignee may rely upon the aforesaid representations and warranties
and that notwithstanding any event or circumstances whatsoever, the undersigned
shall pay and perform all liabilities and obligations arising under or relating
to the aforesaid Agreement in accordance with its terms.
INTEK INFORMATION INC.
By: /s/ Timothy O'Crowley
--------------------------
Timothy O'Crowley
Title: President and Secretary
-----------------------
Date: September 28, 1999
<PAGE>
Debtor: Intek Information, Inc. Page 1
5619 DTC Parkway, l2th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
SCHEDULE "A"
- --------------------------------------------------------------------------------
EOUIPMENT LOCATION: 4500 Campbell Road
Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
Aspect Telecommunications
Invoice 534932
1 3405 UTILITY SHELF--MDF
invoice 534761
2 3192 ASPECT HANDS-FREE TELESET
40 3190 ASPECT TELESET
Invoice 533630
3 4028 T-1 DIGITAL TRUNK INTFC CARD
Invoice 534725
2 3258 2,000,000 CALL RECORDS STORAGE
1 6025 AGENTACCESS LICENSE 5D USERS
1 6498 CU REPORTWRITER 2.0 PLUS 2.0.1 PATCH
8 4072 STATION INTERFACE CARD
1 3011 MUSIC RECORDING ADAPTER
21 7002 OVER THE EAR HEADSET AND CONTROL UNIT SET
21 7000 MOMAURAL TOME SWITCH HEADSET & CONTROL
5 ASPECT SYSTEM MANGEMENT SUITE 10.1
2 ASPECT ARCHITECT 1.0.1
1 6710 CUSTOMVIEW DIRECTOR SINGLE COPY
1 CUSTOM VIEW PRODUCER - FIRST COPY
1 6494 CV REPORTRUNNER 2.0 PLUS 2.0.1 PATCH
Invoice 534250
1 3061 RINGING VOLTAGE GENERATOR
3 4062 16-PORT TELESET INTERFACE CARD REL 7
3 T-1 DIGITAL TRUNK INTFC EXPN
Invoice 532641
1 9717V-VOUCHER INTRO TO APPL BRIDGE & CTE
1 9716V-VOUCHER CUSTOM VIEW PRODUCER COURSE
1 9712V-VOUCHER ADV CV REPORT WRITER REL 2
1 9709V VOUCHER CCT DESIGN & IMPLEMENTATION
1 9703V VOUCHER ADVANCE MANAGING ASPECT ACD
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 2
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
SCHEDULE "A"
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
<TABLE>
<CAPTION>
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
<S> <C> <C>
1 9702V VOUCHER BASIC MANGING THE ASPECT ACD
1 97l0V VOUCHER INTRO TO CV REPORT WRITER-REL 2
Invoice 533291-1
13 3124 LBOP/GRND START TRNK BYPASS CD
Invoice 532922
3 3028 ESP & CHAH SVCE UNIT (CSU)
Haworth, Inc.
Proposal 32003
347 PNM-911-R STANDARD PLATFORM W/
PALMREST LOWER MOUSE AND FREEDOM
ARM, BLACK FINISH
Proposal 31814
326 PINWHEEL WORKSTATIONS
7 BFM-1-B BASE FEED MODULE, HARDWIRE
329 EFN-454-B STRAIGHT FABRIC PANEL
NO POWER 48" x 54"
332 EFP-254-B STRAIGHT FABRIC PANEL
POWER 24" x 54"
38 TFM-6-B TOP FEED MODULE 68" FOR
PANEL HEIGHT 64" & 68"
8 INQ46870L5 SUPERVISOR WORKSURFACE,
GRAPHITE SPEX LAMINATE, CHARCOAL TRIM
316 INQ46870L4 SPECIAL POD WORKSURFACE
WITH GROMMET CUT,
GRAPHITE SPEX W/CHARCOAL TRIM OH-023;
TR-K
56 PRD-3-B DUPLEX RECEPTACLES (BOX OF 6)
332 HWHP-0001 WORK SURFACE-HEIGHT
DUPLEX RECEPTACLE
332 WM-33 WIRE MANAGER 33"
</TABLE>
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 3
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
SCHEDULE "A"
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
<TABLE>
<CAPTION>
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
<S> <C> <C>
16 13l8-1031 SCREWS FOR SPECIAL WORKSURFACE
16 1820-1005 WORK SURFACE CHANNEL
8 WSC-P WORK SURFACE SUPPORT BRACKET PAIR
16 HFSH-2912 WRK SRF END PNL-HALF
SUPPORT 12 INCHES
327 PCSS-3-B STRAIGHT SPAN POWER
CONNECTOR
6 DWST-430 D-TOP, VINYL EDGE, 48" x 30"
REQUIRES MOUNT KIT/SUPPORTCOL
6 HCC-000l D-TOP SINGLE-LEG BASE,
ADJUSTABLE HEIGHT
26" - 30"
6 FMK-I FLUSH MOUNT KIT
2 EFN-254-B STRAIGHT FABRIC PANEL
NO-POWER 24" x 54"
12 EFN-266-B STRAIGHT FABRIC PANEL
NO-POWER 24" x 66"
1 EFP-266-B STRAIGHT FABRIC PANEL
POWER 24" x 66"
2 EFN-3042-B STRAIGHT FABRIC PANEL
NO-POWER 30" x 42"
5 EPN-3054-B STRAIGHT FABRIC PANEL
NO-POWER 30" x 54"
5 EFN-3066-B STRAIGHT FABRIC PANEL
NO. POWER 30" x 66"
1 EFP-3066-B STRAIGHT FABRIC PANEL
NO-POWER 30 x 66
15 EFN-366-B STRAIGHT FABRIC PANEL
NO-POWER 36" x 66"
4 EFP-366-B STRAIGHT FABRIC PANEL
POWER 36" x 66"
1 EFN-354-B STRAIGHT FABRIC PANEL
</TABLE>
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 4
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
SCHEDULE "A"
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
<TABLE>
<CAPTION>
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
<S> <C> <C>
NO-POWER 36" x 54"
2 EFN-4254-B STRAIGHT FABRIC PANEL
NO POWER 42" x 54"
3 EFN-466-B STRAIGHT FABRIC PANEL
NO-POWER 48" x 66"
9 EFN-566-B STRAIGHT FABRIC PANEL
NO-POWER 60" x 66"
2 EGN-366-B STRAIGHT GLAZED PANEL
NO-POWER 36" x 66"
3 EGN-4266-B STRAIGHT GLAZED PANEL
NO-POWER 42" x 66"
10 FDRF-5 REG. FLIPPER DOOR - FABRIC 60"
3 FPFC-54-B 90 DEG. FABRIC FINISH POST 54"
7 FPFC-66-B 90 DEG. FABRIC FINISH POST 66"
2 FPFS-66-B 180 DEG FABRIC FINISH POST 66"
8 FDRF-3 REG. FLIPPER DOOR FABRIC 36"
2 EDRF-42 REG FLIPPER DOOR FABRIC 42"
10 HTB-6016 TACKBOARD 60" x 16"
2 HTB-4216 TACKBOARD 42" x 16"
8 HTB-3616 TACKBOARD 36" x 16"
8 HTL-0036-T TASK LIGHT 36"
2 HTL-0042 TASK LIGHT 42"
10 HTL-0060-T TASK LIGHT 60"
15 PDX-24-HLN FIXED PEDESTAL DRAWER 24"
15 PDX-24-JLN FIXED PEDESTAL DRAWER 24"
8 SR-3 REGULAR SHELF 36"
10 SR-S REGULAR SHELF 60"
2 SRS-42 REGULAR SHELF 42"
15 WMK-66 WALL MOUNT KIT 66"
</TABLE>
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 5
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
SCHEDULE "A"
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
<TABLE>
<CAPTION>
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
<S> <C> <C>
15 WRCS-324 90 DEG. CORNER WORK SURFACE
W/O KEYBOARD PAD 36" x 24"
3 WS-324 REGULAR WORK SURFACE 36" x 24"
3 WS-424 REGULAR WORK SURFACE 48" x 24"
15 WS-524 REGULAR WORK SURFACE 60" x 24"
5 WS-5424 REGULAR WORK SURFACE 54" X 24"
4 WS-624 REGULAR WORK SURFACE
72" x 24"
1 SPCL-67 REGULAR WORK SURFACE
84" x 24"
2 WSSP-2429-L WORK SURFACE SUPPORT PANEL 24"
4 WSSP-2429-R WORK SURFACE SUPPORT PANEL 24"
27 WT-60 WALL TRACK 60"
71 M231-1741 MB H.E., PNEU, HA TASK ARMS HARD CASTERS
112 M231-1741 MB H.E., PNEU, HA TASK ARMS HARD CASTERS
112 M231-1741 MB H.E., PNEU, HA TASK ARMS HARD CASTERS
16 M231-1741 MB H.E., PNEU, HA TASK ARMS HARD CASTERS
2 PMK-1 PANEL MOUNT KIT
38 BFM-1-B BASE FEED MODULE, HARDWIRE
Proposal 31831
4 31 10-GEST TALLY, GUEST CHAIR HAWORTH- HAM DISCOUNT 50%
2 A830-1641 MB SYNC. MECH, BHA, TARM W/VNYL, HARD CASTERS,
BACK LOCK HAWORTH HAS DISCOUNT 55%
3 A870-1V41 HB SYNC, MECH, HW ADJ ARM W/VNYLHARD CASTERS,
BACK LOCK HA WORTH - HAS DISCOUNT 55%
HTRT-3672-W RACE TRACK CONFERENCE TABLE 36" x 72"
HAWORTH - HAF DISCOUNT 55%
2 LHTL-0054 TASK LIGHT, 54" HAWORTH - HAL DISCOUNT 50%
1 OCKF-2272 CREDENZA, W/DOUBLE PEDESTAL 72" W x 22" D,
KNEESPACE HA WORTH -HAL DISCOUNT 50%
2- OCLQ-2272-R B CREDENZA, W/LATERAL STORAGE 72" W x 22"D
STORAGE SPACE HAWORTH - HAL DISCOUNT 50%
</TABLE>
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 6
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA# 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
SCHEDULE "A"
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
<TABLE>
<CAPTION>
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
<S> <C> <C>
2 ODED-3672 DESK, D-TOP EXTENSION 72"Wx36"D HAWORTH-HAL
DISCOUNT 50%
2 OLBE-2236 BRIDGE, 36"Wx22"D HAWORTH - HAL DISCOUNT 50%
2 OLCU-2236 CPU CORNER UNIT, 36"Wx22"D HAWORTH HAL
DISCOUNT 50%
2 0VS4-4172 VSU, 4-DOOR CABINET 72"Wx4l"Hx15"D HAWORTH -
HALDISCOUNT 50%
Pear Commercial Interiors
Invoice 39923
40 M231-1741 MB H.E., PNEU, HA TASK ARMS HARD CASTERS
Invoice 40186
347 PNM-911-R STANDARD PLATFORM W/PALM REST
LOWER MOUSE AND FREEDOM ARM, BLACK FINISH
Invoice 40662
4 3110-GEST TALLY, GUEST CHAIR
2 A830-1641 MB SYNC, MECH, BHA, TARM W/VNYL
HARD CASTERS, BACK LOCK
1 CUSTOM MERIT RACETRACK WOOD TABLE
TOP 36"x72" SPL # = 194-850
2 698-003 STND FOUR ARM POWDER COATED BLK
BASE FOR TOP 36"x72"
2 199-908 SINGLE TUBE FLUORESCENT TASK LIGHT
1 194-505 MERIT CREDENZA WITH TWO F/F PEDESTALS 72"x21"x29"
2 MERIT CREDENZA W/SINGLE F/F PEDESTAL RIGHT 72"x21"x29"
2 194-411 MERIT D TOP DESK FOR RIGHT HAND RETURN 72"x30"x29"
2 194-314 EXECUTIVE CORNER STAND 36"Wx36"Wx29"H
2 194-575 MERIT HIGH BACK ORGANIZER 71-1/2"xl5"x43"
2 194-31 6RW MERIT EXECUTIVE BRIDGE 36"Wx21"D SPECIAL SIZE
Invoice 40659
M62 PNM 911 R PLATFORM, PALM, LOWER MOUSE AND FREEDOM ARM
</TABLE>
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 7
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
SCHEDULE "A"
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
<TABLE>
<CAPTION>
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
<S> <C> <C>
KEYBOARD
146 SPLB-2777 8-POD WING SURFACE W/GROMMETS
17 EC-1O-B END CAP
175 EFN-454-B STRAIGHT FABRIC PANEL NO-POWER 48" x 54"
162 EFP-254-B STRAIGHT FABRIC PANEL POWER 24" x 54"
16 HPSH-2912 WRK SRF END PNL-HALF SUPPORT
12 INCHES
162 HWHP-0001 WORK SURFACE-HEIGHT DUPLEX RECEPTACLE
135 PCSS-3-B STRAIGHT SPAN POWER CONNECTOR
27 PRD-3-B DUPLEX RECEPTACLES (BOX OF 6)
31 SPLA-2950 TOP FEED MODULE FOR PANEL
HEIGHT 54"
162 WM-33 WIRE MANAGER 33"
OnLine Connecting Point
Invoice 1015277-00
1 3C250C-TX24-4PK SSI HUB 100TX 24-PRT 4-PK 3C
2 3C250C-TX24 SUPERSTACK II HUB 100TX 24-POR
1 3C16671A SS11 HUB 10 24-PRT TP 3 COM EN
4 3C219 SSII HUB 100 EXP CBL 3 COM ENT
3 002805-00 COURIER V. EVERYTHING V.90 INT
215 F5C550 SURGEMASTER 7 OUTLET STRIP
4 C4120A#ABA HP LASERJET 4000 N HEWLETT-PAC usqa008359
usqa008651
usqc0l2008
usqc0l2l42
2 VSE-DRCT-NAS2-0 VIRUSSCAN SECURITY SUITE
1 3C16981 SSII SWTCH 3300 12-PRT 10/100
200 351-00222 MOLP-B WIN NT CAL 4.0 WIN N
</TABLE>
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 8
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
SCHEDULE "A"
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------
Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
Invoice 1015823-00
1 WIC-IT CISCO1600/2600/3600 1-PORT
2 1202060L1 TSU LT LOW COST SINGLE
2 CAB-V35MT MALE DTE V.35 10FT CABLE
Invoice 1015301-00
1 CISCO2501-CH Ethernet/dual serial
router 250970407
1 MEM-1X8F Optional 8 MB Flash SIMM
1 CAB-V35MT V.35 Cable, DTE,
Male I 0 Fee
Invoice 1015303-00
1 CISCO2501-CH Ethernet/dual serial
router 250970411
1 MEM-1X8F Optional 8 MB Flash SIMM
1 CAB-AC Power Cord, 110V
Invoice 1015296-00
3 3C16611-US SSII DUAL SPD HUB 500
24-PRT 3
Invoice 1015298-00
3 002806-00 COURIER V.EVERYTHING
V.90 EXT
3 F2L088.06 IBM AT MDM ADPTR CABLE,
6DB9F/
1 4202086L3 ISU 512 ISDN INV MUX
512K S/T 85za7399
Invoice 1015613-00
1 4200023LS Smart 16E SHELF AC W/CONTR
16S
1 1200077L1 TSU V.35 (RM) T1-FT1 910c2239
12 1202066L1 T1 ESF CSU (SMART 16)
FULL 906a3140
906a3146
906a3277
906a3319
906a3328
906a3331
906a3337
906a3383
906a3392
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 9
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
SCHEDULE "A"
- -------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------- Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
906a3414
906a3417
906a3426
1 1200048L3 Smart 16 Redundant AC P/S/ ADTR 849a26253
1 1200045L1 Datamate Hand-Held LCD 913c4668
Invoice 1015314-00
1 328970-001 Proliant 1850R 6/450 64MB D917CFW11104
1 313614-B21 64MB SDRAM DIMM KIT (1X64
1 313615-B21 128MB SDRAM DIMM KIT (1X128
Invoice 1015314-00
1 227-00369 MOLP-B WIN NT SVR 4.0 RUNNI
1 295643-B21 SMART ARRAY 3200 COMPAQ ACCESS
8 400739-B21 18.20GB SCSI ULTRA-WIDE 1IN
1 304100-B21 PROLIANT STORAGE SYSTEM U1 RA 8907BSN100700
2 DT3-STD-NT DOUBLE TAKE FOR WINDOWS NT.3.
Invoice 1015304-00
2 MEM-1X8D CISCO 2500 8MB DRAM MEMORY
2 CD25-C-11.3 CISCO 2500 IP FEATURE PACK
1 NM-1E2W CISCO 3600 1 ENET 2 WAN
Invoice 1015233-00
2 333100-001 Proliant 1850R PLI 400MHZ100MH d849bzq30346
d849bzq30357
2 313614-B21 65MB SDRAM DIMM KIT (1x64
6 313706-B21 9.1GB PLUGGABLE WIDE-UL-TRSCSI-
1 295513-B21 12/24-GB DDS-3 DAT DRV COMPAQ
1 165753-001 RACK 7142 42U (7FT) W/DOOR COM
1 165652-001 RACK SIDEWALL KIT FOR 42U RACK
1 169940-001 RACK BLANKING PANEL KIT 15U P
1 189907-001 RACK STABILIZING FEET FOR42U R
1 325900-001 V500 15' MNTR 1024X768 85HZ 909bf26rc977
1 SU3OOORMNET SMART-UPS 3000VA RKMT BUND W/
2 388099-B21 SMART ARRAY 221 SINGLE CHANNEL
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 10
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
SCHEDULE "A"
- -------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------- Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
2 227-00369 MOLP-B WIN NT SVR 4.0 RUNNI
1 NSE-DRCT-NAS2-0 NETSHIELD SECURITY SUITE
1 ARB6001661CUA ARCSERVEIT 6.61 AD ED FO
2 ARB6013661AEA ARCSERVEIT WRKGRP/AD ED AGENT
1 EL-80DT 8PT 1X8 OUTLOOK CONSOLE KVM SW
1 EL-480DT 8PT 4X8 OUTLOOK CONSOLE KVM SW
1 2172-PC NETCOM3 72" UNIT
4 CZ-1232 12FT ZIP KVM CABLE SET HRES AP
1 EUROTECH-C EUROTECH 104-KEY KEYBOARD WIN9
ALEXANDER OPEN SYSTEMS, INC.
Invoice #6213
7 Yellow/Blue Stripe Cross Connect Cable
4 2 Pair White/Blue and White/Org. Cross
Invoice #6214
1 24 Port Patch Panel
Invoice #6215
2 24"x5" 18 gauge cable tray, 10' section
2 24" 18 gauge hinged cover, 5' sections
3 18" curved ladder rack section
16 Straight clamp assembly
2 Cable Fence
3 Rack junction plate
8 18" ladder rack, 10' sections
4 Wall angle assemblies, 18"
16 Threaded rod
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Inteck Information, Inc. Page 11
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA #4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
SCHEDULE "A"
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
10 Shelf bracket
16 Open Clip
16 Ceiling hanger bracket
2 Corner clamp
Invoice #6216
48 25 pair to 12 RJ45 Octopus Cable
Invoice #6217
30 Patch Cables 10' CAT 5 Blue
416 Patch Cables 7' CAT 5 Blue
Invoice #6218
3 Female RJ45 to Male DB25
Invoice #6220
20 25' Patch Cords
Invoice #6221
9 Cross Connect
Invoice #6222
2 7' x 19" Relay Rack
Invoice #6223
1 Patch Panel 24 Port
Invoice #6224
30 25' Patch Cords
30 20' Silver Flat Ribbon Patch Cords
ASPECT TELECOMMUNICATIONS CORPORATION
Invoice #528245-2
1 6389 Remote Monitoring
1 6388 Idle with reason
1 6387 Sign-off with reason
2 3258 2,000,000 call records storage
1 6393 Aspect openmedia software
1 6030 Agentaccess license -- 250 users
2 6025 Agentaccess license -- 50 users
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 12
5619 DTC Parkway, l2th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
SCHEDULE "A"
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------
Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
10 6019 Agentaccess license - 1 user
1 1355 Aspect ACD Software - 300R
1 3273 10 hour voice storage
1 6448 Aspect Amis analog networking
1 6390 Remote recording of announcements
2 3273 10 hour voice storage
1 6386 Qkeeper
1 6385 Intelligent interflow
1 6384 Data direct call routing
1 6383 Basic IVR
1 6380 Skill mapping
1 1351 Advanced ACD application suite - 300R
1 6401 Application bridge access LIC
1 6412 Application INTF consult - PC
1 6391 Voice Messaging
1 6382 Call back messaging
1 3990-NA NA English Language Prompts
1 6648 Aspect ACD Release 7.0.1
1 6648 Aspect ACD Release 7.0.1
18 4030 Primary rate interface (PRI)
18 3028 ESF & SF Chan svce unit (CSU)
1 3992 Openmedia Module
1 6440 Network interqueue w/tl spans
1 6431 ANI application SW package
1 3871 4-GB Disk Drive
2 4049 DTMF Receiver card
1 3890 Integrated applications module - ACD
1 3871 4-GB Disk Drive
1 3871 4-GB Disk Drive
23 4062 16-port teleset interface card rel 7
1 3890 Integrated applications module - ACD
1 6818 Aspect System management suite 1.0.1
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 13
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
SCHEDULE "A"
- -------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------- Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
1 6808 Aspect Architech 1.0.1
11 6710 Customview director - single COPV
1 6411 Application bridge developer's license
1 6494 CV reportrunner 2.0 plus 2.0.2 patch
179 7000 Nomaural Tome Switch Headset & Control
53 3197 Standard Handset & Cradel
28 3192 Aspect Hands-Free Teleset
1 6818 Aspect System Management Suite 1.0.1
1 6808 Aspect Architect 1.0.1
1 6710 Customview director - single copy
1 6700 Customview producer - first copy
1 6498 CV Reportwriter 2.0 plus 2.0.1 patch
179 7002 Over-the ear headset and control unit set
12 4028 T-1 Digital trunk INTFC Card
6 4082 Switching module controller card
3 3880 Switching module
2 4047 24 port voice card
1 3105 200 MHZ Pentium pro processor
2 3090 Security modem
1 3105 200 MHZ Pentium pro processor
12 4029 T-1 Digital trunk INTFC EXPN
1 3118 Trunk bypass assembly
1 3897 Cabinet cable kit
2 3895 System cabinet
1 3841 System monitor switcher
3 3452 AC Power cable sys power-TDI
1 3445 Frame 2 power connection-TDI
1 3444 Redumdant power option (RPO)-TDI
1 3443 48 VDC Power supply-TDI
2 3442 Cabinet power connection (30ft)-TDI
1 4043 External music on hold interfc
12 4038 Loop/GRMD Start trunk I/F Card
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 14
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
SCHEDULE "A"
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
4 3440 Battery backup assembly
2 3404 Mail distribution frame-fixed
1 3403 Secondary CKT protect blk kit
1 3845 ACD regulatory kit
1 3840 ACD system kit
2 3560 110 punch down block
1 3850 ACD redundancy kit
1 3441 Frame 1 power connection - TDI
330 3190 Aspect teleset
2 3124 Loop/Grd start trunk bypass CD
Invoice #533291-1
1 3124 Loop/Grnd start trunk bypass
Invoice #533291-2
10 3124 LOOP/GRND start trunk bypass CD
EIS INTERNATIONAL, INC.
1 CP-1010-00 CAB CP 12000
1 CP-1030-00 BRD Cage CP120000 82770001A91
1 CP-1022-00 POWER Drawer CP8000/9600/12000 81850110AS1
1 CP-1103-00 BRD MPU 81850234PAZ
1 CP-1032-00 BRD Network for CP12000 82770015PA1
8 CP-1501-00 BRD Feed II T-1 818500015PA4
8 CP-1401-03 BRD Universal Interface T-1
1 CM-1035-01 SVR Proliant 3000 6/333 w/64mb Memory CD
ROM 512k Cach
1 CM-1327-00 Mem 128mb 2 simm kit
1 CM-1326-00 MEM 64mb 2simm kit (66 MHz)
2 CM-1117-01 HD 9.1 GB Hot Pluggable (10K)
1 CM-1620-00 CARD Controller Smart 2/DH
1 CM-1403-00 MON 15" Color VGA Compaq
1 CM-2412-01 HUB 12 Port Asante 10 Base T
1 CM-1711-00 CONNECTION Station CNS-1600
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 15
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
SCHEDULE "A"
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
Corollary Lan-attached
1 OC-1407-00 CBL 10 Base-T #2737-05V RJ45-RJ45 50'
1 CM-2007-00 MDM 56K Compaq Microco, 510
1 CM-2002-00 CBL Modem-AT DB25M to DB9FM
1 CM-2100-00 PNTR 80 Column Panasonic
1 CM-2102-00 CBL Printer Cable
72 CM-3010-00 Software, CALL MANAGER LICENSE
72 CM-3000-00 Answering Machine Detection
1 CM-3040-00 Dialing Rules
1 CM-2305-00 UPS 1400VA w/Powerchute
includes SW CM-2306-00
1 CM-2306-00 SW Powerchute for SCO Unix
1 CM-2238-00 DRV DAT 24Gb Conner Scorpion
STD624000N External
1 CM-2438-00 CBL SCSI I to Fast SCSI 3
wide 6' with thumb screws
1 CM-2780-00 SW SCO Media Pack
1 CM-2772-00 SW SCO OS5 5.0.2 150 User Lice
150 user lic./#AA260-E110-N5.0
1 CM-2770-00 SW SCO os5 5.0.2 25user lic
bump pak use with CM-2772-00
7 CM-3001-00 SUPERVISOR SOFTWARE LICENSE
5 MONITOR SOFTWARE LICENSE
1 CPS296 Ed Svcs - CPS
1 CPS210 Ed Svcs - CPS
1 CM-2417-01 COMPAQ Netelligent 10/100 Pci
Network Card
4 CP-1302-02 BRD Digital Station
DSC009 81850236PA6 Rev.A
PROGRESSIVE TECHNOLOGIES
Invoice #S96151
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 16
5619 DTC Parkway, l2th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
SCHEDULE "A"
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------
Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
11 3100-1TD TT Desk
1 3100-1TD TT Desk PTI11708
4 3100-TTW Touch Tone Wall PTI10900; PTI10901;
PTI10909; PTI109082
2 11228X EX Soundstation w/MICS 12233299; 12233295
3 11227X Soundstation No MICS 12226256; 12226257;
12225716
FUTURESOFT
Invoice #037045
1 201SA507103 DCSB 7.1.03 DOM RC 50 PACK
GATEWAY COMPANIES, INC.
Invoice #43794926
1 1002520 GP6-366C PC 1002520 0013912408
1 1505545 Office 97 SBE with bookshelf 98
and Office 2000
1 7001375 EV700 17" Monitor with 15.9"
Viewing Area
Invoice #43760484
149 1002520 GP6-366C PC serial numbers: 1002520 0013988025;
0013988026;0013988027;0013988028;0013988029;0013988030;0013988031;0013988031;
0013988032;0013988033;0013988034;0013988035;0013988036;0013988037;0013988038;
0013988039;0013988040;0013988041;0013988042;0013988043;0013988044;0013988045;
0013988046;0013988047;0013988048;0013988049;0013988050;0013988051;0013988052;
0013988053;0013988054;0013988055;0013988056;0013988057;0013988058;0013988059;
0013988060;0013988061;0013988062;0013988063;0013988064;0013988065;0013988066;
0013988067;0013988068;0013988069;0013988070;0013988071;0013988072;0013988073;
0013988074;0013988075;0013988076;0013988077;0013988078;0013988079;0013988080;
0013988081;0013988082;0013988083;0013988084;0013988085;0013988086;0013988087;
0013988088;0013988089;0013988090;0013988091;0013988092;0013988093;0013988094;
0013988095;0013988096;0013988097;0013988098;0013988099;0013988100;0013988101;
0013988102;0013988103;0013988104;0013988105;0013988106;0013988107;0013988108;
0013988109;0013988110;0013988111;0013988112;0013988113;0013988114;0013988115;
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 17
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MSLA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
SCHEDULE "A"
- -------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------- Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
0013988116; 0013988117; 0013988118; 0013988119; 0013998120; 0013998121;
0013988122; 0013988123; 0013988124; 0013988125; 0013998126; 0013988127;
0013988128; 0013988129; 0013988130; 0013988131; 0013988132; 0013988133;
0013988134; 0013988135; 0013988136; 0013988137; 0013988138; 0013988139;
0013988140; 0013988141; 0013988142; 0013988143; 0013988144; 0013988145;
0013988146; 0013988147; 0013988148; 0013988149; 0013988150; 0013988151;
0013988152; 0013988153; 0013988154; 0013988155; 0013988156; 0013988157;
0013988158; 0013988159; 0013988160; 0013988161; 0013988162; 0013988163;
0013988164; 0013988165; 0013988166; 0013988167; 0013988168; 0013988169;
0013988170; 0013988171; 0019388172; 0019388173
149 1505545 Office 97 SBE with Bookshelf 98 and Office 2000 Offer
102 7000828 EV700 17" Monitor with 15.9" Viewable
JORDY CARTER, INC.
Proposal #16777
108 Lockers-republic standard lockers w/louvers
(3 tier) 12x12x72 w/flat top Z bases/combination locks
w/master key/color: #52 canyon
13 458 - morgan club chair w/provincial walnut finish/
com: maharam lariate #001 camel loewenstein
10 OW-C2220MC - Occasional table/wood cylinder w/amber cherry
Finish
8 461 Carlyle club chair w/provincial walnut finish
com: maharam lariate #001, camel loewenstein
18 3636SWF Table top 36x36 w/waterfall Edge/Col;
formica 515-58 graphite grafix/edge: #5 black
edgemold
5 4200SWF Table top 42" Dia. W/waterfall edge/col;
formical 515/58 graphite grafix/edge: #5 black
edgemold
23 Standard prong base 30x30 3" column black
Wrinkle edgemold
72 096 Sail armless stack chair/7B purple shell/
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 18
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
SCHEDULE "A"
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------- Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
black frame Loewenstein
20 44100 bola side chair w/uph. Arm inserts/
altamont #101 fabric/Y34 plum glide & arm
insert/ black frame fixture furniture
10 641112 Trillium round swivel-tilt chair w/blk
base/#3608 seaspray fabrc Kimball
International
1 CT1-R120DBC Racetrack wood top 120x48 w/bourbon on
cherry Bullnose edge/ com: Wilson Art
#4673-60 Safron Tigris Kimball International
3 CB2016W Cylinder base w/bourbon on cherry finish
Kimball International
1 CQ38229-A Rectangular Table top 168x48 w/pvc edge MB
Midnight Black col: Wilson Art #4673-60 Safron
Tigris Kimball International
3 CB7-2M 2 Prong base/AMB black Kimball International
14 4.OTA2 Transit high back tilt lock conference chair
w/loop arms/mystery mist fabric sit on it
12 TT3072RGY Array training table 30x72 w/2 grommets/flat
PVC edge #462 cindr coIL Wilson Art #4673-60
Safron Tigris Kimball International
2 TT2460RGY Array training table top 24x60 w/grommets/PVC
edge #462 cinder col: Wilson Art #4673-60 Safron
Tigris Kimball International
28 TB2328TS Static base w/#462 cinder Kimball International
12 TMP609 Array Modesty panel/black Kimball International
12 TCML Cable manager for leg Kimball International
26 TCM29 Cable manager (undersurface) Kimball International
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 19
5419 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
SCHEDULE "A"
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
26 4.0TA7 Transit high back tilt lock
training chair w/adjustable
arms/mystery mist fabric sit
on it
28 44100 Bola guest chair w/arms/
altamont #101 fabric/black
frame/Y34 Plum arm inserts &
glides -- fixtures furniture
1 642212/3608 Trillium roun pneumatie/kneetilt
w/black base/ #3608 seapray
Kimball International
2 641112/3608 Trillium round swivel-tilt
mechanical conference
chair/black base/#3608 seaspray
Kemball International
Invoice #2032
13 458 Morgan club chair w/provincial
walnut finish/com: maharam
lamiate #001, camel
72 096 Sail armless stack chair/7B
purple shell/black frame
Invoice #1942
1 OW-C2220MC Occasional table/wood cylinder
w/amber cherry finish
18 3636SWF Table, top 36x36 w/waterfali
edge/col: formica 515-58
graphite grafix/edge: #5 black
5 4200SWF Table top 42' Dia w/waterfall
edge/col: formical 515-58
graphite grafix/edge: #5 black
20 44100 Bola side chair w/uph arm
inserts/altamont #101 fabric/
Y34 plum glide & arm insert/
black frame
10 641112 Trillium round swivel-tilt chair
w/blk base/#3608 seaspray
fabric
14 4.0TA2 Transit high back tilt lock
conference chair w/loop arms/
mystery mist fabric
26 4.0TA7 Transit high back tilt lock
training chair w/adjustable
arms/mystery mist fabric
28 44100 Bola guest chair w/arms/
altamont #101 fabric
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 20
5419 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
SCHEDULE "A"
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
black frame/Y34 plum arm
inserts & glides
1 642212/3608 Trillium round pneumatic!
kneetilt w/black base/#3608
seapray
2 641112/3608 Trillium round swivel-tilt/
mechanical conference chair/
black base/#3608 seaspray
1 OW-C222oMC Occasional table/wood cylinder
w/amber cherry finish.
Invoice #2158
108 Lockers Republic Standard Lockers
w/Louvers (3 tier) 12x12x72
w/flat top Z bases combination
locks w/master key/door
louvers/#52 canyon finish
8 461 Camlyle club chair w/provincial
walnut finish/com.rnaharam
lamiate #001, camel
1 CT! -R12ODBC Racetrack wood top I 20x48
w/bourbon on cherry, bullnose
edge/com: Wilson Art #4673-60
Safron Tigris
3 CB2-16W Cylinder Base w/Bourbon
on Cherry Finish
1 CQ38229-A Rectangular Table Top
168X48 w/PVC Edge MB #462 Cinr
Col: Wilson Art
Midnight Black Col: Wilson Art
#4673-60 Safron Tigris
3 CB7-2M 2 Prong Base/Amb Black
12 TT3O72RGY Arrary Training Table
30X72 w/2 Grommets/Ftam PVC Edge
#462 Cindr Col: Wilson Art
#4673-60 Safron Tigris
2 TT2460RGY Array Training Table
Top 24X60 w/Grommets/PVC Edge
#4673-60 Safron Tigris
28 TB2328TS Static Base w/#462 Cinder
12 TMP6O9 Array Modesty Panel/Black
12 TCML Cable Manager for Leg
26 TCM29 Cable Manager (undersurface)
Invoice 2260
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS,. REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 21
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
SCHEDULE "A"
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
5 WW1248 48" Standard Wall Panel
1 WW1244 44" Standard Wall Panel
2 WW1236 36" Standard Wall Panel
3 WW1224 24" Standard Wall Panel
1 WW1220 20" Standard Wall Panel
5 WW1218 18" Standard Wall Panel
3 WW1212 12" Standard Wall Panel
2 WW1208 8" Standard Wall Panel
1 WD1240 40" Single Door
1 WX0039 Primary Door Hardware
14 WJC22SP Custom Angle 2 Way Square
Invoice 2259
1 Call Center Stations All Center Core Pinwheel Stations, 4
Steelcase Stations & 1 Haworth Private office Workstation
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Prepayment Agreement
WHEREAS, Charter Financial, Inc. ("Charter"), as Secured Party and Intek
Information, Inc. as Debtor ("Debtor") are parties to certain Loan Schedule No.
01 to Master Loan and Security Agreement No. 4339 (the "Agreement"), dated
August 26, 1999 affecting the equipment (the "Equipment") described therein; and
WHEREAS, the parties hereto desire to confirm their understanding pursuant
to which the Debtor may prepay the Agreement on certain dates ("Prepayment
Dates") set forth below.
NOW, THEREFORE, the parties hereto agree as follows:
1. provided that the Debtor shall so request Charter in writing not less
than ninety (90) days prior to a Prepayment Date, and further provided that the
Debtor shall have paid all monthly payments due through and including the
applicable Prepayment Date in accordance with the terms and provisions of the
Agreement and shall then be in compliance with all the terms and provisions of
the Agreement and shall continue to comply with all the terms and provisions of
the Agreement thereafter until such Prepayment Date, Charter agrees to allow
Debtor to prepay the Agreement (in whole, but not in part) by paying to Charter
the appropriate prepayment amount as set forth below ("Prepayment Amount") in
good funds prior to the applicable Prepayment Date.
2. A Prepayment Date shall be any date which is one day after a date that a
regular monthly installment Is due under the Agreement, provided however that
there shall be no Prepayment Date prior to the date that the thirteenth (13th)
monthly installment is due and timely paid. The Prepayment Amount due on any
Prepayment Date shall be the then present value of all remaining payments under
the Agreement, computed using a discount rate of 5%.
3. All taxes attributable to the transaction herein contemplated including
any taxes on the Prepayment Amount, shall be borne exclusively by the Debtor.
4. Time is of the essence for the Debtor's making written request for
prepayment and for remitting the Prepayment Amount in the event Debtor timely
exercises its option to prepay hereunder.
5. Except as specifically permitted by this Prepayment Agreement, Debtor
shall have no right to prepay the Agreement.
6. This Prepayment Agreement shall constitute an indivisible part of the
Agreement and shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
Inteck Information, Inc. Charter Financial, Inc.
By: /s/ Timothy O'Crowley By: /s/ Signature
--------------------------- -------------------------
(Authorized Signature) (Authorized Signature)
Timothy O'Crowley
Title: President and Secretary Title: Vice President
------------------------ ----------------------
Dated: August 26, 1999 Dated: October 6, 1999
------------------------ ----------------------
<PAGE>
Loan Schedule No. 01 under
Master Loan and Security Agreement No. 4339
Pursuant to a Master Loan and Security Agreement No.4339 dated August 26, 1999
("Master Agreement") between Charter Financial, Inc. ("Secured Party") having a
place of business at 530 Fifth Avenue, 15th Floor, New York, New York 10036 and
Intek Information, Inc. ("Debtor") a Delaware corporation having a place of
business at 5619 DTC Parkway, 12th Floor, Englewood, CO 80111. Debtor hereby
promises to pay to the order of Secured Party the Loan Amount set forth in the
schedule of obligations below in installments in the amounts and at the times
specified below. This Loan Schedule incorporates the terms and conditions of the
Master Agreement and constitutes an Agreement as referred to in the Master
Agreement. Terms used herein which are defined in the Master Agreement shall
have the meanings as so defined.
The Equipment in which Debtor grants to Secured Party a security interest in
accordance with the provisions of the Master Agreement is set forth and
described in Schedule A annexed hereto and made a part hereof. Said Equipment
shall be located at 4500 Campbell Road, Fort Scott, Kansas 66701 at all times
until all payments hereunder have been paid in full.
- --------------------------------------------------------------------------------
SCHEDULE OF OBLIGATIONS
- --------------------------------------------------------------------------------
Loan Amount $2,513,130.43
Documentation Fees $ 3,500.00
Interest $ 436,689.57
Time Balance $2,953,320.00
Term of Loan Thirty (30) months
Number of Payments 30
Payments Payable Monthly - in advance
Amount of Each Payment $98,444.00
Debtor agrees to pay the Time Balance to Secured Party in monthly
installments as follows: (a) an advance payment in the amount of $98,444.00 due
and payable on or before execution of this Agreement followed by (b) twenty-nine
(29) additional monthly payments of $98,444.00 payable on the 5th day of each
month, commencing on 10/5/99 and continuing on the like date of each month
thereafter through and including 3/5/2002.
The Debtor agrees to all the provisions set forth above. This Agreement is
executed pursuant to due authorization. DEBTOR ACKNOWLEDGES RECEIPT OF A SIGNED
TRUE COPY OF THIS AGREEMENT.
Accepted on August 26, 1999 Date October 6,1999
-----------
Intek Information, Inc. Charter Financial, Inc.
(Signature of Proprietor or name of Corporation (Secured Party)
or Partnership)
By /s/ Timothy O'Crowley By: /s/ Signature
--------------------------- --------------------
Timothy O'Crowley
Its President and Secretary Its Vice President
-------------------------- --------------------
(Title of Officer) (If Corporation, President
or Vice President should
sign and give official
title: if Partnership,
state partner; if L.L.C.
state member or manager)
<PAGE>
INTERCREDITOR AGREEMENT
September 30, 1999
Silicon Valley Bank
3003 Tasman Drive
Santa Clara, California 95054
Re: Intek Information, Inc. ("Borrower")
------------------------------------
Gentlemen:
This will confirm our agreement as follows:
1. Bank Collateral. As used in this Agreement, "Bank Collateral" means all
of Borrower's present and future accounts, general intangibles, inventory,
equipment and other assets of every kind, including without limitation all
present and future property described on Exhibit "A" hereto (except for the
"Other Collateral" as defined below).
2. Other Collateral. As used in this Agreement, "Other Collateral" means
the property listed on Exhibit "B" hereto.
3. Subordination. All security interests now or hereafter acquired by the
undersigned (the "Other Lender") in the Other Collateral shall at all times be
prior and superior to any security interest or other interest or claim now held
or hereafter acquired by you (the "Bank") in the Other Collateral, all security
interests now or hereafter acquired by the Bank in any or all of the Bank
Collateral shall at all times be prior and superior to any security interest,
ownership interest, or other interest or claim now held or hereafter acquired by
the Other Lender in the Bank Collateral. Said priorities shall be applicable
irrespective of the time or order of attachment or perfection of any security
interest or the time or order of filing of any financing statements or other
documents, or any statutes, rules or law, or court decisions to the contrary.
("Collateral" as used in this Agreement shall mean the Bank Collateral or the
Other Collateral, as the case may be.)
4. Lenders' Rights. The Bank and the Other Lender each agree that the other
may at any time, and from time to time, without the consent of the other party
and without notice to the other party, renew, extend or increase any of the
indebtedness, liabilities on obligations owing to it from the Borrower (the
"Secured Obligations") or that of any other person at any time directly or
indirectly liable for the payment of any Secured Obligations, accept partial
payments of the Secured Obligations, settle, release (by operation of law or
otherwise), compound, compromise, collect or liquidate any of the Secured
Obligations, make loans on advances to the Borrower secured in whole or in part
by its Collateral or refrain from making any loans or advances to the Borrower,
change, alter or vary the interest charge on, or any other terms or provisions
of the Secured Obligations or any present or future instrument, document or
agreement with the Borrower, and take any other action or omit to take any other
action with respect to its Secured Obligations or its Collateral as it deems
necessary or advisable in its sole discretion. The Bank and the Other Lender
each waive any right to require the other to marshal any Collateral or other
assets in favor of it or against or in payment of any or all of its Secured
Obligations.
<PAGE>
5. Remedies. The Bank shall not collect, take possession of, foreclose
upon, or exercise any other rights, or remedies with respect to, the Other
Collateral, judicially or non-judicially, or attempt to do any of the foregoing,
without the prior written consent of the Other Lender, which shall be a matter
of the Other Lender's sole discretion. The Other Lender shall not collect, take
possession of, foreclose upon, or exercise any other rights or remedies with
respect to, the Bank Collateral, judicially or non-judicially, or attempt to do
any of the foregoing, without the prior written consent of the Bank, which shell
be a matter of the Bank's sole discretion.
6. No Commitment by Lenders. It is understood and agreed that this
Agreement shall in no way be construed as a commitment or agreement by the Bank
or the Other Lender to continue financing arrangements with the Borrower and
that the Bank and the Other Lender may terminate such arrangements at any time,
in accordance with their agreements with the Borrower.
7. General. The Other Lender and the Bank each agree, upon the request of
the other, to execute all such documents and instruments and take all such
actions as the other shall reasonably request in order to carry out the purposes
of this Agreement, including, without limitation appropriate amendments to
Financing Statements executed by the Borrower in favor of the Other Lender or
the Bank in order to refer to this Agreement (but this Agreement shall remain
fully effective notwithstanding any failure to execute any additional documents
or instruments. The Other Lender and the Bank each represent and warrant to the
other that it has not heretofore transferred or assigned any Financing Statement
naming the Borrower as debtor and it as secured party, This Agreement is solely
for the benefit of the Bank and the Other Lender and their successors and
assigns, and neither the Borrower nor any other person shall have any right,
benefit, priority or interest under, or because of the existence of, this
Agreement. This Agreement sets forth in full the terms of our agreement with
respect to the subject matter hereof, and may not be modified or amended, nor
may any rights hereunder be waived, except in a writing signed by the Bank and
the Other Lender. This Agreement shall be binding upon the Other Lender and the
Bank and their respective successors and assigns, and shall be construed in
accordance with, and governed by, the laws of the State of California.
Sincerely yours,
Charter Financial, Inc.
By /s/ Signature
-----------------------------
Title Vice President
------------------------
Accepted and Agreed:
Silicon Valley Bank
By /s/ Signature
-----------------------
Title Vice President
------------------
-2-
<PAGE>
BORROWER'S CONSENT AND AGREEMENT
The undersigned Borrower hereby approves of, agrees to and consents to all
of the terms and provisions of the foregoing Agreement and agrees to be bound
thereby and further agrees that any default or event of default by the Borrower
under any present or future instrument or agreement between the Borrower and the
Other Lender shall constitute an immediate default and event of default under
all present and future instruments and agreements between the Borrower and the
Bank and any default or event of default by the Borrower under any present or
future instrument or agreement between the Borrower and the Bank shall
constitute an immediate default and event of default under all present and
future instruments and agreements between the Borrower and the Other Lender. The
Borrower further agrees that, at any time and from time to time, the foregoing
Agreement may be altered, modified or amended by the Bank and the Other Lender
without notice to or the consent of the Borrower.
Intek Information, Inc.
By /s/ Signature
------------------------
Title Treasurer
-------------------
-3-
<PAGE>
EXHIBIT "A"
The following types or items of property:
All "accounts," "general intangibles," "chattel paper," "documents,"
"instruments," "deposit accounts," "inventory," "farm products," "fixtures' and
"equipment," as such terms are defined in Division 9 of the California Uniform
Commercial Code in effect on the date hereof, and all life and other insurance
policies and claims, and all rights in all litigation presently or hereafter
pending for any cause or claim (whether in contract, tort or otherwise), and all
judgments now or hereafter arising therefrom; the foregoing include, but are not
limited to, the following: all obligations for the payment of money arising out
of Borrower's sale or lease of goods or rendition of services; all moneys,
securities and other property, now or hereafter held or received by, or in
transit to, Secured Party from or for Borrower, whether for safekeeping, pledge,
custody. transmission, collection or otherwise; all of Borrower's deposits
(general or special), balances, sums and credits with, and all claims of
Borrower against, Secured Party, at any time existing; all right, title and
interest of Borrower, and all of Borrower's rights, remedies, security and
liens, in, to and in respect of all accounts and other collateral, including,
without limitation, rights of stoppage in transit, replevin, repossession and
reclamation and other rights and remedies of an unpaid vendor, lien or secured
party, and all guaranties and other contracts of suretyship with respect to any
accounts and other collateral, and all deposits and other security for any
accounts and other collateral, and all credit and other insurance; all other
general intangibles of every kind and description, including (without
limitation) trade names and trademarks and the goodwill of the business
symbolized thereby, federal, state and local tax refunds and claims of all
kinds, all rights as a licensor or licensee of any kind, all customer lists,
trade secrets, telephone numbers, processes, proprietary information, and
purchase orders, and all rights to purchase, lease, sell, or otherwise acquire
or deal with real or personal property (and all rights relating thereto); all
notes, drafts, letters of credit, contract rights, and things in action; all
drawings, specifications, blueprints and catalogs; and all raw materials, work
in process, materials used or consumed in Borrower's business, goods, finished
goods, returned goods and all other goods and inventory of whatsoever kind or
nature, all and all wrapping, packaging, advertising and shipping materials, and
all documents relating thereto, and all labels and other devices, names and
marks affixed or to be affixed thereto for purposes of selling or identifying
the same or the seller or manufacturer thereof; and all equipment, machinery,
machine tools, motors, controls, parts, vehicles, tools, dies, jigs, furniture,
furnishings and fixtures; and all attachments, accessories, accessions and
property now or hereafter affixed to or used in connection with any of the
foregoing, and all substitutions and replacements for any of the foregoing; and
all books, records, ledger cards, computer data and programs and other property
and general intangibles at any time evidencing or relating to any or all of the
foregoing; and all products and proceeds of any or all of the foregoing, in any
form (including, without limitation, any insurance proceeds, and all claims by
Borrower against third parties for loss or damage to, or destruction of, or
otherwise relating to, any or all of the foregoing).
-4-
<PAGE>
Debtor: Intek Information, Inc. Page 1
5419 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
EXHIBIT B
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
Aspect Telecommunications
Invoice 534932
1 3405 UTILITY SHELF -MDF
Invoice 534761
2 3192 ASPECT HANDS-FREE TELESET
40 3190 ASPECT TELESET
Invoice 533630
3 4028 T-1 DIG1TAL TRUNK INTFC CARD
Invoice 534725
2 3258 2,000,000 CALL RECORDS STORAGE
1 6025 AGENT ACCESS LICENSE 5D USERS
1 6498 CU REPORTWRITER 2.0 PLUS 2.0.1 PATCH
8 4072 STATION INTERFACE CARD
1 3011 MUSIC RECORDING ADAPTER
21 7002 OVER THE EAR HEADSET AND CONTROL UNIT SET
21 7000 MOMAURAL TOME SWITCH HEADSET & CONTROL
5 ASPECT SYSTEM MANGEMENT SUTIE 1.0.1
2 ASPECT ARCHITECT 1.0.1
1 6710 CUSTOMVIEW DIRECTOR SINGLE COPY
1 CUSTOMVIEW PRODUCER - FIRST COPY
1 6494 CV REPORTRUNNER 2.0 PLUS 2.0.1 PATCH
Invoice 534250
1 3061 RINGING VOLTAGE GENERATOR
3 4062 16-PORT TELESET INTERFACE CARD REL 7
3 T-1 DIGITAL TRUNK INTFC EXPN
Invoice 532641
1 9717V-VOUCHER INTRO TO APPL BRIDGE & CTE
1 971 6V-VOUCHER CUSTOM VIEW PRODUCER COURSE
1 971 2V-VOUCHER ADV CV REPORT WRITER REL 2
1 9709V VOUCHER CCT DESIGN & IMPLEMENTATION
1 9703V VOUCHER ADVANCE MANAGING ASPECT ACD
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 2
5419 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
EXHIBIT B
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
1 9702V VOUCHER BASIC MANGING THE ASPECT ACD
1 9710V VOUCHER INTRO TO CV REPORT WRITER-REL 2.
Invoice 533291-1
13 3124 LBOP/GRND START TRNK BYPASS CD
Invoice 532922
3 3028 ESF & CHAH SVCE UNIT (CSTU)
Haworth, Inc.
Proposal 32003
347 PNM-9 11-R STANDARD PLATFORM W/
PALMREST LOWER MOUSE AND FREEDOM
ARM, BLACK FINISH
Proposal 31814
326 PINWHEEL WORKSTATIONS
7 BFM-1-B BASE FEED MODULE, HARDWIRE
329 EFN-454-B STRAIGHT FABRIC PANEL
NO POWER 48" x 54"
332 EFP-254-B STRAIGHT FABRIC PANEL
POWER 24" x 54"
38 TFM-6-B TOP FEED MODULE 68" FOR
PANEL HEIGHT 64" & 68"
8 1NQ46870L5 SUPERVISOR WORKSURFACE
GRAPHITE SPEX LAMINATE, CHARCOAL TRIM
316 1NQ46870L4 SPECIAL POD WORKSURFACE
WITH GROMMET CUT,
GRAPHITE SPEX W/CHARCOAL TRIM 0H-023,
TR-K
56 PRD-3-B DUPLEX RECEPTACLES (BOX OF 6)
332 HWHP-000 I WORK SURFACE-HEIGHT
DUPLEX RECEPTACLE
332 WM-33 WIRE MANAGER 33"
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWN ED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 3
5419 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
EXHIBIT B
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
16 1318-1031 SCREWS FOR SPECIAL WORKSURFACE
16 1820-1005 WORK SURFACE CHANNEL
8 WSC-P WORK SURFACE SUPPORT BRACKET PAIR
16 HFSH-2912 WRK SRF END PNL-HALF
SUPPORT 12 INCHES
327 PCSS-3-B STRAIGHT SPAN POWER
CONNECTOR
6 DWST-430 D-TOP, VINYL EDGE, 48" x 30"
REQUIRES MOUNT KIT/SUPPORTCOL
6 HCC-0001 D-TOP SINGLE-LEG BASE,
ADJUSTABLE HEIGHT
26" -- 30"
6 FMK-l FLUSH MOUNT KIT
2 EFN-254-B STRAIGHT FABRIC PANEL
NO-POWER 24" x 54"
12 EFN-266.B STRAIGHT FABRIC PANEL
NO-POWER 24" x 66"
1 EFP-266-B STRAIGHT FABRIC PANEL
POWER 24" x 66"
2 EFN-3042-B STRAIGHT FABRIC PANEL
NO-POWER 30" x 42"
5 EPN-3054-B STRAIGHT FABRIC PANEL
NO-POWER 30" x 54"
5 EFN-3066-B STRAIGHT FABRIC PANEL
NO-POWER 30" x 66"
1 EFP-3066-B STRAIGHT FABRIC PANEL
NO-POWER 30 x 66
15 EFN-366-B STRAIGHT FABRIC PANEL
NO-POWER 36" x 66"
4 EFP-366-B STRAIGHT FABRIC PANEL
POWER 36" x 66"
1 EFN-354-B STRAIGHT FABRIC PANEL
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 4
5419 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
EXHIBIT B
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
NO-POWER 36" x 54"
2 EFN-4254.B STRAIGHT FABRIC PANEL
NO POWER 42" x 54".
3 EFN-466-B STRAIGHT FABRIC PANEL
NO-POWER 48" x 66"
9 EPN-566-B STRAIGHT FABRIC PANEL
NO-POWER 60" x 66" .
2 EGN-366-B STRAIGHT GLAZED PANEL
NO-POWER 36" x 66"
3 EGN-4266-B STRAIGHT GLAZED PANEL
NO-POWER 42" x 66"
10 FDRF-5 REG. FLIPER DOOR -
FABRIC 60"
3 FPFC-54-B 90 DEG. FABRIC FINISH
POST 54"
7 FPFC-66-B 90 DEG. FABRIC FINISH POST 66"
2 FPFS-66-B 180 DEG FABRIC FINISH POST 66"
8 FDRF-3 REG. FLIPPER DOOR
FABRIC 36"
2 FDRF-42 REG FLIPPER DOOR FABRIC 42"
10 HTB-6016 TACKBOARD 60" x 16"
2 HTB-4216 TACKBOARD 42" x 16"
8 HTB-3616 TACKBOARD 36" x 16"
8 HTL-0036-T TASK LIGHT 36"
2 HTL-0042 TASK LIGHT 42"
10 HTL-0060-T TASK LIGHT 60"
15 PDX-24-HLN FIXED PEDESTAL DRAWER 24"
15 PDX-24-JLN FIXED PEDESTAL DRAWER 24"
8 SR-3 REGULAR SHELF 36"
10 SR-S REGULAR SHELF 60"
2 SRS-42 REGUALR SHELF 42"
15 WMK-66 WALL MOUNT KIT 66"
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 5
5419 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
EXHIBIT B
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
15 WRCS-324 90 DEG. CORNER WORK SURFACE
W/O KEYBORAD PAD 36" X 24"
3 WS-324 REGULAR WORK SURFACE 36" x 24"
3 WS-424 REGLAR WORK SURFACE 48" x 24" .
15 WS-324 REGULAR WORK SURFACE 60" x 24"
S WS-5424 REGULAR WORK SURFACE 54" x 24"
4 WS-624 REGULAR WORK SURFACE
72" x 24"
1 SPCL-67 REGULAR WORK SURFACE
84" x 24"
2 WSSP-2429-L WORK SURFACE SUPPORT PANEL 24"
4 WSSP-2429-R WORK SURFACE SUPPORT PANEL 24"
27 WT-60 WALL TRACK 60"
71 M231-1741 MB H.E., PNEU, HA TASK ARMS HARD CASTERS
112 M231-1741 MB H.E., PNEU, HA TASK ARMS HARD CASTERS
112 M231-1741 MB H.E., PNEU, HA TASK ARMS HARD CASTERS
16 M231-1741 MB H.E.. PNEU, HA TASK ARMS HARD CASTERS
2 PMK- 1 PANEL MOUNT KIT
38 BFM-1-B BASE FEED MODULE, HARDWIRE
Proposal 31831
4 3110-GEST TALLY, GUEST CHAIR HAWORTH - HAM DISCOUNT 50%
2 A830-1641 MB SYNC. MECH, BHA, TARM W/VNYL, HARD CASTERS,
BACK LOCK HA WORTH HAS DISCOUNT 55%
3 A870-1V41 HB SYNC, MECH, HW ADJ ARM W/VNYLHARD CASTERS,
BACK LOCK HAWORTH - HAS DISCOUNT 55%
1 HTRT-3672-W RACE TRACK CONFERENCE TABLE 36" x 72"
HAWORTH - HAF DISCOUNT 55%
2 LHTL-0054 TASK LIGHT, 54" HAWORTH - HAL DISCOUNT 50%
OCKF-2272 CREDENZA, W/DOUBLE PEDESTAL 72" W x 22" D,
1 KNEESPACE HAWORTH -HAL DISCOUNT 50%
OCLQ-2272-R B CREDENZA, W/LATERAL STORAGE 72" W x 22"D
2 STORAGE SPACE HAWORTH - HAL DISCOUNT 50%
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OP WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREATFER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS,
<PAGE>
Debtor: Intek Information, Inc. Page 6
5419 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
EXHIBIT B
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
2 ODED-3672 DESK. D-TOP EXTENSION 72"W x 36"D HA WORTH -HAL
2 DISCOUNT 50%
OLBE-2236 BRIDGE, 36"W x 22"D HAWORTH - HAL dISCOUNT 50%
2 OLCU-2236 CPU CORNER UNIT, 36"W x 22"D HAWORTH HAL
DISCOUNT 50%
2 OVS4-4172 VSU, 4-DOOR CABINET 72"W x 4l"H x 15"D
HAWORTH - HALDISCOUNT 50%
Pear Commercial Interiors
Invoice 39923
40 M231-1741 MB H.E., PNEU, HA TASK ARMS
HARD CASTERS
Invoice 40186
347 PNM-911-R STANDARD PLATFORM W/PALM REST
LOWER MOUSE AND FREEDOM ARM, BLACK FINISH
Invoice 40662
4 31 10-GEST TALLY, GUEST CHAIR
2 A830-1641 MB SYNC, MECH, BHA, TARM W/VNYL .
HARD CASTERS, BACK LOCK
1 CUSTOM MERIT RACETRACK WOOD TABLE
TOP 36" x 72" SPL #-194850
2 698-003 STND FOUR ARM POWDER COATED BLK
BASE FOR TOP 36" x 72"
2 199-908 SINGLE TUBE FLUORESCENT TASK LIGHT
1 I 94-505 MERIT CREDENZA WITH TWO F/F PEDESTALS
72" x 21" x 29"
2 MERIT CREDENZA W/SINGLE F/F PEDESTAL RIGHT 72" x 21" x
29" 2 194-411 MERIT D TOP DESK FOR RIGHT HAND RETURN
72" x 30" x 29"
2 194-314 EXECUTIVE CORNER STAND 36"W x 36"W x 29"H
2 194-575 MERIT HIGH BACK ORGANIZER 71-1/2" x 15" x 43"
2 194-316RW MERIT EXECUTIVE BRIDGE 36"W x 2l"D SPECIAL
SIZE
Invoice 40659
162 PNM 911 R PLATFORM, PALM, LOWER MOUSE AND FREEDOM ARM
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATI0N, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 7
5419 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
EXHIBIT B
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
KEYBOARD
146 SPLB-2777 E--POD WING SURFACE W/GROMMETS
17 EC-10-B END CAP
175 EFN-454-B STRAIGHT FABRIC PANEL NO-POWER 48" x 54"
162 EFP-254-B STRAIGHT FABRIC PANEL POWER 24" x 54"
16 HPSH-2912 WRK SRP END PNL-HALF SUPPORT
12 INCHES
162 HWHP-0001 WORK SURFACE-HEIGHT DUPLEX
RECEPTACLE
135 PCSS-3-B STRAIGHT SPAN POWER CONNECTOR
27 PRD-3-B DUPLEX RECEPTACLES (BOX OF 6)
31 SPLA-2950 TOP FEED MODULE FOR PANEL
HEIGHT 54"
162 WM-33 WIRE MANAGER 33"
OnLine Connecting Point
Invoice 1015277-00
1 3C250C-TX24-4PK SSI HUB lOOTX 24-PRT 4-PK 3C
2 3C250C-TX24 SUPERSTACK II HUB lOOTX 24-POR
1 3C16671A SSII HUB 10 24-PRT TP 3 COM EN
4 3C219 SSII HUB 100 EXP CBL 3 COM ENT
3 002805-00 COURIER V. EVERYTHING V.90 INT
215 F5C55O SURGEMASTER 7 OUTLET STRIP
4 C4120A#ABA HP LASERJET 4000 N HEWLETT-PAC usqa008359
usqa008651
usqc012008
usqc012142
2 VSE-DRCT-NAS2-0 VIRUSSCAN SECURITY SUITE
I 3C16981 SSII SWTCH 3300 12-PRT 10/100
200 351-00222 MOLP-B WIN NT CAL 4.0 WIN N
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDiNG
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 8
5419 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
EXHIBIT B
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
Invoice 1015823-00
1 WIC-IT CISC0600/2600/3600 1-PORT
2 1202060L1 TSU LT LOW COST SINGLE
2 CAB-V35MT MALE DTE V.35 1OFT CABLE
Invoke 1015301-00
1 CISCO2SOL-CH Ethernet/dual serial router 250970407
1 MEM-lX8F Optional 8 MB Flash SIMM
1 CAB-V35MT V.35 Cable, DTE, Male 1 0 Fee
Invoice 1015303-00
1 CISCO25O 1-CR EtherTier/dual serial rou ter 250970411
1 MEM-lX8F Optional 8 MB Flash SIMM
1 CAB-AC Power Cord, 11OV
Invoice 1015296-00
3 3C16611-US SSII DUAL SPD HUB 500 24-PRT 3
Invoice 1015298-00
3 002806-00 COURIER V.EVERYTHTNG V.90 EXT
3 F2L088-06 IBM AT MDM ADPTR CABLE, 6DB9F/
1 4202086L3 ISU 512 ISDN INV MUX 512K S/T
85za7399
Invoice 1015613-00
1 4200023L5 Smart 16E SHELF AC W/CONTR 16S
1 1200077L1 TSU V.35 (RM) TI-FT I 910c2239
12 1202066L1 TI ESF CSU (SMART 16) FULL 906a3140
906s3146
906a3277
906a3319
906a3328
906a3331
906a3337
906a3383
906s3392
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF' WHATEVER DESCRIPTION OR
NATURE WHETHER NOW 0WNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LlMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 9
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA #4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
EXHIBIT B
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
<TABLE>
<CAPTION>
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
<S> <C> <C>
906a3414
906a3417
906a3426
1 1200048L3 Smart 16 Redundant AC P/S/ ADTR 849a26253
1 1200045L.1 Datamate Hand-held LCD 913c4668
Invoice 1015314-00
1 328970.001 Proliant 1850R 61450 64MB D917CFW11104
1 313614-B21 64MB SDRAM DIMM KIT (1X64
1 313615-B21 128MB SDRAM DIMM KIT(1X128
Invoice 1015314-00
1 227-00369 MOLP-B WiN NT SVR 4.0 RUNNI
1 295643-B21 SMART ARRAY 3200 COMPAQ ACCESS
8 400739-B21 18.20GB SCSI ULTRA-WIDE 1 IN
1 304100-B21 PROLIANT STORAGE SYSTEM Ul RA 8907BSN100700
2 DT3-STD-NT DOUBLE TAKE FOR WINDOWS NT. 3.
Invoice 1015304-00
2 MEM-IX8D CISCO 2500 8MB DRAM MEMORY
2 CD25-C-l1.3 CISCO 2500 IP FEATURE PACK
1 NM-lE2W CISCO 3600 1 ENET 2 WAN
Invoice 1015233-00
2 333100-001 Proliant 1850R PL1 400MHZ1OOMH d849bzq30346
d849bzq30357
2 3136l4-B21 64MB SDRAM DIMM KIT (1x64
6 313706-B219.1GB PLUGGABLE WIDE-UL-TRSCSI-
1 295513-B21 12/24-GB DDS-3 DAT DRV COMPAQ
1 165753-001 RACK 7142 42U (7FT) W/DOOR COM
1 165652-001 RACK SIDEWALL KIT FOR 42U RACK
1 169940-001 RACK BLANKING PANEL KIT 15U P
1 189907-001 RACK STABILIZING FEET FOR42U R
1 325900-001 V500 l5' MNTR 1024X768 85HZ 909bf26rc977
1 SU3000RMNET SMART-UPS 3000 VA RKMT BUND W/
2 388099-B21 SMART ARRAY 221 SINGLE CHANNEL
</TABLE>
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTiON OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 10
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
EXHIBIT B
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
2 227-00369 MOLP-B WIN NT SVR 4.0 RUNNI
1 NSE-DRCT-NAS2-0 NETSHIELD SECURITY SUITE
1 ARB6001G61CUA ARCSERVEIT 6.61 AD BD FO
2 ARB6013661AEA ARCSERVEIT WRKGRP/AD ED AGENT
1 EL-80DT 8PT 1X8 OUTLOOK CONSOLE KVM SW
1 EL-480DT 8PT 4X8 OUTLOOK CONSOLE KVM SW
1 2172-PC NETCOM3 72" UNIT
4 CZ-1232 12FT ZIP KVM CABLE SET HRES AP
1 EUROTECH-C EUROTECH 104-KEY KEYBOARD WIN9
ALEXANDER OPEN SYSTEMS, INC.
Invoice #6213
7 Yellow/Blue Stripe Cross Connect Cable
4 2 Pair White/Blue and White/ Org Cross
Connect Cable
Invoice #6214
1 24 Port Patch Panel
Invoice #6215
2 24"x5"' 18 gauge cable tray, 10' section
2 24" 18 gauge hinged cover, 5" sections
3 18" curved ladder rack section
16 Straight clamp assembly
2 Cable Fence
3 Rack junction plate
8 18" ladder rack, 10' sections
4 Wall angle assemblies, 18"
16 Threaded rod
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATlON, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 11
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
EXHIBIT B
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION 4500 Campbell Road
------------------ Fort Scott, KS 66701
QTY, DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
10 Shelf bracket
16 Open Clip
16 Ceiling hanger bracket
2 Corner clamp
Invoice #6216
48 25 pair to 12 RJ45 Octopus Cable
Invoice #6217
30 Patch Cables 10" CAT 5 Blue
416 Patch Cables 7' CAT 5 Blue
Invoice #6218
3 Female RJ45 to Male DB25
Invoice #6220
20 25' Patch Cords
Invoice #6221
9 Cross Connect
Invoice #6222
2 7' x 19" Relay Rack
Invoice #6223
1 Patch Panel 24 Port
Invoice #6224
30 25" Patch Cords
30 20' Silver Flat Ribbon Patch Cords
ASPECT TELECOMMUNICATIONS CORPORATION
Invoice #528245-2
1 6389 Remote Monitoring
1 6388 Idle with reason
1 6387 Sign-off with reason
2 3258 2,000,000 call records storage
1 6393 Aspect openmedia software
1 6030 Agentaccess license -- 250 users
2 6025 Agentaccess license -- 50 users
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS
<PAGE>
Debtor: Intek Information, Inc. Page 12
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
EXHIBIT B
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
----------- -------------
10 6019 Agentaccess license-- 1 user
1 1355 Aspect ACD Software-- 300R
1 3273 10 hour voice storage
1 6448 Aspect Amis analog networking
1 6390 Remote recording of announcements
2 3273 10 hour voice storage
1 6386 Qkeeper
1 6385 Intelligent interflow
1 6384 Data direct call routing
1 6383 Basic IVR
1 6380 Skill mapping
1 1351 Advanced ACD application suite-- 300R
1 6401 Application bridge access LIC
1 6412 Application INTF consult-- PC
1 6391 Voice Messaging
1 6382 Call back messaging
1 3990-NA NA English Language Prompts
1 6648 Aspect ACD Release 7.0.1
1 6648 Aspect ACD Release 7.0.1
18 4030 Primary rate interface (PRI)
18 3028 ESF & SF Chan svce unit (CSU)
1 3992 Openmedia Module
1 6440 Network interqueue w/tl spans
1 6431 ANI application SW package
1 3871 4-GB Disk Drive
2 4049 DTMF Receiver card
1 3890 Integrated applications module-- ACD
1 3871 4-GB Disk Drive
1 3871 4-GB Disk Drive
23 4062 1 6-port teleset interface card rel 7
1 3890 Integrated applications module-- ACD
1 6818 Aspect System management suite 1.0.1
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 13
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
EXHIBIT B
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
----------- -------------
1 6808 Aspect Architect 1.0.1
11 6710 Customview director-- single COPV
1 6411 Application bridge developer's license
1 6494 CV reportrunner 2.0 plus 2.0.2 patch
179 7000 Nomaural Tome Switch Headset & Control
53 3197 Standard Handset & Cradel
28 3192 Aspect Hands-Free Teleset
1 6818 Aspect System Management Suite 1.0.1
1 6808 Aspect Architect 1.0.1
1 6710 Customview director-- single copy
1 6700 Customview producer-- first copy
1 6498 CV Reportwrirer 2.0 plus 2.0.1 patch
179 7002 Over-the ear headset and control unit set
12 4028 T-1 Digital gunk INTFC Card
6 4082 Switching module controller card
3 3880 Switching module
2 4047 24 port voice card
1 3105 200 MHZ Pentium pro processor
2 3090 Security modem
1 3105 200 MHZ Pentium pro processor
12 4029 T-1 Digital trunk INTFC EXPN
1 3118 Trunk bypass assembly
1 3897 Cabinet cable kit
2 3895 System cabinet
1 3841 System monitor switcher
3 3452 AC Power cable sys power-TDI
1 3445 Frame 2 power connection-- TDI
1 3444 Redumdant power option (RPO)-- TDI
1 3443 48 VDC Power supply-TDI
2 3442 Cabinet power connection (30ft)-- TDI
1 4043 External music on hold interfc
12 4038 Loop/GRMD Start trunk I/F Card
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 14
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
MLSA # 4339.01
Secured Party: Charter Financial, Inc.
530 Fifth Avenue
New York, NY 10036
EXHIBIT B
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
4 3440 Battery backup assembly
2 3404 Main distribution frame-fixed
1 3403 Secondary CKT prorect-blk kit
1 3845 ACD regulatory kit
1 3840 ACD system kit
2 3560 110 punch down block
1 3850 ACD redundancy kit
1 3441 Frame 1 power connection -- TDI
330 3190 Aspect teleset
2 3124 Loop/Grd start trunk bypass CD
Invoice #533291-1
1 3124 Loop/Grad start trnk bypass
Invoice #53329l-2
10 3124 LOOP/GRND start trunk bypass CD
ETS INTERNATIONAL, INC.
1 CP-1010-00 CABCP 12000
1 CP-1030-00 BRD Cage CP12000 82770001A91
1 CP-1022-00 POWER Drawer CP8000/9600/12000
1 CP-1103-00 BRD MPU 81850234PAZ
1 CP-1032-00 BRD Network for CP12000 82770015PA1
8 CP-l50l-00 BRD Feed II T-1 81850001PA4
8 CP-1401-03 BRD Universal Interface T-1
1 CM-1035-01 SVR Proliant 3000 6/333
w/64mb Memory CD ROM 512K Cach
1 CM-1327-00 Mem 128mb 2 simm kit
1 CM-1326-00 MEM 64mb 2SIMM kit (66 MHz)
2 CM-1117-01 HD 9.1GB Hot Pluggable (10K)
1 CM-1620-00 CARD Controller Smart 2/DH
1 CM-1403-00 MON 15" Color VGA Compaq
1 CM-2412-01 HUB 12 Port Asante 10 Base T
1 CM-1711-00 CONNECTION Station CNS-1600
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 15
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
Secured Party: Charter Financial, Inc. MLSA # 4339.01
530 Fifth Avenue
New York, NY 10036
EXHIBIT B
- --------------------------------------------------------------------------------
EOUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
Corollary Lan-attached
1 OC-1407-00 CBL 10 Base-T #2737-05V RJ45-RJ4S 50'
1 CM-2007-00 MDM 56K Compaq Microco, 510
1 CM-2002.00 CBL Modem - AT DB25M to DB9FM
1 CM-2100-00 PNTR 80 Column Panasonic
1 CM-2102-00 CBL Printer Cable
72 CM-3010-00 Software, CALL MANAGER LICENSE
72 CM-3000-00 Answering Machine Detection
1 CM-3040-00 Dialing Rules
1 CM-2305-00 UPS 1400VA w/Powerchute
includes SW CM-2306-00
1 CM-2306-00 SW Powerchute for SCO Unix
1 CM-2238-00 DRV DAT 24Gb Conner Scorpion
STD624000N External
1 CM-2438-00 CBL SCSI Ito Fast SCSI 3
wide 6' with thumb screws
1 CM-2780-00 SW SCO Media Pack
1 CM-2772-00 SW SCO 0S5 5.0.2 150 User Lice
150 user lic./#AA260-E110-NS.0
1 CM-2770-01 SW SCO 0s5 5.0.2 25user lic
bump pak use with CM-2772-00
7 CM-3001-00 SUPERVISOR SOFTWARE LICENSE
5 MONITOR SOFTWARE LICENSE
1 CPS296 Ed Sves -- CPS
1 CPS210 Ed Sves -- CPS
1 CM-2417-0l COMPAQ Netelligent 10/100 Pci
Network Card
4 CP-1302-02 8RD Digital Station
DSCOO9 8l850236PA6 Rev. A
PROGRESSIVE TECHNOLOGIES
Invoice #S96151
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIE$, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 16
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
Secured Party: Charter Financial, Inc. MLSA # 4339.01
530 Fifth Avenue
New York, NY 10036
EXHIBIT B
- --------------------------------------------------------------------------------
EOUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
11 3100-ITO TT Desk
1 3100-lTD TT Desk PTI11108
4 3100-TrW Touch Tone Wall PTIIO900;PTI10901
PTI10909;PTII0908
2 11228X EX Soundstation w/MICS 12233299;12233295
3 11227X Soundstation No MICS 12226256;I2226257;
12225716
FUTURESOFT
Invoice #037045
1 20ISA507103 DCSB 7.1.03 DOM RC 50 PACK
GATEWAY COMPANIES, INC.
Invoice #43794926 1002520 001391240
1 1002520 0P6-366C PC
1 1505545 Office 97 SBE with bookshelf 98 and Office 2000
1 7001375 EV700 17" Monitor with 15.9" Viewing Area
Invoice #43760484
149 1002520 GP6-366C PC serial numbers: 1002520 0013988025;
0013988026; 0013988027; 0013988028; 0013988029; 0013988030; 0013988031;
0013988031; 0013988032; 0013988033; 0013988034; 0013988035; 0013988036;
0013988037; 0013988038; 0013988039; 0013988040; 0013988041; 0013988042;
0013988043; 0013988044; 0013988045; 0013988046; 00~3988047; 0013988048;
0013988049; 0013988050; 0013988051; 0013988052; 0013988053; 0013988054;
0013988055; 0013988056; 0013988057; 0013988058; 0013988059; 0013988060;
0013988061; 0013988062; 0013988063; 0013988064; 0013988065; 0013988066;
0013988067; 0013988068; 0013988069; 0013988070; 0013988071; 0013988072:
0013988073; 0013988074; 0013988075; 0013988076; 0013988077; 0013988078;
0013988079; 0013988080; 0013988081; 0013988082; 0013988083; 0013988084;
0013988085; 00l3988086; 0013988087; 0013988088; 0013988089; 0013988090;
0013988091; 0013988092; 0013988093; 0013988094; 0013988095; 0013988096;
0013988097; 0013988098; 0013988099; 0013988100; 0013988101; 0013988102;
0013988103; 0013988104; 0013988105; 0013988106; 0013988107; 0013988108;
0013988109; 0013988110; 0013988111; 0013988112; 0013988113; 0013988114;
0013988115;
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 17
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
Secured Party: Charter Financial, Inc. MLSA # 4339.01
530 Fifth Avenue
New York, NY 10036
EXHIBIT B
- --------------------------------------------------------------------------------
EOUIPMENT LOCATION: 4500 Campbelh Road
------------------ Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
0013988116; 0013988117; 0013988118; 0013988119; 0013988120; 0013988121;
0013988122; 0013988123; 0013988124; 0013988125; 0013988126; 0013988127;
0013988128; 0013988l29; 0013988130; 0013988131; 0013988132; 0013988133:
0013988134; 0013988135; 0013988136; 0013988137; 0013988138; 0013988139;
0013988140; 0013988141; 0013988142; 0013988143; 0013988144; 0013988145;
0013988146; 0013988147; 0013983148; 0013988149; 0013988150; 0013988151;
0013988152; 0013988153; 0013988154; 0013988155; 00l3988l56; 0013988157;
0013988158; 0013988159; 0013988160; 0013988161; 0013988162; 0013988163;
0013988164; 0013988165; 0013988166; 0013988167; 0013988168; 0013988169;
0013988170; 0013988171; 0013988172; 0013988173
149 1505545 Office 97 SBE with Bookshelf 98 and Office 2000 Offer
102 7000828 EV700 17" Monitor with 15.9" Viewable
JORDY CARTER, INC.
Proposal #16777
108 Lockers -- republic standard lockers w/louvers
(3 tier) 12x12x72 w/flat top Z bases/ combination locks
w/ master key/ color: #52 canyon
13 458 -- morgan club chair w/provincial walnut finish/
com: maharam lariate #001 camel loewenstein
10 OW-C2220MC -- Occasional table/ wood cylinder w/amber
cherry Finish
8 461 Carlyle club chair w/provincial walnut finish
com: maharam lariate #001, camel loewenstein
18 36365WF Table top 36x36 w/waterfall Edge/ Col:
formical 515-58 graphite grafix/edge: #5 black
edgemold
5 4200SWF Table top 42" Dia. W/ waterfall edge/ col:
formical 515-58 graphite grafix/edge: #5 black
edgemold
23 Standard prong base 30x30 3" column black
Wrinkle edgemold
72 096 Sail armless stack chair/7B purple shell/
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 18
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
Secured Party: Charter Financial, Inc. MLSA # 4339.01
530 Fifth Avenue
New York, NY 10036
EXHIBIT B
- --------------------------------------------------------------------------------
EOUIPMENT LOCATION: 4500 Campbelh Road
------------------ Fort Scott, KS 66701
<TABLE>
<CAPTION>
<S> <C> <C>
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
black frame Loewenstein
20 44100 bola siJe chair w/uph. Arm inserts/altamont
#101 fabric/Y34 plum glide & arm insert/
black frame fixture furniture
10 641112 Trillium round swivel-tilt chair w/blk base/#3608
seaspray fabrc Kimball International
1 CT1-Rl2ODBC Racetrack wood top 120x48 w/bourbon on cherry
Bullnose edge/ corn: Wilson Art #4673-60
Safron Tigris Kimball International
3 CB2O16W Cylinder base w/bourbon on cherry finish
Kimball International
1 CQ38229-A Rectangular Table top 163x48 w/pvc edge MB Midnight
black col: Wilson Art #4673-60 Safron Tigris
Kimball International
3 CB7-2M 2 Prong base/AMB black
Kimball International
14 4.0TA2 Transit high back tilt lock conference chair w/loop
arms / mystery mist fabric sit on it
12 TT3072RGY Array training table 30x72 w/ 2 grommets/ flat
PVC edge #462 cinder col Wilson Art #4673-60 Safron
Tigris Kimball International
2 TT2460RGY Array training table top 24x60 w/grommets/PVC edge
#462 cinder col: Wilson Art #4673-60 Safron Tigris
Kimball International
28 TB2328TS Static base w/#462 cinder
Kimball International
12 TMP609 Array Modest panel/black
Kimball International
12 TCML Cable manager for leg
Kimball International
26 TCM29 Cable manager (undersurface)
Kimball International
</TABLE>
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPARIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 19
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
Secured Party: Charter Financial, Inc. MLSA # 4339.01
530 Fifth Avenue
New York, NY 10036
EXHIBIT B
- --------------------------------------------------------------------------------
EOUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
<TABLE>
<CAPTION>
<S> <C> <C> <C>
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
26 4.OTA7 Transit high back tilt lock training chair
w/ adjustable arms / mystery mist fabric
sit on it
28 44l00 Bola guest chair w/ arms/ altarnont #101
fabric / black frame/ Y34 Plum arm inserts
& glides - fixtures furniture
l 642212/3608 Trillium roun pneumatic/kneetilt
w/black base/ #3608 seapray
Kimball International
2 641112/3608 Trillium round swivel-tilt mechanical
conference chair/black base/#3608 seaspray
Kemball International
lnvoice #2032
13 458 Morgan club chair w/provincial walnut finish/
corn: maharam lariate #001, camel
72 096 Sail armless stack chair/7B purple shell /black
frame
Invoice # 1942
1 OW-C2220MC Occasional table/ wood cylinder w/amnber cherry finish
18 3636SWF Table top 36x36 w/waterfall edge/col: formica 515-58
graphite grafix / edge: #5 black
5 4200SWF Table top 42' Dia w/waterfall edge/col:
formical 515-58 graphite grafix/edge: #5 black
20 44l00 Bola side chair w/ uph arm inserts/ altamont #101
fabric/ Y34 plum glide & arm insert/black frame
10 641112 Trillium round swivel-tilt chair w/ blk base / #3608
seaspray fabric
14 4.0TA2 Transit high back tilt lock conference
chair w/loop arms/ mystery mist fabric
26 4.OTA7 Transit high back tilt lock training chair w/
adjustable arms / mystery mist fabric
28 44l00 Bola guest chair w/ arms/ altarnont #101 fabric
</TABLE>
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 20
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
Secured Party: Charter Financial, Inc. MLSA # 4339.01
530 Fifth Avenue
New York, NY 10036
EXHIBIT B
- --------------------------------------------------------------------------------
EOUIPMENT LOCATION: 4500 Campbelh Road
------------------ Fort Scott, KS 66701
<TABLE>
<CAPTION>
<S> <C> <C>
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
black frame/ Y34 plum arm inserts & glides
1 6422l2/3608 Trillium round pneumatic/kneetilt w/black
base/ #3608 seapray
2 641112/3608 Trillium round swivel-tilt/ mechanical
conference chair/ black base/ #3608
seaspray
1 OW-C222oMC Occasional table / wood cylinder w/ amber
cherry finish.
Invoice #2158
108 Lockers Republic Standard Lockers w/Louvers (3 tier)
12x12x72 w/flat top Z bases combination
locks w/master key/door louvers/ #52 canyon
finish
8 46 Carlyle club chair w/provincial walnut finish/
com: maharam lariate #001, camel
1 CT!-R120DBC Racetrack wood top 120x48 w/bourbon on
cherry, bullnose edge/ corn: Wilson Art
#4673-60 Safron Tigris
3 CB2-16W Cylinder Base w/Bourbon on Cherry Finish
1 CQ38229-A Rectangular Table Top 168X48 w/PVC Edge MB
#462 Cinr Col: Wilson Art
Midnight Black Col: Wilson Art #4673-60 Safron Tigris
3 CB7-2M 2 Prong Base/Amb Black
12 TT3072RGY Arrary Training Table 30X72 w/2 Grommets/Ftat
PVC Edge #462 Cindr Col:Wilson Art #4673-60 Safron Tigris
2 TT2460RGY Array Training Table Top 24X60 w/Grommnets/PVC Edge
#4673-60 Safron Tigris
28 TB2328TS Static Base w/#462 Cinder
12 TMP609 Array Modesty Panel/Black
12 TCML Cable Manager for Leg
26 TCM29 Cable Manager(undersurface)
Invoice 2260
</TABLE>
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED QR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Debtor: Intek Information, Inc. Page 21
5619 DTC Parkway, 12th Floor
Englewood, CO 80111
Secured Party: Charter Financial, Inc. MLSA # 4339.01
530 Fifth Avenue
New York, NY 10036
EXHIBIT B
- --------------------------------------------------------------------------------
EOUIPMENT LOCATION: 4500 Campbell Road
------------------ Fort Scott, KS 66701
QTY. DESCRIPTION SERIAL NUMBER
- ---- ----------- -------------
5 WW1248 48" Standard Wall Panel
1 WW1244 44" Standard Wall Panel
2 WW1236 36" Standard Wall Panel
3 WW1224 24" Standard Wall Panel
1 WW1220 20" Standard Wall Panel
5 WW1218 18" Standard Wall Panel
3 WW1212 12" Standard Wall Panel
2 WW1208 8" Standard Wall Panel
1 WD1240'40" Single Door
1 WX0039 Primary Door Hardware
14 W1C22SP Custom Angle 2 Way Square
Invoice 2259
1 Call Center Stations All Center Core
Pinwheel Stations, 4 Steelcase
Stations & 1 Haworth Private office
Workstation
AND ALL ADDITIONS, ATTACHMENTS, ACCESSORIES, SUBSTITUTIONS, REPLACEMENTS,
REPAIRS, IMPROVEMENTS, BETTERMENTS AND APPURTENANCES OF WHATEVER DESCRIPTION OR
NATURE WHETHER NOW OWNED OR HEREAFTER ACQUIRED, AND ALL PROCEEDS, INCLUDING
WITHOUT LIMITATION, INSURANCE PROCEEDS.
<PAGE>
Exhibit 10.27.1
FORM
EMPLOYMENT AGREEMENT
(_____________________)
Exhibit 6.1.1
This EMPLOYMENT AGREEMENT is made as of October 30, 1999 by and between
Intek Information, Inc., a Delaware corporation (the "Company" or "Intek"),
Acorn Information Services, Inc., a Delaware corporation ("Acorn"), and
_________________, an individual residing in __________, _________ Connecticut
("Employee").
WHEREAS, concurrently herewith, the Company is purchasing all of the
capital stock of Acorn pursuant to that certain Share Purchase Agreement among
the Company, Acorn, the Employee and others of even date herewith (the "Share
Purchase Agreement"); and
WHEREAS, the Company desires to employ the Employee as an employee of the
Company and as ________________ of Acorn, and Employee desires to serve as an
employee of the Company and as ________________ of Acorn upon the following
terms and conditions and effective as of October 1, 1999 (the "Effective Date").
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants herein, the
parties agree as follows:
1. Employment. Upon the terms and subject to the conditions of this Agreement,
----------
the Company hereby employs and Acorn employs, and the Employee hereby
agrees to serve, as an employee of the Company and as ________________ of
Acorn.
2. Term. Subject to Section 5 hereof, the term of Employee's employment under
----
this Agreement shall be for a period of three (3) years commencing on the
Effective Date and terminating on the third anniversary thereof. This
Agreement shall automatically extend for successive one-month periods after
the initial three (3) year term unless terminated as provided herein. The
initial three (3) year period and any extensions are collectively referred
to herein as the "Term".
3. Compensation.
------------
A. Base Salary. The Company shall, commencing on the Effective Date and
-----------
during the Term, pay to the Employee, and the Employee agrees to
accept, a base salary of $________ per year, less applicable
withholding taxes, payable in accordance with the customary practices
of the Company, but not less than monthly, plus such salary increases
as approved by the Board of Directors of the Company. The annual base
salary, excluding all bonus payments, as in effect from time to time,
is referred to herein as the "Base Salary".
<PAGE>
B. Signing Bonus. On the date hereof, the Company shall pay Employee a
-------------
signing bonus (which shall be subject to withholding and other similar
taxes) of $________as described in Exhibit A.
C. Spider Stock. On the date hereof, the Company shall deliver to
------------
Employee three hundred eighty-eight thousand one hundred fifty-five
(388,155) shares of common stock of Spider Technologies, Inc., a
Delaware corporation ("Spider Stock"), which shall be subject to the
Stock Restriction Agreement attached hereto as Exhibit B. Employee
agrees to make a timely Section 83(b) election with the Internal
Revenue Service with respect to the Spider Stock, and a failure to do
so constitutes a material breach of this Agreement permitting the
Company to terminate this Agreement for "Cause".
D. Consideration. Employee agrees to accept the above amounts and the
-------------
benefits described in this Agreement in full payment for the services
to be rendered by him hereunder; provided, however, that the Company's
Board of Directors or its Compensation Committee and Employee will
meet no later than six (6) months after the Effective Date and again
on each anniversary of the Effective Date to discuss an increase in
Base Salary. There is no assurance any increase in Base Salary will
occur. In no event shall Base Salary decrease.
4. Duties.
------
A. Employee has been retained to occupy a position that constitutes part
of the professional, management and executive staff of the Company and
Acorn, whose duties will include the formulation and execution of
management policy.
B. The Employee shall during the Term:
(i) devote his full normal working time, energies and attention to
the duties of his employment as they may be established from time
to time by the Board of Directors of the Company and/or Acorn
consistent with the position and office occupied by Employee,
except that Employee may spend time managing Employee's personal,
financial and legal affairs and, upon the prior written consent
of the ________________ of the Company (which consent shall not
be unreasonably withheld), serving on corporate, civic or
charitable boards and committees, provided that such approval
shall be deemed to have been given if the ________________ of the
Company does not notify Employee that Employee may not so serve
within fifteen (15) business days of receipt of Employee's notice
of Employee's intent to serve on such boards or committees, and
further provided that in any event such time does not
unreasonably interfere with Employee's performance of his duties
hereunder;
(ii) comply with all reasonable rules, regulations and administrative
directions now or hereafter established by the Company;
2
<PAGE>
(iii) not engage in any activity or employment which materially
conflicts with or has a material adverse affect on, the present
or prospective business of the Company (including its
subsidiaries) and Employee's performance of his duties for the
Company or Acorn; and
(iv) notwithstanding the foregoing, if reasonably requested by the
Company, perform services for and/or be an officer of one or
more Intek subsidiaries, to the extent such duties are
consistent with Employee's executive position.
C. It is expressly understood and agreed that the Employee's continuing
with the same level of involvement to serve on any boards and
committees (i) on which he is serving or with which he is otherwise
associated on the Effective Date, and/or (ii) his service on any other
boards and committees of which he notifies the ________________ of the
Company and the Company gives prior written approval (which approval
will not be unreasonably withheld and shall be deemed to have been
given if the ________________ of the Company does not notify Employee
that Employee may not so serve within fifteen (15) business days of
receipt of Employee's notice), shall not be deemed to interfere with
the performance of the Employee's services to the Company.
D. Unless Employee consents otherwise in writing, which consent will not
be unreasonably withheld, the principal location for the performance
of his duties hereunder shall be at Acorn's offices in Shelton,
Connecticut.
5. Termination.
-----------
A. Mutual Agreement. Notwithstanding the provisions of Sections 1 and 2
----------------
hereof, this Agreement may be terminated at any time by the mutual
written agreement of the Company and Employee.
B. Termination of Employment Other Than by Employee. Notwithstanding the
------------------------------------------------
provisions of Sections 1 and 2 hereof, this Agreement may be
terminated prior to the expiration of the Term by the Company only
upon the occurrence of any of the following events:
(i) Death. Upon the death of the Employee.
-----
(ii) Disability. The inability of the Employee to perform his duties
----------
in any material respects on account of injury, illness or other
incapacity for the longest of (i) ninety (90) consecutive days,
or (ii) ninety (90) days in a three hundred sixty-five (365) day
period, or (iii) any longer period prescribed by any applicable
law, and the Board of Directors of the Company reasonably
determines that Employee has been unable to perform his duties
for such period as a result of injury, illness or other
incapacity ("Disability").
(iii) Cause. For "Cause", which shall be limited to:
-----
3
<PAGE>
(1) the Employee is convicted or indicted of a felony, or of a
criminal offense involving any act or acts of moral turpitude or
any crime other than a vehicle offense that materially impairs
the Company's business, goodwill or reputation;
(2) the Employee has committed any material act of dishonesty with
respect to the Company, or any of the Company's subsidiaries or
affiliates, that materially impairs the Company's business,
goodwill or reputation and that is not the result of an
inadvertent or innocent mistake;
(3) willful malfeasance or nonfeasance of duty by the Employee
hereunder that materially injures the reputation, business or
business relationships of the Company or any of its subsidiaries
or any of their respective officers, directors or employees;
(4) the Employee materially breaches any term of this Agreement and
such action or failure to act is not remedied or cured, or
reasonable steps to fully effect such remedy or cure are not
commenced, within twenty (20) days of Employee's receipt of
written notice from the Company of such material breach;
(5) willful or prolonged absence from work by the Employee (other
than by reason of Disability) or material failure, neglect or
refusal by the Employee to perform his duties and
responsibilities without the same being remedied or corrected
upon twenty (20) days prior written notice; or
(6) a failure to properly and timely make the Section 83(b) election
provided for above regarding the Spider Stock.
C. Without Cause. Notwithstanding the provisions of Sections 1 and 2 hereof,
-------------
the Company may terminate this Agreement at any time without Cause upon
thirty (30) days prior written notice to the Employee, in which case the
Company shall pay the Employee the amounts set forth in Section 5G(iv)
below.
D. Termination of Employment by Employee. Notwithstanding the provisions of
-------------------------------------
Sections 1 and 2 hereof, this Agreement may be terminated prior to the
expiration of the Term by the Employee as follows:
(i) General. The Employee may terminate his employment at any time on
-------
ninety (90) days written notice, provided, however, that the Company
-------- -------
may, in its sole discretion, elect to accelerate Employee's
termination under this Subsection by giving the Employee written
notice of its desire for the Employee to terminate his employment at
any time after thirty (30) days after receipt of Employee's notice of
termination hereunder.
4
<PAGE>
(ii) Hardship. The Employee may terminate his employment immediately and
--------
without prior notice due to a significant and long term family
medical emergency or similar hardship ("Hardship").
(iii) Good Reason. The Employee may terminate his employment at any time
-----------
for Good Reason by giving Notice of Termination pursuant to Section
5.D. within sixty (60) days after the Employee has actual notice of
the occurrence of any of the following events (each or collectively,
"Good Reason") (provided the Company and Acorn do not cure such
event, or commence reasonable steps to fully effect such a remedy or
cure, on a retroactive basis to the extent possible within twenty
(20) days following its receipt of the Employee's Notice of
Termination):
(1) The Employee's Base Salary, bonuses and/or other compensation are
reduced or not paid for any reason other than in connection with
the termination of his employment.
(2) The Company otherwise materially breaches, or is unable to
perform its obligations under this Agreement and such breach is
not remedied or cured, or reasonable steps to fully effect a
remedy or cure have not commenced, within twenty (20) days of the
Company's receipt of written notice from Employee of such
material breach.
(3) For any reason, other than in connection with the termination of
Employee's employment for Cause, the Company materially reduces
any benefit provided to the Employee below the level of such
benefit provided generally to other actively employed executives
of the Company of similar compensation and responsibility levels,
unless the Company agrees to fully compensate the Employee for
any such material reduction.
E. Notice of Termination. Any termination of the Employee's employment by the
---------------------
Company hereunder, or by the Employee other than termination upon the
Employee's death, shall be communicated by written Notice of Termination to
the other party. For purposes of this Agreement, a "Notice of Termination"
means a notice that shall indicate the specific termination provision
relied upon in this Agreement, and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Employee's employment under the specified provision or provisions.
F. Date of Termination. "Date of Termination" means:
-------------------
(i) If the Employee's employment is terminated by his death, the date of
his death.
(ii) If the Employee's employment is terminated by the Company as a result
of Disability pursuant to Section 5.B.(ii), the date that is thirty
(30) days after Notice of Termination is given.
5
<PAGE>
(iii) If the Employee terminates his employment for Good Reason pursuant to
Section 5.D(iii) the date that is twenty (20) days after Notice of
Termination is given (provided that the Company does not cure such
event during the twenty (20) day period).
(iv) If the parties terminate Employee's employment pursuant to Section
5(A) or if the Company terminates Employee's employment pursuant to
Section 5(C) or if Employee terminates his employment for Hardship
pursuant to Section 5(D)(ii), the date of Employee's last day of
work.
(v) If the Employee terminates his employment pursuant to Section
5(D)(i), the date that is ninety (90) days after Notice of
Termination is given, or such last day of employment as may be
specified by the Company in its notice to the Employee under Section
5(D)(i).
(vi) If the Employee's employment is terminated by the Company either for
Cause pursuant to Section 5(B)(iii), the date on which the Notice of
Termination is given.
G. Amounts Payable Upon Termination of Employment or During Disability.
-------------------------------------------------------------------
(i) Death. If the Employee's employment is terminated by his death, the
-----
Employee's beneficiary, as designated by the Employee in writing with
the Company prior to his death, shall be entitled to the following
payments and benefits (collectively, "Termination Payments"): (i) any
Base Salary that is accrued but unpaid, any bonus that is earned but
unpaid pursuant to the applicable terms and provisions of such bonus
plan, any vacation that is accrued but unused, and any business
expenses that are unreimbursed -- all, as of the Date of Termination;
and (ii) any benefit following the Date of Termination which may be
provided under the benefit plans, policies and programs described in
Section 7 in the amounts and for the time periods set forth in the
applicable terms and provisions of such plans. In the absence of a
beneficiary designation by the Employee, or, if the Employee's
designated beneficiary does not survive the Employee, or if required
by law, the Termination Payments shall be paid to the Employee's
estate.
(ii) Disability.
----------
During any period that the Employee fails to perform his duties
hereunder as a result of a Disability ("Disability Period"), the
Employee shall continue to receive his Base Salary at the rate then
in effect for such period until his employment is terminated pursuant
to Section 5(B)(ii) less any payments received pursuant to disability
policies or benefits (whether of the Company, Acorn or governmental);
and
Upon his termination of employment because of Disability, the
Employee shall be entitled to the Termination Payments as if the
Employee has died on his Date of
6
<PAGE>
Termination. In the event of the Employee's death prior to the time
that all Termination Payments have been paid, such payments and
benefits shall be paid to the Employee's beneficiary as designated
pursuant to Section 5(G)(i), or, in the absence of a beneficiary
designation or the designated beneficiary does not survive the
Employee, to the Employee's estate.
(iii) Hardship or Mutual Agreement. In the event the parties mutually
----------------------------
agree to terminate this Agreement or Employee terminates his
employment due to Hardship before the expiration of the Term,
including any extension thereof, the Employee shall be entitled to
the Termination Payments as if the Employee had died on his Date of
Termination.
(iv) Termination by Company Without Cause or Termination by Employee for
-------------------------------------------------------------------
Good Reason. In the event the Company terminates the Employee's
-----------
employment without Cause pursuant to Section 5(c) or the Employee
terminates his employment for Good Reason before the expiration of
the Term, including any extension thereof, the Employee shall be
entitled to the following payments and benefits:
(1) The Termination Payments as if the Employee had died on his Date
of Termination;
(2) Employee's Base Salary then in effect from and after the Date of
Termination through the earlier of (i) the expiration of the Term
-------
and (ii) the date twelve (12) months after the Date of
Termination (the "Initial Severance Period"), less all applicable
payroll deductions, including deductions for federal, state,
local and Social Security taxes (the "Initial Severance
Payments"). The Initial Severance Payments shall be paid in
accordance with the provisions of Section 3; and
(3) In Intek's sole discretion (based on factors such as, without
limitation, Employee diligently searching for future employment,
his reasonable cooperation with Intek during the Initial
Severance Period relating to activities Employee was actively
engaged in prior to the Date of Termination and Employee
refraining from any act or failure to act intended to materially
injure the reputation, business relationships or operations of
the Company), Employee's Base Salary then in effect from and
after the expiration of the Initial Severance Period through the
earlier of (i) the expiration of the Term, (ii) the date twelve
(12) months after the expiration of the Initial Severance Period,
and (iii) the date Employee commences other employment that, in
Employee's sole discretion, is suitable and comparable to his
employment with the Company (the "Extended Severance Period"),
less all applicable payroll deductions, including deductions for
federal, state, local and Social Security taxes (the "Extended
Severance Payments"). The Severance Payments shall be paid in
accordance with the provisions of Section 3.
7
<PAGE>
During the Initial Severance Period, payment of any life
insurance or other benefit of employment which may be provided
under the benefit plans, policies and programs described in
Section 7 will terminate on the Date of Termination (other than
COBRA at the Employee's expense).
During the Initial Severance Period and the Extended Severance
Period, the Company shall provide the Employee at the Company's
expense customary full executive level outplacement services with
a mutually acceptable outplacement firm for a period of up to
twelve (12) months after the Date of Termination to assist
Employee with his post-termination search for employment,
provided that in no event shall the Company be required to pay an
amount greater than fifteen percent (15%) of Employee's then
current Base Salary. In lieu of such outplacement services,
Employee may request equitable payment in cash or request that
the Company provide at its own expense for a period of up to
twelve (12) months (and in an amount that does not exceed the
amount that would have been payable by the Company under the
immediately preceding sentence) a mutually acceptable office,
together with secretarial assistance and customary office
facilities and services, for the purpose of facilitating
Employee's search for new employment. Employee acknowledges and
agrees that he will be responsible for the payment of all taxes
that are applicable in connection with the payments made by the
Company under this section.
In order to obtain payments pursuant to Subsections G(iv)(2) and
G(iv)(3) above, Employee shall submit a request for Severance Payments
identical to Exhibit C hereof following the last day of his
employment. The Company shall have no obligation to pay any such
payments unless and until the Employee shall have submitted such
request. The payments made hereunder, if any, shall be made on a
monthly basis at the time of the Company's regular payroll and shall
not be reduced by compensation the Employee may receive from other
sources.
(v) Termination by Employee Other Than for Good Reason, Hardship, Mutual
--------------------------------------------------------------------
Agreement or Termination by Company for Cause. In the event that the
---------------------------------------------
Employee voluntarily terminates his employment (other than for Good
Reason, Hardship or Mutual Agreement) or the Company terminates his
employment for Cause, the Employee shall not be entitled to any
compensation except as set forth below:
(1) Any Base Salary that is accrued but unpaid, any vacation that is
accrued but unused, any bonuses that are earned but unpaid
pursuant to the terms and provisions of such bonus plans, and any
business expenses that are unreimbursed -- all, as of the Date of
Termination; and
(2) Any other rights and benefits (if any) provided under plans and
programs of the Company (excluding any bonus program), determined
in accordance with the applicable terms and provisions of such
plans and programs.
8
<PAGE>
6. Expenses. The Company shall reimburse the Employee in accordance with the
--------
Company's regular procedures in effect from time to time (but at least
monthly) for all reasonable and necessary business expenses incurred by him
in the performance of his duties hereunder, provided that Employee shall
render to the Company such accounts and vouchers covering expenditures as
the Company reasonably requires or as are necessary for tax purposes, and
shall follow normal Company policy on expenses.
7. Vacation; Benefits. During the Term:
------------------
A. Employee shall be eligible to participate in the benefit plans made
generally available to employees of the Company having similar
responsibility and compensation levels as Employee to the extent not
duplicative of compensation or benefits provided expressly herein.
Employee expressly acknowledges that the Company may alter, modify,
suspend or terminate any such benefit plans at any time and for any
reason, or no reason.
B. Employee shall be entitled to four (4) weeks vacation time annually
with pay, the time of which shall be determined in Employee's
discretion and shall not unreasonably interfere with Employee's
performance of his duties hereunder; and
C. Employee will receive an automobile allowance of $________ per month
and automobile insurance so long as premium levels are in accordance
with standard rates for safe drivers.
8. Non-Competition.
---------------
A. The Company, Acorn and the Employee recognize that the Employee has
been retained to occupy a position that constitutes part of the
professional, management, and executive staff of the Company and
Acorn, whose duties will include the formulation and execution of
management policy. The Employee, for and in consideration of the
payments, rights and benefits provided herein, agrees that during the
Non-Compete Period (defined below), the Employee shall not compete
directly or materially with a Subject Company in the business of (i)
inbound or outbound telemarketing or teleservicing; (ii) outsourced
teleservicing; (iii) customer direct e-servicing business, which
includes, without limitation, the design, development, marketing and
sale of business tools (including business rules and processes) and
computer software that assists businesses and other organizations in
selling products directly to consumers on the Internet, or (iv) "data
mining" by which demographic data is either gathered or analyzed in
order to direct or improve marketing or customer service activities
(collectively the "Business"), during the Non-Compete Period. For
purposes of this Section, the "Non-Compete Period" shall begin on the
Closing Date (as defined in the Purchase Agreement) and end either:
(i) if the Date of Termination is before the EBITDA Threshold (as
defined in the Purchase Agreement) is achieved, the longer of one (1)
year after the Date of Termination or three (3) years after the
Closing Date; or (ii) if the Date of Termination is after the EBITDA
Threshold is achieved, one (1) year after the Date of Termination. The
parties agree that they shall not during such period make public
statements in derogation of each other,
9
<PAGE>
except as may be required by law. For the purposes of this Section,
the term "Subject Company" shall mean Intek and any direct or indirect
subsidiaries, parents and affiliates of Intek including Acorn.
Competing directly or materially with the Subject Company shall mean
(a) either (i) engaging or (ii) having a material interest (any
ownership or profit interest over 5% always being material), directly
or indirectly, as owner, employee, officer, director, partner,
venturer, shareholder, capital investor, consultant, agent, principal,
advisor or otherwise, either alone or in association with others, in
the operation of any individual or entity engaged in (b) the Business
within Canada or the continental United States, including the
California counties which would appear here if each county in
California was listed here. Competing directly or materially with the
Subject Company, as used in this Agreement, shall be deemed not to
include an ownership interest as an inactive investor, which for
purposes of this Section shall mean the beneficial ownership of less
than five percent (5%) of the outstanding shares of any series or
class of securities of any competitor of the Subject Company, which
shares are publicly traded in the securities markets. The Key
Shareholders agree that the Business is inherently nationwide in
scope.
B. Notwithstanding the foregoing, Employee shall have no obligation under
this Section 8 after termination if (i) both (1) (A) the Employee has
terminated this Agreement for Good Reason or the Company has
terminated this Agreement without Cause, and (B) the Company has
obligations to make post-termination continued Base Salary payments
under this Agreement, and (2) after twenty (20) days notice by the
Employee to the Company that the Company has failed to make such post-
termination payments, the Company has not cured such failure to make
payments; or (ii) if the Intek ________________ consents, which
consent shall not be unreasonably withheld, to Employee's employment
or performance of services for a business that does not directly
compete with Intek.
C. Upon the termination of the Employee's employment with the Company,
and for one year thereafter, upon written request of the Company, the
Employee shall promptly provide the Company a Certificate of
Compliance with this Section 8, which Certificate shall include
information regarding Employee's employment or agency relationships
with third parties engaged in a business which is directly or
materially in competition with the Business to the extent not
prohibited by confidentiality agreements with third parties. The
Company agrees to keep confidential and not to use or disclose any
information that Employee provides regarding Employee's employment or
agency relationships with third parties.
D. The Employee agrees that the restrictions contained in this Section 8
are reasonable as to time and geographic scope because of the nature
of the Business and the Employee agrees, in particular, that the
geographic scope of this restriction is reasonable because companies
engaged in the Business compete on a nationwide basis. The Employee
acknowledges that the Company is in direct competition with all other
companies engaged in the Business throughout the continental United
States, Canada, and other markets in which the Company may be
conducting business at the time the Employee's
10
<PAGE>
employment with the Company is terminated, and because of the nature
of the Business, the Employee agrees that the covenants contained in
this Section 8 cannot reasonably be limited to any smaller geographic
area.
E. The provisions of this Section 8 shall survive termination of this
Agreement for any reason.
9. Non-Raid.
--------
A. The Employee acknowledges that the Company has invested substantial
time and effort in assembling its present staff of personnel.
Accordingly, Employee covenants and agrees that during the term of the
Non-Compete Period, he will not (i) solicit or hire any of the
employees of a Subject Company who were employed by a Subject Company
at or within one month before or during the Employee's employment by a
Subject Company, (ii) interfere with the relationship of the Subject
Company with any such employees, or (iii) personally target or
solicit, or assist another to target or solicit, customers of the
Subject Company for activities related to the Business or influence,
or attempt to influence any of the customers of the Subject Company
not to do business with the Company.
B. Notwithstanding the foregoing, Employee shall have no obligation under
this Section 9 after termination if both (i) (A) the Employee has
terminated this Agreement for Good Reason or the Company has
terminated this Agreement without Cause, and (B) the Company has
obligations to make post-termination continued Base Salary payments
under this Agreement, and (ii) after twenty (20) days notice by the
Employee to the Company that the Company has failed to make such post-
termination payments, the Company has not cured such failure to make
payments.
C. The Employee agrees that the restrictions contained in this Section 9
are reasonable as to time and geographic scope because of the nature
of the Business and the Employee agrees, in particular, that the
geographic scope of this restriction is reasonable because companies
engaged in the Business compete on a nationwide basis. The Employee
acknowledges that the Company is in direct competition with all other
companies engaged in the Business throughout the continental United
States, Canada, and other markets in which the Company may be
conducting business at the time the Employee's employment with the
Company is terminated, and because of the nature of the Business, the
Employee agrees that the covenants contained in this Section 9 cannot
reasonably be limited to any smaller geographic area.
10. Blue Pencil Provision. Employee acknowledges that the scope, periods and
---------------------
geographic area of restriction imposed by Section 8 and Section 9 are fair
and reasonable and are reasonably required for the protection of the
Company. If any part or parts of Section 8 or Section 9 shall be held to be
unenforceable or invalid, the remaining parts thereof shall nevertheless
continue to be valid and enforceable as though the invalid portion or
portions were not a part hereof. If any of the provisions of Section 8 and
Section 9 relating to the scope, periods or
11
<PAGE>
geographic area of restriction shall be deemed to exceed the maximum scope,
periods of time or area which a court of competent jurisdiction would deem
enforceable, the scope, times and area shall, for the purposes of Section 8
and Section 9, be deemed to be the maximum scope, time periods and area
which a court of competent jurisdiction would deem valid and enforceable in
any state in which such court of competent jurisdiction shall be convened.
The invalidity or unenforceability of any provision hereof in one
jurisdiction shall not affect its validity or enforceability in another
jurisdiction.
11. Confidentiality. Employee acknowledges that Employee may have access to
---------------
certain information related to the business, operations, future plans and
customers of the Company, the disclosure or use of which could cause the
Company substantial losses and damages. Accordingly, Employee covenants
that during the term of Employee's employment with the Company and
thereafter Employee will keep confidential all such information and
documents furnished to Employee by or on behalf of the Company and not use
the same to Employee's advantage, except to the extent such information or
documents are lawfully obtained from other sources on a non-confidential
(as to the Company) basis or are in the public domain through no fault on
Employee's part or is consented to in writing by the Company or are
disclosed to the extent required by a court, administrative agency,
government body, or applicable law, rule or regulation. Upon termination of
Employee's employment, Employee shall return to the Company all records,
lists, files, disks, documents, media and other Company property which are
in Employee's possession and which relate to the Company or its business.
12. Right to Injunctive Relief. Employee agrees and acknowledges that a
--------------------------
violation of the covenants contained in Sections 8, 9, or 11 of this
Agreement will cause irreparable damage to the Company, and that it may be
impossible to estimate or determine the damage that will be suffered by the
Company in the event of a breach by Employee of any such covenant.
Therefore, Employee further agrees that in the event of any violation or
immediately threatened violation of such covenants, the Company shall be
entitled as a matter of course to seek an injunction from any court of
competent jurisdiction restraining such violation or threatened violation
by Employee, such right to an injunction to be cumulative and in addition
to whatever other remedies the Company may have.
13. Indemnification; Insurance. The Company shall provide for the coverage of
---------------------------
Employee under the Company's standard directors' and officers' insurance
policy to protect Employee against any expense, liability or loss by reason
of the fact that Employee is or was a director or officer of the Company,
to the fullest extent permitted by applicable law and the terms and
conditions of such policy.
14. Integration; Forum. This Agreement together with the Stock Restriction
------------------
Agreement and the Share Purchase Agreement shall constitute the entire
agreement between the parties. This Agreement shall be governed by the laws
of Colorado, excluding laws on choice of law. This Agreement specifically
supersedes any employment arrangements, or other compensation arrangement
(including bonus, option, appreciation, benefit or commission arrangements)
with Acorn. Any litigation regarding this Agreement shall only be brought
and heard in the
12
<PAGE>
federal or state courts located in Chicago, Illinois, which courts shall
apply the laws of the State of Colorado, excluding laws on choice of law,
and no transfer of venue outside such area shall be permitted. If the
Company is enforcing any provision hereof which is similar to a provision
in the Share Purchase Agreement (including, but not limited to, non-
compete, confidentiality and no-hire provisions) and Employee was a party
to such Share Purchase Agreement, the Company may require the resolution of
such issues to be decided in the arbitration or litigation conducted under
such Share Purchase Agreement. Termination of this Agreement or any
provision hereof, including Sections 8, 9, or 11, shall not affect any
similar provision in the Share Purchase Agreement, including any non-
compete covenant; provided, however, that the provisions of Sections 8 and
-------- -------
9 hereof relating to the time periods for the effectiveness of the
agreements addressed in such sections, shall control over a longer time
period in the corresponding provision of the Share Purchase Agreement. In
all other respects the agreements in the Share Purchase Agreement
(including, but not limited to, non-compete, confidentiality and no-hire
provisions) are separate and independent of this Agreement.
15. Unenforceability. If any paragraph or subparagraph of this Agreement or any
----------------
part thereof shall be unenforceable under any applicable laws,
notwithstanding such unenforceability the remainder of this Agreement shall
remain in full force and effect.
16. Attorneys' Fees; Costs. In the event of any legal or arbitration action or
----------------------
proceeding to enforce or interpret the provisions hereof, the prevailing
party shall be entitled to reasonable attorneys' fees and costs, and other
costs and expenses incurred in the action or proceeding, whether or not the
proceeding results in a final judgment. All costs and expenses, including
without limitation attorneys' fees and costs, incurred in connection with
the negotiation, preparation, execution, delivery and enforcement of this
Agreement and consummation of the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses.
17. Survival. Terms which by their terms or sense are to survive termination
--------
hereof (including Sections 5, 8, 9, 11 and 12) shall so survive.
18. Notice. Any notice, direction or instruction required or permitted to be
------
given hereunder shall be given in writing and may be given by facsimile
transmission or similar method if confirmed by mail as herein provided; by
mail if sent postage prepaid by registered mail, return receipt requested;
or by hand delivery to any party at the address of the party set forth
below. If notice, direction or instruction is given by facsimile
transmission or similar method or by hand delivery, it shall be deemed to
have been given or made on the day on which it was given, and if mailed,
shall be deemed to have been given or made on the third business day
following the day after which it was mailed. Any party may, from time to
time, by like notice give notice of any change of address and in such
event, the address of such party shall be deemed to be changed accordingly.
If to the Company: Intek Information Inc.
5619 DTC Parkway, 12/th/ Floor
13
<PAGE>
Englewood, CO 80111
Attn: Timothy C. O'Crowley
Telephone: (303) 357-3000
Facsimile: (303) 323-4213
Copy to: Chrisman, Bynum & Johnson, P.C.
1900 15th Street
Boulder, CO 80302
Attn: G. James Williams, Jr.
Telephone: (303) 546-1300
Facsimile: (303) 449-5426
If to the Employee: _____________________________
PERSONAL AND CONFIDENTIAL
c/o Acorn Information Services, Inc.
4 Corporate Drive
Shelton, CT 06484
Telephone: (800) 279-3889
Facsimile: (203) 225-7610
Copy to: Wiggin & Dana
Three Stamford Plaza
301 Tresser Blvd.
Attn: William A. Perrone
Telephone: (203) 363-7604
Facsimile: (203) 363-7676
19. Inventions. Employee hereby agrees to assigns, and hereby assigns, to the
----------
Company all of Employee's interest (including copyrights and patent rights)
in any ideas, concepts, know-how, inventions, discoveries, works of
authorship, and the like ("Inventions"), which are conceived or made by
Employee during the term of Employee's employment with the Company or his
previous employment by Acorn, and which are or were developed on Company
time or with Company facilities, whether or not related to the Business.
Further, even if not developed on Company time or with Company facilities,
any Invention (conceived by or made by Employee during the term of
employment with the Company) is hereby assigned if it relates to or is
suggested by the Business. Employee also agrees that, independent of any
assignment, Employee's work is a work for hire and the Company owns all
right, title and interest in all Inventions, and all copyrights, patent
rights, and the like, concerning the Inventions. Employee will, from time
to time, execute such confidentiality and invention assignment agreements
as are generally signed by similarly situated Company employees.
20. Amendments; Waivers. This Agreement cannot be changed, modified or amended,
-------------------
and no provision or requirement hereof may be waived, without consent in
writing of the parties hereto.
14
<PAGE>
21. Counterparts. This Agreement may be executed in two or more counterparts,
------------
each of which shall be deemed to be an original. It shall not be necessary
when making proof of this Agreement to account for more than one
counterpart.
22. Acorn as Substitute for Intek; Joint and Several Liability. Acorn and
----------------------------------------------------------
Intek acknowledge and agree that they are jointly and severally liable for
their duties under this Agreement. Throughout this Agreement references are
made to the Company performing certain acts. The Company may cause Acorn to
perform (in whole or in part) any act to be performed by the Company
hereunder; provided, however, that no such assignment or delegation of
duties shall relieve Acorn or Intek of their joint and several liability
hereunder.
[Signature page follows.]
15
<PAGE>
IN WITNESS WHEREOF, the parties have executed this EMPLOYMENT AGREEMENT as of
the date first above written.
INTEK INFORMATION, INC. ACORN INFORMATION SERVICES, INC.
By: __________________________ By:__________________________________
Timothy O'Crowley Title: ______________________________
___________________
EMPLOYEE
__________________________________
EXHIBIT A
---------
In the event Acorn achieves Sustained Profitability by August 31, 1999, the
Company will pay Employee $________, less applicable taxes and withholding. The
bonus will be paid within thirty (30) days of Closing. "Sustained
Profitability" has the meaning set forth in the Share Purchase Agreement.
The Company's obligation to pay such signing bonus shall immediately expire in
the event Employee's employment is terminated for any reason set forth in the
attached Employment Agreement prior to the date such bonus is payable by
Company.
16
<PAGE>
EXHIBIT B
---------
Stock Restriction Agreement
17
<PAGE>
EXHIBIT C
---------
Request for Post-Employment Allowance
This request for severance allowance is made by _________________ (hereinafter
"the Employee") pursuant to the provisions of the Employment Agreement (the
"Agreement") between the Employee on the one hand, and Intek Information, Inc.
and Acorn Information Services, Inc. on the other (hereinafter collectively "the
Company").
1. In consideration of the execution of this request for post-employment
allowance, the Company agrees to pay me the amounts and provide me with the
benefits as set forth in Subsections G(iv)(2) and (3) of the Agreement.
2. In return for these payments and benefits, I fully and finally release, waive
and discharge all charges, claims and causes of action of any sort known to me
that I may have against any person (including the Company, its directors,
officers, employees, agents and owners), including but not limited to, claims
arising from or related to my employment or termination of my employment, any
age, race, any unlawful employment practices of any kind, or otherwise, whether
such claims arise under federal, state, local, common, contract (including, but
not limited to, the Agreement), tort or other laws or regulations, specifically
including Title VII of the Civil Rights Act of 1964 as amended by the Equal
Employment Opportunity Act of 1972 and the Age Discrimination in Employment Act,
42 U.S.C. Section 1981.
3. I represent and warrant that I have returned all property of the Company in
my possession, including but not limited to, documents, manuals, pertinent
business contacts (names and addresses), shareholder lists, software, computers
and computer disks, notes, keys, cellular phone, and other articles or equipment
I used in the course of my employment that were provided to me by the Company.
4. It is understood that the Company does not admit the existence or validity of
any such claims or any liability of any sort nor has the Company made any
agreement or promise to do or omit to do any act or thing not herein set forth.
5. I agree that I will not disclose this document or its terms or provisions
without first obtaining the written consent of the Company except to the extent
such information is lawfully obtained from other sources on a non-confidential
(as to the Company) basis or are in the public domain through no fault on
Employee's part, and except to my accountants, attorneys and immediate family
members.
6. I understand that this Request shall be governed by Colorado law.
7. I have read and completely understand this request and recognize that it
constitutes a general release and waiver of all claims, and I agree that this is
an acceptable compromise of any such
18
<PAGE>
claims described in this request and knowingly and voluntarily intend to be
bound by these provisions without any further promises or consideration by the
Company.
____________________________________ Date __________________
19
<PAGE>
EXHIBIT TO FORM OF EMPLOYMENT AGREEMENT
EMPLOYEE STOCK RESTRICTION AGREEMENT
This EMPLOYEE STOCK RESTRICTION AGREEMENT (the "Agreement") is made as of
the 4th day of November, 1999, by and between INTEK INFORMATION, INC., a
Delaware corporation (the "Company"), and ________________________ ("Employee").
RECITALS
--------
WHEREAS, the Company, Acorn Information Services, Inc., a Delaware
corporation ("Acorn"), Employee, a former shareholder and an employee of Acorn,
and certain other shareholders of Acorn (the "Acorn Shareholders") have entered
into a Share Purchase Agreement dated as of the date hereof (the "Purchase
Agreement") for the purchase by the Company of all of the outstanding capital
stock of Acorn from the Acorn Shareholders. All capitalized terms used, but not
otherwise defined, herein shall have the meaning ascribed to them in the
Purchase Agreement.
WHEREAS, Employee and the Company have entered into an Employment Agreement
of even date herewith (the "Employment Agreement") pursuant to which Employee is
entitled to receive [________________] shares of common stock of Spider
Technologies, Inc., a Delaware corporation and previously wholly owned
subsidiary of the Company ("Spider"), subject to the terms and conditions of
this Agreement.
WHEREAS, the [________________] shares of common stock of Spider, par
value $0.0001 per share, Employee is entitled to receive under the Employment
Agreement (the "Employee Shares") are subject to the restrictions contained in
this Agreement.
WHEREAS, in consideration of the Employment Agreement and the execution by
certain other employees of the Company and Acorn of similar agreements pursuant
to the Purchase Agreement, Employee desires to participate in the stock
restriction plan which this Agreement embodies.
NOW, THEREFORE, the parties agree as follows:
1. Delivery of Spider Common Stock. Employee and the Company agree that
-------------------------------
in consideration for services rendered and to be rendered by Employee to Acorn,
the Company has delivered to Employee [________________] shares of Spider
common stock subject to the terms and conditions of this Agreement. If the spin
off transaction between Intek and Spider (the "Spider Spin Off") closes on or
before the Closing Date (as defined in the Purchase Agreement) or at the
Company's election even if the Spider Spin Off has not occurred, the Company
shall exercise its warrant to purchase shares of Spider common stock and, upon
receipt of certificates evidencing such shares, shall deliver a
1
<PAGE>
duly endorsed certificate to Employee representing [___________] shares of
Spider common stock free and clear of any liens, charges, claims or encumbrances
of any kind (other than this Agreement, the Spider Shareholders Agreement and
the Purchase Agreement) as compensation for certain services rendered and to be
rendered by Employee to Acorn. If the Spider Spin Off does not close on or
before the Closing Date, and the Company does not elect to deliver the Spider
common stock, the Company shall deliver to Employee a warrant entitling Employee
to receive [___________] shares of Spider common stock (subject to the same risk
of forfeiture as the Employee Shares as provided below) upon the closing of the
Spider Spin Off or 25 days after the date hereof, whichever is earlier;
provided, however, that in the event the Spider Spin Off is terminated prior to
- -------- -------
such 25-day period, such warrant shall terminate automatically upon such
termination of the Spider Spin Off and Employee shall not be entitled to receive
any shares of Spider common stock.
2. Escrow of Employee Shares. Employee shall deposit the
-------------------------
certificate representing the Employee Shares (or the warrant as the case may be)
with Wiggin & Dana (the "Escrow Agent") to be held in escrow (the "Escrow") in
accordance with the terms of this Agreement and a mutually acceptable escrow
agreement entered into with the Escrow Agent. The certificate will be held in
Escrow until the expiration of the risk of forfeiture to which the Employee
Shares are subject as provided below, which in any event shall be no later than
30 days after the end of the close of the books of account of the Company for
the period ending on the third anniversary of the date of this Agreement (or
upon earlier expiration of the risk of forfeiture with respect to the Employee
Shares upon an acceleration event as described in Section 5.16 of the Purchase
Agreement) (the "Disbursement Date"). If all or any portion of the Employee
Shares is forfeited (as provided below), the Company will issue on or prior to
the Disbursement Date a new certificate in the name of Employee to the escrow
agent representing the number of Vested Employee Shares (defined below) for
disbursement to employee out of Escrow at the Disbursement Date. Subject to
Section 4, the Escrow Agent shall deliver to Employee the certificate
representing the Vested Employee Shares on the Disbursement Date.
As used herein, "Vested Employee Shares" means a number of shares of
Spider common stock equal to the number of shares of Intek common stock Employee
is entitled to receive under Section 2.2 of the Purchase Agreement in Year 1 (as
defined in the Purchase Agreement), subject to Sections 2.4 and 5.16 of the
Purchase Agreement, and adjusted for all stock splits, stock dividends, stock
combinations and recapitalizations of Spider common stock and Intek common
stock, respectively (and any securities issued in respect thereof) (an
"Adjusting Event"). "Unvested Employee Shares" means the Employee Shares that
are not Vested Employee Shares.
As used in this Agreement, the Employee Shares includes any and all
proceeds and products of the Employee Shares whether by dividend, distribution,
as consideration for a merger, or otherwise. In the event such proceeds or
products includes cash, any cash shall be placed in a mutually acceptable escrow
account with a financial
2
<PAGE>
institution or similar party pursuant to an escrow agreement containing
substantially the terms as the Escrow Agreement entered into by the Company and
the Acorn Shareholders under the Purchase Agreement (provided that such escrow
shall not be created for indemnification claim purposes). Employee shall be
entitled to receive on the Disbursement Date the amount of such products or
proceeds in proportion to the number of Vested Employee Shares Employee is
entitled to receive on such date.
As a condition to receipt of the Employee Shares hereunder, Employee
agrees to execute and deliver to Spider a copy of any shareholders agreement
that is executed by the holders of seventy percent (70%) or more of the
outstanding common stock of Spider (the "Shareholders Agreement").
3. Section 83(b) Election. The Employee Shares received by Employee
----------------------
hereunder are subject to a risk of forfeiture as defined in Section 83(b) of the
Internal Revenue Code of 1986, as amended. Such risk of forfeiture shall
terminate at the same time and in the same manner as the shares of Intek common
stock payable pursuant to Section 2.2 (Contingent Earn-Out Consideration) and
Section 2.4 (Effect of Employee Departures and Minimum EBITDA Threshold) of the
Purchase Agreement. Employee agrees to promptly and timely file with the
----------------------------------------------------
Internal Revenue Service and the Company a Section 83(b) election with respect
- ------------------------------------------------------------------------------
to the Spider shares received by him hereunder and Employee acknowledges that he
- --------------------------------------------------------------------------------
understands the consequences of such filing. Employee agrees that he is solely
- -------------------------------------------
responsible for making such election and that he shall have no recourse against
the Company or its advisors with respect to such election.
4. Employee Shares Upon Termination of Employment. In the event
----------------------------------------------
that Employee shall cease to be an employee of Acorn at any time prior to three
(3) years from the date hereof, Employee shall be entitled to receive the Vested
Employee Shares on the Disbursement Date, except that a number of Employee
Shares shall be placed in the Earn-Out Pool (as defined in the Purchase
Agreement) equal to the shares of Intek common stock placed in the Earn-Out Pool
for Year 1 as Earn-Out Consideration pursuant to Section 2.4 of the Purchase
Agreement and shall be issued in the same manner as the Intek shares. Any
Employee Shares that are not placed in the Earn-Out Pool pursuant to this
Section 4, and that are not Vested Employee Shares, shall be deemed Unvested
Employee Shares and subject to the rights of the Company under Section 5 herein.
5. Unvested Employee Shares. Upon the earlier of the Disbursement
------------------------
Date or the Date of Termination, Employee shall automatically sell and transfer
to the Company at a price of $0.013 per share, as adjusted for any Adjusting
Events (the "Purchase Price"), all of the Unvested Shares as of the Disbursement
Date or the Date of Termination (as applicable) that are not placed in the Earn-
Out Pool as provided in Section 4 herein, without further consideration and
without written notice to such effect.
Unless the Company affirmatively elects not to purchase the Unvested
Shares within sixty (60) days following the Disbursement Date (or the Date of
3
<PAGE>
Termination if earlier), or if the number of Unvested Employee Shares shall not
have been determined as of such time, then within thirty (30) days of the date
on which the Company makes such determination, the Unvested Employee Shares
shall be deemed to have been purchased by the Company. The Company shall pay
the Purchase Price at the closing of such sale, which closing shall occur within
the sixty (60) day period (or thirty day extended period, as applicable)
referenced in the preceding sentence. A failure of the Company to make any
payment under this Section 5 shall not void the transfer of the Spider common
stock to the Company, but will only result in a monetary claim by Employee
against the Company for the amount of such payment. References to Employee
herein shall be deemed to include Employee's legal representative, estate or
beneficiary in the case of Employee's death or Disability (as defined in the
Employment Agreement). If the Company affirmatively elects not to purchase the
Unvested Shares, such Unvested Shares shall be deemed Vested Shares and Employee
shall be entitled to receive such shares on the later of the Disbursement Date
or upon notice from the Company of its election not to purchase the Unvested
Shares.
Upon payment of the Purchase Price (in cash) in accordance with this
Agreement, Employee and the Company shall notify the Escrow Agent of such
payment and Escrow Agent shall deliver the certificate representing the Unvested
Employee Shares to the Company. The escrow agreement with the Escrow Agent
shall terminate as of the Disbursement Date. All transfer taxes and expenses
shall be paid by Employee.
4
<PAGE>
6. Transfer by Employee. Employee may not sell, transfer, gift,
--------------------
assign, pledge, encumber or otherwise dispose ("Transfer") of any of his
Employee Shares during his lifetime until such shares are Vested Employee
Shares, unless to another Acorn Shareholder, to an immediate family member or
other trust or entity formed for estate planning purposes, or pursuant to
Section 5 or with the prior written consent of the Company, which consent may be
withheld for any reason or for no reason. Any Transfer of Employee Shares until
such shares are Vested Shares, whether voluntary or involuntary or by operation
of law, which is made in violation of this Section 6 (other than a Transfer
resulting from a merger or similar event required by applicable law to be
approved by a vote of the shareholders of Spider) shall be null and void and
have no effect, and the Company shall not recognize any such Transfer or
recognize the transferee as the holder of such Employee Shares for any purpose.
If Employee Transfers his Employee Shares in accordance with this Section 6,
then such Transfer may be consummated subject to the restrictions in the
Shareholders Agreement; provided, however, that any transferee thereof shall
-------- -------
become a party to this Agreement, shall execute and deliver a counterpart of
this Agreement and shall agree to be subject to the restrictions and obligations
hereunder. Employee agrees and acknowledges that any Transfer of his Vested
Employee Shares shall be subject to and made in accordance with the terms of the
Shareholders Agreement.
7. No Other Liability. No party hereto shall have by reason hereof
------------------
any liability to the other on account of a termination of Employee's employment
with the Company for any reason, except for any liability which may (or may not)
be established by a separate written mutual agreement signed by the parties,
including, but not limited to, the Employment Agreement or the Purchase
Agreement.
8. Restrictive Legend. Employee consents to the placement of an
------------------
appropriate restrictive legend on the certificate evidencing the Employee Shares
and any certificates issued in replacement or exchange therefor. In addition to
any restrictive legend required under the Spider Shareholders Agreement,
Employee understands that the restrictive legend shall be substantially in the
following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID
ACT. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS CONTAINED
IN AN EMPLOYEE STOCK RESTRICTION AGREEMENT DATED
__________________, 1999, A COPY OF WHICH OBTAINED AT NO COST BY
WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION AT ITS
CORPORATE HEADQUARTERS.
5
<PAGE>
The Company agrees to remove such restrictive legend upon the issuance of
Vested Shares to Employee on the Disbursement Date.
9. Other. The terms of this Agreement shall apply to any additional
-----
shares of Spider common stock issued to or received by Employee in connection
with a stock dividend, stock split, or other distribution of Spider stock. All
certificates representing shares hereinafter issued Employee shall bear the
legend provided in Section 8. If there shall be any change in the capital stock
of Spider through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, or other change in the corporate structure of
Spider, the restrictions contained in this Agreement shall apply with equal
force to the new or additional securities, or both, if any are received by
Employee in exchange for, or by virtue of his ownership of, the Employee Shares.
An appropriate adjustment shall also be made to the Purchase Price set forth in
Section 4 upon the occurrence of any such events.
10. Rights as Shareholder. Subject to the provisions of this Agreement,
---------------------
Employee shall, during the term of this Agreement, be entitled to all rights and
privileges of a shareholder of Spider with respect to the Employee Shares.
11. Notice. Any notice required or permitted under this Agreement shall
------
be given in writing and shall be deemed effectively given upon personal delivery
or three (3) business days after deposit in the United States Post Office, by
registered or certified mail, with postage and fees prepaid, addressed to the
Company at its principal office and to Employee at his address as carried on the
Company's records, or at such other address as such party may designate by ten
(10) days' advance written notice to the other party hereto.
12. Assignment. This Agreement shall inure to the benefit of the
----------
successors and assigns of the Company and, subject to the restrictions on
transfer set forth in this Agreement, be binding upon Employee, his heirs,
administrators, successors and assigns.
13. Survival. The rights and obligations of the Company and of Employee
--------
under this Agreement shall survive any merger or sale of all or substantially
all of the capital stock or assets of Spider, or a public offering of Spider
capital stock.
14. Governing Law. This Agreement shall be governed by and construed
-------------
under the internal laws of the State of Colorado, without regard to the choice
of law rules therein.
6
<PAGE>
15. Arbitration. Except as provided below in this paragraph, any and all
-----------
disputes arising under or related to this Agreement shall be submitted to
binding arbitration before the American Arbitration Association ("AAA") in
accordance with its rules of Commercial Arbitration. The decision of the
arbiter shall be final and binding upon the parties, and it may be entered in
any court of competent jurisdiction. The arbitration shall take place in
Chicago, Illinois. The arbiter shall be bound by the laws of the State of
Colorado applicable to all relevant privileges and the attorney work product
doctrine. The arbiter shall have the power to grant equitable relief where
applicable under Colorado law and shall not be entitled to make an award of
punitive damages. The arbiter shall issue a written opinion setting forth its
decision and the reasons therefor within thirty (30) days after the arbitration
proceeding is concluded. The obligation of the parties to submit any dispute
arising under or related to this Agreement to arbitration as provided in this
Section shall survive the expiration or earlier termination of this Agreement.
Notwithstanding the foregoing, any party may seek an injunction or other
appropriate relief from a court of competent jurisdiction to preserve or protect
the status quo with respect to any matter pending conclusion of the arbitration
proceeding, but no such application to a court shall in any way be permitted to
stay or otherwise impede the progress of the arbitration proceeding.
The Company and Employee hereby consent to the jurisdiction of the AAA
and the courts of the State of Illinois and the United States District Courts
for the Northern District of Illinois, as well as to the jurisdiction of all
courts from which an appeal may be taken from such courts, for the purpose of
any arbitration, suit, action or other proceeding arising out of any of their
obligations arising hereunder or with respect to the transactions contemplated
hereby and expressly waive any and all objections they may have as to venue in
any of such courts.
16. Section Titles. Section titles are for descriptive purposes only and
--------------
shall not control or alter the meaning of this Agreement as set forth in the
text.
17. Further Assurances. The parties shall execute and deliver such
------------------
further instruments and do such further acts and things as may be required to
carry out the intent and purposes of this Agreement.
18. Directly or Indirectly. Where any provision in this Agreement refers
----------------------
to action to be taken by any person, or which such person is prohibited from
taking, such provision shall be applicable whether the action in question is
taken directly or indirectly by such person.
19. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original of this Agreement.
20. Entire Agreement. This Agreement together with the other agreements
----------------
and instruments entered into in connection herewith constitutes the entire
agreement among the parties hereto with respect to the transactions contemplated
herein, and
7
<PAGE>
supersedes all other prior understandings or agreements between
Employee and the Company with respect to such transactions.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Restricted Stock
Agreement as the date first written above.
COMPANY: INTEK INFORMATION, INC.
A Delaware corporation
By: _______________________
Title: ____________________
EMPLOYEE: ____________________________
Print Name: ________________
9
<PAGE>
EXHIBIT 8.8.3
ESCROW AGREEMENT
----------------
THIS AGREEMENT is made as of the 30th day of October, 1999 by and among
Venkat Sharma, Shoba Murali, Raja Ramnarayan, Sunil Gupta, Richard Wayne, the
Sharma Family LLC, the Murali Family LLC and the Ramnarayan Family LLC
(collectively, the "Shareholders"), Intek Information, Inc., a Delaware
corporation ("Buyer"); and Colorado State Bank and Trust ("Escrow Agent"), a
Colorado Corporation. All capitalized terms used, but not otherwise defined
herein shall have the meanings ascribed to them in the Purchase Agreement.
WHEREAS, contemporaneously with the execution hereof, the Shareholders and
Buyer will enter into that certain Share Purchase Agreement whereby Buyer will
purchase all of the issued and outstanding capital stock of Acorn ("Purchase
Agreement"); and
WHEREAS, pursuant to the Purchase Agreement, the parties have agreed to
place a portion of the purchase price in escrow upon the terms and conditions
herein.
In consideration of the mutual covenants and agreements contained in this
Agreement, the parties hereto agree as follows:
1. Receipt of Escrow Fund for Purchase Price. Upon the payment by
-----------------------------------------
Buyer to the Shareholders of the Sustained Profitability Consideration and the
cash portion of the Contingent Earn-Out Consideration in the amounts and at the
times set forth in the Purchase Agreement, Buyer shall deliver on the date of
such payments for a period expiring fifteen (15) months after the Closing Date a
bank cashier's check, certified check, wire transfer or other immediately
available funds in an amount which shall equal ten percent (10%) of such amounts
paid to the Shareholders on each such date, payable to the order of Escrow Agent
(the "Fund"). The Base Consideration and the stock portion of the Contingent
Earn-Out Consideration payable under the Purchase Agreement shall not be subject
to this Agreement and shall not be delivered to Escrow Agent as part of the
Fund. Escrow Agent agrees to hold the Fund pursuant to the terms and
conditions of this Agreement. Escrow Agent shall invest the Fund in an
interest-bearing account. Interest earned on the Fund shall be paid to, and
reported as interest by, the recipient of the Fund.
2. Release of Escrow for Purchase Price. Escrow Agent shall release
------------------------------------
and deliver the Fund together with accrued interest, to the Shareholders on
October 30, 2001, being the date that is eighteen (18) months after the Closing
Date ("Claim Expiration Date"), unless on or prior to the Claim Expiration Date,
Escrow Agent shall have received a Claim Notice (as defined in and in accordance
with Section 3 below) from Buyer, in which case disbursement will be as provided
herein. Upon release by Escrow Agent of the Fund, as provided for herein, this
Agreement shall terminate and Escrow Agent shall be discharged of any further
duties hereunder.
3. Claim Notice. If Buyer has a Claim for Damages for which Buyer
------------
believes it is entitled to indemnification under Article 8 of the Purchase
Agreement and which Buyer believes should be paid out of the Fund, prior to the
Claim Expiration Date Buyer shall deliver to each of
<PAGE>
the Shareholders and on the Escrow Agent a written request ("Claim Notice")
setting forth the amount of indemnity claimed ("Claim Amount") and in reasonable
detail the basis therefor. If a Claim Notice is timely made, Escrow Agent shall
promptly furnish each of the Shareholders with a copy of such Claim Notice in
accordance with the notice provisions hereof and shall proceed in the following
manner:
(a) If within thirty (30) days of Escrow Agent's
receipt of the Claim Notice, the Buyer shall
deliver to the Escrow Agent joint written
instructions duly executed by Shareholders and
Buyer, the Escrow Agent shall release and deliver
the Funds in accordance with such written notice.
Escrow Agent shall have no obligation to verify
the accuracy or validity of the signatures on such
written instructions.
(b) If within thirty (30) days of Escrow Agent's
receipt of the Claim Notice, the Buyer or any
Shareholder shall deliver to the Escrow Agent and
on each of the Shareholders or Buyer (as
applicable) a written demand for arbitration in
accordance with Section 9 below, the Escrow Agent
shall withhold the Claim Amount until such
arbitration shall have been concluded. Upon
conclusion of such arbitration, Escrow Agent shall
make distribution of the amount awarded to Buyer
in such arbitration, if any, and release and
deliver the balance of the Claim Amount to the
Shareholders if the Claim Expiration Date has
passed (unless the Fund is the subject of another
Claim Notice) or return the balance to the Fund if
the Claim Expiration Date has not passed.
(c) If on the thirtieth (30/th/) day following Escrow
Agent's receipt of the Claim Notice, Escrow Agent
has received neither written instructions nor
demand for arbitration in accordance with Sections
3(a) or 3(b) above, the Escrow Agent shall release
and deliver the amount claimed in the Claim Notice
of the Fund together with accrued interest thereon
to the Buyer and shall continue to hold the
balance of the Fund pursuant to the terms of this
Agreement unless and until Escrow Agent receives
another Claim Notice hereunder, or this Agreement
expires or is terminated by written consent of the
parties hereto.
2
<PAGE>
If Escrow Agent should at any time be confronted with
inconsistent claims or demands by the parties hereto, Escrow
Agent shall have the right to initiate arbitration proceedings
pursuant to Section 9 hereunder.
4. Disbursement at Claim Expiration Date. As to any amount for which a
-------------------------------------
Claim Notice has not been made before the Claim Expiration Date, the Escrow
Agent shall immediately release and deliver the balance of the Fund plus accrued
interest thereon to the Shareholders in accordance with Section 5 herein.
5. Sellers' Disbursements and Action. Escrow Agent shall make
---------------------------------
distributions of the Sustained Profitability Consideration and the cash portion
of the Contingent Earn-Out Consideration to each Shareholder in the percentages
set forth in the attached Exhibits B, which Exhibit shall be amended by the
Shareholders promptly upon any change to such percentages. Any action of the
Shareholders hereunder requires only the approval or consent of persons
representing 80% in interest of the percentages listed in Exhibit B (as the same
may be amended) and the Shareholders' payment and indemnification obligations
(if several and not joint) shall be in the same proportion as such percentages.
6. Notices. All notices and other communications required or permitted
-------
under this Agreement shall be deemed to have been duly given and made if in
writing and if served either by personal delivery to the party for whom intended
or by deposit with Federal Express or other overnight delivery service which
guarantees next day delivery, signature required, bearing the address shown in
this Agreement for, or such other address as may be designated in writing
hereafter by, such party:
If to any Shareholder: the address set forth on Exhibit A hereto
with a copy to Wiggin & Dana
Three Stamford Plaza
Stamford, CT 06901
Attn: William A. Perrone
Telephone: (203) 363-7604
Facsimile: (203) 363-7676
If to Buyer: Intek Information Inc.
5619 DTC Parkway, 12th Floor
Englewood, CO 80111-3017
Attention: Timothy C. O'Crowley
Telephone: (303) 357-3000
Facsimile: (303) 323-4213
3
<PAGE>
with a copy to: Chrisman, Bynum & Johnson
1900 Fifteenth Street
Boulder, CO 80302
Attention: G. James Williams
Telephone: (303) 546-1300
Facsimile: (305) 449-5426
If to Escrow Agent: Colorado State Bank & Trust
1600 Broadway
Denver, CO 80202
Attention: Sara Swain
Telephone: 303-864-7222
Facsimile: 303-864-7300
A notice given in accordance with this Section 6 shall be deemed effective on
the same business day if delivered personally or on the following business day
if sent by Federal Express or other overnight delivery service in accordance
with this Section 6.
7. Performance of Escrow Agent's Duties. Escrow Agent undertakes to
------------------------------------
perform only such duties as are expressly set forth herein (or required by
applicable law), and no additional duties or obligations shall be implied
hereunder. In performing its duties under this Agreement, or upon the claimed
failure to perform any of its duties hereunder, Escrow Agent shall not be liable
to anyone for any damages, losses or expenses which may be incurred as a result
of Escrow Agent so acting or failing to so act; provided, however, that Escrow
-------- -------
Agent shall not be relieved from liability for damages to the extent a court of
competent jurisdiction or arbitrator pursuant to Section 9 herein determines by
final order that such damages arose out of the gross negligence, bad faith or
willful misconduct of Escrow Agent under this Agreement. Escrow Agent shall in
no event incur any liability with respect to (a) any action taken or omitted to
be taken in good faith upon advice of legal counsel, which may be counsel to any
party hereto, given with respect to any question relating to the duties and
responsibilities of Escrow Agent hereunder or (b) any action taken or omitted to
be taken in reliance upon any instrument delivered to Escrow Agent and believed
by it to be genuine and to have been signed or presented by the proper party or
parties. Except as set forth in Section 3(a) above, Escrow Agent shall not be
bound in any way by any agreement or contract between the Shareholders and
Buyer, whether or not Escrow Agent has knowledge of any such agreement or
contract, including, but not limited to the Purchase Agreement.
4
<PAGE>
Escrow Agent may execute any of its powers or responsibilities hereunder
and exercise any rights hereunder either directly or by or through its agents or
attorneys. Escrow Agent shall not be responsible for and shall not be under a
duty to examine or pass upon the validity, binding effect, execution or
sufficiency of this Agreement or of any agreement amending or supplementing this
Agreement.
8. No Security Interests. The Shareholders and Buyer each warrant to and
---------------------
agree with Escrow Agent that, unless otherwise expressly set forth in this
Agreement, there is no security interest in the Fund or any part of the Fund; no
financing statement under the Uniform Commercial Code of any jurisdiction is on
file in any jurisdiction claiming a security interest in or describing, whether
specifically or generally, the Fund or any part of the Fund; and Escrow Agent
shall have no responsibility at any time to ascertain whether or not any
security interest exists in the Fund or any part of the Fund or to file any
financing statement under the Uniform Commercial Code of any jurisdiction with
respect to the Fund or any part thereof.
9. Dispute Resolution. Except as provided below in this paragraph, any
------------------
and all disputes arising under or related to this Agreement shall be submitted
to binding arbitration before the American Arbitration Association ("AAA") in
accordance with its rules of Commercial Arbitration. The decision of the
arbiter shall be final and binding upon the parties, and it may be entered in
any court of competent jurisdiction. If the Escrow Agent is a party to the
arbitration, the arbitration shall take place in Denver, Colorado, the arbiter
shall be bound by the laws of the State of Denver, Colorado applicable to all
relevant privileges and the attorney work product doctrine, and the arbiter
shall have the power to grant equitable relief where applicable under Colorado
law and shall not be entitled to make an award of punitive damages. The arbiter
shall issue a written opinion setting forth its decision and the reasons
therefor within thirty (30) days after the arbitration proceeding is concluded.
The obligation of the parties to submit any dispute arising under or related to
this Agreement to arbitration as provided in this Section shall survive the
expiration or earlier termination of this Agreement. Notwithstanding the
foregoing, any party may seek an injunction or other appropriate relief from a
court of competent jurisdiction to preserve or protect the status quo with
respect to any matter pending conclusion of the arbitration proceeding, but no
such application to a court shall in any way be permitted to stay or otherwise
impede the progress of the arbitration proceeding.
In the event of any arbitration being filed or instituted between the
parties concerning this Agreement, the prevailing party will be entitled to
receive from the other party or parties its attorneys' fees, experts' fees,
witness fees, costs and expenses, court costs and other reasonable expenses,
whether or not such controversy, claim or action is prosecuted to judgment or
other form of relief.
Buyer and the Shareholders specifically agree that arbitration shall
be invoked under this Agreement only if Escrow Agent is a necessary party and
that if the matter to be
5
<PAGE>
decided is the validity of a claim under Article 8 of the Purchase Agreement
that the arbitration provisions of the Purchase Agreement will control and
govern the dispute.
As an additional consideration for and as an inducement for Escrow
Agent to act hereunder, it is understood and agreed that, in the event of any
disagreement between the parties to this Agreement or among them or any other
person(s) resulting in adverse claims and demands being made in connection with
or for any money or other property or rights involved in or affected by this
Agreement, Escrow Agent shall be entitled, at the option of Escrow Agent, to
refuse to comply with the demands of such parties, or any of such parties, so
long as such disagreement shall continue. In such event, Escrow Agent shall
make no delivery or other disposition of the Fund or any parts of such Fund.
Anything herein to the contrary notwithstanding, Escrow Agent shall not be or
become liable to such parties or any of them for the failure of Escrow Agent to
comply with the conflicting or adverse demands of such parties or any of such
parties.
Escrow Agent shall be entitled to continue to refrain and refuse to
deliver or otherwise dispose of the Fund or any part therefore or to otherwise
act hereunder, as stated above, unless and until:
(i) the rights of such parties have been finally settled by binding
arbitration or duly adjudicated in a court having jurisdiction of the
parties and the Fund; or
(ii) the parties have reached an agreement resolving their
differences and have notified Escrow Agent in writing of such agreement and
have provided Escrow Agent with indemnity satisfactory to Escrow Agent
against any liability, claims or damages resulting from compliance by
Escrow Agent with such agreement.
In the event of a disagreement between such parties as described above, Escrow
Agent shall have the right, in addition to the rights described above and at the
option of Escrow Agent, to tender into the registry or custody of any court of
competent jurisdiction, all money and other property or rights comprising the
Fund and may take such other legal action as may be appropriate or necessary, in
the opinion of Escrow Agent. Upon such tender, the parties hereto agree that
Escrow Agent shall be discharged from all further duties under this Agreement;
provided, however, that the filing of any such legal proceedings shall not
deprive Escrow Agent of its compensation earned hereunder prior to such filing
and discharge of Escrow Agent of its duties hereunder.
6
<PAGE>
10. Escrow Agent's Fees.
-------------------
The Shareholders and Buyer shall share equally the fees, costs and
expenses (including reasonable attorneys' fees) of Escrow Agent incurred in
connection with this Agreement. In the event Escrow Agent is required to
perform extraordinary services in connection with the arbitration of any dispute
as set forth in Section 9 above, the non-prevailing party shall pay the
reasonable compensation for Escrow Agent's extraordinary services and reimburse
Escrow Agent for all costs and expenses reasonably incurred in connection with
such arbitration.
11. Resignation of Escrow Agent.
---------------------------
Escrow Agent may resign at any time from its obligations under this
Agreement by providing written notice to the parties hereto. Such resignation
shall be effective on the date set forth in such written notice which shall be
no earlier than thirty (30) days after such written notice has been given. In
the event no successor escrow agent has been appointed on or prior to the date
of such resignation is to become effective, Escrow Agent shall be entitled to
tender into the custody of a court of competent jurisdiction all assets then
held by it hereunder and shall thereupon be relieved of all further duties and
obligations under this Agreement. Escrow Agent shall have no responsibility for
the appointment of a successor escrow agent hereunder. Such resignation shall
not deprive Escrow Agent of its compensation earned prior thereto.
12. Indemnification.
---------------
Escrow Agent shall have no obligation to take any legal action in
connection with this Agreement or towards its enforcement, or to appear in,
prosecute or defend any action or legal proceeding which would or might involve
it in any cost, expense, loss or liability unless security and indemnity, as
provided in this paragraph, shall be furnished.
The Shareholders (as to one half) and Buyer (as to one half) severally
(not jointly) agree to indemnify Escrow Agent and its officers, directors,
employees and agents and save Escrow Agent and its officers, directors employees
and agents harmless from and against any and all Claims (as hereinafter defined)
and Losses (as hereinafter defined) which may be incurred by Escrow Agent or
any of such officers, directors, employees or agents as a result of Claims
asserted against Escrow Agent or any of Escrow Agent's officers, directors,
employees or agents as a result of or in connection with Escrow Agent's capacity
as such under this Agreement by any person or entity. For the purposes hereof,
the term "Claims" shall mean all claims, lawsuits, causes of action or other
legal actions and proceedings of whatever nature brought against (whether by way
of direct action, counterclaim, cross action or impleader) Escrow Agent or any
of Escrow Agent's officers, directors, employees or agents, even if groundless,
false or fraudulent, so long as the claim, lawsuit, cause of action or other
legal action or proceeding is alleged or determined, directly or indirectly, to
arise out of, result from, relate to or be based
7
<PAGE>
upon, in whole or in part: (a) the acts or omissions of the Shareholders or
Buyer, (b) the appointment of Escrow Agent as escrow agent under this Agreement,
or (c) the performance by Escrow Agent of its powers and duties in accordance
with this Agreement; and the term "Losses" shall mean losses, costs, damages,
expenses, judgments and liabilities of whatever nature (including but not
limited to attorneys', accountants' and other professionals' fees, litigation
and court costs and expenses and amounts paid in settlement), directly or
indirectly resulting from, arising out of or relating to one or more Claims.
Upon the written request of Escrow Agent or any such officer, director, employee
or agent (each referred to hereinafter as an "Indemnified Party"). The
Shareholders (as to one-half) and Buyer (as to one-half) severally (not jointly)
agree to assume the investigation and defense of any Claim, including the
employment of counsel acceptable to the applicable Indemnified Party and the
payment of all expenses related thereto. The Shareholders and Buyer hereby agree
that the indemnifications and protections afforded Escrow Agent in this section
shall survive the termination of the Agreement. The Shareholders and Buyer have
no indemnification obligation in respect of Escrow Agent's action, or failure to
take action, in bad faith.
13. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Colorado, without regard to the choice
of law rules therein.
14. Miscellaneous. The headings herein are for convenience only and shall
-------------
not be of substantive effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective legal
representatives, heirs, successors and assignees. This Agreement together with
the Purchase Agreement constitutes the entire agreement among the parties with
respect to the subject matter hereof and supersedes all prior negotiations,
understandings and writings (or any part thereof) whether oral or written
between any of the parties relating to the subject matter of this Agreement.
This Agreement may be executed in one ore more counterparts, each of which shall
be deemed an original, and all of which taken together shall constitute one and
the same instrument.
[signature page follows]
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Escrow Agreement as
of the date first above written.
SHAREHOLDERS: /s/ Venkat Sharma
----------------------------------
Venkat Sharma
----------------------------------
/s/ Shoba Murali
----------------------------------
Shoba Murali
/s/ Raja Ramnarayan
---------------------------------
Raja Ramnarayan
/s/ Sunil Gupta
----------------------------------
Sunil Gupta
/s/ Richard Wayne
---------------------------------
Richard Wayne
THE SHARMA FAMILY LLC
/s/ Venkat Sharma
----------------------------------
Venkat Sharma, Manager
THE MURALI FAMILY LLC
/s/ Shoba Murali
----------------------------------
Shoba Murali, Manager
THE RAMNARAYAN FAMILY LLC
/s/ Ramnarayan
-----------------------------------
Raja Ramnarayan, Manager
9
<PAGE>
BUYER: INTEK INFORMATION, INC.
By: /s/ Timothy O'Crowley
-------------------------------
Its: Chief Executive Officer
-------------------------------
ESCROW AGENT: /s/
---------------------------------------
By: ___________________________________
Its: __________________________________
10
<PAGE>
EXHIBIT A
---------
SHAREHOLDERS
Venkat Sharma
25 Wimbleton Lane
Easton, CT
Ph: (203) 225-7600 (office)
Fax: (203) 459-2896 (home)
SSN: ###-##-####
Shoba Murali
12 River Knoll Road
Westport, CT
SSN: ###-##-####
Raja Ramnarayan
25 Highland Road
Westport, CT 06880
SSN: ###-##-####
Sunil Gupta
305 Judd Road
Easton, CT 06612
SSN: ###-##-####
Richard Wayne
55 Valley Road
Easton, CT 06612
SSN: ###-##-####
The Sharma Family LLC
25 Wimbleton Lane
Easton, CT
EIN#: 06-1552928
The Murali Family LLC
12 River Knoll Road
Westport, CT
EIN#: 06-1552802
11
<PAGE>
The Ramnarayan Family LLC
25 Highland Road
Westport, CT 06880
EIN#: 06-1551577
12
<PAGE>
EXHIBIT B
---------
SHAREHOLDERS' PERCENTAGES FOR
SUSTAINED PROFITABILITY CONSIDERATION
<TABLE>
<S> <C>
Venkat Sharma 31.7935%
Sharma Family LLC 10.5978%
Shoba Murali 20.3261%
Murali Family LLC 13.5870%
Raja Ramnarayan 12.7174%
Ramnarayan Family LLC 6.3587%
Sunil Gupta 2.1739%
Richard Wayne 2.4456%
SHAREHOLDERS' PERCENTAGES
FOR CONTINGENT EARN-OUT CONSIDERATION
<S> <C>
Venkat Sharma 29.1116%
Shoba Murali 18.2262%
Raja Ramnarayan 12.3500%
Sunil Gupta 10.0000%
Richard Wayne 2.2500%
The Sharma Family LLC 9.7039%
The Murali Family LLC 12.1833%
The Ramnarayan Family LLC 6.1750%
</TABLE>
13
<PAGE>
EXHIBIT 2.7
TRANSACTION ADVISOR FEE PAYMENT AGREEMENT
This TRANSACTION ADVISOR FEE PAYMENT AGREEMENT (the "Agreement") effective
October 1, 1999 is made by and among INTEK INFORMATION, INC., a Delaware
corporation (the "Company"), PROSPERO LLC., a Connecticut limited liability
company ("Prospero"), PROSPERO HOLDINGS LLC, a Connecticut limited liability
company ("Prospero Holdings"), Acorn Information Services, Inc. a Delaware
corporation ("Acorn") and certain shareholders of Acorn who are signatories to
this Agreement (collectively the "Acorn Shareholders") in connection with a
Share Purchase Agreement by and among the Company, Acorn and the Acorn
Shareholders of even date herewith (the "Purchase Agreement").
W I T N E S S E T H
-------------------
A. Prospero and Acorn are parties to that certain letter agreement dated
August 3, 1998 as amended December 2, 1998 (together, the "Engagement Letter").
B. Prospero has provided Acorn with certain investment banking services
in connection with the Engagement Letter (the "Prospero Services"), including
without limitation advice regarding the sale of all of the outstanding capital
stock of Acorn to the Company under the terms and conditions of the Purchase
Agreement.
C. Concurrently herewith, Acorn and Prospero are entering into a letter
agreement regarding fee payment (the "Fee Payment Letter Agreement").
D. In connection with the Purchase Agreement and the Fee Payment Letter
Agreement and on the terms and conditions set forth in this Agreement, the
Company and the Acorn Shareholders have each agreed to pay a portion of the
amount payable by Acorn to Prospero in consideration for the Prospero Services.
E. Prospero desires to assign its right to payment for the Prospero
Services to Prospero Holdings.
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein, and for other good and valuable consideration, the sufficiency
of which is hereby acknowledged, the parties agree as follows:
1. Transaction Advisor Fees. In consideration for the Prospero Services,
------------------------
Intek will at the closing of the next round of private financing by the Company
(the "Financing"), issue to Prospero Holdings on behalf of Acorn such number of
shares of Intek common stock equal to the quotient obtained by dividing $100,000
by the price per share of Series F Preferred Stock of Intek at the time of the
closing of such Financing ("Transaction Advisor Shares"). If the Financing
does not close by December 31,
<PAGE>
1999, the Company shall issue to Prospero Holdings such number of shares of
Intek common stock equal to $100,000 divided by the per share price of $1.61, as
may be adjusted for any stock splits, stock dividends, stock combinations or
recapitalizations, other than the spin off by the Company of Spider
Technologies, Inc. common stock (the "Spider Shares"). Prospero (including
Prospero Holdings) shall not be entitled to receive any Spider Shares as part of
or upon issuance of the Transaction Advisor Shares hereunder. The Company shall
have no obligation to register the Transaction Advisor Shares except piggyback
registration rights as set forth in the Form of Registration Rights Agreement
attached hereto as Exhibit A (the "Registration Rights Agreement"), and shall
have no obligation to register the Transaction Advisor Shares in violation of
any applicable law or regulation.
Notwithstanding the foregoing, upon the occurrence of a Change in Control (as
defined in the Purchase Agreement) prior to the earlier of the close of the
Financing or December 31, 1999, the Company shall issue to Prospero Holdings
such number of Transaction Advisor Shares obtained by dividing $100,000 by the
per share price of $1.61. The Company shall issue such shares immediately prior
to the closing of a transaction that results in a Change in Control.
Upon issuance of the Transaction Advisor Shares to Prospero Holdings, the
Company and Prospero Holdings shall enter into the Registration Rights
Agreement.
2. No Further Liability. Except for the fees for the Prospero Services,
--------------------
neither Acorn nor the Acorn Shareholders are indebted to Prospero or Prospero
Holdings for any amount. Upon (i) execution of this Agreement and (ii) receipt
of the Fee Balance (as defined in the Fee Payment Letter Agreement), Acorn and
the Acorn Shareholders shall have no further liability to Prospero or Prospero
Holdings. Upon (i) execution of this Agreement and (ii) receipt by Prospero
Holdings of the Transaction Advisor Shares, the Company shall have no further
liability to Prospero or Prospero Holdings. The Company shall assume no
liability for any taxes or other payments of Prospero or Prospero Holdings,
Acorn or the Acorn Shareholders in connection with services rendered by
Prospero. Prospero acknowledges that payment of the Transaction Advisor Shares
is being made on behalf of Acorn (and not on behalf of the Company), which is
Prospero's sole client with respect to the transactions contemplated by the
Purchase Agreement.
3. Shareholders Agreement. As a condition to receipt of the Transaction
----------------------
Advisor Shares, Prospero (and Prospero Holdings as applicable) shall execute and
deliver to the Company, and agree to be bound by the terms and conditions of,
the Shareholders Agreement of the Company then in effect and shall execute and
deliver such Shareholders Agreement and a subscription agreement to the Company
prior to the delivery of Transaction Advisor Shares hereunder. Prospero and
Prospero Holdings each acknowledges that the Shareholders Agreement may be
amended from time to time or may be terminated, whether before or after the time
Transaction Advisor Shares are issued, in accordance with the terms of the
Shareholders Agreement.
2
<PAGE>
4. Investor Representations. Prospero and Prospero Holdings each represents
------------------------
it is currently an "accredited investor" as defined in Regulation D promulgated
by the Securities and Exchange Commission and shall so represent at the time of
receipt of any Transaction Advisor Shares. Prospero and Prospero Holdings each
further represents that it has had an opportunity to ask questions of and
receive answers from representatives of the Company with respect to the
acquisition of the Transaction Advisor Shares and that the Company has made
available to Prospero and Prospero Holdings all documents requested and has
provided answers to all such questions relating to receipt of the Transaction
Advisor Shares. Prospero and Prospero Holdings each acknowledges that, because
the Transaction Advisor Shares will not have been registered under the
Securities Act of 1933, as amended (the "Act"), or applicable state securities
laws, any resale inconsistent with the Act may create liability on its part
and/or the part of Intek, and agrees not to assign, sell, pledge, transfer or
otherwise dispose of or transfer any of the Intek Shares unless registered under
the Securities Act and applicable state securities laws or he has delivered an
opinion of counsel satisfactory to Intek that such registration is not required.
Neither Prospero nor Prospero Holdings nor any "associate" of Prospero or
Prospero Holdings as such term is defined in Rule 12b-2 of the Securities
Exchange Act of 1934, as amended, or has a relationship with, a member of the
National Association of Securities Dealers, Inc. ("NASD"), or is an officer,
director, registered representative, lender, employee or beneficial owner of 10%
or more of a NASD member or any corporation or entity which owns a 10% or
greater ownership interest in an NASD member.
5. Restrictive Legend. Prospero and Prospero Holdings each acknowledges that
------------------
the certificate representing the Transaction Advisor Shares shall bear
substantially the following restrictive legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THEY
MAY NOT BE OFFERED OR TRANSFERRED BY SALE, ASSIGNMENT, PLEDGE OR OTHERWISE
UNLESS (I) A REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT IS IN EFFECT OR (II) THE CORPORATION HAS RECEIVED AN OPINION OF
COUNSEL, WHICH OPINION IS SATISFACTORY TO THE CORPORATION, TO THE EFFECT
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT
TO, AND ARE SUBJECT TO A CERTAIN SHAREHOLDERS AGREEMENT AMONG INTEK
INFORMATION, INC. AND CERTAIN SHAREHOLDERS NAMED THEREIN, DATED OCTOBER 1,
1999 AS AMENDED FROM TIME TO TIME. A COPY OF SUCH
3
<PAGE>
AGREEMENT IS AVAILABLE AT THE OFFICES OF THE CORPORATION."
6. Notice. Any notice required or permitted hereunder shall be in writing and
------
shall be sufficiently given if (i) personally delivered, (ii) mailed by
certified or registered United States mail, return receipt requested, or (iii)
sent by recognized air express courier for next business day delivery, addressed
to the parties at the addresses set forth on the signature page hereof and shall
be deemed to have been delivered as of the date so personally delivered, three
business days after so mailed, or one business day after the date delivered to
the air express courier.
7. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Colorado exclusive of the conflict of
law provisions thereof.
8. Arbitration; Attorneys' Fees.Arbitration; Consent to Jurisdiction. Any and
---------------------------- ------------------------------------
all disputes arising under or related to this Agreement shall be submitted to
binding arbitration in accordance with the Arbitration provision contained in
the Purchase Agreement. In the event of any arbitration or litigation being
filed or instituted between two or more of the parties concerning this
Agreement, the Prevailing Party will be entitled to receive from the other party
or parties its attorneys' fees, experts' fees, costs and expenses, whether or
not such controversy, claim or action is prosecuted to judgment or other form of
relief. The "Prevailing Party" is that party which is awarded judgment or other
legal or equitable relief as a result of trial or arbitration, or who receives
or is entitled to receive a payment of money from the other party in settlement
of claims asserted by such party. If both parties receive a judgment or other
award of relief, the court or the arbiter shall determine which party is the
Prevailing Party, taking into consideration the merits of the claims asserted by
each party, the relative values of the judgments or other forms of relief
received by each party, and the relative equities between the parties.
9. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
10. Entire Agreement. This Agreement and the documents referenced herein
----------------
constitute the entire agreement between the parties regarding the matters
herein.
11. Unenforceability. If any paragraph or subparagraph of this Agreement
----------------
or any part thereof shall be unenforceable under any applicable laws,
notwithstanding such unenforceability the remainder of this Agreement shall
remain in full force and effect.
12. Amendments; Waivers. This Agreement cannot be changed, modified or
-------------------
amended, and no provision or requirement hereof may be waived, without consent
in writing of the parties hereto.
4
<PAGE>
[Signature Page Follows]
5
<PAGE>
IN WITNESS WHEREOF, the parties hereby execute this TRANSACTION ADVISOR FEE
PAYMENT AGREEMENT as of the date first written above.
PROSPERO LLC. INTEK INFORMATION, INC.
By: /s/ Daniel J. Donovan By: /s/ Timothy C. O'Crowley
------------------------------- ----------------------------------
Daniel J. Donovan, Managing Member Timothy C. O'Crowley, President
265 Post Road West 5619 DTC Parkway, 12/th/ Floor
Westport, CT 06880 Englewood, CO 80111
Attn: Daniel J. Donovan Attn: Timothy C. O'Crowley
Telephone: (203) 454-5616 Telephone: (303) 357-3000
Facsimile: (203) 459-8157 Facsimile: (303) 323-4213
PROSPERO HOLDINGS LLC
By: /s/
---------------------------
Its: _________________________
265 Post Road West, Westport, CT 06880
Attn: Daniel J. Donovan
Telephone: (203) 454-5616
Facsimile: (203) 459-8157
AGREED AND ACKNOWLEDGED:
ACORN INFORMATION SERVICES, INC.
/s/ Venkat Sharma
- ------------------------------
Venkat Sharma, Chief Executive Officer
4 Corporate Drive, Shelton, CT 06484
ACORN SHAREHOLDERS:
/s/ Venkat Sharma THE SHARMA FAMILY LLC
- ------------------------------
Venkat Sharma
/s/ Shoba Murali /s/ Venkat Sharma
- ------------------------------- --------------------------------
Shoba Murali Venkat Sharma, Manager
/s/ Raja Ramnarayan THE MURALI FAMILY LLC
- ------------------------------- --------------------------------
Raja Ramnarayan
/s/ Shoba Murali
/s/ Sunil Gupta --------------------------------
- -------------------------------- Shoba Murali, Manager
Sunil Gupta
/s/ Richard Wayne THE RAMNARAYAN FAMILY LLC
- --------------------------------
Richard Wayne
/s/ Raja Ramnarayan
--------------------------------
Raja Ramnarayan, Manager
6
<PAGE>
EXHIBIT A
Form of Registration Rights Agreement
7
<PAGE>
Exhibit 23.2
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
Denver, Colorado,
February 17, 2000
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in this Registration Statement on Form S-1 of Intek
Information, Inc. of our report dated June 28, 1999, except as to the proposed
acqusition described in the second and third paragraphs of Note 10 which is as
of July 16, 1999, relating to the financial statements of Acorn Information
Services, Inc., which appear in such Registration Statement. We also consent to
the reference to us under the headings "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Stamford, Connecticut
February 17, 2000
