U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(X) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 1997.
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______ to ________.
Commission File No.: 0-29098
NAVIDEC, INC.
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(Exact name of small business issuer as specified in its charter)
COLORADO 33-0502730
(State or other (IRS Employer
jurisdiction of Identification No.)
incorporation)
14 INVERNESS DRIVE, SUITE F-116, ENGLEWOOD, CO 80112
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, incl. area code: 303-790-7565
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK NO PAR VALUE
Title of Class
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes ( ) No (X)
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. (X)
Revenues for the issuer's most recent fiscal year ended December 31, 1997, are
$6,008,000.
As of March 24, 1998, there were 3,245,298 shares of Common Stock issued and
outstanding and the aggregate market value of the issued and outstanding Common
Stock held by non-affiliates was approximately $10,900,000
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
Navidec, Inc.(the "Company"), based in Englewood, Colo., is a leading provider
of products and solutions that use Web-based technologies to achieve its
customers' business objectives. From commercial Web site development to the
design and implementation of intranet and extranet applications and tools, the
Company helps customers nationwide define, develop and deploy successful online
solutions. The Company provides its services and distributes its products to
over 700 customers as of the date of this report. The Company also serves as a
distributor of various high technology and other products through traditional
and electronic channels.
The Company's core competencies in Internet/Intranet technology and traditional
product marketing and distribution form its business model of providing complete
Internet/Intranet Solutions. These solutions include computer and network
infrastructure equipment, software and services, content and aggregation,
electronic commerce and fulfillment of orders. The Company was organized as ACI
Systems, Inc. in July 1993 and changed its name to NAVIDEC, Inc. in July 1996.
The Company's principal sources of revenue are from the resale of computer
equipment, high technology peripherals and electronic components manufactured by
independent vendors ( Product Distribution ) and services related to
Internet/Intranet Solutions and license fees from recurring lead revenue from
the Wheels solution. The Company merged with Interactive Planet, Inc. ("IPI"), a
designer and developer of Internet World Wide Web sites, in July 1996. The
Company issued an aggregate of 678,877 shares of Common Stock to the
shareholders of IPI and a promissory note in the amount of $75,000 to one
shareholder of IPI in exchange for all of the issued and outstanding stock of
IPI. The Company acquired TouchSource, Inc. ("TS"), a designer and developer of
interactive Kiosks, in July 1997. The Company issued an aggregate of 207,000
shares of Common Stock to the shareholders of TS and TS was merged into the
Company in exchange for all of the issued and outstanding stock of TS. The
merger and acquisition were consummated in order to expand the Company's
business model of combined expertise in traditional marketing and distribution
and Internet/ Intranet technology.
Business Strategy
The Company's goal is to enhance its position as a leading provider of
comprehensive networking and electronic marketing and distribution solutions to
regional, national and international clients. To achieve this objective, the
Company is pursuing the following strategies.
Leverage Expertise and Core Competencies
The Company leverages its expertise in two core businesses, high technology
product distribution and Internet/Intranet Solutions, into complete electronic
marketing and networking solutions. The Company's solutions span all segments of
the commercial Internet industry, including networking equipment and routers,
Internet software, Internet/Intranet design and implementation, content creation
and aggregation, and promotion. Management believes that the Company's ability
to offer this full range of Internet/Intranet products and services as well as
traditional distribution and marketing services is unique in its industry.
Exploit Recurring Revenue Streams
The Company emphasizes ongoing services to its Internet/Intranet Solutions
clients, which services are a source of recurring revenues often well in excess
of the fees associated with initial Web site development. The Company's primary
focus has been on its Wheels solution. Wheels which was introduced in the 4th
quarter of 1997,provides recurring revenues from lead fees paid by Automotive
Dealers, and hosting and maintenance fees paid by its Media partner (regional
news paper, television or radio station).
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Develop Strategic Relationships
The Company has developed technology, marketing and distribution relationships
with a number of leading companies. Important relationships include those with
Banc One, AT&T, Silicon Graphics, Sybase, and Netscape. Wheels is currently
under contract in Denver Colorado, and in Portland Oregon. The Company is
currently deploying its Wheels solution through a strategic relationship with
Banc One Credit Company which has committed to launching four additional
regional Wheels sites. Banc One Credit has offices in 48 states. Banc One Credit
Company is a subsidiary of Banc One Corporation headquartered in Columbus, Ohio.
It is one of the largest finance companies in the United States and is a holding
company of eight units. Banc One chose the Company's "Wheels" solution after two
years of reviewing other automotive solutions. The choice of the Company's
solution was based on its abilities to sell cars for dealers, and Banc One's
belief that Wheels could increase its indirect automotive lending. As a result
of the Company's technical expertise, it has been designated as a Netscape
Commercial Applications Products Provider Partner (NCAPP), which is Netscape's
top reseller designation and which allows the Company to offer all of Netscape's
high-end commercial Internet software products to its clients. These and other
strategic relationships have fueled much of the recent growth of the Company,
and management expects them to continue to generate additional clients and
revenue. Management believes that the primary growth that will be experienced in
1998 will come from its Wheels solution. The Wheels solution provides the
Company revenue from one times fees and recurring monthly fees. The one time
fees come from license fees for each region, one time setup fees from dealers,
and training fees. Recurring fees come from customer lead and lookup fees,
monthly fees which come from dealers and monthly fees charged to regional media
partners.
Emphasize Client Return on Investment.
The Company furnishes clients with solutions which are designed to provide a
return on their investment through generation of leads, increased sales, reduced
personnel expenses and/or improved communications within their company. The
Company also intends to emphasize hardware solutions such as on - and off-site
free standing kiosks which include a computer terminal linked to the Wheels Web
site of the client. These kiosks are designed to expand the audience for the
client's electronic marketing presence.
Promote Intranets
The Company believes that many companies can benefit from the ease of use and
familiarity of a Web-style interface for their internal networks. Intranets can
provide an open, non-proprietary enterprise interface to a closed, proprietary
legacy database system, thereby avoiding the need to replace the entire legacy
system when an updated enterprise interface is desired. The Company has
implemented a major Intranet system for KN Energy and Merrick Engineering and
intends to promote its expertise in this area to other large companies with a
need for an easy to use internal network interface.
Expand Traditional Distribution Channels
To date, distribution of high technology products and related services has
accounted for the substantial majority of the Company's revenue. The Company
intends to expand its high technology product distribution business by through
solution selling, which will combine the Company's software development and
hardware sales. The Company also plans to implement and promote its own Internet
Web site for direct sales of high technology products.
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INTERNET/INTRANET SOLUTIONS
Internet/Intranet Industry Overview
The Internet is a network of computer networks that are both commercially and
publicly owned. The networks all use a common set of nonproprietary networking
protocols. This commonality of protocols provides what appears to the Internet
user to be a seamless, integrated virtual network notwithstanding the
heterogeneity of the computer hardware and communications systems underlying the
Internet. Although the individual networks comprising the Internet are privately
owned, no one organization owns or controls the Internet. Any network may join
or remove itself from the Internet at any time and this open access has allowed
the Internet to grow exponentially as a resource in the United States and
world-wide. Each new network (or individual connecting through a network)
becomes not only a consumer of information available on the Internet but also a
potential information or content provider to other users of the Internet.
Internet networks are connected in a variety of ways, including regular analog
phone lines, high-speed digital lines and fiber optic links. The Internet
permits users to communicate electronically, share or publish information,
download software and participate in commercial transactions. Internet data
packets are transferred through flexible routing protocols which allow signals
to reach their destinations even though portions of the network may be down or
overburdened. Nonetheless, because of the rapidly growing traffic on the
Internet, users sometimes report significant delays in data transfer and some
loss of data. There is a risk that as the Internet grows in popularity, its
infrastructure will become overwhelmed to the point where its functionality is
impaired, perhaps significantly. Because connecting directly to the Internet
requires expensive equipment and considerable technical expertise, most Internet
users connect to the Internet through one of a rapidly growing number of local
and national Internet Service Providers (ISPs), including the major on-line
services such as America Online and CompuServe. The Company is not one of these
ISPs.
The World Wide Web
Much of the recent growth in Internet use has been attributable to a network of
servers and information available via open protocols known as the World Wide
Web. The Web can be accessed through software programs such as Netscape
Navigator and Microsoft Explorer, which allow non-technical users to exploit the
capabilities of the Internet. The Web enables users to find, retrieve and link
to multimedia content on the Internet with easy to use graphical interfaces.
Electronic documents are published on Web servers in a common format called
hypertext markup language (HTML). Web software browsers can retrieve these
documents across the Internet by making requests through a standard
communications protocol called Uniform Resource Locators, or URLs.
The technical capabilities of the Web together with the increasing availability
of user-friendly navigational and utility tools and search engines such as
Yahoo, Excite, Webcrawler, Magellan and Alta Vista are responsible for the rapid
growth in the popularity of the Web as a distribution channel. In March 1997,
International Data Corporation estimated the number of
commercial sites on the World Wide Web is doubling every six months and came to
more than 45,000 in 1996 and predicted that the number of business sties would
reach 100,000 by 2000.
The term Web site is commonly used to describe the computer screen layouts and
the file server computer that are accessible by users of the Web. Typically, a
Web site has a collection of Web pages which may contain text, graphics,
pictures, sound, animation, video or other multimedia content. One important
feature of the HTML format is that it allows a Web user to travel to other sites
simply by selecting with a mouse or other pointing device a text or graphic
marker on the current Web page. In this manner, users can quickly and
effortlessly connect to Web pages that are part of the same Web site or to Web
pages located on servers in another continent. Web sites vary significantly in
their complexity and interactivity. A simple Web site may have only text in
outline form. More complex sites may have full multimedia content. Web sites may
also vary in their level of interactivity with the user. Many Web sites are for
inquiry only (informational), while others allow the user to interact with,
enter and process information (interactive).
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Commercial Uses of the Internet
Commercial uses of the Internet include business-to-business and
business-to-consumer transactions, product marketing, advertising,
entertainment, electronic publishing, electronic services and Internet support.
The Company views the Internet and in particular the Web as presenting
significant opportunities for electronic marketing, sale and distribution of
products. In the Company's view, the Internet's benefits include:
- - Low cost in comparison to other marketing channels
- - Direct marketing of products and services
- - Audio/visual display and demonstration of products
- - Ability to capture orders electronically at significantly lower personnel
costs than traditional order-taking
- - Provision of client services such as order tracking and trouble-shooting
Immediate fulfillment and satisfaction of certain orders, such as software
and information deliverable electronically
- - Customer convenience (24-hour, 7 days a week access)
- - Potential for narrowly-targeted marketing
A number of companies have developed systems to maintain the security of
transactions on the Internet and the Company has developed its own proprietary
merchandise engine which provides security for order-taking functions. There can
however be no assurance that breaches in transaction security will not have an
adverse effect on the growth and viability of on-line commerce.
Intranets
Because of the ease of use and widespread acceptance of Internet protocols, HTML
and other scripting languages and tools, a number of companies have implemented
internal networks, or Intranets, based on such protocols. The use of these
protocols allows employees using personal computers and Web browser software to
access and interact with a broad range of information sources within their
company, independent of physical location and underlying computer and database
design, on the familiar platform of Web browser software.
The Company's Internet/Intranet Solutions
The Company provides its Internet/Intranet Solutions through six business units:
Business Development Services, World Wide Web Services, Marketing Services,
Media Services, Client Services and Channel Services. These units function as a
team in providing solutions for clients. The Internet/Intranet Solutions
provided to clients often also involve one or more of the traditional
distribution services offered by the Company.
Business Development Services are delivered through consulting engagements,
generally billed on an hourly basis, in which Company professionals analyze
client business requirements and recommend comprehensive solutions for the
client's Internet or Intranet requirements. Proposed solutions offered by the
Company include one or more of the following components:
- - Network solutions
- - Web site specifications
- - Private Intranets - Web distribution strategies
- - Traditional channel strategies
- - Integrated marketing
- - Image development
- - Product introduction
- - Project management
- - Graphic design
- - Product distribution
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World Wide Web Services provide the design and implementation of a Web site
based upon specifications developed by the Company and the client. The Company's
World Wide Web Services also include the design and implementation of private
Intranets, including hardware and software implementation.
The Company designs many of its Web sites with database system integration,
which allows the Web site to act as an interface to selected portions of the
client's internal legacy or enterprise systems. Such integration allows the Web
site to reflect continuously the most current information concerning the client.
The Company has developed a set of proprietary software tools for implementation
on client Web sites. These tools are licensed to clients for use on the
particular site for so long as the site is maintained by the Company. A brief
description of each of the Company's proprietary tools follows.
Wheels
Wheels: Navidec's Online Automotive Solution
Wheels provides the first comprehensive regional automotive Internet solution to
the television and newspaper publishing industries. Wheels addresses the online
sales needs of media organizations, automotive dealers and consumers in the
following ways:
Media
With the growing impact of online media on traditional media, television
stations and newspapers are looking to secure revenue from online activities and
gain a competitive advantage in their markets. Wheels offers media organizations
a new online revenue stream from their existing dealer advertiser relationships,
and proactively positions media organizations with these important advertisers.
Automotive Dealers
Wheels offers dealers a total online automotive solution that allows them to
integrate their complete new and pre-owned inventory across dealer franchises
and multiple legacy systems automatically updating that inventory on the Web,
touch-screen kiosks and mobile sales laptops. This solution complements a
dealer's existing traditional media advertising strategy and is proven to help
them sell more vehicles.
Consumers
Consumers can use Wheels to search both new and pre-owned car inventories of
dealers in their region, view digital photographs and maintain personal interest
lists. Wheels allows consumers to search multiple dealer inventories by make,
model, year, price range and mileage. It also allows consumers to request that
dealers assist them in their search for a specific vehicle.
Market opportunity
Navidec believes the market opportunity for Wheels is extremely promising. The
massive automotive market has quickly been impacted by Internet technology as
consumers have adopted the Internet as an important tool for making automotive
purchase decisions. The Internet allows consumers to collect the large amount of
information necessary to choose an auto from the comfort and convenience of home
or work. According to Toyota, Internet auto shoppers buy within two to three
days of visiting a dealership. Prior to the Internet, consumers bought only
after two to three weeks of shopping. Following are statistics about online
buying and its potential impact on the automotive industry:
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Online Auto Buying
- - 63 percent of all respondents to a recent study would use the Internet to
obtain information about the vehicles they are considering for purchase.
The Dohring Co.
- - 2.5 million people shopped for cars or parts over the Internet in the last
half of 1996. CommerceNet/Nielson Media
- - Chrysler believes that 25 percent of its vehicle sales will happen online
within four years. The Economist, March 8, 1997.
Automotive Market
- - The automotive market in the U.S. generates in excess of $600 billion each
year.
- - Auto dealers spend approximately $300 in advertising to sell each vehicle
in their inventory. Reynolds & Reynolds
- - Wheels significantly lowers cost of sales for each participating dealer.
Growth potential of Wheels
Navidec is well-positioned to experience significant growth from Wheels.
Colorado Wheels, Navidec's first Wheels implementation has far exceeded initial
expectations for participating dealers, customer leads and auto sales, as well
as for consumer acceptance. In December 1997, ColoradoWheels included the
inventory of 35 separate dealer franchises in Denver and generated 84 percent
more leads to those dealers than anticipated. Navidec's resulting revenue was
also 97 percent higher than budgeted.
Navidec continues to license Wheels to media partners in the top markets
nationwide and is currently negotiating final contracts in five major markets.
Navidec currently expects to license Wheels in 12 markets in 1998, and expects
to license up to 65 markets within 36 months.
Competitive positioning
Navidec's Wheels has several features that make it unique in the marketplace
today. First, it is a regional solution. Traditionally consumers have shopped
for autos within five to 10 miles of their home, and Navidec's experience has
shown that the Internet does not change a shopper's desire to purchase a vehicle
from a near by dealer. Consumers use the Internet as a tool to make a purchase
decision and generally want to see and drive the vehicle they are interested in.
Second, Wheels was the first online automotive sales solution to be licensed to
media partners. Wheels provides the sponsoring media with a method to generate
ongoing revenue from new media and secure a competitive position in a market.
Media partnerships ensure that Wheels is heavily promoted in each market.
Navidec does not pay the advertising costs to draw consumers to the Wheels site
in each market--all promotion is provided by its media partner.
Market Entry
Navidec developed the software framework of Wheels based on its experience and
the proven solution it created for the Burt Automotive Group in Denver. Burt
sells more than 46,000 automobiles each year and its 1996 sales were $813
million. Burt sells 100 cars each month from the Internet. Navidec's development
of Burt's online solution allowed Navidec to use its development for Burt as a
research and development tool for Wheels. Wheels has now been launched in
Colorado with all of the functionality required for future markets. Wheels can
literally be launched in additional markets within days, limiting the
time-to-market issues that have traditionally plagued software launches. The
ability to easily roll out markets also ensures that Navidec can enter new
markets quickly prior to other solutions.
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Products provided by Navidec to the auto industry
Navidec provides the total online automotive solution that includes regional
Wheels Web sites, individual dealer Web sites, touch-screen kiosks, and mobile
sales laptops. These tools use the same vehicle management technology to present
a dealer's inventory through multiple points of presence. Once the dealer's
inventory is available on Wheels, it can easily be channeled into unique dealer
websites, kiosks or laptops. The kiosks provide dealers or Wheels partners an
avenue to reach non-Internet users and consumers in high traffic locations such
as banks and malls. The mobile sales laptops create a portable inventory manager
for a dealer to take to fleet sales calls or trade shows. Both are powerful
tools to leverage Wheels participation and drive more new vehicle sales.
Potential applications in other vertical markets
Wheels is an inventory management system and its framework could be adapted to
manage and sell a vast array of inventory over the Web. Though Navidec has not
begun selling its technology into other vertical markets, it is examining its
potential applications.
Navidex
The Navidex tool is a dynamic, database driven table of contents that allows the
user to intuitively navigate the Web site.
Navimap
The Navimap tool is a graphical representation of site information with links to
other areas on the site.
Merchandise Engine
The Merchandise Engine creates an on-line catalog of products available for sale
through the Web site. The Merchandise Engine also contains a secure algorithm
for transmitting credit card information and is capable of capturing contact and
marketing information from customers placing orders.
Calendar Tool
The Calendar Tool provides a visual interface for searching through a database
of date oriented activities, announcements, meetings or other events.
E-Mail Tool
The E-Mail Tool is an e-mail engine which allows e-mail to be sent from the Web
site to e-mail addresses designated by the client for purposes such as customer
feedback, customer information capture and customer service inquiries.
Administration Tools
Administration Tools provide clients with the means to maintain and update their
sites themselves.
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Creative Services
Creative Services include digital image capture, post-processing services for
scanned images and graphic arts production. The Company offers these services to
assist clients in developing a uniform company image that spans both traditional
and electronic media. Actual output services provided by the Company include
photographic quality prints, color transparencies and printed output in all
sizes. The Company typically bills Creative Services on a project basis.
Client Services
Client Services include technical support, network implementation, Web site
maintenance and evolution, hosting of Web sites on a Company Internet server,
database management, product support and electronic messaging implementation.
The Company charges a variety of fees for these services, ranging from a
specific one time fee for change requests to a monthly fee for site maintenance.
Channel Services
Channel Services include all of the functions necessary to implement an Internet
marketing and distribution plan, including on-line sales of merchandise,
warehousing and order fulfillment. The Company generates revenues from these
services principally through sales commissions which vary depending upon the
level of Company involvement in the distribution plan.
Significant Clients
The Company's major Internet/Intranet Solutions clients include the following:
Account: Colorado Wheels by The Denver Post / Navidec
Industry: Retail Automobile Market
Description: Navidec developed Colorado Wheels to allow consumers to
search for new and pre-owned cars from the inventories of
multiple auto dealers in the local Denver metropolitan area.
Navidec's vision was to develop a system that would generate
sales leads to enable automobile dealers to sell cars using
the Internet as a new distribution channel. The vision
includes working with media partners within local
metropolitan markets who create awareness of the Web site
through advertising. Bank One is Navidec's national partner
to produce Wheels in markets nationwide.
The first regional Wheels site, Colorado Wheels,
coloradowheels.com, was unveiled in late 1997, and is
promoted by The Denver Post. Northwest Wheels was announced
in February 1998, and will be promoted by KOIN-Channel 6, a
CBS affiliate, to consumers in Portland and southern
Washington.
Shoppers who access the site can search for autos using a
variety of criteria, including make, model, year and price.
The site contains an inventory of thousands of new and
pre-owned vehicles, representing virtually all automobile
manufacturer makes and models. In addition to determining
which dealers have desired vehicles in inventory, shoppers
may view digital photos of the autos. Inventory is updated
on a daily basis to reflect additions and subtractions due
to sales or the arrival of additional vehicles.
For auto dealers, the system provides a new incremental
distribution channel, which generates highly qualified sales
leads. The system generates recurring revenues for both
Navidec and The Denver Post.
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Architecture: The Colorado Wheels site was written in Java, using high
performance Java servlets. The servlet architecture enables
complex query functions to be handled on the server end of
the system. Sybase is the underlying database used for the
site.
Development
Features:
- Locate a vehicle yourself or request an assisted search Search
by the following criteria:
- Range according to your zip code
- Year, make, model, type & price
- Construct an interest list based on your search results
- Search for dealers within your range based on your zip code
- Java development allows vendor and system independence
- Shared common code baseline and database with dealer Web sites
and
Navidec's Interactive Auto Sales Kiosks allow
synchronized updates across multiple systems
- Highly responsive query capabilities
Account: Denver Metro Convention and Visitor's Bureau
Industry: Conference Marketing and Reservations
Description: The Denver Metro Convention and Visitor's Bureau's (DMCVB),
primary responsibility is to market and promote the city of
Denver, Colo., as a prime convention location to businesses,
organizations and individuals worldwide.
The bureau's vision was to develop and implement a Web site
that would help market Denver to potential conventioneers
and visitors as well as to provide meeting planners,
visitors and local members with information regarding
activities, restaurants, accommodations, shopping and other
services available once they arrived. The goal was to
provide users with a single comprehensive resource for
information.
Highlights of the site include information about Denver and
the Rocky Mountain region. Detailed information is available
on Denver shopping, restaurants and menus, accommodation,
attractions and other services of interest to convention
groups and visitors to the city and region. A database
driven event calendar provides local events listings.
Architecture: The Web site is hosted on a Unix server running Netscape
Enterprise server. All of the software was developed using
HTML, CGI script, and Javascript. Functionality was cutting
edge when the site was developed in 1996.
Development The DMCVB Web site is comprehensive with a vast breadth of
Features: information. Key features of the site include:
- Database driven events calendar
- Database of convention bureau membership
- Searchable by type of product or service
- Searchable by name
- Database driven directories for the following local
information:
- Dining
- Accommodations
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- Transportation
- Attractions
- Art & Culture
- Recreation
- Services & Relocation
- Kid Stuff
- Shopping
- Meeting planning assistance
- Maps for convention sites
- Online booking services
- Rotating banner ads
- Interactive map constrains database driven searches b
region
Account: Primestar by TCI
Industry: Broadcast/Entertainment
Description: Primestar by TCI is a division of TCI Satellite
Entertainment, Inc. Primestar markets satellite television
services to approximately 40 percent of the United States.
The majority of its customers primarily are families
residing in rural parts of the country as opposed to major
metropolitan areas. Primestar's current offerings include
160 video and audio viewing channels, equipment to receive
and display television satellite signals which may be
purchased or rented, high quality digital picture or sound,
in-home service, 24-hour customer service and support, and a
full line of accessory products.
Primestar by TCI's vision was to build a Web site to market
its products to new markets, particularly metropolitan
markets. The goal was to design a family oriented site that
presents Primestar systems and programming as the premium
product on the market.
Navidec used state-of-the-art 3D rendered graphics to design
a colorful, three-dimensional Primestar Town. The Web site
created a typical small town setting, including such
features as the town hall, schoolhouse, newsstand, and
shopping mall.
Web site users are able to navigate around the town and into
buildings to receive up-to-date information about Primestar.
The site also allows users to participate in events like the
Virtual Town Meeting to address family issues and provide
information feedback to Primestar on such issues as TV
ratings and current program airings.
After perusing the most in-depth information available for
Primestar products, users can initiate their purchase with
an online order form or request a demo.
Architecture: The Primestar Web site is hosted on a Unix system using
Netscape Enterprise server. Navigation and mouse-over events
were designed using Java applets. The zip code search and
validation functions are database driven.
3D rendered artwork was used to maximize the adaptability
for changes and updates. For example, a holiday 'Layer'
could be created for every scene and scheduled during the
holiday season. Or, Primestar could change a light source to
be driven by the time the user logs on. For example, if a
user logs on in the A.M., the sun is in the east, and if the
user logs on at night, the town is moonlit. The screen shot
on the previous page shows an empty lot on the left side.
That lot is reserved for a sports complex where users can
get the latest information on sports programming. When
ready, Navidec can plug the stadium module into the existing
artwork.
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Development
Features:
3D rendered graphics
Java pop-up mouse events
Java content driven button bar navigation Zip code
validation database Zip code driven marketing data
collection Online order form Demo request form Town meeting
forum
Account: Live Entertainment
Industry: Broadcast/Entertainment
Description: Live Entertainment is a diversified company that specializes
in the marketing and distribution of media entertainment
both within the United States and internationally. Live's
primary business focus is the selling of motion pictures and
related movie merchandise used to promote and advertise
films.
Live Entertainment's goal was to develop a site which would
enable Live to provide information to the public as well as
enable users to purchase directly from the Live inventory of
videocassettes, interactive CDs and movie-related
merchandise.
Navidec designed the Live Web site to appear as a 3D store.
Visitors to the site enter the store and are able to click
on a piece of clothing merchandise to determine colors,
sizes and pricing prior to ordering online. The site also
has a home theater, enabling visitors to view video clips of
Live movies. Users also have access to Club Live, a video
club where site visitors can register and join to get new
information about special Live Entertainment movie,
merchandise and promotional offerings.
Architecture: The Web site is hosted on a Silicon Graphics Challenge-S
running the Irix operating system. The Web server software
is Netscape Enterprise Server 3.0. The animation was
developed using Macromedia Director 6.0. A Verity search
engine, Quicktime video and an MSQL Database are other
technologies used to develop and support the site.
Development
Features:
- Registration database with a variety of client reporting
tools
- Suite of page update tools
- Career opportunities
- Home page text
- Financial form
- International page(s)
- Web site monitoring and statistics
- Keyword search capability
- Shockwave animation throughout the site
- Awarded Shocked Site of the Day 3/16/97
- Custom secure E-Commerce engine, developed by Navidec
<PAGE>
Account: Destination Hotels & Resorts
Industry: Travel
Description: Destination Hotels and Resorts (DH&R) is the management
corporation for world-class luxury hotel and resort
properties located throughout the country. The distinctive
properties are designed to restore your spirit and stir your
imagination. The properties also include spacious and
well-designed conference facilities for business meetings.
This service enables users to shop for gift shop merchandise
from DH&R resorts.
DH&R's vision was to develop a unique, comprehensive Web
site which would enable potential customers the ability to
obtain the latest information regarding DH&R's resort
properties and provide them with tools for planning their
vacations and business travel. In addition to providing a
trip planning tool, DH&R also wanted to give customers who
had stayed at their properties as well as potential
customers the ability to relive or dream about their
vacations through online purchases of resort merchandise.
Architecture: The DH&R E-Commerce system is based on AT&T's Secure Buy.
This was one of the first Secure Buy systems implemented in
the country. In addition to providing access to the DH&R
Destination Express site via the Web, Navidec developed
on-site kiosks, which were deployed throughout DH&R's resort
properties.
Development Key information and features of the DH&R Web site include:
Features:
- Resort properties
- Offer special resort value packages (coming soon)
- On line access to the DH&R site via kiosks located at
resorts On line store for purchasing merchandise
- Navidec is also the fulfillment agent
Account: Bryan Memorial Hospital
Industry: Healthcare
Description: Bryan Memorial Hospital is the largest healthcare provider
in the state of Nebraska. In addition to providing
healthcare services for its customer base, the hospital
interfaces with numerous private and governmental agencies.
Bryan Memorial processes information and performs thousands
of data transactions in paper formats everyday.
Bryan's vision is to implement a state-of-the-art, open
systems solution to provide an effective, highly secure way
to perform all of its business transactions electronically.
Its goal is to operate much more efficiently and
productively and save operating costs in the process.
Navidec has installed a 700 seat pilot solution using
Netscape servers. This Netscape pilot replaced Bryan
Memorial's previous proprietary Novell GroupWare system. The
pilot program enables Bryan Memorial to implement new
e-mail, calendar, and Web capabilities for internal and
external communication. Netscape Directory Services with
LDAP and the Certificate Server provide ease of
administration and the security needed to perform electronic
data transfers. Annual overall savings for Bryan Memorial
are expected to be in excess of $200,000.
<PAGE>
Architecture: The 700 seat pilot program involved the installation of
seven Netscape servers on a DEC Alpha server running NT 4.0
SP3. The server was a two processor configuration with 512MB
of RAM and RAID 5 backup. Desktop clients were TCP/IP
enabled.
Development
Features: Open TCP/IP E-Mail (No gateways to Internet) Open
Calendaring (Unified LDAP Directory) Open Web Publishing
(Secure, controlled access) LDAP Directory Services (Single,
unified resource directory) Proxy Services (User
authentication & secure data transactions) Desktop
Management Services (consistent desktop user interface with
remote administration capabilities)
Account: Merrick & Company
Industry: Engineering
Description: Merrick & Company is a multi-discipline engineering and
architectural firm headquartered in Denver, Colo. Merrick
serves a variety of clients including Advanced Technologies,
Government, Light Industry and Heavy Industry. Merrick
employs a professional base of nearly 500 and has offices
throughout the United States.
Merrick's vision for its corporate intranet was the
comprehensive integration of all corporate systems and
organizations. Key corporate information is integrated from
HR, Marketing, Project Management, Administration,
Accounting and Project Tracking and Information Systems
organizations.
The goals and expected benefits of the Merrick Intranet are
as follows:
- Reduce operating costs
- Improve the accuracy and distribution of critical
information
- Improve service to employees Automate key processes
- Migrate from paper to electronic management of vital
corporate information
- Control increasing data synchronization, management and
security problems
Architecture: Navidec developed a completely custom intranet solution
supported by a data warehouse integrating data from seven
legacy systems. The intranet was developed using Microsoft
Web technology exclusively due to the client's requirements.
All departments and information driven functions are
integrated or impacted by the intranet.
Development
Features: Developed on the Microsoft IIS Web server on an NT system.
Custom applications for complex, state driven, multiple user
functions were developed in Java. The data warehouse was
developed in MS-SQL and integrates a total of seven Oracle,
MS Access and proprietary database systems. The data
warehouse will ultimately replace all of the minor legacy
systems and provides the quality control gate for
synchronizing data between the primary databases.
Database driven, custom applications include:
- Online organization charts
- Function and role based 'Yellow Pages'for the online
help desk
- Bid and proposal generation and tracking
- Project creation and tracking system
<PAGE>
- Key corporate financial information
- Marketing and forecast reports
- Quality assurance procedure, including training and
tracking
Other sites developed by the Company include Sunstrand Fluid Handling
(http://www.sfh.com) Richmond American Homes (http://richmondamerican.com)
currently under development, Denver Metro Convention & Visitors Bureau
(http://www.denver.org), Christopher Dodge (http://www.cdodge.com), Plastiprint
(http://plastiprint.com), On Sale Online (http://onsaleoneline.com), Lakewood
Hospitality Association (http://denverwesthotels.com), Cohen Brame & Smith PC
(http://www.cbspc.com), Kloppenberg (http://kloppenber.com ), Belmar Pharmacy
(http://www.belmarpharmacy.com), Kimmon Electric Co., Ltd.
(http://www.kimmon.com), KUSA-9News (http://www.9news.com), , Colorado
Recreation (http://www.coloradorecreation.com) and the American Animal Hospital
Association (http:// www.healthypet.com).
DISTRIBUTION AND RELATED SERVICES
The Company distributes high technology systems and components manufactured by
third parties and provides related services such as system integration and
installation. Product distribution clients range from small businesses to
Fortune 100 companies. Significant product distribution clients include Lockheed
Martin, Johnson Controls, Hughes Aircraft and US West. The Company serves both
as a national manufacturer's representative for the products of certain
international manufacturers and as a reseller of selected computer products in
the Rocky Mountain region. The Company focuses its distribution efforts towards
selling specialized, higher margin products. The Company intends to expand its
product distribution activities into electronic channels, including sales over
the Internet on the Company's Web site.
Distribution activities usually involve the receipt by the Company of orders for
equipment from prospective purchasers and the delivery and/or installation of
the equipment by the Company.
The Company purchases the equipment directly from the manufacturer or vendor and
resells it to the purchaser at a price which includes the Company's cost and a
profit margin. With the exception of graphics supplies and certain imported
components, the Company does not generally maintain an inventory of products it
distributes. The Company specializes in components, lasers, graphics, supplies,
and systems integration.
Components
The Company represents and distributes component products from several Japanese
manufacturers, principally Hayashi Denko and Sunmoulon. Products include
temperature sensors, push-button switches and numerous other specialized
components. These products are sold primarily through phone sales as well as
through a national network of manufacturer's representatives.
Most of these components are sold to original equipment manufactures ("OEMs")
which incorporate these components into their product designs. Key industries
for the Company's component products include: industrial process control,
heating, ventilation and air conditioning (HVAC), energy management, food
processing, consumer appliances and medical monitoring.
Graphics
The Company sells graphics products focused in the areas of data capture
(scanning, digital cameras and X-terminals) and color output (color printers and
LCD projection devices). The sale of many of these products is through
territorial authorizations granted to the Company by the manufacturers. The
Company has significant manufacturer alliances with Xerox, Tektronix, Sony,
InFocus and Hewlett Packard. Graphics products are sold primarily to end-user
customers by a direct sales team operating both in the field as well as through
an inside sales group which takes orders from existing customers.
<PAGE>
Supplies
The Company sells consumable supplies for color graphic output devices. The
Company stocks an inventory of popular consumables in order to provide prompt
response for customer orders. In addition, the supplies division sells
third-party extended warranty agreements for all hardware products.
Systems Integration
The Company offers network design and implementation services to corporate
customers in the Rocky Mountain region, which services often include the
acquisition and location of network equipment and servers. These services are
performed by a direct sales team. The primary manufacturers of network equipment
and servers distributed by the Company are Compaq, IBM and Hewlett Packard.
EMPLOYEES
There are currently 51 full-time employees of the Company. These include nine in
Client Services, five in creative services, thirteen in World Wide Web Services,
two in Marketing Services, fourteen in sales, and eight in management and
administration.
The Company expects to hire ten additional full-time employees in the twelve
months following this report. The Company currently anticipates three new hires
dedicated to sales, four new hires dedicated to client services and three new
technical employees.
COMPETITION
Existing competitors to the Internet/Internet Solutions business include Online
Systems Services, Inc., Eagle River Interactive, Inc. and Open Market, Inc., all
public companies traded on NASDAQ, as well as a large number of regional firms
providing similar services to those of the Company. Potential competitors in
this business include browser software vendors, PC and UNIX software vendors and
on-line service providers. Additional competition comes from numerous
client/server companies, database companies, multimedia companies, advertising
agencies, document management companies, networking software companies, network
management companies and educational software companies. In a broader sense, the
Company may compete with the more traditional advertising and distribution
mediums, such as radio, television and mail order outlets.
Potential competition also comes from the Company's clients, who could choose to
address their Internet/Intranet needs through in-house personnel. Some of the
Company's current and many of the Company's potential competitors have longer
operating histories, greater name recognition, larger installed customer bases
and significantly greater financial, technical and marketing resources than
those of the Company. Competitive factors in the Internet/Intranet Solutions
business include core technology, breadth of services offered, creative and
artistic ability, marketing and distribution resources, customer service and
support and price.
A large number of companies act as re-marketers of computer networks, graphics
equipment and components, and the Company's competition in the high technology
product distribution business is therefore also intense. In some instances, the
Company, in acting as a re-marketer, may compete with the original manufacturer.
In addition, a large number of companies offer the reprographic services offered
by the Company and competition in this area is also intense. Many of the
Company's competitors in the high technology product distribution business have
longer operating histories, greater name recognition, larger installed customer
bases, larger sales staffs and substantially greater financial, technical and
marketing resources than those of the Company.
<PAGE>
Competitive factors in the distribution business include technical expertise,
breadth of products offered, product quality, performance and reliability,
price, name recognition, customer service and support and access to distribution
channels.
Competitors in the automotive market
There are numerous online automotive sales Web sites on the Internet today, but
none that employ the same total solution strategy as Wheels. Other online auto
sales products include Carpoint, Auto-by-Tel, AutoConnect, and AutoVantage. A
few Internet developers are also attempting to sell online sales products to
media, but none offer the total sales solution that Wheels offers to ensure that
dealers sell vehicles, including important add-ons such as touch-screen kiosks
and mobile sales laptops. Another important distinction is that Navidec
understands the auto sales process and even trains dealers to help them sell
more autos from the leads generated by Wheels. Navidec employees have over 40
years of experience in the automotive industry and have expended over 190,000
hours into the development of the Wheels solution.
Navidec has hired a team of experts well versed in the automotive business, and
has the president of Denver's largest independently owned dealership group (Burt
Automotive) on its board of directors. These experts enable Navidec's access to
the latest industry information and a deep understanding of the automotive
business and its processes. This team has enabled Navidec to develop a solution
which primary focus is on enabling automotive dealers the ability to sell more
cars.
Both the Internet/Intranet Solutions business and the high technology product
distribution business are characterized by low financial barriers to entry and
frequent introductions of new products. The Company therefore expects
competition in each of its businesses to increase in the future. There can be no
assurance that the Company will be able to successfully compete in its
businesses. Although the Company believes that it has the requisite management,
technical and creative abilities to successfully compete, the intense level of
competition in each of the Company's businesses could materially adversely
affect the Company's future operating results and financial condition.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's headquarters are located at 14 Inverness Drive, Building F, Suite
116, Englewood, Colorado, in a 8,900 square foot facility, which includes
approximately 1,500 square feet in warehouse space. The facility is occupied
under a lease with an unaffiliated party expiring in June 2001 and providing for
a current monthly lease rate of $8,150. The Company also leases space at 1300
Plaza North, Suite 101, Lafayette, CO, this is a 1,500 square foot facility. The
facility is occupied under a lease with an unaffiliated party expiring in June
1999 and providing for a monthly lease rate of $2,180. The Company may lease
additional warehouse and office space if needed to support the growth in
traditional and on-line product distribution.
ITEM 3. LEGAL PROCEEDINGS
The Company is currently not involved in any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1997.
<PAGE>
PART II.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock commenced trading on the Nasdaq SmallCap Market under
the symbol "NVDC" on February 11, 1997. The Company also has a class of common
stock purchase warrants ("Warrants") listed on the Nasdaq SmallCap market under
the symbol "NVDCW." The Warrants also commenced trading on February 11, 1997.
Common Stock Warrants
-------------------- --------------------
Quarter Ended High Low High Low
March 31, 1997 $5.625 $5.125 $0.750 $0.625
June 30, 1997 $6.000 $3.250 $0.875 $0.375
September 30, 1997 $7.000 $5.250 $1.031 $0.625
December 31, 1997 $7.000 $4.063 $1.031 $0.025
The closing price as of March 30, 1998 was $6.375 and $0.6875 for the common
stock and warrants respectively.
As of March 30, 1998, the Company had 78 common shareholders of record and
believes that approximately 1,400 persons beneficial owns street named
positions.
The Company has not declared any cash dividends on its common shares for the
last two fiscal years. The Company currently intends to retain funds from
earnings, if any, from future grow and therefore does not intend to pay any cash
dividends in the foreseeable future on its Common Stock. The Company is not
currently a party to any agreement restricting the payment of dividends.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement Regarding Forward Looking Statements. The matters discussed
here and elsewhere in this report, when not historical matters, are forward
looking statements that involve a number of risks and uncertainties that could
cause actual results to differ materially from projected results. Such factors
include, among other things, the rapidly developing and unpredictable nature of
the Internet, intense competition in all of the Company's markets, obsolescence
of products and technological changes, the need for management of growth and the
dependence on relationships of the Company with its customers and suppliers, as
well as other risk factors described from time to time in the Company's filings
with the Securities and Exchange Commission.
Overview
The Company was organized as ACI Systems, Inc. in July 1993 and changed its name
to NAVIDEC, Inc. in July 1996 when it acquired IPI, a designer and developer of
Internet World Wide Web sites. The Company's principal sources of revenue are
from the resale of computer equipment, high technology peripherals and
electronic components manufactured by independent vendors (Product Distribution)
and services related to Internet/Intranet Solutions, license fees from recurring
lead revenue from the Wheels solution. The Company issued an aggregate of
678,877 shares of Common Stock to the shareholders of IPI and a promissory note
in the amount of $75,000 to one shareholder of IPI in exchange for all of the
issued and outstanding stock of IPI. The Company acquired TouchSource, Inc., a
designer and developer of interactive Kiosks, in July 1997. The Company issued
an aggregate of 207,000 shares of Common Stock to the shareholders of TS and TS
was merged into the Company in exchange for all of the issued and outstanding
stock of TS. The merger and acquisition were consummated in order to expand the
Company's business model of combined expertise in traditional marketing and
distribution and Internet/ Intranet technology.
<PAGE>
The Company's strategy is to increase revenue generated by its two core
competencies: (1) Internet/Intranet Solutions, which are focused in five major
market areas, including computer and network infrastructure equipment, software
and services, content aggregation, electronic commerce and order fulfillment,
and (2) Product Distribution. The Company has built and intends to continue to
build an infrastructure that assumes this strategy will succeed. Management
believes that, based on the current product mix, the Company's new Wheels
solution will provided for the majority of its increased revenues in 1998 and
years to follows. The Wheels solution combines the companies two core
competencies of Internet/Intranet solutions and product distribution. Wheels is
designed on a state of the art platform that allows it to distribute electronic
information out to consumers through regional wheels web sites, individual
dealer web sites, remote automotive kiosks and also in mobile sales laptops. The
failure of the Company to achieve this strategy could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company recognizes revenue upon delivery of its Internet/Intranet Solutions
and Product Distribution goods. Internet/Intranet Solutions generally begin with
consulting arrangements that are billed on an hourly basis and progress to a bid
for a proposed project. Deposits are then taken upon acceptance of the bid. Most
of the Company's customers elect to update and expand their Web sites
frequently, and clients are billed monthly on a time and materials basis for
these services. Additional sources of ongoing revenue include revenue from
advertising sold by the Company on clients Web sites, revenue from sales of
merchandise and services over clients Web sites and revenue from maintenance and
hosting of client Web sites.
From August through October, 1996, the Company raised net proceeds of
approximately $1,233,000 from the sale of 10% Unsecured Subordinated Convertible
Promissory Notes (the "Bridge Promissory Notes") in a private placement (the
"Bridge Private Placement"). These notes were converted by their terms into an
aggregate of 349,126 Units upon consummation of the Company's public offering
described below. The Units were identical to the Units offered in the public
offering.
On February 14, 1997, the Company consummated a public offering of 1,000,000
Units consisting of one share of Common Stock and one Common Stock purchase
warrant ("Warrant"). Each Warrant entitles the holder to purchase one share of
Common Stock at a price of $7.20 per share until February 10, 2002. The Warrants
are redeemable at the option of the Company, at $.05 per Warrant, at any time on
or after February 10, 1998 or such earlier date as may be determined by Joseph
Charles & Associates, the managing underwriter in the public offering. Of the
1,000,000 shares of Common Stock and 1,000,000 Warrants included in the
offering, 755,000 shares of Common Stoc and 1,000,000 Warrants were sol by the
Company, for net proceeds of approximately $3,436,000 (after subtracting the
underwriting discount and other expenses of the offering). The remaining 255,000
shares of Common Stock were sold by the investors in the Bridge Private
Placement.
From November 1997 to March 1998, the Company raised net proceeds of
approximately $888,000 from the issuance of 233,577 shares of commons stock and
warrants from a private placement. Each Warrant entitles the holder to purchase
one share of Common Stock at a price of $7.20 per share until February 10, 2002.
The Warrants are redeemable at the option of the Company, at $.05 per Warrant,
at any time on or after February 10, 1998.
No holder of the public offering or private placement Warrants, as such, will be
entitled to vote or receive dividends or be deemed the holder of shares of
Common Stock for any purpose what so ever until such Warrants have been duly
exercised and the purchase price has been paid in full. The Warrants are
redeemable at the option of the Company, at $.05 per Warrant, at any time on or
after February 10, 1998 upon thirty days' prior written notice, at any time when
the closing price per share of Common Stock for twenty consecutive trading days
within the thirty-day period prior to the date notice of redemption is given
equals or exceeds $8.40 and at such time there is a current effective
registration statement covering the shares of Common Stock underlying the
Warrants.
<PAGE>
Results of Operations
The following tables sets forth for the periods indicated the percentage of net
sales represented by certain line items included in the Company's statement of
operations.
Year Ended
December 31
1997 1996
Net Sales 100% $6,008,000 100% $5,470,000
Cost of Sales 70 4,219,000 81 4,425,000
Gross Margin 30 1,789,000 19 1,045,000
Operating Expense 73 4,367,000 40 2,259,000
Other Income (Expense) (25) (1,529,000) (3) ( 201,000)
Net Income (Loss) (68) (4,107,000) (24) (1,415,000)
Net sales for fiscal 1997 were $6,008,000 which represents an increase of 10%
over net sales of $5,470,000 in fiscal 1996. The increase is primarily
attributed to sales of Internet/Intranet Solutions, which were $1,519,000 an
increase of 290% over net sales of $389,000 in fiscal 1996. Wheels which was
introduced in the fourth quarter of 1997 accounted for $232,000 or 56% of the
$413,000 in Internet revenue during the quarter. In addition, net sales of
Computer Infrastructure were $1,819,000 an increase of 49% over net sales of
$1,221,000. The increase in net sales in all two categories was primarily
attributable to increased marketing activities and greater market penetration.
Net sales in product distribution were $2,662,000 a decrease of 31% from net
sales of $3,860,000 in fiscal 1996. The decrease in sales is attributed to the
discontinuation of distribution products that didn't have strong gross profit
and or recurring sales. In 1997 Kimmon Electric, Inc., the Company's supplier of
laser products, began marketing its lasers directly in the United States through
Kimmon Electric USA, Inc. This resulted in a decrease in sales of $863,000. The
decrease affected the Company's net sales but due to the lower margins of
distribution did not materially adversely effect the gross margin for 1997.
Gross margin was 30% during fiscal 1997, an increase of 11% over a gross margin
of 19% in fiscal 1996. The increase in the Company's gross margin was attributed
to management's elimination of several distribution products that carried low
gross margin and the strong gross margin on Internet/Intranet Solutions which
were at 57%.
Operating expenses for fiscal 1997 were $4,367,000 compared with $2,259,000 for
fiscal 1996. The increase in operating expenses was primarily the result of an
increase in staff and marketing activity and legal and consulting fees.
Operating expenses are expected to remain stable as the Company continues to
invest in the development of high end Internet/Intranet Solutions.
Net interest expense for fiscal 1997 was $236,000 compared with $204,000 for
fiscal 1996. The increase was a result of the Bridge Promissory Notes. The
company expects interest expense to decrease in 1998.
In 1998 the company experienced $1,305,000 in expense for the impairment of
goodwill. The goodwill was the result of the merger with IPI in 1996 and the
acquisition of TS (see additional discussion on impairment, which follows) in
1997.
<PAGE>
Liquidity and Capital Resources
Through December 31, 1997, the Company funded its operations primarily through
equity investments, through the companies IPO and subsequent Private Placements,
and revenues generated from operations, loans from principal shareholders and
employees, lines of credit and factoring arrangements made available to it by
banks. On December 31, 1997, the Company had cash and cash equivalents of
$369,000 and a net working capital of $678,000. This compares with cash and cash
equivalents of $231,000 and a working capital deficit of $711,000 on December
31, 1996.
Cash used in operating activities for the Company totaled $3,359,000 and
$631,000 for fiscal 1997 and 1996, respectively. Cash used in investing
activities consisted of expenditures for property and equipment and cost of the
acquisition of TouchSource. Capital expenditures increased to $475,000 in fiscal
1997 from $472,000 during fiscal 1996.
Cash from financing activities in fiscal 1997 consisted of advances from
factoring arrangements of $634,000 net of repayments of $444,000, proceeds from
the issuance of common stock of $,4,153,000, borrowings of $333,000 net of
payments of $369,000. This compares to 1996 borrowings of $1,435,000 from the
Bridge Private Placement, $256,000 in loans from shareholders and employees and
$4,196,000 in advances through the factoring arrangement with the Company's
bank, net of $226,000 in repayments of shareholder/employee loans and $4,382,000
in factoring and line of credit payments.
The Company has not recorded a deferred tax asset as it cannot conclude to date
that it is more likely than not that the deferred tax asset will be realized.
Impairment of Long-Lived Assets
Effective July 1, 1996 the Company acquired 100% of the stock of IPI for 679,000
shares of common stock of the Company and a $75,000 note payable in a purchase
transaction. The acquisition was valued at approximately $750,000 and resulted
in goodwill of approximately $850,000 being recorded. The expected future cash
flows associated with the technology previously developed by IPI declined due to
rapidly changing technologies and increased competition for products developed
with the IPI technology. In addition, during the fourth quarter of 1997, after
the introduction of new Internet solutions by the Company, management decided to
focus the Company on its automotive solution. As such, the Company reevaluated
the goodwill related to this acquisition and recorded an impairment expense of
$598,000, resulting in a remaining net balance of $20,000. This amount will be
amortized over the next year.
Effective July 31, 1997, the Company acquired 100% of the stock of TouchSource
for 207,000 shares of common stock of the Company in a purchase transaction. The
acquisition was valued at approximately $776,000 and resulted in goodwill of
approximately $859,000 being recorded. Subsequent to the acquisition, Java
technologies developed far more rapidly than expected, causing the company to
replace a large portion of the software developed by TouchSource which has
reduced the expected future cash flows associated the TouchSource technology.
Furthermore, the Company intends to integrate the TouchSource technology with
its other products and market it primarily to the automotive industry, which was
not a market focus of TouchSource. As such, the Company also reevaluated the
related goodwill, and recorded an impairment expense of $707,000 resulting in a
remaining net balance of $80,000. This amount is being amortized over the next
year.
Inflation
The Company does not believe that inflation will have a material impact on the
Company's future operations.
Year 2000
Management has initiated an enterprise-wide program to prepare the Company's
computer systems and applications for the year 2000. The Company expects to
incur internal staff cost as well as consulting and other expenses related to
the year 2000 project. At this point, the Company is not able to determine the
estimated cost for its year 2000 project and, if unresolved, whether the year
2000 issue will have a material impact on the operations of the Company.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
<PAGE>
NAVIDEC, INC.
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Independent Auditor's Report....................................... F-2
Balance Sheet - December 31, 1997.................................. F-3
Statements of Operations - For the Years Ended
December 31, 1997 and 1996................................. F-4
Statement of Changes in Stockholders' Equity (Deficit) -
For the Years Ended December 31, 1996 and 1997............. F-5
Statements of Cash Flows - For the Years
Ended December 31, 1997 and 1996........................... F-6
Notes to Financial Statements...................................... F-7
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
NAVIDEC, Inc.
Englewood, Colorado
We have audited the accompanying balance sheet of NAVIDEC, Inc. as of December
31, 1997 and the related statements of operations, changes in stockholders'
equity (deficit), and cash flows for the years ended December 31, 1997 and 1996.
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 financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
1997, and the results of its operations and its cash flows for the years ended
December 31, 1997 and 1996, in conformity with generally accepted accounting
principles.
HEIN + ASSOCIATES LLP
Denver, Colorado
March 5, 1998
F-2
<PAGE>
NAVIDEC, INC.
BALANCE SHEET
DECEMBER 31, 1997
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 369,000
Accounts receivable:
Trade, net of $50,000 allowance for doubtful accounts 726,000
Retainage 21,000
Costs and estimated earnings in excess of billings 106,000
Note receivable, related party 60,000
Inventories 549,000
Prepaid expenses and other current assets 86,000
-----------
Total current assets 1,917,000
PROPERTY AND EQUIPMENT, net 713,000
OTHER ASSETS:
Intangibles, net 169,000
Restricted certificate of deposit 300,000
-----------
TOTAL ASSETS $ 3,099,000
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current portion of capital lease obligations $ 37,000
Notes payable 63,000
Accounts payable 778,000
Accrued liabilities 171,000
Payable to factor 190,000
-----------
Total current liabilities 1,239,000
-----------
CAPITAL LEASE OBLIGATIONS, net of current portion 95,000
NOTES PAYABLE, net of current portion 215,000
COMMITMENTS AND CONTINGENCIES (Notes 2 and 8)
STOCKHOLDERS' EQUITY:
Common stock, no par value; 20,000,000 share
authorized; 3,201,000 shares issued and outstanding 6,768,000
Accumulated deficit (5,218,000)
-----------
Total stockholders' equity 1,550,000
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,099,000
===========
See accompanying notes to these financial statements.
F-3
<PAGE>
NAVIDEC, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------
1997 1996
----------- -----------
NET SALES $ 6,008,000 $ 5,470,000
Cost of sales 4,219,000 4,425,000
----------- -----------
GROSS MARGIN 1,789,000 1,045,000
Operating expense 4,367,000 2,259,000
----------- -----------
OPERATING LOSS (2,578,000) (1,214,000)
OTHER INCOME (EXPENSE):
Interest expense, net (236,000) (204,000)
Other 12,000 3,000
Impairment of goodwill (1,305,000) --
----------- -----------
Other, Net (1,529,000) (201,000)
----------- -----------
NET LOSS $(4,107,000) $(1,415,000)
=========== ===========
NET LOSS PER SHARE (Basic and Diluted) $ (1.47) $ (.73)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES AND
EQUIVALENTS OUTSTANDING 2,799,526 1,948,000
=========== ===========
See accompanying notes to these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
NAVIDEC, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
COMMON STOCK
----------------------------- ACCUMULATED
SHARES Amount Deficit Total
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
BALANCES, January 1, 1996 217,000 $ 63,000 $ (118,000) $ (55,000)
Exercise of stock options 805,000 2,000 -- 2,000
Compensation recognized related to
transfers of common stock to
employees -- 83,000 -- 83,000
Shares issued in acquisition of IPI 679,000 675,000 -- 675,000
Reclassification of accumulated
deficit in connection with
termination of tax status as a
Subchapter S-Corporation -- (422,000) 422,000 --
Net loss -- -- (1,415,000) (1,415,000)
----------- ----------- ----------- -----------
BALANCES, December 31, 1996 1,701,000 401,000 (1,111,000) (710,000)
Conversion of unsecured promissory
notes to common stock 104,000 1,438,000 -- 1,438,000
Issuance of common stock and
warrants in a public offering, net
of offering costs 1,000,000 3,436,000 -- 3,436,000
Issuance of common stock for
acquisition of TouchSource 207,000 776,000 -- 776,000
Issuance of common stock and
warrants in a private placement,
net of offering costs 189,000 717,000 -- 717,000
Net loss -- -- (4,107,000) (4,107,000)
----------- ----------- ----------- -----------
BALANCES, December 31, 1997 3,201,000 $ 6,768,000 $(5,218,000) $ 1,550,000
=========== =========== =========== ===========
See accompanying notes to these financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAVIDEC, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(4,107,000) $(1,415,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 865,000 173,000
Impairment of goodwill 1,305,000 --
Stock based compensation -- 83,000
Provision for bad debt 41,000 59,000
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (627,000) (56,000)
Costs and estimated earnings in excess of billings (106,000)
Inventories (315,000) 8,000
Other assets (52,000) (33,000)
Increase (decrease) in:
Accounts payable and accrued liabilities (92,000) 352,000
Other liabilities (271,000) 198,000
----------- -----------
Net cash used in operating activities (3,359,000) (631,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property and equipment (475,000) (472,000)
Cash acquired in mergers 7,000 5,000
Acquisition costs incurred (32,000) (38,000)
----------- -----------
Net cash used in investing activities (500,000) (505,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from factoring of accounts receivable 634,000 491,000
Payments to factor (444,000) --
Proceeds from issuance of common stock 4,153,000 2,000
Proceeds from issuance of notes payable 333,000 5,887,000
Payment on notes payable and capital leases (369,000) (4,608,000)
Payment for deferred financing and offering costs (10,000) (405,000)
----------- -----------
Net cash provided by financing activities 4,297,000 1,367,000
INCREASE IN CASH AND CASH EQUIVALENTS 438,000 231,000
CASH AND CASH EQUIVALENTS, beginning of period 231,000 --
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 669,000 $ 231,000
=========== ===========
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Cash payments for interest $ 79,000 $ 155,000
=========== ===========
Net assets, net of cash assumed, acquired in merger of
NAVIDEC with IPI and TouchSource $ 769,000 $ 670,000
=========== ===========
See accompanying notes to these financial statements.
F-6
</TABLE>
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------------
Organization and Nature of Operations - The Company was incorporated in the
State of Colorado in 1993 and distributes various high technology and other
products through traditional and electronic channels. Effective on July 1,
1996, the Company merged with Interactive Planet, Inc. (IPI) and as a
result, the Company also provides comprehensive Internet and Intranet
solutions, including design and development of World Wide Web sites,
marketing, database integration, electronic commerce and order
fulfillments. Effective July 31, 1997, the Company acquired TouchSource,
and as a result, the Company designs and markets touch screen computer
kiosks.
Cash Equivalents - For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments with original maturities of
three months or less to be cash equivalents.
Inventories - Inventories are stated at the lower of cost or market,
determined by the first--in, first-out method and consist primarily of
products held for resale.
Property and Equipment - Property and equipment is stated at cost.
Depreciation is computed over the estimated useful lives of the assets
using the 200% declining balance method generally over a three to seven
year period. Leasehold improvements are amortized on the straight-line
method over the lesser of the lease term or the useful life. Expenditures
for ordinary maintenance and repairs are charged to expense as incurred.
Upon retirement or disposal of assets, the cost and accumulated
depreciation are eliminated from the account and any gain or loss is
reflected in the statements of operations.
Intangibles - Intangibles represents organization costs and the excess of
the purchase price paid over the net liabilities acquired in the IPI and
the TouchSource acquisition, net of amortization costs and impairment loss.
The remaining balance in intangibles will be amortized during 1998.
Impairment of Long-Lived Assets - In fiscal 1997, the Company adopted
Financial Accounting Standards Board Statement No. 121, Accounting for
Impairment of Long-Lived Assets (FAS 121). In the event that facts and
circumstances indicate that the cost of assets or other assets may be
impaired, an evaluation of recoverability would be performed. If an
evaluation is required, the estimated future undiscounted cash flows
associated with the asset would be compared to the asset's carrying amount
to determine if a write-down to market value or discounted cash flow value
is required. Adoption of FAS 121 had no effect on the December 31, 1997
financial statements other than the impairment of goodwill associated with
IPI and TouchSource to the value of the expected future cash flows
associated with the acquired assets.
Fair Value of Financial Instruments - The estimated fair values for
financial instruments are determined at discrete points in time based on
relevant market information. These estimates involve uncertainties and
cannot be determined with precision. The carrying amounts of cash, trade
accounts receivable, accounts payable, and accrued liabilities approximate
fair value.
Revenue Recognition - The Company recognizes revenue upon delivery of its
Internet/Intranet and Kiosk Solutions and Product Distribution goods.
Internet/Intranet and Kiosk Solutions generally begin with consulting
F-7
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
arrangements, which are billed on an hourly basis and/or on a percentage of
completion method on fixed bid projects. Most of the Company's customers
elect to update and expand their Web site frequently, and clients are
billed monthly on a time and materials basis for these services. Additional
sources of ongoing revenue include revenue from advertising sold by the
Company on clients' Web sites, revenue from sales of merchandise and
services over clients' Web sites and revenue from maintenance of client Web
sites. The Company receives and records a percentage of the gross revenue
from advertising and merchandise sales immediately upon completion of these
sales.
Revenues from long-term contracts are recognized on the
percentage-of-completion method for individual contracts, commencing when
progress reaches a point where experience is sufficient to estimate final
results with reasonable accuracy. Revenues are recognized in the ratio that
costs incurred bear to total estimated costs. Changes in job performance,
estimated profitability and final contract settlements may result in
revisions to costs and income, and are recognized in the period in which
the revisions are determined.
Contract costs include all labor costs and those indirect costs related to
contract performance. General and administrative costs are charged to
expense as incurred.
Profits on short-term contracts are recorded upon substantial completion of
each contract. Revenues from time and material contracts are recognized
currently as the work is performed.
At the time a loss on a contract becomes known, the entire amount of the
estimated ultimate loss on both short and long-term contracts is accrued.
Costs and estimated earnings in excess of billings on uncompleted
contracts," represents revenues recognized in excess of amounts billed. The
liability, "billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenues
recognized.
Loss Per Share - Loss per share is presented in accordance with the
provisions of Statement of Financial Accounting Standards No. 128 Earnings
Per Share (FAS 128). FAS 128 replaced the presentation of primary and fully
diluted earnings (loss) per share (EPS) with a presentation of basic EPS
and diluted EPS. Basic EPS is calculated by dividing the income or loss
available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur is securities or other contracts to issue common
stock were exercised or converted into common stock. Basic and diluted EPS
were the same for 1997 and 1996 because the Company had losses from
operations and therefore, the effect of all potential common stocks was
anti-dilutive.
Options to purchase 297,000 shares of common stock, and warrants to
purchase 1,642,417 shares of common stock were outstanding at December 31,
1997. See Note 9, Stockholders' Equity, for a detailed discussion of the
options and warrants issued by the Company.
Income Taxes - During 1996, the Company converted to a "C Corporation" and
adopted Statement of Financial Accounting Standards No. 109, which requires
recognition of deferred tax assets and liabilities for the expected future
F-8
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined, based on the difference between the financial
statements and tax bases of asset and liabilities using enacted tax rates
in effect for the year in which the differences are expected to reverse.
Pro forma income tax expense prior to the adoption of the "C Corporation"
status is not presented due to losses for the year and a valuation
allowance for the loss carryovers which would have been recorded under FASB
109 after the Company's proposed public offering and the termination of the
"S" corporate election.
Use of Estimates - The preparation of the Company's financial statements in
conformity with generally accepted accounting principles requires the
Company's management to make estimates and assumptions that affect the
amounts reported in these financial statements and accompanying notes.
Actual results could differ from those estimates. The Company makes
significant estimates, including the allowance for doubtful accounts and
the life of the excess of purchase price over net assets acquired
(goodwill) in both the IPI merger and the TouchSource acquisition. Due to
the uncertainties inherent in the estimation process, it is at least
reasonably possible that the life of goodwill could be revised over the
next year and such revisions could be material.
New Pronouncements - Statement of Financial Accounting Standards 130
Reporting Comprehensive Income and Statement of Financial Accounting
Standards 131 Disclosures About Segments of an Enterprise and Related
Information were recently issued. Statement 130 establishes standards for
reporting and display of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all
changes in equity except those resulting from investments by owners and
distributions to owners. Among other disclosures, Statement 130 requires
that all components of comprehensive income shall be classified based on
their nature and shall be reported in the financial statements in the
period in which they are recognized. A total amount for comprehensive
income shall be displayed in the financial statements where the components
of other comprehensive income are reported. Statement 131 supersedes
Statement of Financial Accounting Standards 14 Financial Reporting for
Segments of a Business Enterprise. Statement 131 establishes standards on
the way that public companies report financial information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial statements issued
to the public. It also establishes standards for disclosures regarding
products and services, geographic areas, and major customers. Statement 131
defines operating segments as components of a company about which separate
financial information is available that is evaluated regularly by the chief
operating decisionmaker in deciding how to allocate resources and in
assessing performance.
Statements 130 and 131 are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for
earlier years to be restated. Because of the recent issuance of these
standards, management has been unable to fully evaluate the impact, if any,
the standards may have on the future financial statement disclosures.
Results of operations and financial position, however, will be unaffected
by implementation of these standards.
F-9
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
2. LIQUIDITY:
---------
The Company has incurred net losses for the past two years and has
experienced negative cash flows from operations. As described in Note 9,
management has taken the following actions to improve the Company's cash
flow and operating results.
o In February 1997, the Company completed an initial public
offering for the sale of its common stock and warrants which
resulted in gross proceeds of approximately $4,555,000.
o The Company is currently in the process raising additional
capital in a private placement.
The Company is also aggressively working to increase revenues and improve
operating results to ultimately achieve profitability. No assurances can be
given that the Company will be successful in completing its private
offering or ultimately achieving profitability.
3. ACQUISITION AND IMPAIRMENT OF IPI AND TOUCHSOURCE TECHNOLOGIES:
--------------------------------------------------------------
Effective July 1, 1996, the Company acquired 100% of the stock of IPI for
679,000 shares of common stock of the Company and a $75,000 note payable in
a purchase transaction. The acquisition was valued at approximately
$750,000 and resulted in goodwill of approximately $850,000 being recorded.
Projected future cash flows associated with the technology previously
developed by IPI declined due to rapidly changing technologies and
increased competition for products developed with the IPI technology. In
addition, during the fourth quarter of 1997, after the introduction of new
Internet solutions by the Company, management decided to focus the Company
on its automotive solution. As such, the Company reevaluated the goodwill
related to this acquisition and recorded an impairment expense of $598,000,
resulting in a remaining net balance of $20,000. This amount will be
amortized over the next year.
Effective July 31, 1997, the Company acquired 100% of the stock of
TouchSource for 207,000 shares of common stock of the Company in a purchase
transaction. The acquisition was valued at approximately $776,000 and
resulted in goodwill of approximately $859,000 being recorded. Subsequent
to the acquisition, technologies developed more rapidly than expected,
which has reduced the expected future cash flows associated with the
TouchSource technology. Furthermore, the Company intends to integrate the
TouchSource technology with its other products and market it primarily to
the automotive industry, which was not a market focus of TouchSource. As
such, the Company also reevaluated the related goodwill, and recorded an
impairment expense of $707,000, resulting in a remaining net balance of
$80,000. This amount is being amortized over the next year.
F-10
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
The unaudited following pro forma information presents the effect of the
TouchSource merger as if it occurred on January 1, 1996.
For the Years Ended
December 31,
------------------------------
1997 1996
----------- -----------
Revenue $ 6,362,000 $ 6,046,000
=========== ===========
Net loss $(4,377,000) $(1,541,000)
=========== ===========
Loss per share $ (1.50) $ (.72)
=========== ===========
Common share and
equivalents outstanding 2,920,000 2,155,000
=========== ===========
The above pro forma information is not necessarily indicative of the
financial results which would have occurred if such acquisition had taken
place at the earlier date, nor of future operating results.
4. CONCENTRATION OF CREDIT RISK:
----------------------------
Credit risk represents the accounting loss that would be recognized at the
reporting date if counterparties failed completely to perform as
contracted. Concentrations of credit risk (whether on or off balance sheet)
that arise from financial instruments exist for groups of customers or
counterparties when they have similar economic characteristics that would
cause their ability to meet contractual obligations to be similarly
effected by changes in economic or other conditions described below. The
Company intends to market a significant portion of its products to the
automotive industry in the forthcoming year. This may create a market
concentration in future years. Sales to this industry have not been
significant in the past.
A geographic concentration exists because the Company has historically sold
approximately 40% of its products and services in the State of Colorado
with remaining revenue derived from sales throughout the United States.
Financial instruments that subject the Company to credit risk consist
principally of accounts receivable. The Company performs periodic credit
evaluations on its customers' financial condition to reduce its exposure to
credit risks.
At December 31, 1997, the Company maintained cash balances with a
commercial bank, which were approximately $414,000 in excess of FDIC
insurance limits.
The Company is dependent on four key suppliers. The Company has contracts
with these suppliers, however, they are not exclusive and can be terminated
at any time. Management believes that while the Company may suffer a
short-term adverse impact, it would be able to replace anyone of these
suppliers.
F-11
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
5. CONTRACTS IN PROGRESS:
---------------------
The following applies to contracts in progress as of December 31, 1997:
Costs incurred on contracts in progress $ 30,000
Estimated earnings 76,000
----------
106,000
Less progress billings --
----------
Costs and estimated earnings in excess of billings $ 106,000
==========
6. PROPERTY AND EQUIPMENT:
----------------------
Property and equipment at December 31, 1997 consists of the following:
Furniture, fixtures and equipment $1,036,000
Leasehold improvements 41,000
----------
1,077,000
Less accumulated depreciation (364,000)
----------
$ 713,000
==========
7. NOTES PAYABLE:
-------------
Notes payable at December 31, 1997, consists of the following:
Note payable, financial institution, due in
monthly principal installments of $5,000 plus
interest at prime plus 1/4% (8.75% at
December 31, 1997), due July 15, 2002,
collateralized by a certificate of deposit.
The loan agreement contains covenants, which,
among other items, restricts the Company from
incurring certain debt. As of December 31,
1997, the Company is in compliance with these
covenants. $ 275,000
Other. 3,000
----------
278,000
Less current portion (63,000)
----------
$ 215,000
==========
F-12
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
8. COMMITMENTS AND CONTINGENCIES:
Capital Lease Obligations - The Company leases certain equipment under
agreements classified as capital leases. Equipment under the leases has a
cost of approximately $174,000 and accumulated amortization of
approximately $43,000. The following is a schedule of future minimum lease
payments under capital leases at December 31, 1997.
Future minimum lease payments $ 177,000
Less amount representing interest (45,000)
---------
Present value of net minimum lease payments 132,000
Less current portion (37,000)
---------
$ 95,000
=========
Office Leases - The Company leases its office space under operating leases
for a term expiring 2001. The lease calls for monthly payments of $10,000.
The aggregate minimum annual lease payments are as follows:
Operating
Year Ending December 31, Leases
------------------------ ---------
1998 $ 121,000
1999 111,000
2000 101,000
2001 42,000
---------
Total minimum lease payments $ 375,000
=========
Receivables Factored With Recourse - In 1997, the Company entered into an
agreement with a bank to factor, with full recourse, existing and future
accounts receivable to a maximum of $750,000. The Company must maintain a
cash reserve account with the bank of up to 20% of the face amount of
receivables sold to the bank. The Company's recourse obligation is secured
by all of the Company's assets and is guaranteed by two of the Company's
shareholders. As of December 31, 1997, the face amount of receivables
factored was $249,000 resulting in a recourse obligation of $190,000. For
financial presentation purposes, the related receivable and outstanding
recourse liability have been included as an asset and liability,
respectively, on the balance sheet.
F-13
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
Employment Agreements - In July 1996, the Company entered into employment
agreements with two shareholders. The agreements provide for payments
totaling $165,000 per year through June 30, 1998 and include covenants not
to compete during the term of employment and for one year thereafter.
The Company entered into a service agreement with a shareholder which
commenced on August 1, 1996, and was subsequently extended through February
1999. The agreement provides for payments of approximately $5,000 per month
plus options to purchase 212,500 shares of the Company's common stock at
$4.12 per share. The options are exercisable from April 1999 to October
2001. The agreement also contains a covenant not to compete during the term
of the service agreement and for one year thereafter. During 1997, the
Company loaned $60,000 to this shareholder at 5.5% interest, due in
semi-monthly installments of $2,300 beginning January 1, 1998,
collateralized by the options discussed above.
In April 1997, the Company entered into an additional service agreement
with this shareholder. This agreement provides for additional payments of
$5,000 per month plus 2 1/2% of any capital raised as a result of the
shareholder's efforts in the form of options and warrants for the Company's
stock. These options shall be exercisable at the closing price of the
Company's stock on the date of closing of any transaction, exercisable
commencing six months after each grant and expire five years from the date
of each grant. The agreement expired on October 1, 1997. As a result of
this agreement, 4,717 warrants are outstanding at December 31, 1997.
9. STOCKHOLDERS' EQUITY (DEFICIT):
------------------------------
Termination of S-Corporation Status - Effective July 1, 1996, the Company
terminated its S-Corporation status and became a C-Corporation. As a
result, the Company reclassified its accumulated deficit attributable to
the S-Corporation as a reduction in common stock upon termination of
S-Corporation status.
Public Stock Offering - In February 1997, the Company completed an initial
public stock offering of 1,000,000 Units (comprised of 1,000,000 shares of
common stock and warrants for the purchase of 1,000,000 shares of common
stock) which provided gross proceeds to the Company of approximately
$4,555,000. Included in the 1,000,000 shares were 245,000 shares offered by
the holders of unsecured subordinated convertible promissory notes. Each
warrant allows the holder to purchase one share of common stock at an
exercise price of $7.20 through February 2002. The warrants are redeemable
by the Company at $.05 per warrant upon 30 days notice if the market price
of the common stock for 20 consecutive trading days within the 30-day
period preceding the date the notice is given equals or exceeds $8.40. The
Company also sold to the underwriter at the close of the public offering
underwriters warrants, at a price of $0.001 per warrant, to purchase
100,000 shares of common stock. The underwriters warrants are exercisable
for 4 years beginning in February 1998 at $7.38 per share.
F-14
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
Private Placement - The Company is raising additional capital in a private
placement. The offering provides for a maximum amount of $2,500,000 with no
minimum, consisting of a maximum of 555,555 units (comprised of one share
of common stock and one warrant) at $4.50 per unit. Each warrant allows the
holder to purchase one share of common stock at an exercise price of $7.20
for a period extending through February 10, 2002. The warrants are
redeemable by the Company at $.05 per warrant upon 30 days notice if the
market price for 20 consecutive trading days within the 30-day period
preceding the date the notice is given equals or exceeds $8.40. The Company
is required by the terms of the placement agreement to register the common
shares and the common shares underlying the warrants within 45 days of
filing the Company's 10-KSB. Offering costs associated with the private
placement include underwriter commissions and non-accountable expense
allowances totaling 13% of proceeds, as well as placement agent warrants to
purchase 10% of the units sold for 5 years from the date of closing at
$4.50 per unit. In addition, the Company has agreed to issue any broker or
registered agent who places four or more placement units (consisting of
6,000 units or $27,000 each) one broker warrant for each $20 sold at a
price of $4.50. As of December 31, 1997, the Company had closings on the
private placement of $717,000 net of offering costs of $132,000. No
warrants had been issued to brokers or registered representatives as of
December 31, 1997.
Through March 5, 1998, the Company completed two additional closings on the
private placement for a total of 45,000 units, receiving proceeds of
$176,000 net of offering costs of $27,000.
Stock Split - During 1996, the Company declared a 1 for 2 reverse stock
split and 510.2041 for 1 stock split. The Company also declared a .85 for 1
reverse stock split to be effective immediately prior to the initial public
offering. Accordingly, all common stock reflected in the financial
statements and accompanying notes reflect the effect of the split and
reverse splits.
Common Stock Transfers and Options - In June 1996, an officer and a
shareholder transferred 83,725 shares of common stock to employees at no
cost. The Company recognized $83,000 in compensation expense related to
this transfer.
During 1994 and 1993, the Company issued stock options to an officer and
shareholder to purchase 804,881 shares of common stock at an aggregate
exercise price of $1,745. During June 1996, these options were exercised.
Pro Forma Stock-Based Compensation Disclosures - The Company applies APB
Opinion 25 and related interpretations in accounting for stock options
granted to employees and directors. Accordingly, no compensation cost has
been recorded for grants of options to employees and directors where the
exercise price is not less than the fair market value of the Company's
F-15
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
common stock on the measurement date. Had compensation cost been determined
using the fair value method pursuant to FAS 123, the Company's net loss and
net loss per share would have increased to the pro forma amounts indicated
in the following table:
Year Ended June 30,
----------------------------
1997 1996
------------ -----------
Net loss
As reported $(4,107,000) $(1,415,000)
Pro forma (2,721,000) (1,415,000)
Net loss per common share
As reported $ (1.47) $ (.73)
Pro forma (1.51) (.73)
The fair value of all options granted was estimated as of the date of grant
using the Black-Scholes option pricing model using the following weighted
average assumptions:
Year Ended June 30,
----------------------------
1997 1996
----------- -----------
Estimated fair value per option $4.33 $ -
Expected volatility 104% - %
Risk-free interest rate 5.5% 6.5%
Expected dividends - -
Expected term (in years) 4.4 3.5
10. INCOME TAXES:
------------
As of December 31, 1997, the Company has a net operating loss (NOL)
carryforward for tax reporting purposes of approximately $3,750,000. This
NOL expires in the years 2011 through 2017.
Deferred income taxes are provided for differences between the tax and book
basis of assets and liabilities as a result of temporary differences in the
recognition of revenues or expenses for tax and financial reporting
purposes, which relates primarily to certain items not currently deductible
for tax purposes until paid.
F-16
<PAGE>
NAVIDEC, INC.
NOTES TO FINANCIAL STATEMENTS
Deferred tax assets (liabilities) resulting from these differences consist
of the following:
Net operating loss carryforward $ 1,398,000
Other (30,000)
-----------
Total 1,368,000
Less valuation allowance (1,368,000)
-----------
Net deferred tax asset $ --
===========
The valuation allowance for deferred tax assets increased from $236,000 at
December 31, 1996 to $1,330,000 at December 31, 1997, due primarily to an
increase in the Company NOL carryforwards.
11. DEFINED CONTRIBUTION PLAN:
-------------------------
The Company has a 401(k) profit sharing plan (the Plan). Eligible employees
may make voluntary contributions to the Plan. The amount of employee
contributions is limited as specified in the Plan. The Company may, at its
discretion, make additional contributions to the Plan. The Company made no
contributions in 1997 and 1996.
F-17
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9. MANAGEMENT
The information required by this Item is incorporated herein by reference to the
Company's 1998 Annual Meeting Proxy Statement under the caption ".
ITEM 10. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from the
Company's Proxy Statement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference from the
Company's Proxy Statement.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference from the
Company's Proxy Statement.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
Number Description
- ------ -----------
1.1 Form of Underwriting Agreement *
1.2 Form of Selected Dealers Agreement *
1.3 Warrant Exercise Fee Agreement *
3.1 Amended and Restated Articles of Incorporation of ACI *
Systems, Inc.
3.2 Amended and Restated Bylaws of ACI Systems, Inc. *
3.3 Articles of Merger and Agreement and Plan of Merger *
Between ACI Systems, Inc.
and Interactive Planet, Inc.
4.1 Form of Certificate for Common Stock of NAVIDEC, Inc. *
4.2 Form of Warrant *
4.3 Form of Warrant Agreement *
4.4 Form of Representative's Option Agreement *
4.5 Form of Private Placement Financing Converted Units *
Registration Rights Agreement
4.6 Form of 10% Unsecured Subordinated Convertible *
Promissory Note
4.7 Form of Placement Agent's Warrant Registration Rights *
Agreement [Rescinded]
4.8 Form of Placement Agent's Warrant for the Purchase of *
Shares of Common Stock and Warrants [Rescinded]
5.1 Opinion, with Consent, of Cohen Brame & Smith *
Professional Corporation
<PAGE>
10.1 Form of "Lock Up" Letter to be entered into by the *
Company's current shareholders
10.2 Form of Shareholders' Agreement dated July 12, 1996, *
among NAVIDEC, Inc. and its shareholders on such date.
10.3 Form of Confidentiality and Non-Disclosure Agreement *
between the Company and its significant technical
employees
10.4 Employment Agreement dated July 3, 1996 between *
NAVIDEC, Inc. and Ralph Armijo
10.5 Employment Agreement between NAVIDEC, Inc. and *
John R. McKowen
10.6 Lease Agreement dated February 23, 1996 for the *
premises located at 14 Inverness Dr., Building F, Suite
116, Englewood, Colorado 80112
10.7 Lease Agreement dated October 27, 1993 for the premises *
located at 7002 S. Revere Parkway, Suite 40, Englewood,
Colorado 80112 [Terminated in December 1996]
10.8 Promissory Note as of October 1, 1993, in the principal *
amount of $119,199, from ACI Systems, Inc. payable to
Arthur Armijo
10.9 Promissory Note as of March 31, 1996, in the principal *
amount of $45,110 from Interactive Planet, Inc. payable
to Patrick Mawhinney
10.10 Promissory Note as of July 9, 1996, in the principal *
amount of $75,000 from NAVIDEC, Inc. payable to Cynthia
Simmons
10.11 Business/Manager Agreement and Commercial Security *
Agreement, each dated February 27, 1996, between
NAVIDEC, Inc. and Colorado State Bank of Denver
10.12 Form of Commercial Guarantee of Ralph Armijo and Arthur *
Armijo in favor of Colorado State Bank of Denver in
connection with February 27, 1996 Promissory Note
10.13 Form of Commercial Continuing Guarantee of Ralph Armijo *
and Arthur Armijo dated November 17, 1993 in favor of
Vectra Bank in connection with line of credit
terminated in February 1996
10.14 Promissory Note as of August 6, 1996, in the principal *
amount of $70,000 from NAVIDEC, INC. payable to Ralph
Armijo
10.15 Promissory Note as of July 26, 1996 in the principal *
amount of $30,000 from NAVIDEC, INC. payable to Patrick
Mawhinney
10.16 Promissory Note as of July 25, 1996, in the principal *
amount of $182,500 from NAVIDEC, INC. payable to Little
Land Company
10.17 Netscape Commercial Applications Partner Program *
(NCAPP) Guidelines
10.18 Form of Restated Agreement Not to Sell with Bridge *
Financing Selling Stockholders
10.19 Form of Insider's Lock-up Agreement to be entered into *
by the Company's officers, directors and 5%
shareholders
10.20 Form of Promissory Note in the principal amount of *
$70,000 from NAVIDEC, Inc. payable to Trust Company of
America FBO Michael Hendricks SEP IRA and guaranteed by
Ralph Armijo and Patrick Mawhinney
<PAGE>
10.21 Wheels licence agreement with the Denver Post Filled Here With
10.22 Wheels licence agreement with KOIN TV Filled Here With
21.1 Subsidiaries of the Registrant *
23.1 Consent of Hein + Associates LLP *
23.2 Consent of Cohen Brame & Smith Professional Corporation *
(included in Exhibit 5.1)
23.3 Consent of Lloyd G. Chavez, Jr. *
24.1 Power of Attorney with respect to certain signatures
in the Registration statement (see signature page to
Registration Statement)
27 Financial Data Schedule *
* All exhibits are incorporated by reference to like numbered exhibits to the
Company's Registration Statement on Form SB-2 declared effective February
10, 1997 (SEC File Number 333-14497).
REGIONAL MEDIA PARTNER
PROMOTION AND REVENUE SHARING AGREEMENT
THIS AGREEMENT, dated _____________, 1997, is by and between NAVIDEC, INC.,
a Colorado corporation ("Navidec"), and THE DENVER POST, a ______________
("Media Partner").
RECITALS:
A. Navidec is an Internet solution provider and is developing an
Internet-based marketing program for new and used automobiles known as "Wheels
by Navidec".
B. The Wheels by Navidec program is comprised of several components,
including U.S. Wheels and various Regional Wheels (as those terms are defined
below).
C. Navidec desires to obtain the assistance of Media Partner in promoting
Colorado Wheels (as hereinafter defined) throughout the state of Colorado.
D. Navidec and Media Partner desire to set forth their agreement regarding
the services to be rendered by each to the other with respect to the promotion
and development of, and regarding the sharing of revenues generated by
subscriptions to, Colorado Wheels.
NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS. The following terms when used herein shall have the
following meanings:
1.1 Buyer Profile. A "Buyer Profile" is information provided by a
Prospect in completing an online customer information form within Colorado
Wheels including name, address, phone number and e-mail address. Prospects will
complete this information in order to have a Subscriber contact the Prospect in
connection with a specific vehicle or to apply for credit.
1.2 Colorado Wheels. "Colorado Wheels" means the Regional Wheels being
developed by Navidec for the state of Colorado.
1.3 Colorado Wheels Recurring Revenue. "Colorado Wheels Recurring
Revenue" means with respect to each month during the term of this Agreement the
aggregate of Net Monthly Dealer Franchise Fees, Dealer Lookup Fees and Buyer
Prospect Fees due from Subscribers for such month.
<PAGE>
1.4 Colorado Wheels Setup Proceeds. "Colorado Wheels Setup Proceeds"
means, with respect to each month during the term of this Agreement, the
aggregate of Dealer Setup Fees and Dealer Inventory Integration Fees due from
Subscribers for such month.
1.5 Dealer Franchise Fees. "Dealer Franchise Fees" means the gross
monthly franchise fees due from Subscribers with respect to their participation
in Colorado Wheels.
1.6 Dealer Inventory Integration Fee. A "Dealer Inventory Integration
Fee" is a one time fee charged to a Subscriber for the computer software
required to provide a seamless integration of the Subscriber's automobile
inventory system with Colorado Wheels. Navidec anticipates that such integration
will be provided using software obtained from a third party vendor and that to
obtain the right to use such software Navidec will be required to pay such
vendor the entire Dealer Inventory Integration Fee received from each
Subscriber, as well as a monthly franchise fee. The monthly franchise fee paid
to such third party vendor shall be deducted from gross monthly franchise fees
received from Subscribers in computing Net Monthly Dealer Franchise Fees.
1.7 Dealer Lookup. A "Dealer Lookup" occurs when a Prospect retrieves
information about a Subscriber from within Colorado Wheels. This can occur upon
a specific request of the Prospect to view information about a Subscriber or can
occur when a Prospect elects to view the information about a Subscriber
associated with a particular vehicle listed on Colorado Wheels.
1.8 Dealer Lookup Fees. "Dealer Lookup Fees" are fees charged to a
Subscriber when a Prospect performs a Dealer Lookup with respect to such
Subscriber.
1.9 Dealer Setup Fee. A "Dealer Setup Fee" is a fee charged to a
Subscriber by Navidec for training employees of the Subscriber in utilization of
Colorado Wheels and the management of referrals received from Colorado Wheels
and for setting up the Subscriber's information page within Colorado Wheels. A
Dealer Setup Fee generally will be a one time fee charged when a Subscriber
first subscribes to Colorado Wheels. However, an additional Dealer Setup Fee
will be charged each time Navidec is requested to provide additional training on
Colorado Wheels to a Subscriber's employees.
1.10 Kiosks. "Kiosks" are a value added reseller product offered by
Navidec consisting of free standing, touch screen computer kiosks configured
with software enabling them to access U.S. Wheels, Regional Wheels and/or
individual automobile dealership websites with a Subscriber- selected subset of
the full data bases stored locally on the Kiosk.
1.11 Launch Party Expenses. "Launch Party Expenses" means all expenses
incurred by Navidec and/or Media Partner in connection with the reception and
dinner to be held September 18, 1997 at Lakewood Country Club in Lakewood,
Colorado for the purpose of introducing automobile dealers in the Colorado Front
Range area to Colorado Wheels and shall include, without limitation, the cost of
renting a room for the reception at Lakewood Country Club and the cost of the
dinner provided. All Launch Party Expenses shall be shared by Navidec and Media
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<PAGE>
Partner on a 50/50 basis and shall be reimbursed to Navidec and Media Partner,
as applicable, out of Colorado Wheels Recurring Revenue before any revenue
sharing of Colorado Wheels Recurring Revenue between Media Partner and Navidec
shall occur.
1.12 Missiles. "Missiles" are a value added reseller product offered
by Navidec to Subscribers which participate in Wheels by Navidec. The Missile is
a high end notebook computer configured with software enabling a user to access
U.S. Wheels, Regional Wheels and/or individual automobile dealership websites
using data stored locally on the Missile.
1.13 Navidec Trademarks. "Navidec Trademarks" means Wheels by Navidec,
U.S.Wheels, Regional Wheels, the individual names (including, without
limitation, Colorado Wheels and Colorado Wheels by The Denver Post) ultimately
given to the various Regional Wheels, any product names developed for Kiosks and
Missiles and any other identifying names or designs developed by either Navidec
or Media Partner for use in connection with Wheels by Navidec.
1.14 Net Monthly Dealer Franchise Fees. "Net Monthly Dealer Franchise
Fees" means the Dealer Franchise Fees due from Subscribers, minus the monthly
franchise fees required to be paid by Navidec to the third party vendor
providing the computer software that allows seamless integration of the
Subscriber's automobile inventory system with Colorado Wheels.
1.15 Operating Account. "Operating Account" means an operating account
to be maintained by Navidec with ____ Bank, which account shall be in the name
of Navidec, shall be solely for the deposit of revenues generated by Colorado
Wheels pursuant to this Agreement and shall require for withdrawal of monies
therefrom signatures of two officers of Navidec, whose names shall be furnished
to Media Partner.
1.16 Promotional Expenses. "Promotional Expenses" include the cost of
advertising undertaken by Media Partner with respect to Colorado Wheels; the
cost of producing all promotional materials for promoting Colorado Wheels; legal
fees incurred by Media Partner in connection with the negotiation of this
Agreement; salaries, commissions and benefits paid or provided by Media Partner
to its employees; transportation, lodging and meal expenses for employees of
Media Partner; and any other expenses incurred by Media Partner with respect to
the performance of its obligations hereunder. Notwithstanding the foregoing,
Promotional Expenses shall not include Launch Party Expenses.
1.17 Prospect. A "Prospect" is any person who accesses Colorado Wheels
over the Internet or from a Kiosk located at a location other than a
Subscriber's business premises.
1.18 Prospect Fees. "Prospect Fees" are fees charged to a Subscriber
when a Prospect completes a Buyer Profile for such Subscriber.
1.19 Regional Wheels. "Regional Wheels" are the Internet-based
regional motor vehicle marketing programs being developed by Navidec for local
and/or regional marketing of new and used vehicles offered for sale by
automobile dealerships, banks, finance companies and other organizations having
automobiles for sale.
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<PAGE>
1.20 Subscribers. "Subscribers" means those persons or entities who
have subscribed to Colorado Wheels. Media Partner and Navidec anticipate that
Subscribers will include individual automobile dealerships, banks, finance
companies and other organizations located within the state of Colorado having
automobiles for sale.
1.21 U.S. Wheels. "U.S. Wheels" is the Internet-based marketing
program being developed by Navidec for national marketing of new and used
vehicles offered for sale by automobile dealerships, banks, finance companies
and other organizations having automobiles for sale.
1.22 U.S. Wheels Revenue. "U.S. Wheels Revenue" means all revenues
generated by subscriptions to U.S. Wheels.
1.23 Wheels by Navidec. "Wheels by Navidec" means the Internet-based
marketing program for new and used automobiles being developed by Navidec.
Components of Wheels by Navidec include U.S. Wheels, the various Regional
Wheels, individual automobile dealer websites developed by Navidec, Kiosks,
Missiles and customized intranet services developed by Navidec for individual
automobile dealerships.
2. MEDIA PARTNER PROMOTIONAL SERVICES.
2.1 General. Navidec hereby appoints Media Partner, and Media Partner
hereby accepts such appointment, as Navidec's promotional agent in the state of
Colorado for promoting Colorado Wheels to the automobile purchasing public
within the state of Colorado. By its acceptance of such appointment Media
Partner represents and warrants to Navidec that (i) it is duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, has qualified to do business in the state of Colorado and has all
requisite power and authority to enter into and perform its obligations under
this Agreement, (ii) the person signing this Agreement for it is duly authorized
to execute this Agreement on its behalf and (iii) it has secured and will keep
in effect throughout the term of this Agreement all necessary licenses, permits
and authorizations to enable it, and all agents and employees acting on its
behalf, to perform all of its duties and obligations under this Agreement and
shall notify Navidec immediately should any such license, permit or
authorization no longer be in effect or in good standing. Notwithstanding the
agency granted hereinabove, Navidec reserves the right (a) to grant to other
media organizations located outside of the state of Colorado the right to
promote Regional Wheels within their circulation or broadcast areas and (b) to
itself market and promote Wheels by Navidec throughout the United States.
The promotional services to be provided by Media Partner shall include,
without limitation, the following:
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<PAGE>
2.1.1 Ongoing promotion of Colorado Wheels in The Denver
Post newspaper.
2.1.2 Ongoing promotion of Colorado Wheels through Media
Partner's internet publications.
2.1.3 Ongoing promotion of Colorado Wheels through
inclusion of the Colorado Wheels logo and URL in
Media Partner's ongoing print, television, radio and
billboard promotional campaigns.
2.2 Authority. Media Partner shall have no authority to bind Navidec
in any manner whatsoever and shall neither hold itself out nor avail itself of
any opportunity or circumstance to the contrary. Without limiting the generality
of the foregoing, Media Partner shall have no authority to make or enter into
any agreement relating to Colorado Wheels or any component of Wheels by Navidec
on behalf of Navidec.
2.3 Reporting. Media Partner shall provide Navidec monthly reports in
a form reasonably acceptable to Navidec outlining all promotional efforts made
by Media Partner pursuant to this Agreement since the date of the last report.
2.4 Expenses. Media Partner shall bear all Promotional Expenses
incurred by it.
2.5 Wheels by Navidec Designation. All promotional materials produced
by or on behalf of Media Partner for purposes of promoting Colorado Wheels shall
have displayed in a conspicuous place thereon the statement that Colorado Wheels
has been "Designed by Navidec".
3. NAVIDEC SERVICES.
3.1 Wheels by Navidec Development. Navidec shall have responsibility
for development, testing and implementation of Colorado Wheels.
3.2 Installation of Wheels by Navidec. Navidec shall have
responsibility for installing Colorado Wheels for each Subscriber.
3.3 Infrastructure Support. Navidec shall provide all necessary
hardware, third party software, networking solutions and other infrastructure
required for Colorado Wheels.
4. U.S. WHEELS.
4.1 Participation in Colorado Wheels. Any person or entity located
within the state of Colorado that desires to subscribe to U.S. Wheels shall be
required to also subscribe to Colorado Wheels. In any such case the Subscriber
shall pay the setup and monthly fees applicable to Colorado Wheels and shall be
provided its subscription to U.S. Wheels without requirement for payment of the
setup or monthly fee therefor.
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4.2 No Revenue Sharing. Navidec shall be entitled to 100% of all U.S.
Wheels Revenue, if any.
5. COLORADO WHEELS.
5.1 Inclusion of Subscribers in U.S. Wheels. Every Subscriber shall
automatically be offered a subscription to U.S. Wheels without requirement for
payment of the setup or monthly fee therefor.
5.2 Revenue Sharing/Recurring Revenue. Media Partner and Navidec shall
share Colorado Wheels Recurring Revenue as follows:
Media Partner 85%
Navidec 15%
Media Partner shall not be entitled to share in any other revenue generated by
the Wheels by Navidec program or any component thereof.
5.3 Setup Proceeds. Navidec shall be entitled to 100% of all Colorado
Wheels Setup Proceeds and shall pay therefrom all setup and franchise fees
required to be paid to the third party vendor providing the software that allows
seamless integration of the Subscriber's automobile inventory system with
Colorado Wheels.
5.4 License, Host and Service Fees. In consideration of the agency
granted to Media Partner pursuant to Section 2.1 above, Media Partner shall pay
to Navidec the following fees:
5.4.1 License Fee. A one time License Fee of $50,000 for the
right to promote Colorado Wheels in the state of Colorado. The License
Fee shall be paid in two equal installments of $25,000 each. The first
installment has already been billed to Media Partner. The second
installment will be billed to Media Partner during the fourth quarter
of 1997.
5.4.2 Host Fee. A monthly Host Fee of $2,000 covering the
provision by Navidec of high speed redundant network access to Colorado
Wheels, server capacity for the Colorado Wheels website and dealer
inventory database and physical and network security for Colorado
Wheels. The Host Fee shall be due and payable on the first day of each
calendar month during the term of this Agreement.
5.4.3 Service Fee A monthly Service Fee of $1,700 covering
Navidec's ongoing research, development and deployment of new software
releases for Colorado Wheels and management of a "Help Desk" for
Subscribers. The Service Fee shall be due and payable on the first day
of each calendar month during the term of this Agreement.
6. TERM.
6
<PAGE>
6.1 Primary Term and Renewals. This Agreement shall become effective
on the date that it has been executed by both Navidec and Media Partner and
shall continue in full force and effect until the firts anniversary thereof
unless otherwise terminated as provided herein. Thereafter, this Agreement shall
automatically renew from year to year for additional one-year terms on the same
terms and conditions as set forth herein, unless either party hereto has given
written notice to the other party no later than ninety days prior to the
conclusion of the term then in effect of such party's election not to renew this
Agreement. This Agreement shall otherwise be terminable only on the conditions
and in the manner provided hereinbelow.
6.2 Termination for Cause. Notwithstanding anything to the contrary
contained in this Agreement, in the event either party shall fail to cure any
material default or breach by such party hereunder within thirty days after
receipt of written notice of such default or breach from the other party, or in
the event such default cannot reasonably be cured within such thirty day period,
within such additional time as may be reasonably necessary to cure such default
so long as such party is diligently proceeding to accomplish such cure, then the
non-defaulting party may terminate this Agreement. If the non-defaulting party
shall elect to terminate this Agreement, this Agreement shall terminate ten days
after receipt by the defaulting party of notice of the non-defaulting party's
election to terminate this Agreement.
6.3 Bankruptcy. In the event a petition for bankruptcy is filed by or
against either party hereto, on if either party hereto shall make an assignment
for the benefit of its creditors or take advantage of any insolvency act, either
party may terminate this Agreement by written notice to the other, such
termination to be effective immediately upon the giving of such written notice.
6.4 Continued Responsibility. Notwithstanding the receipt by one party
of notice from the other party terminating this Agreement, the parties agree to
use their best efforts with respect to the administration of Colorado Wheels and
the performance of this Agreement until the effective date of termination of
this Agreement. In addition, notwithstanding the termination of this Agreement,
Media Partner shall remain entitled to receive for a period of one year
following such termination its 85% share of all Colorado Wheels Recurring
Revenue generated by the Colorado Wheels program as such program is in effect on
the date of termination of this Agreement, but shall have no right to
participate in any Colorado Wheels Recurring Revenue generated after the date of
termination by reason of expansion of the number of Subscribers within the
Colorado Wheels program or the addition of new revenue generating components to
the program.
7. OWNERSHIP OF TRADEMARKS.
7.1 Navidec Trademarks. Media Partner acknowledges that all of the
Navidec Trademarks are the sole property of Navidec, and Media Partner shall not
have any rights to the same except as expressly set forth in this Agreement.
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<PAGE>
8. LICENSES.
8.1 Trademarks. Navidec hereby grants to Media Partner, and Media
Partner hereby accepts from Navidec, a nonexclusive license during the term of
this Agreement to use the Navidec Trademarks in conjunction with its promotion
of Colorado Wheels. The license granted hereby shall expire concurrently with
the expiration or termination of this Agreement.
8.2 Representation and Warranty. Navidec hereby represents and
warrants to Media Partner that Navidec is the owner of the Navidec Trademarks
and has the power and authority to license the same to Media Partner.
8.3 Infringement. Media Partner agrees to cooperate with Navidec to
protect Media Partner and Navidec against infringement of the Navidec
Trademarks, including, but not limited to, the defense or prosecution of any
lawsuits if, in the judgment of counsel to Navidec, such action is necessary or
advisable. Navidec shall pay all costs and expenses, including attorneys' fees,
incurred with respect thereto. Navidec agrees to enforce and take all steps
reasonably necessary to maintain the continuing validity of the Navidec
Trademarks.
9. CONFIDENTIALITY AGREEMENTS.
9.1 Media Partner. Media Partner, for itself, its officers, directors,
agents, legal representatives, successors and assigns, covenants that its shall
maintain on a strictly confidential basis and, except as may otherwise be
required by law, will not disclose to any person or entity (except to such of
Media Partner's officers, directors, employees, accountants, attorneys and
agents who require access to such information for the proper administration of
this Agreement and Colorado Wheels, but only after obtaining appropriate
confidentiality agreements from such persons) any information provided to Media
Partner by Navidec which Navidec identifies at the time of delivery to Media
Partner as being confidential and subject to the terms of this Section. Media
Partner further covenants that any such confidential information provided to
Media Partner by Navidec shall be used by Media Partner solely for the purposes
of performing its obligations to Navidec as set forth in this Agreement.
9.2 Navidec. Navidec, for itself, its officers, directors, agents,
legal representatives, successors and assigns, covenants that its shall maintain
on a strictly confidential basis and, except as may otherwise be required by
law, will not disclose to any person or entity (except to such of Navidec's
officers, directors, employees, accountants, attorneys and agents who require
access to such information for the proper administration of this Agreement and
Wheels by Navidec, but only after obtaining appropriate confidentiality
agreements from such persons) any information provided to Navidec by Media
Partner which Media Partner identifies at the time of delivery to Navidec as
being confidential and subject to the terms of this Section. Navidec further
covenants that any such confidential information provided to Navidec by Media
Partner shall be used by Navidec solely for the purposes of developing and
marketing Colorado Wheels.
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10. ACCOUNTING/BILLING.
10.1 Billing; Collections. Navidec shall promptly calculate and bill
Subscribers and diligently demand, collect, receive and give receipt for any and
all revenue generated by Colorado Wheels. All such monies so collected shall be
deposited into the Operating Account.
10.2 Accounting. Navidec shall prepare and provide to Media Partner
within twenty calendar days after the end of each calendar month during the term
of this Agreement, a true, complete and accurate accounting of (a) the gross
revenue generated by Colorado Wheels for such calendar month, (b) all allowable
reimbursements to Navidec or Media Partner out of such gross revenue (including,
without limitation, any unrecovered Launch Party Expenses paid by Media Partner
or Navidec, amounts paid to the third party vendor providing the software that
allows seamless integration of the Subscriber's automobile inventory system with
Colorado Wheels and any amounts paid by Navidec pursuant to Section 10.4 below),
and (c) Media Partner's share of Colorado Wheels Recurring Revenue for such
month. Upon delivery of such monthly accounting to Media Partner, Navidec shall
issue a check to Media Partner for Media Partner's share of Colorado Wheels
Recurring Revenue actually collected for such month.
10.3 Audit. Media Partner shall have the right to conduct an
examination of and to audit the books and records maintained by Navidec with
respect to the administration of this Agreement and the Colorado Wheels program.
Any such examination or audit shall be performed at the offices of Navidec
during normal business hours and upon reasonable prior notice to Navidec
thereof. Should the audit discover errors in the record keeping, Navidec shall
immediately correct the same and shall promptly inform Media Partner in writing
of the corrective action taken. Audits conducted by Media Partner shall be at
its expense. Media Partner's right to audit the books and records maintained by
Navidec with respect to the administration of this Agreement and the Colorado
Wheels program shall survive the expiration or earlier termination of this
Agreement.
10.4 Use of Counsel and Other Professionals. If Navidec shall require
the assistance of outside attorneys, accountants or other professionals for any
reason associated with the proper administration of Colorado Wheels, including
without limitation, in connection with efforts to collect amounts due from
Subscribers, Navidec shall have the authority to retain such professionals on
such terms as Navidec deems reasonable and appropriate in the circumstances and
to pay such professionals out of the Operating Account. Any such payments shall
constitute Marketing Costs and Expenses. Navidec shall include a full accounting
of any such payments in its monthly reports to Media Partner provided pursuant
to Section 10.2 above.
11. MISCELLANEOUS.
11.1 Entire Agreement. This Agreement contains the entire agreement
between the parties respecting the matters herein set forth and supersedes all
prior agreements, whether written or oral, between the parties respecting such
matters. Any amendments or modifications hereto in order to be effective shall
be in writing and executed by the parties hereto.
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11.2 Severability. If any provision of this Agreement shall be or
become invalid or unenforceable, such invalidity or unenforceability shall not
invalidate or render unenforceable the remaining portions of this Agreement, and
such remaining portions shall be construed as though not containing the
particular invalid or unenforceable provision or provisions and the rights and
obligations of the parties shall be construed and enforced accordingly.
11.3 No Assignment. Media Partner shall not assign this Agreement or
any of its obligations hereunder to any person or entity without the prior
written consent of Navidec, which consent may be given or withheld in Navidec's
sole and absolute discretion.
11.4 Binding Effect. Subject to the restrictions on Assignment set
forth in Section 11.3 above, this Agreement shall be binding upon and inure to
the benefit of Navidec and Media Partner and their respective officers,
directors, agents, legal representatives, successors and assigns.
11.5 No Joint Venture. Media Partner and Navidec are not and shall not
be considered joint venturers nor partners and neither shall have power to bind
or obligate the other except as set forth in this Agreement.
11.6 Time of Essence. Time is of the essence in the performance of
each and every term, condition, and covenant of this Agreement.
11.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but such counterparts together shall constitute but one and the same
instrument.
11.8 Paragraph Headings. The paragraph headings herein contained are
for purposes of identification only and shall not be considered in construing
this Agreement.
11.9 Arbitration. Any dispute between Navidec and Media Partner
hereunder shall be settled by arbitration conducted by in Denver, Colorado in
accordance with the rules of the American Arbitration Association. In the event
the parties are unable to agree on an arbitrator within thirty days after either
party initiates arbitration pursuant to this section, the arbitrator shall be
selected by the Denver, Colorado office of the American Arbitration Association.
The prevailing party in any such arbitration shall, at the sole discretion of
the arbitrator, be entitled to an award of some or all of its reasonable costs
and attorney fees incurred therein. The cost of the arbitrator shall be borne
equally by Navidec and Media Partner. The decision by the arbitrator shall be
final and binding on the parties.
11.10 Attorneys' Fees. The prevailing party in any legal proceeding
brought to enforce rights hereunder shall recover from the other party its
reasonable attorneys' fees and costs. As used herein the term "prevailing party"
means the party entitled to recover costs in any suit, whether or not brought to
judgment, and whether or not incurred before or after the filing of suit.
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11.11 Waiver. Except as herein expressly provided, no waiver by a
party of any breach of this Agreement or of any warranty or representation
hereunder by another party shall be deemed to be a waiver of any other breach of
any kind or nature (whether preceding or succeeding and whether or not of the
same or similar nature), and no acceptance of payment or performance by a party
after any such breach by another party shall be deemed to be a waiver of any
further breach of this Agreement or of any representation or warranty hereunder
by such other party whether or not the first party knows of such a breach at the
time it accepts such payment or performance. No failure on the part of a party
to exercise any right it may have by the terms hereunder or by law upon the
default of another party, and no delay in the exercise thereof by the first
party at any time when such other party may continue to be so in default, shall
operate as a waiver of any default, or as a modification in any respect of the
provisions of this Agreement.
11.12 Gender. Whenever the singular or plural number, masculine or
feminine or neuter gender is used herein, it shall equally include the other.
11.13 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Colorado.
11.14 Notices. All notices, demands, or other communications of any
type (herein collectively referred to as "Notices") given by either party to the
other, whether required by this Agreement or in any way related to the
transactions contracted for herein, shall be void and of no effect unless given
in accordance with the provisions of this Agreement. All Notices shall be
legible and in writing and shall be delivered to the party to whom the Notice is
directed, either in person with a receipt requested therefor or by facsimile
transmission or sent by a recognized overnight courier service for next day
delivery or by United States certified mail, return receipt requested, postage
prepaid and addressed to the party at its address or facsimile number set forth
below, and the same shall be effective (a) upon receipt or refusal if delivered
personally, (b) upon receipt if delivered by facsimile, (c) one business day
after depositing with such an overnight courier service, or (d) three business
days after deposit in the mails if mailed, addressed to party to whom the Notice
is directed. Either party hereto may change the address for Notices specified
above by giving the other party ten days advance written Notice of such change
of address.
To Media Partner: The Denver Post
==========================
Fax:_______________________
To Navidec: Navidec, Inc.
14 Inverness Drive East
Suite F-116
Englewood, CO 80112
Fax: (303) 790-8845
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective from and as of the date first above written.
NAVIDEC, INC.
Date:__________________ By:_____________________________
Ralph Armijo, President
THE DENVER POST
Date:__________________ By:_____________________________
Name:___________________________
Title:____________________________
12
REGIONAL MEDIA PARTNER
PROMOTION AND REVENUE SHARING AGREEMENT
THIS AGREEMENT, dated _____________, 1998, is by and between NAVIDEC, INC.,
a Colorado corporation ("Navidec"), and IBS/LEE PARTNERS LLC, an
________________ limited liability company whose members are KOIN-TV and
Internet Broadcast Systems ("Media Partner").
RECITALS:
1. Navidec is an Internet solution provider and is developing an
Internet-based marketing program for new and used automobiles known as "Wheels
by Navidec".
2. The Wheels by Navidec program is currently comprised of several
components, including various Regional Wheels (as those terms are defined
below).
3. Navidec desires to obtain the assistance of Media Partner in promoting
Oregon Wheels (as hereinafter defined) in the State of Oregon.
4. Valley National Financial Services Company ("Valley National") is an
automotive finance company which has business relationships with automobile
dealers in the State of Oregon. Valley National desires to be a participant in
the Oregon Wheels program. Valley National and Navidec are in the process of
completing a marketing agreement between Valley National and Navidec. It is
anticipated that such agreement will be completed in early February 1998. A copy
of such executed agreement will be attached hereto as Exhibit B.
5. Navidec and Media Partner desire to set forth their agreement regarding
the services to be rendered by each to the other with respect to the promotion
and development of, and regarding the sharing of revenues generated by,
subscriptions to Oregon Wheels.
NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS. The following terms when used herein shall have the
following meanings:
1.1 Buyer Profile. A "Buyer Profile" is information provided by a Prospect
in completing an online customer information form within Oregon Wheels,
including name, address and at least one of the following: phone number, e-mail
address or fax number. Prospects will complete this information in order to have
a Subscriber contact the Prospect in connection with a specific vehicle or
vehicle description, or to apply for credit.
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1.2 Dealer Franchise Fees. "Dealer Franchise Fees" means the gross monthly
franchise fees due from Subscribers with respect to their participation in
Oregon Wheels.
1.3 Dealer Inventory Integration Fee. A "Dealer Inventory Integration Fee"
is a one time fee charged to a Subscriber for the computer software required to
provide a seamless integration of the Subscriber's automobile inventory system
with Oregon Wheels. Navidec anticipates that such integration will be provided
using software obtained from a third party vendor and that to obtain the right
to use such software Navidec will be required to pay such vendor the entire
Dealer Inventory Integration Fee received from each Subscriber, as well as an
Inventory Integration Software Royalty.
1.4 Dealer Lookup. A "Dealer Lookup" occurs when a Prospect retrieves
information about a Subscriber from within Oregon Wheels. This can occur upon a
specific request of the Prospect to view information about a Subscriber
(excluding access to Subscriber information within the Dealer Locater module of
the Oregon Wheels site) or can occur when a Prospect elects to view the
information about a Subscriber associated with a particular vehicle listed on
Oregon Wheels.
1.5 Dealer Lookup Fees. "Dealer Lookup Fees" are fees charged to a
Subscriber when a Prospect performs a Dealer Lookup with respect to such
Subscriber. Dealer Lookup Fees are a part of Oregon Wheels Recurring Revenue.
1.6 Dealer Setup Fee. A "Dealer Setup Fee" is a fee charged to a Subscriber
by Navidec for training employees of the Subscriber in the utilization of Oregon
Wheels and the management of referrals received from Oregon Wheels and for
setting up the Subscriber's information page within Oregon Wheels. A Dealer
Setup Fee generally will be a one time fee charged when a Subscriber first
subscribes to Oregon Wheels. However, an additional Dealer Setup Fee will be
charged each time Navidec is requested to provide additional training on Oregon
Wheels to a Subscriber's employees.
1.7 Inventory Integration Software Royalty. An "Inventory Integration
Software Royalty" is a monthly fee that Navidec anticipates will be required to
be paid to the third party vendor that supplies the computer software required
to provide a seamless integration of a Subscriber's automobile inventory system
with Oregon Wheels. The Inventory Integration Software Royalty is currently
$5.00 per month per Subscriber franchise. The monthly Inventory Integration
Software Royalty paid to such third party vendor shall be deducted from Dealer
Franchise Fees in computing Net Monthly Dealer Franchise Fees.
1.8 Kiosks. "Kiosks" are a value added reseller product offered by Navidec
consisting of free standing, touch screen computer kiosks configured with
software enabling them to access Regional Wheels and/or individual automobile
dealership websites with a Subscriber-selected subset of the full Oregon Wheels
data base that is stored locally on the Kiosk. If Navidec ultimately develops
U.S. Wheels, Kiosks will also allow access to U.S. Wheels.
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1.9 Launch Event Expenses. "Launch Event Expenses" means all expenses
incurred by Navidec, Media Partner and/or Valley National in connection with any
events to be held for the purpose of introducing automobile dealers in the State
of Oregon to Oregon Wheels and shall include, without limitation, the cost of
renting a room for the event and the cost of any food provided. All Launch Event
Expenses must be approved by Navidec, Media Partner and Valley National. All
Launch Event Expenses shall be shared by Navidec, Media Partner and Valley
National on an equal basis. Launch Event Expenses shall be repaid to Navidec,
Media Partner and Valley National equally by means of a deduction from Dealer
Franchise Fees in computing Net Monthly Dealer Franchise Fees.
1.10 Missiles. "Missiles" are a value added reseller product offered by
Navidec to Subscribers who participate in Wheels by Navidec. The Missile is a
high-end notebook computer configured with software enabling a user to access a
Subscriber-selected subset of the full Oregon Wheels database that is stored
locally on the Missile.
1.11 Navidec Trademarks. "Navidec Trademarks" means Wheels by Navidec,
U.S.Wheels, Regional Wheels, the individual names (including, without
limitation, Oregon Wheels) ultimately given to the various Regional Wheels, any
product names developed for Kiosks and Missiles and any other identifying names
or designs developed by either Navidec, Media Partner or Valley National for use
in connection with Wheels by Navidec.
1.12 Net Monthly Dealer Franchise Fees. "Net Monthly Dealer Franchise Fees"
means the Dealer Franchise Fees due from Subscribers, minus (a) the monthly
Inventory Integration Software Royalty required to be paid by Navidec to the
third party vendor providing the computer software that allows seamless
integration of the Subscriber's automobile inventory system with Oregon Wheels,
(b) Launch Event Expenses that have not yet been reimbursed to Navidec, Media
Partner and Valley National (c) Subscriber Sales Materials expenses that have
not yet been reimbursed to Navidec and Media Partner, and (d) costs incurred by
Navidec pursuant to Section 11.4 of this Agreement. Net Monthly Dealer Franchise
Fees are a part of Oregon Wheels Recurring Revenue.
1.13 Operating Account. "Operating Account" means an operating account to
be maintained by Navidec with ____________ Bank, which account shall be in the
name of Navidec, shall be solely for the deposit of revenues generated by Oregon
Wheels pursuant to this Agreement and shall require for withdrawal of monies
therefrom signatures of two officers of Navidec, whose names shall be furnished
to Media Partner.
1.14 Oregon Wheels. "Oregon Wheels" means the Regional Wheels being
developed by Navidec for the State of Oregon.
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1.15 Oregon Wheels Recurring Revenue. "Oregon Wheels Recurring Revenue"
means, with respect to each month during the term of this Agreement, the
aggregate of Net Monthly Dealer Franchise Fees, Dealer Lookup Fees and Buyer
Prospect Fees due from Subscribers for such month.
1.16 Oregon Wheels Setup Proceeds. "Oregon Wheels Setup Proceeds" means,
with respect to each month during the term of this Agreement, the aggregate of
Dealer Setup Fees and Dealer Inventory Integration Fees due from Subscribers for
such month.
1.17 Promotional Expenses. "Promotional Expenses" include the cost of
advertising undertaken by Media Partner with respect to Oregon Wheels; the cost
of producing all promotional materials for promoting Oregon Wheels; legal fees
incurred by Media Partner in connection with the negotiation of this Agreement;
salaries, commissions and benefits paid or provided by Media Partner to its
employees; transportation, lodging and meal expenses for employees of Media
Partner; and any other expenses incurred by Media Partner with respect to the
performance of its obligations hereunder. Notwithstanding the foregoing,
Promotional Expenses shall not include Launch Event Expenses. Promotional
Expenses shall be borne solely by Media Partner.
1.18 Prospect. A "Prospect" is any person who accesses Oregon Wheels over
the Internet or from a Kiosk located at a location other than a Subscriber's
business premises.
1.19 Prospect Fees. "Prospect Fees" are fees charged to a Subscriber when a
Prospect completes a Buyer Profile for such Subscriber.
1.20 Regional Wheels. "Regional Wheels" are the Internet-based regional
motor vehicle marketing programs being developed by Navidec for local and/or
regional marketing of new and used vehicles offered for sale by automobile
dealerships and other organizations having automobiles for sale.
1.21 Subscribers. "Subscribers" mean those persons or entities who have
subscribed to Oregon Wheels. Media Partner and Navidec anticipate that
Subscribers will include individual automobile dealerships in the State of
Oregon and other organizations located within the State of Oregon having
automobiles for sale.
1.22 Subscriber Contract. "Subscriber Contract" means the contract entered
into between Navidec and a Subscriber which outlines the contractual terms and
responsibilities of Navidec and the Subscriber with respect to such Subscriber's
participation in Oregon Wheels. A copy of the current version of the Subscriber
Contract is attached hereto as Exhibit A.
1.23 Subscriber Sales Materials. "Subscriber Sales Materials" means
collateral material to be utilized for marketing Oregon Wheels to Subscribers.
Navidec shall bear the creative cost of developing Subscriber Sales Materials.
Navidec and Media Partner shall share equally in the physical production cost of
Subscriber Sales Materials. Production costs of Subscriber Sales Materials shall
be repaid to Navidec and Media Partner equally by means of a deduction from
Dealer Franchise Fees in computing Net Monthly Dealer Franchise Fees.
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1.24 U.S. Wheels. "U.S. Wheels" is the Internet-based marketing program
which may be developed by Navidec at a future date. Its purpose will be for
national marketing of new and used vehicles offered for sale by automobile
dealerships and other organizations having automobiles for sale.
1.25 U.S. Wheels Revenue. "U.S. Wheels Revenue" means all Recurring
Revenues generated by subscriptions to U.S. Wheels.
1.26 Wheels by Navidec. "Wheels by Navidec" means the Internet-based
marketing program for new and used automobiles being developed by Navidec.
Components of Wheels by Navidec include U.S. Wheels, the various Regional
Wheels, individual automobile dealer websites developed by Navidec, Kiosks,
Missiles and customized intranet services developed by Navidec for individual
Subscribers.
2. MEDIA PARTNER PROMOTIONAL SERVICES.
-----------------------------------
2.1 General. Navidec hereby appoints Media Partner, and Media Partner
hereby accepts such appointment, as Navidec's promotional agent in the State of
Oregon for promoting Oregon Wheels to the automobile purchasing public within
the State of Oregon. By its acceptance of such appointment Media Partner
represents and warrants to Navidec that (i) it is duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
has qualified to do business in the State of Oregon and has all requisite power
and authority to enter into and perform its obligations under this Agreement,
(ii) the person signing this Agreement for it is duly authorized to execute this
Agreement on its behalf and (iii) it has secured and will keep in effect
throughout the term of this Agreement all necessary licenses, permits and
authorizations to enable it, and all agents and employees acting on its behalf,
to perform all of its duties and obligations under this Agreement and shall
notify Navidec immediately should any such license, permit or authorization no
longer be in effect or in good standing. Notwithstanding the agency granted
hereinabove, Navidec reserves the right (a) to grant to other media
organizations located outside the State of Oregon the right to promote Regional
Wheels within their circulation or broadcast areas and (b) to itself market and
promote Wheels by Navidec throughout the United States.
The promotional services to be provided by Media Partner shall include,
without limitation, the following:
2.1.1. Ongoing promotion of Oregon Wheels on air by KOIN-TV. Minimum
on air promotion required is as follows:
2.1.1.1 First Thirty Days of Oregon Wheels Operation: During the
first thirty days after which Oregon Wheels is launched,
KOIN will air commercial spots which combined constitute 240
Gross Rating Points of air time. Commercial spots shall air
in key dayparts such as Daytime, Early Fringe, Prime and
Late Fringe, with an emphasis on news programming. A
detailed promotional schedule shall be submitted to Navidec
by Media Partner for final approval by Navidec. Affidavits
detailing the actual commercial spots run, time periods,
commercial length, etc. shall be provided to Navidec on a
monthly basis.
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2.1.1.2 All Calendar Months Subsequent to Launch: During all months
subsequent to the initial launch of Oregon Wheels, KOIN will
air commercial spots which combined constitute 120 Gross
Rating Points of air time. Commercial spots shall air in key
dayparts such as Daytime, Early Fringe, Prime and Late
Fringe, with an emphasis on news programming. A detailed
promotional schedule shall be submitted to Navidec by Media
Partner for final approval by Navidec. Affidavits detailing
the actual commercial spots run, time periods, commercial
length, etc. shall be provided to Navidec on a monthly
basis.
2.1.2 Ongoing promotion of Oregon Wheels through Media Partner's
Internet publications. Oregon Wheels will have a permanent hot logo
position on the home page of Media Partner's primary Internet publication
whose URL is http//www.koin.com. Media Partner displays a "hotline" story
listing on the home page of its primary Internet publication. At least
fifty percent (50%) of the time one (1) of these "hotlines" shall be
dedicated to Oregon Wheels related stories, with the content thereof to be
written by Media Partner staff.
2.1.3 Media Partner will place banner ads promoting Oregon Wheels on
its primary Internet publication. Media Partner guarantees a minimum of
10,000 distinct individual user impressions per month beginning at launch
and monthly thereafter.
2.1.4 Media Partner will provide Oregon Wheels signage twice weekly
during its "Live from Channel 6000 Newsroom" inserts.
2.1.5 Media Partner will produce a one-half hour program related to
"Channel 6000." This program is to contain a segment dedicated to Oregon
Wheels. Program to air at least four times during the period on or about
March 15th to April 15th 1998.
2.1.6 Ongoing promotion of Oregon Wheels through inclusion of the
Oregon Wheels logo and URL in KOIN-TV's and/or Media Partner's ongoing
print, television, radio and billboard promotional campaigns.
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2.2 Authority. Media Partner shall have no authority to bind Navidec in any
manner whatsoever and shall neither hold itself out nor avail itself of any
opportunity or circumstance to the contrary. Without limiting the generality of
the foregoing, Media Partner shall have no authority to make or enter into any
agreement relating to Oregon Wheels or any component of Wheels by Navidec on
behalf of Navidec.
2.3 Sales to Subscribers. Media Partner shall have responsibility for
assisting Navidec and Valley National in obtaining Subscribers to Oregon Wheels.
Such responsibility shall include, but shall not be limited to, Media Partner
representatives setting appointments and making sales calls on potential
Subscribers in the State of Oregon.
2.4 Reporting. Media Partner shall provide Navidec monthly reports as
detailed in 2.1.1 above in a form reasonably acceptable to Navidec outlining all
promotional efforts made by Media Partner pursuant to this Agreement since the
date of the last report.
2.5 Expenses. Media Partner shall bear all Promotional Expenses incurred by
it.
2.6 Wheels by Navidec Designation. All promotional materials produced by or
on behalf of Media Partner for purposes of promoting Oregon Wheels shall have
displayed in a conspicuous place thereon the statement that Oregon Wheels has
been "Designed by Navidec".
3. NAVIDEC SERVICES.
-----------------
3.1 Wheels by Navidec Development. Navidec shall have responsibility for
development, testing and implementation of Oregon Wheels.
3.2 Installation of Wheels by Navidec. Navidec shall have responsibility
for installing Oregon Wheels for each Subscriber.
3.3 Infrastructure Support. Navidec shall provide all necessary hardware,
third party software, networking solutions and other infrastructure required for
Oregon Wheels.
4. SHARED MEDIA PARTNER AND NAVIDEC SERVICES.
------------------------------------------
4.1 Media Partner and Navidec acknowledge that Valley National and its
representative(s) shall have the right to assist Navidec and Media Partner in
obtaining Subscribers to Oregon Wheels. Such right shall include, but shall not
be limited to, Valley National representatives setting appointments and making
sales calls on potential Subscribers in the State of Oregon.
4.2 Media Partner and Navidec acknowledge that Subscribers targeted for
Oregon Wheels participation will initially be identified by Valley National.
However, additional Subscribers that Media Partner desires to target will be
mutually agreed upon in good faith negotiation by Valley National and Media
Partner.
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4.3 Media Partner and Navidec acknowledge that Valley National shall have
the right to receive secondary branding presence on Oregon Wheels equal to
Navidec's, e.g. "brought to you by Valley National." In addition, Valley
National will be entitled to receive such secondary branding presence on a
Subscriber's credit application page. Media Partner shall have the primary
branding position on Oregon Wheels.
5. U.S. WHEELS.
------------
5.1 Participation in Oregon Wheels. Any person or entity located within the
State of Oregon that desires to subscribe to U.S. Wheels shall be required to
also subscribe to Oregon Wheels. In any such case the Subscriber shall pay the
setup and monthly fees applicable to Oregon Wheels and shall be provided its
subscription to U.S. Wheels without requirement for payment of the setup or
monthly fee therefor.
5.2 Revenue Sharing. At such time, if ever, that Navidec develops U.S.
Wheels, Media Partner shall be entitled to 35% of Navidec's share (if any) of
U.S. Wheels Dealer Lookup Fees generated from Subscribers.
6. OREGON WHEELS.
--------------
6.1 Inclusion of Subscribers in U.S. Wheels. At such time, if ever, that
Navidec develops U.S. Wheels, every Subscriber shall automatically be offered a
subscription to U.S. Wheels without requirement for payment of the setup or
monthly fee therefor.
6.2 Revenue Sharing/Recurring Revenue. Media Partner and Navidec shall
share Oregon Wheels Recurring Revenue as follows:
Media Partner 70%
Navidec 30%
6.3 Advertising/Revenue Sharing. Except as otherwise provided below, Media
Partner is entitled to sell online advertising for display within Oregon Wheels
and/or on-air sponsorship advertising in conjunction with Oregon Wheels
commercials. Notwithstanding the foregoing, Media Partner shall not be entitled
to sell any Oregon Wheels related online or on-air sponsorship advertising to
financial institutions. Media Partner and Navidec shall share all revenues (if
any) generated from any such advertising as follows:
Media Partner 85%
Navidec 15%
6.4 Revenue Sharing/Kiosks, Missiles and Subscriber Websites. The parties
acknowledge that Navidec may sell Kiosks and/or Missiles to Subscribers and may
also develop individual websites for Subscribers. Gross Revenues generated from
such sales and/or development, shall be shared by Navidec and Media Partner as
follows:
Navidec 90%
Media Partner 10%
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Gross revenues generated from ongoing Subscriber maintenance fees associated
with individual Subscriber websites shall be shared by Navidec and Media Partner
as follows:
Navidec 70%
Media Partner 30%
6.5 Setup Proceeds. Navidec shall be entitled to 100% of all Oregon Wheels
Setup Proceeds and shall pay therefrom all Dealer Inventory Integration Fees
required to be paid to the third party vendor providing the software that allows
seamless integration of the Subscribers' automobile inventory systems with
Oregon Wheels.
6.6 Implementation, Host, and License Fees. In consideration of the agency
granted to Media Partner pursuant to Section 2.1 above, Media Partner shall pay
to Navidec the following fees:
6.6.1 Implementation Fee. Media Partner shall pay a one time
Implementation Fee of $10,000 for the right to promote Oregon Wheels in the
State of Oregon. The Implementation Fee covers part of the cost of travel
by Navidec personnel to the State of Oregon until the targeted dealer base
is signed to Oregon Wheels. The Navidec Dealer Sales Rep, Navidec
Automotive Rep and the Navidec Dealer Training Rep. will make market trips
as required to attend dealer recruiting functions during the launch phase,
to sign up a minimum franchise base of 35 franchises, train dealers and
integrate dealer inventory. The Implementation Fee shall be paid upon
execution of this Agreement. The Implementation Fee shall be considered an
allowable reimbursement to Media Partner out of gross revenue (detailed in
Section 11).
6.6.2 Host Fee. Media Partner shall pay a monthly Host Fee of $1,500,
covering the provision by Navidec of high speed redundant network access to
Oregon Wheels, server capacity for the Oregon Wheels website and dealer
inventory database and physical and network security for Oregon Wheels. The
Host Fee shall be due and payable on the first day of each calendar month
during the term of this Agreement.
7. TERM.
-----
7.1 Primary Term and Renewals. This Agreement shall become effective on the
date that it has been executed by Navidec and Media Partner and shall continue
in full force and effect until the first anniversary thereof unless otherwise
terminated as provided herein. Thereafter, this Agreement shall automatically
renew from year to year for additional one-year terms on the same terms and
conditions as set forth herein, unless either Navidec or Media Partner has given
written notice to the other no later than ninety days prior to the conclusion of
the term then in effect of such party's election not to renew this Agreement.
This Agreement shall otherwise be terminable only on the conditions and in the
manner provided herein below.
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7.2 Termination for Cause. Notwithstanding anything to the contrary
contained in this Agreement, in the event either Navidec or Media Partner shall
fail to cure any material default or breach by such party hereunder within
thirty days after receipt of written notice of such default or breach from the
other party, or in the event such default cannot reasonably be cured within such
thirty day period, within such additional time as may be reasonably necessary to
cure such default so long as such party is diligently proceeding to accomplish
such cure, then the non-defaulting party may terminate this Agreement. If the
non-defaulting party shall elect to terminate this Agreement, this Agreement
shall terminate ten days after receipt by the defaulting party of notice of the
non-defaulting party's election to terminate this Agreement.
7.3 Bankruptcy. In the event a petition for bankruptcy is filed by or
against either Navidec or Media Partner, on if either Navidec or Media Partner
hereto shall make an assignment for the benefit of its creditors or take
advantage of any insolvency act, either Navidec or Media Partner may terminate
this Agreement by written notice to the other, such termination to be effective
immediately upon the giving of such written notice.
7.4 Continued Responsibility. Notwithstanding the receipt by any party of
notice from the other party terminating this Agreement, the parties agree to use
their best efforts with respect to the administration of Oregon Wheels and the
performance of this Agreement until the effective date of termination of this
Agreement. In addition, notwithstanding the termination of this Agreement under
conditions detailed under Section 7.1, Media Partner shall remain entitled to
receive for a period of one year following such termination its 70% share of all
Oregon Wheels Recurring Revenue generated by the Oregon Wheels program as such
program is in effect on the date of termination of this Agreement, but shall
have no right to participate in any Oregon Wheels Recurring Revenue generated
after the date of termination by reason of expansion of the number of
Subscribers within the Oregon Wheels program or the addition of new revenue
generating components to the program.
8. OWNERSHIP OF TRADEMARKS.
------------------------
8.1 Navidec Trademarks. Media Partner acknowledges that all of the Navidec
Trademarks are the sole property of Navidec, and Media Partner shall not have
any rights to the same except as expressly set forth in this Agreement.
9. LICENSE.
--------
9.1 Trademarks. Navidec hereby grants to Media Partner, and Media Partner
and hereby accepts from Navidec, a nonexclusive license during the term of this
Agreement to use the Navidec Trademarks in conjunction with its promotion of
Oregon Wheels. The license granted hereby shall expire concurrently with the
expiration or termination of this Agreement.
9.2 Representation and Warranty. Navidec hereby represents and warrants to
Media Partner that Navidec is the owner of the Navidec Trademarks and has the
power and authority to license the same to Media Partner.
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9.3 Infringement. Media Partner agrees to cooperate with Navidec to protect
Navidec against infringement of the Navidec Trademarks, including, but not
limited to, the defense or prosecution of any lawsuits if, in the judgment of
counsel to Navidec, such action is necessary or advisable. Navidec shall pay all
costs and expenses, including attorneys' fees, incurred with respect thereto.
Navidec agrees to enforce and take all steps reasonably necessary to maintain
the continuing validity of the Navidec Trademarks.
10. CONFIDENTIALITY AGREEMENTS.
---------------------------
10.1 Media Partner. Media Partner, for itself, its officers, directors,
agents, legal representatives, successors and assigns, covenants that it shall
maintain on a strictly confidential basis and, except as may otherwise be
required by law, will not disclose to any person or entity (except to such of
Media Partner's officers, directors, employees, accountants, attorneys and
agents who require access to such information for the proper administration of
this Agreement and Oregon Wheels, but only after obtaining appropriate
confidentiality agreements from such persons) any information provided to Media
Partner by Navidec which Navidec identifies at the time of delivery to Media
Partner as being confidential and subject to the terms of this Section. Media
Partner further covenants that any such confidential information provided to
Media Partner by Navidec shall be used by Media Partner solely for the purposes
of performing its obligations as set forth in this Agreement.
10.2 Navidec. Navidec, for itself, its officers, directors, agents, legal
representatives, successors and assigns, covenants that it shall maintain on a
strictly confidential basis and, except as may otherwise be required by law,
will not disclose to any person or entity (except to such of Navidec's officers,
directors, employees, accountants, attorneys and agents who require access to
such information for the proper administration of this Agreement and Oregon
Wheels, but only after obtaining appropriate confidentiality agreements from
such persons) any information provided to Navidec by Media Partner which Media
Partner identifies at the time of delivery to Navidec as being confidential and
subject to the terms of this Section. Navidec further covenants that any such
confidential information provided to Navidec by Media Partner shall be used by
Navidec solely for the purposes of performing its obligation as set forth in
this Agreement.
11. ACCOUNTING/BILLING.
-------------------
NAVIDEC
11.1 Billing; Collections. Navidec shall promptly calculate and bill
Subscribers and diligently demand, collect, receive and give receipt for any and
all revenue generated by Oregon Wheels. All such monies so collected shall be
deposited into the Operating Account.
11.2 Accounting. Navidec shall prepare and provide to Media Partner within
twenty calendar days after the end of each calendar month during the term of
this Agreement, a true, complete and accurate accounting of (a) the gross
revenue generated by Oregon Wheels for such calendar month, (b) all allowable
11
<PAGE>
reimbursements to Navidec, Media Partner or Valley National out of such gross
revenue (including, without limitation, any unrecovered Launch Event Expenses
paid by Media Partner, Navidec and Valley National; the Implementation Fee paid
by Media Partner; amounts paid to the third party vendor providing the software
that allows seamless integration of the Subscribers' automobile inventory
systems with Oregon Wheels and any amounts paid by Navidec pursuant to Section
11.4 below), (c) Media Partner's share of Oregon Wheels Recurring Revenue for
such month, (d) Kiosk, Missile and Subscriber website development revenue, (e)
gross revenues generated from ongoing Subscriber maintenance fees associated
with individual Subscriber websites and (f) Media Partner's share of Kiosk,
Missile and Subscriber website development revenue and Subscriber website
maintenance fees. Upon delivery of such monthly accounting to Media Partner,
Navidec shall issue a check to Media Partner for Media Partner's share of Oregon
Wheels Recurring Revenue and Kiosk, Missile and Subscriber website development
revenue and Subscriber website maintenance fees actually collected for such
month.
11.3 Audit. Media Partner shall have the right to conduct an examination of
and to audit the books and records maintained by Navidec with respect to the
administration of this Agreement and the Oregon Wheels program. Any such
examination or audit shall be performed at the offices of Navidec during normal
business hours and upon reasonable prior notice to Navidec thereof. Should the
audit discover errors in the record keeping, Navidec shall immediately correct
the same and shall promptly inform Media Partner in writing of the corrective
action taken. Audits conducted by Media Partner shall be at its expense. Media
Partner's right to audit the books and records maintained by Navidec with
respect to the administration of this Agreement and the Oregon Wheels program
shall survive the expiration or earlier termination of this Agreement.
11.4 Use of Counsel and Other Professionals. If Navidec shall require the
assistance of outside attorneys, accountants or other professionals for any
reason associated with the proper administration of Oregon Wheels, including
without limitation, in connection with efforts to collect amounts due from
Subscribers, Navidec shall have the authority to retain such professionals on
such terms as Navidec deems reasonable and appropriate in the circumstances and
to pay such professionals out of the Operating Account. Any such payments shall
be deducted from Dealer Franchise Fees in computing Net Monthly Dealer Franchise
Fees. Navidec shall include a full accounting of any such payments in its
monthly reports to Media Partner provided pursuant to Section 11.2 above.
MEDIA PARTNER
11.5 Billing; Collections. Media Partner shall promptly calculate and bill
advertisers and diligently demand, collect, receive and give receipt for any and
all advertising revenue generated by Oregon Wheels.
11.6 Accounting. Media Partner shall prepare and provide to Navidec within
twenty calendar days after the end of each calendar month during the term of
this Agreement, a true, complete and accurate accounting of (a) the gross
advertising revenue generated by Oregon Wheels for such calendar month, (b) less
agency fees (if any). Upon delivery of such monthly accounting to Navidec, Media
Partner shall issue a check to Navidec for Navidec's share of Oregon Wheels
advertising revenue actually collected for such month.
12
<PAGE>
11.7 Audit. Navidec shall have the right to conduct an examination of and
to audit the books and records maintained by Media Partner with respect to the
administration of this Agreement and the Oregon Wheels program. Any such
examination or audit shall be performed at the offices of Media Partner during
normal business hours and upon reasonable prior notice to Media Partner thereof.
Should the audit discover errors in the record keeping, Media Partner shall
immediately correct the same and shall promptly inform Navidec in writing of the
corrective action taken. Audits conducted by Navidec shall be at its expense.
Navidec's right to audit the books and records maintained by Navidec with
respect to the administration of this Agreement and the Oregon Wheels program
shall survive the expiration or earlier termination of this Agreement.
12. MISCELLANEOUS.
--------------
12.1 Entire Agreement. This Agreement contains the entire agreement between
the parties respecting the matters herein set forth and supersedes all prior
agreements, whether written or oral, between the parties respecting such
matters. Any amendments or modifications hereto in order to be effective shall
be in writing and executed by the parties hereto.
12.2 Severability. If any provision of this Agreement shall be or become
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate or render unenforceable the remaining portions of this Agreement, and
such remaining portions shall be construed as though not containing the
particular invalid or unenforceable provision or provisions and the rights and
obligations of the parties shall be construed and enforced accordingly.
12.3 No Assignment. Media Partner shall not assign this Agreement or any of
its obligations hereunder to any person or entity without the prior written
consent of Navidec, which consent may be given or withheld in Navidec's sole and
absolute discretion.
12.4 Binding Effect. Subject to the restrictions on Assignment set forth in
Section 12.3 above, this Agreement shall be binding upon and inure to the
benefit of Navidec and Media Partner and their respective officers, directors,
agents, legal representatives, successors and assigns.
12.5 No Joint Venture. Media Partner and Navidec are not and shall not be
considered joint venturers or partners, and neither shall have power to bind or
obligate the other except as set forth in this Agreement.
12.6 Time of Essence. Time is of the essence in the performance of each and
every term, condition, and covenant of this Agreement.
13
<PAGE>
12.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but such counterparts together shall constitute but one and the same
instrument.
12.8 Paragraph Headings. The paragraph headings herein contained are for
purposes of identification only and shall not be considered in construing this
Agreement.
12.9 Arbitration. Any dispute between Navidec and Media Partner hereunder
shall be settled by arbitration conducted in Denver, Colorado in accordance with
the Commercial Arbitration Rules of the American Arbitration Association. In the
event the parties to an arbitration are unable to agree on an arbitrator within
thirty days after either party initiates arbitration pursuant to this section,
the arbitrator shall be selected by the Denver, Colorado office of the American
Arbitration Association. The prevailing party in any such arbitration shall, at
the sole discretion of the arbitrator, be entitled to an award of some or all of
its reasonable costs and attorney fees incurred therein. The cost of the
arbitrator shall be borne equally by the parties to the arbitration. The
decision by the arbitrator shall be final and binding on the parties to the
arbitration.
12.10 Attorneys' Fees. The prevailing party in any legal proceeding brought
to enforce rights hereunder shall recover from the other party its reasonable
attorneys' fees and costs. As used herein the term "prevailing party" means the
party entitled to recover costs in any suit, whether or not brought to judgment,
and whether or not incurred before or after the filing of suit. 12.11 Waiver.
Except as herein expressly provided, no waiver by a party of any breach of this
Agreement or of any warranty or representation hereunder by another party shall
be deemed to be a waiver of any other breach of any kind or nature (whether
preceding or succeeding and whether or not of the same or similar nature), and
no acceptance of payment or performance by a party after any such breach by
another party shall be deemed to be a waiver of any further breach of this
Agreement or of any representation or warranty hereunder by such other party
whether or not the first party knows of such a breach at the time it accepts
such payment or performance. No failure on the part of a party to exercise any
right it may have by the terms hereunder or by law upon the default of another
party, and no delay in the exercise thereof by the first party at any time when
such other party may continue to be so in default, shall operate as a waiver of
any default, or as a modification in any respect of the provisions of this
Agreement.
12.12 Gender. Whenever the singular or plural number, masculine or feminine
or neuter gender is used herein, it shall equally include the other.
12.13 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado.
12.14 Notices. All notices, demands, or other communications of any type
(herein collectively referred to as "Notices") given by either party to the
other, whether required by this Agreement or in any way related to the
14
<PAGE>
transactions contracted for herein, shall be void and of no effect unless given
in accordance with the provisions of this Agreement. All Notices shall be
legible and in writing and shall be delivered to the party to whom the Notice is
directed, either in person with a receipt requested therefor or by facsimile
transmission or sent by a recognized overnight courier service for next day
delivery or by United States certified mail, return receipt requested, postage
prepaid and addressed to the party at its address or facsimile number set forth
below, and the same shall be effective (a) upon receipt or refusal if delivered
personally, (b) upon receipt if delivered by facsimile, (c) one business day
after depositing with such an overnight courier service, or (d) three business
days after deposit in the mails if mailed, addressed to party to whom the Notice
is directed. Either party hereto may change the address for Notices specified
above by giving the other party ten days advance written Notice of such change
of address.
To Media Partner: Internet Business Systems, LLC
------------------------------
------------------------------
------------------------------
Fax:
--------------------------
To Navidec: Navidec, Inc.
14 Inverness Drive East
Suite F-116
Englewood, CO 80112
Fax: (303) 790-8845
12.15 Indemnification. Each of the parties hereto (and "Indemnitor") shall
indemnify, defend with competent and experienced counsel reasonably acceptable
to the others ("Indemnitee") and hold harmless the Indemnitees, their
subsidiaries, affiliates and their respective officers, directors, shareholders
and employees, from and against any liabilities, actions, causes of action,
suits, proceedings, claims, demands, losses, costs and expenses (including
without limitation, reasonable attorneys' fees, disbursements and court costs),
whatsoever caused by any act or omission of the Indemnitor, its employees,
agents, representatives, or independent contractors, including but not limited
to, the breach by the Indemnitor, its employees, agents, representatives or
contractors of any terms, provisions, covenants, stipulations, conditions,
representations, warranties, obligations and/or agreements contained in this
Agreement, except to the extent such liability, etc. results from the negligence
or willful misconduct of the Indemnitee seeking indemnity.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective from and as of the date first above written.
NAVIDEC, INC.
Date:__________________ By:_____________________________
Ralph Armijo, President
IBS/LEE PARTNERS LLC
Date:__________________ By:_____________________________
Name:___________________________
Title:__________________________
16
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