TENFOLD CORP /UT, 424B4, 1999-05-21

TENFOLD CORP /UT
424B4, 1999-05-21
COMPUTER PROGRAMMING SERVICES

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<PAGE>
Filed pursuant to Rule 424(b)(4)
Registration No. 333-74057

4,700,000 Shares

TenFold Corporation

Common Stock
[TENFOLD LOGO]

-------------------

This is an initial public offering of shares of common stock of TenFold
Corporation. TenFold is offering 2,050,000 of the shares to be sold in this
offering. The selling stockholder identified in this prospectus is offering an
additional 2,650,000 shares. TenFold will not receive any of the proceeds from
the sale of the shares being sold by the selling stockholder.

The underwriters are reserving 1,000,000 of the shares to be sold in this
offering for issuance to Perot Systems Corporation, which Perot Systems has
the right to purchase under an agreement between Perot Systems and TenFold.
See "Business--Strategic Alliance" for more information concerning this
agreement.

The common stock has been approved for quotation on The Nasdaq Stock Market
under the symbol "TENF".

See "Risk Factors" beginning on page 6 to read about factors you should
consider before buying shares of the common stock.

-------------------

Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.

-------------------

<TABLE>
<CAPTION>
Per Share Total
--------- -----------
<S> <C> <C>
Initial public offering price............................ $17.00 $79,900,000
Underwriting discount.................................... $ 1.19 $ 5,593,000
Proceeds, before expenses, to TenFold.................... $15.81 $32,410,500
Proceeds to the selling stockholder...................... $15.81 $41,896,500
</TABLE>

The underwriters may purchase up to an additional 705,000 shares from
TenFold and certain selling stockholders at the initial public offering price
less the underwriting discount.

The underwriters expect to deliver the shares in New York, New York on May
26, 1999.

-------------------

Goldman, Sachs & Co.

BT Alex. Brown

U.S. Bancorp Piper Jaffray

-------------------

Prospectus dated May 20, 1999.
<PAGE>

[Description of Artwork]

Inside cover:

The inside cover includes images of people in work situations and images
representing various industries such as insurance, banking, and utilities. Text
reads: "TenFold is an innovative software and services company that builds and
implements complex applications rapidly and for a fixed price. We offer the
TenFold Guarantee, the industry's first money-back guarantee for large-scale
software applications. We deliver applications on time, for a fixed price, and
on target--or we refund our customer's money." The text reads further: "ON
TIME We show clear, visible results within weeks and typically deliver
completed, tested, and documented applications in four to eight months. ON
BUDGET By reducing the overall development and delivery time frame, we help
customers avoid expensive projects that exceed budgets and schedules. ON
TARGET TenFold applications meet precise business needs by offering significant
functionality, flexibility, and quality. We strive to exceed customer
expectations by delivering features customers need today as well as
functionality for tomorrow. GUARANTEED."

Gatefold:

A chart depicts the headline "The TenFold Advantage: The Best of "Buy' and
"Build.'" Below the chart appears a collage of people in work situations and
includes the headline: "Process + Technology=Business Value." Call-out text
describes the TenFold Way, the Universal Application, TenFold ComponentWare,
and FastStart. A collage of customer logos represents a sampling of TenFold
customers. A chart has Speed of Implementation on one axis and Features for
Your Business on another axis, with "Buy" in the Speed of Implementation upper
gradiant, "Build" in the upper quadrant of Features for Your Business and
"TenFold" in the upper gradiant of both axis. The further text is as follows:
1 TenFold applications offer the best of both the "buy" and "build" options,
giving customers the rapid time-to-market and quality benefits of packaged
applications, with the tailored-to-their-business features of custom-built
software. 2 The TenFold Way(TM) is a start-to-finish approach to working
closely with our customers to design, develop, test, deliver, and evolve custom
applications. We use the TenFold Way to identify requirements in four to eight
weeks, and typically deliver the complete, fully tested application in four to
eight months. 3 TenFold is led by applications experts and business managers
with significant experience delivering large-scale software solutions. 4 The
combination of our TenFold Way methodology and our unique Universal
Application(TM) and TenFold ComponentWare(TM) technologies lets us develop
applications significantly faster than alternative approaches. 5 The Universal
Application is a sophisticated and powerful applications architecture that
reduces design effort, and automates and accelerates applications development
and testing. TenFold ComponentWare is a library of components, reusable across
multiple applications and industries, that lets us add complex, business-
specific functionality to an application and virtually eliminate applications-
specific programming. 6 We recognize that implementing complex applications
can be as difficult as building them. FastStart(TM) provides both technology
and implementation services to quickly put TenFold applications into production
- - all within a fixed price and time frame. 7 Our customers include industry
leaders in insurance, investment management, telecommunications, utilities and
energy, healthcare, banking and credit, and other industries. Each of the
following customers accounted for the corresponding percentages of revenues in
1998: Barclays Global Investors (7%), Enron (3%), Franklin Templeton (2%),
Loomis Sayles & Company (1%), Mercy Health Services (3%), Nielsen Media
Research (8%), Oppenheimer Capital (1%), Provident (15%), TIG Insurance (5%),
Unitrin (20%), Utica National (10%). Each of the following customers accounted
for the corresponding percentages of revenues in the first quarter of 1999:
Abbey National (5%), HEALTHSOUTH (1%) and Westfield Companies (30%). Southern
Company is a recent customer in the second quarter of 1999.

Inside back cover:

A TenFold ad shows an archer's arrow aimed at an apple on top of an
executive's head with the headline, "Imagine an archer who hits the bulls-eye
8% of the time. Now imagine he's placed an apple on your head." The text of the
ad highlights statistics from the Standish Group, a software industry research
firm, illustrating that 92% of large-scale software development projects fail
to be delivered on time, on budget, and on target. The ad copy further states:
"Introducing the TenFold Guarantee. So there you are, balancing the apple, and
hoping the archer defies the odds. Talk about a do-or-die situation. At
TenFold, we know that developing core software applications is critical to your
company. And currently, 92% of applications development projects costing
$6-10 million fail to be delivered on time, on budget, and according to
original specifications. Do you see the arrow coming? Now consider the TenFold
Guarantee: We deliver large-scale applications on time and on budget, or you
get your money back. You might say we have straighter arrows in our quiver. So
give us a call, or visit our Web site. We're TenFold. And we'll hit the apple,
guaranteed."

1999 TenFold Corporation. All rights reserved. Statistical data taken from
1998 Standish Group CHAOS study.

2
<PAGE>

PROSPECTUS SUMMARY

This summary may not contain all of the information that you should consider
before investing in our common stock. You should read the following summary
together with the more detailed information regarding TenFold and the common
stock being sold in this offering, "Risk Factors", and our financial statements
and notes to those statements appearing elsewhere in this prospectus.

TenFold Corporation

Packaged software suppliers such as Enterprise Resource Planning (ERP)
vendors primarily offer horizontal applications that address general business
processes, such as accounting, human resources, and manufacturing, but offer
limited industry-specific functionality outside of manufacturing. Traditional
industry-specific, or "vertical", software vendors provide more industry
functionality, but often with products built on aging technology.

Instead of purchasing packaged software, companies can build custom
applications, either internally or with third parties. This approach may
provide the functionality and flexibility they seek, but it carries a high risk
of failure. According to research from The Standish Group, a software industry
research firm, only 8 percent of applications development projects costing $6-
10 million succeed--delivered on time, on budget, and according to original
specifications. Their published 1998 CHAOS Study also estimates that U.S.
applications development failures and cost overruns amounted to almost $100
billion in 1998.

We believe that our applications offer the best of both the "buy" and
"build" options, giving customers the rapid time-to-market and quality benefits
of packaged applications, with the tailored-to- their-business features of
custom-built software. We believe that it is the combination of our disciplined
methodology and our unique technologies that lets us develop applications
significantly faster than alternative approaches. Because TenFold can deliver
complex applications in relatively short time frames, we believe that our
applications typically cost less than those offered by competitors.

Our disciplined methodology, the TenFold Way, is a start-to-finish approach
to working closely with our customers to design, develop, test, deliver, and
evolve custom applications. We use the TenFold Way to identify requirements in
four to eight weeks, and typically deliver the complete, fully tested
application in four to eight months. The TenFold Way organizes a project into
phases, each with well-defined activities and deliverables, and combines
continuous communication and customer feedback with rapid, iterative
development to keep projects on target.

3
<PAGE>

Our unique technologies include the Universal Application and TenFold
ComponentWare. The Universal Application is a sophisticated and powerful
applications architecture that reduces design effort and automates and
accelerates applications development and testing. The Universal Application
lets us begin applications development projects having pre-built significant
functionality and having already solved many complex applications design and
implementation problems. TenFold ComponentWare is a library of components,
reusable across multiple applications and industries, that lets us add complex,
business-specific functionality to an application and lets us virtually
eliminate applications-specific programming.

Our mission is to become the leading provider of vertical software
applications in multiple industries. We intend to accomplish this by developing
innovative applications for customers and reselling these applications to other
companies in the same industry. A key element of our strategy is to leverage
our innovative technology to build mission-critical applications that address
under-served needs in large, multi-billion dollar vertical markets. We organize
TenFold into discrete, industry-specific business units called Vertical
Business Groups, to tailor marketing, selling, product development, and
business strategies for our target industries.

Our customers include industry leaders in insurance, investment management,
telecommunications, utilities and energy, healthcare, banking and credit, and
other industries. TenFold customers include Ameritech, Barclays Global
Investors, Crawford & Company, Enron, Mercy Health Services, Provident, and
Unitrin. Each of these customers accounted for more than $500,000 of our
revenues in 1998 and collectively accounted for 62% of these revenues.

In addition, we recently entered into a strategic relationship with Perot
Systems Corporation, a systems integrator, to develop and deliver applications,
products, and services to TenFold and Perot Systems customers using the TenFold
Way, Universal Application, TenFold ComponentWare, and FastStart.

Our executive offices are located at 180 West Election Road, Draper, Utah
84020. The telephone number at that location is (801) 495-1010 and the Web site
address is www.10fold.com. The information on our Web site is not part of this
prospectus.

We have applied for federal registration of the marks TenFold, The TenFold
Way, Universal Application, The Power of Ten, TenFold Revenue Manager,
10fold.com, and the TenFold logo. All other brand names, trademarks, or service
marks appearing in this prospectus are the property of their respective
holders.

4
<PAGE>

The Offering

The following information, which is based on shares outstanding as of March
31,1999, assumes that the underwriters do not exercise the option to purchase
additional shares in this offering. Please see "Underwriting" for more
information concerning this option.

<TABLE>
<C> <S>
Shares offered by TenFold..................... 2,050,000 shares
Shares offered by the selling stockholder..... 2,650,000 shares
Shares to be outstanding after this offering.. 33,875,333 shares
Use of proceeds............................... Working capital, general
corporate purposes, and capital
expenditures. See "Use of
Proceeds" for more information
concerning our proposed use of
proceeds.
Nasdaq Stock Market Symbol.................... "TENF"
</TABLE>

The share numbers exclude:

. 7,065,000 shares issuable upon exercise of options outstanding under
TenFold's 1993 flexible stock incentive plan with a weighted average
exercise price of $3.14 per share;

. 6,500,000 shares reserved for issuance under TenFold's newly adopted
1999 stock incentive plan, excluding future annual automatic increases
to the number of shares reserved under the plan; and

. 1,000,000 shares reserved for issuance under TenFold's newly adopted
1999 employee stock purchase plan, excluding future annual automatic
increases to the number of shares reserved under the plan.

Subsequent to March 31, 1999, TenFold granted additional options to purchase
740,500 shares of common stock at an exercise price of $12.60 per share. See
"Management--Stock Plans" and Note 8 of Notes to Consolidated Financial
Statements for more information concerning our stock plans and option grants.

Summary Financial Information
(in thousands)

<TABLE>
<CAPTION>
Three Months
Ended March
Year Ended December 31, 31,
--------------------------- ---------------
Consolidated Statement of 1996 1997 1998 1998 1999
Operations Data: ------- -------- -------- ------ -------
<S> <C> <C> <C> <C> <C>
Revenues:
License........................ $ 271 $ 5,244 $ 13,382 $1,259 $ 5,656
Services....................... 2,744 8,879 26,785 3,940 10,371
------- -------- -------- ------ -------
Total revenues............... 3,015 14,123 40,167 5,199 16,027
Total operating expenses......... 3,142 15,012 38,324 5,909 15,508
------- -------- -------- ------ -------
Income (loss) from operations.... (127) (889) 1,843 (710) 519
Net income (loss)................ $ (99) $ (600) $ 1,723 $ (401) $ 373
Accretion of Series A and B
redeemable
preferred stock................. -- (274) (915) (218) (248)
------- -------- -------- ------ -------
Net income (loss) applicable to
common stock.................... $ (99) $ (874) $ 808 $ (619) $ 125
======= ======== ======== ====== =======
</TABLE>

<TABLE>
<CAPTION>
March 31, 1999
-------------------
Actual As Adjusted
Consolidated Balance Sheet Data: ------- -----------
<S> <C> <C>
Cash and cash equivalents.................................. $13,171 $44,082
Total current assets....................................... 21,752 52,662
Total assets............................................... 28,395 59,306
Total current liabilities.................................. 9,445 9,445
Long-term obligations, less current portion, and redeemable
preferred and common stock ............................... 14,687 2,908
Total stockholders' equity................................. 4,178 46,868
</TABLE>
- -------
As adjusted amounts reflect the sale of 2,050,000 shares of common stock by
TenFold at the initial public offering price of $17.00 per share after
deducting the underwriting discount and estimated offering expenses. See "Use
of Proceeds" and "Capitalization" for more information concerning proceeds of
this offering and our capitalization after this offering.

5
<PAGE>

RISK FACTORS

You should carefully consider the risks described below before making a
decision to buy our common stock. The risks and uncertainties described below
are not the only ones facing our company.

If any of the following risks actually occur, our business, financial
condition, and results of operations could be materially adversely affected. In
such case, the trading price of our common stock could decline, and you may
lose all or part of your investment. You should also refer to the other
information set forth in this prospectus, including our financial statements
and the related notes.

Risks Related to Our Business

We have a limited operating history and consequently our future prospects are
difficult to evaluate

TenFold was founded in 1993 and has a limited operating history. As a
result, it is difficult to evaluate our future prospects. We have only a
limited number of applications completed and currently in use and there can be
no assurance that we will be able to complete any current or new projects. We
cannot be certain that our business strategy will succeed.

There are many factors that may cause fluctuations in our quarterly financial
results, and if our results are below the expectations of securities market
analysts, our stock price will likely decline

In the past, the software industry has experienced significant downturns,
particularly when general economic conditions decline and spending on
management information systems decreases. Our business, financial condition,
and operating results may fluctuate substantially from quarter to quarter as a
consequence of general economic conditions in the software industry. In
addition, our revenues and operating results may vary significantly from
quarter to quarter due to a number of factors that affect our business and the
software industry, including:

. the number, size, and scope of projects in which we are engaged;

. the contractual terms and degree of completion of our projects;

. any delays or changes in customer requirements incurred in connection
with new or existing projects;

. the accuracy of our estimates of the resources required to complete
ongoing, as well as new, projects;

. the adequacy of provisions for losses associated with fixed-price
contracts;

. the timing of sales of our products and services; and

. delays in introducing new applications.

Due to these factors, some of which are discussed in more detail below, we
believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance. It is likely that in some future
quarter our operating results will be below the expectations of securities
market analysts and investors. In this event, the price of our common stock
will likely fall.

Our historical quarterly operating results have varied significantly, and
future adverse quarterly operating results could cause our stock price to fall

Historically, our quarterly operating results have varied significantly. For
example, our results of operations during 1997 fluctuated from a net loss of
$1.3 million in the first quarter, to a net income

6
<PAGE>

of $1.1 million in the second quarter, to a net loss of $927,000 in the third
quarter, and to a net income of $526,000 in the fourth quarter. During 1998,
our results of operations improved from a net loss of $401,000 in the first
quarter, to a net loss of $17,000 in the second quarter, to a net income of
$557,000 in the third quarter, and to a net income of $1.6 million in the
fourth quarter. Our future quarterly operating results may continue to vary
significantly. Furthermore, although we have not suffered an operating loss
since the second quarter of 1998, there can be no assurance that we will not
suffer a loss in future periods.

If we fail to adequately anticipate our employee and resource utilization
rates, our quarterly operating results could suffer and our stock price could
fall

We plan to significantly increase our operating expenses to broaden our
service and customer support capabilities, expand our sales and marketing
operations, develop new distribution channels, and fund greater levels of
research and development. Our operating expenses are largely based on
anticipated revenue trends and a high percentage of our operating expenses,
particularly personnel and rent, are relatively fixed in advance of any
particular quarter. As a result, unanticipated variations in the number, or
progress toward completion, of our projects or in employee utilization rates
may cause significant variations in operating results in any particular quarter
and could result in quarterly losses. An unanticipated termination of a major
project, the delay of a project, or the completion during a quarter of several
major projects could result in underutilized employees and could, therefore,
cause us to suffer quarterly losses or adverse results of operations.

If we experience project delays, our quarterly operating results could suffer
and our stock price could fall

Because we recognize service revenues over the period we develop an
application, project delays could have a significant negative impact on our
operating results. See "Management Discussion and Analysis of Financial
Condition and Results of Operations--Overview" for a discussion of our revenue
recognition policies. These delays could be caused by a number of factors that
are outside of our control. For example, because our development methodology
requires significant involvement by customer personnel during several key
phases of the development cycle, delays could be caused by customers failing to
meet their contractual obligations, including reviewing and approving
requirements, providing timely feedback, and providing adequate staffing.
Delays could also be caused by customers being distracted by information
technology issues they face, including year 2000 issues, by corporate
reorganizations or business combinations in which they are involved, or other
factors. Furthermore, delays could be caused by a loss of personnel or members
of a particular project team. We have experienced delays for these and other
reasons in the past and there can be no assurance that we will not experience
delays in the future.

Our sales cycle is lengthy and subject to delays, and these delays could cause
our quarterly operating results to suffer and our stock price to fall

We believe that a customer's decision to purchase our software involves a
significant commitment of resources and is influenced by customer budget
cycles. To successfully sell our products, we generally must educate our
potential customers regarding the use and benefit of our products, which can
require significant time and resources. Consequently, the period between
initial contact and the purchase of our products is often long and subject to
delays associated with the lengthy budgeting, approval, and competitive
evaluation processes that typically accompany significant capital expenditures.
Our sales cycles are lengthy and variable, typically ranging between three to
twelve months from our initial contact with a potential customer to the signing
of a contract. Sales delays could cause our operating results to vary widely.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Results of Operations" for more information concerning
our quarterly operating results.

7
<PAGE>

We are dependent on a small number of large customers and the loss of one or
more of these customers may cause our revenues to decline

Although we plan to expand and diversify our customer base, as a result of
our limited operating history, we have derived, and over the near term we
expect to continue to derive, a significant portion of our revenues from a
limited number of large customers. The loss of any of these large customers,
without their replacement by new large customers, would have an adverse effect
on our revenues. Our five largest customers accounted for approximately 66% of
our revenues in 1998 and 74% of our revenues in the first quarter of 1999. Four
customers each accounted for more than 10% of our revenues in 1998, and three
customers each accounted for more than 10% of our revenues in the first quarter
of 1999. In the future, revenues from a single customer or a few large
customers may constitute a significant portion of our total revenues in a
particular quarter. The volume of work performed for specific customers is
likely to vary from year to year, and a major customer in one year may not hire
us to develop applications in a subsequent year. In addition, if a customer is
involved in a corporate reorganization or business combination, it may delay a
decision to hire us or cause the customer to choose not to hire us to develop
applications in a given year. See "Management Discussion and Analysis of
Financial Condition and Results of Operations" for more information concerning
our customers and revenues.

We derived a majority of our revenues in 1998 from customers in the insurance
industry, and if we continue to depend on customers in the insurance industry
and that industry suffers adverse economic conditions, our revenues and demand
for our products may decline

Sixty-five percent of our revenues were derived from software applications
we developed for companies in the insurance industry during 1998, and 75%
during the first quarter of 1999. Our reliance on customers from a particular
industry subjects our business to the economic conditions impacting that
industry, including the industry's demand for information technology resources.
If we continue to rely on the insurance industry as a major source of revenues,
and the insurance industry suffers adverse economic conditions, there will
likely be a significant reduction in the demand for our products, causing our
revenues to suffer. Although we intend to diversify our customer base, there
can be no assurance that we will be able to do so in the near term or at all.

If our software contains defects or other limitations, we could face product
liability exposure and our reputation could be damaged

Because of our limited operating history and our small number of customers,
we have completed a limited number of projects that are now in production. As a
result, there may be undiscovered material defects in our products or
technology. Furthermore, complex software products often contain errors or
defects, particularly when first introduced or when new versions or
enhancements are released. Despite internal testing and testing by current and
potential customers, our current and future products may contain serious
defects. Serious defects or errors could result in lost revenues or a delay in
market acceptance, which would damage our reputation and our business.

We have designed and tested the current versions of our products to be year
2000 compliant. We believe that none of our customers is currently using prior
versions of our products, and, as a result, we have not assessed whether these
prior versions are year 2000 compliant. However, there can be no assurance that
any current or prior versions of our products do not contain undetected errors
or defects associated with year 2000 date functions that may result in material
costs to TenFold. Some commentators have stated that a significant amount of
litigation will arise out of year 2000 compliance issues, and we are aware of a
growing number of lawsuits against other software vendors. Because of the
unprecedented nature of this litigation, it is uncertain to what extent TenFold
may be affected by it.

Our products have not been extensively tested to determine the extent to
which they are scalable -- capable of being used effectively by large numbers
of users simultaneously. Because

8
<PAGE>

customers may require that our products be capable of simultaneous use by large
numbers of users, if it turns out that our products are not scalable to the
required extent, our growth and market share would be materially adversely
affected.

Because our customers may use our products for mission-critical
applications, errors, defects, or other performance problems could result in
financial or other damages to our customers. Our customers could seek damages
for these losses. Any successful claims for these losses, to the extent not
covered by insurance, could result in us being obligated to pay substantial
damages, which would cause our operating results to suffer. Although our
license agreements typically contain provisions designed to limit our exposure
to product liability claims, existing or future laws or unfavorable judicial
decisions could negate these limitation of liability provisions. A product
liability claim brought against us, even if not successful, would likely be
time consuming and costly.

We have experienced significant growth in our revenues and in the number of our
employees, and we anticipate developing a complex organizational structure; our
failure to manage this growth and organizational structure could impair our
business

Our growth and new projects have placed significant demands on our
management and other resources. If we are unable to manage our growth and
projects effectively, this inability could have a material adverse effect on
the quality of our services and products, our ability to retain key personnel,
and our business, financial condition, and results of operations. Our revenues
increased approximately 184% in 1998 from $14.1 million in 1997 to $40.2
million in 1998. Our staff increased from 146 full-time employees at December
31, 1997 to 318 full-time employees at December 31, 1998. Our ability to manage
this growth effectively will require us to continue to develop and improve our
operational, financial, and other internal systems, as well as our business
development capabilities, and to train, motivate, and manage our employees. In
addition, our future success will depend in large part on our ability to
continue to set fixed-price fees accurately, maintain high rates of employee
utilization, and maintain project quality.

An element of our business strategy involves organizing our business along
industry lines, and evolving these business units into separate operating
companies. Our success in executing this strategy will depend to a large extent
on our ability to create and manage this complex organizational structure,
including our ability to establish and implement the appropriate management
structure, compensation programs, and financial reporting systems. Our
management has limited experience in managing an organization of this nature,
and its failure to meet the managerial challenges posed by the development and
operation of such an organization would harm our business.

We offer fixed-price, fixed-time contracts that we guarantee; if we fail to
accurately estimate the resources necessary to complete these contracts, or if
we fail to meet our performance obligations, we may be required to absorb cost
overruns, satisfy our performance guarantees, or suffer losses on projects, any
of which would adversely affect our operating results

An important element of our strategy is to enter into fixed-price, fixed-
time contracts, rather than time and materials contracts. These contracts
involve risk because they require us to absorb possible cost overruns and, if
we fail to meet our performance obligations, may require us to satisfy our
performance guarantee. We guarantee that we will complete our projects within a
fixed time or the customer has the option to return the software and receive a
refund of any fees paid under the contract. For fixed-price contracts, we
recognize license fees related to the application and the application
development service fees over time as we perform the services, using the
percentage of completion accounting method. Our failure to accurately estimate
the resources required for a project or our failure to complete our contractual
obligations in a manner consistent with the project plan would likely cause us
to have lower margins or to suffer a loss on the project, which would
negatively impact our operating results. In specific circumstances, we have
been required to commit

9
<PAGE>

unanticipated additional resources to complete projects. We will likely
experience similar situations in the future. In addition, for specific
projects, we may fix the price before the requirements are finalized. This
could result in a fixed price that turns out to be too low, which would cause
us to suffer a loss on the project and would negatively impact our operating
results.

A loss of Gary D. Kennedy, Jeffrey L. Walker, or any other key employee could
impair our business

Our industry is competitive and we are substantially dependent upon the
continued service of our existing executive personnel, especially Gary D.
Kennedy, President and Chief Executive Officer and William M. Conroy, Executive
Vice President and Chief Operating Officer. Furthermore, our products and
technologies are complex and we are substantially dependent upon the continued
service of our senior technical staff, including Jeffrey L. Walker, Chairman,
Executive Vice President and Chief Technology Officer; Sameer Shalaby, Senior
Vice President of Architecture Development; Adam Slovik, Senior Vice President
of Worldwide Applications Development; and Richard W. VanderDrift, Senior Vice
President of Applications Products. If a key employee resigns to join a
competitor or to form a competing company, the loss of the employee and any
resulting loss of existing or potential customers to the competing company
would harm our business. We do not carry key man life insurance on any of our
key employees. None of our key employees, other than Mr. Kennedy, has signed an
employment agreement or an agreement not to compete with TenFold upon
termination of employment. Even in the case of Mr. Kennedy, his employment
agreement does not assure his continued service to TenFold. In the event of the
loss of key personnel, there can be no assurance that we would be able to
prevent their unauthorized disclosure or use of our technical knowledge,
practices, or procedures.

Highly-skilled employees, particularly project managers and other senior
technical personnel, are difficult to attract and retain; our failure to
attract and retain these personnel could impair our ability to complete
projects and expand our business

Our business is labor intensive. Our success will depend in large part upon
our ability to attract, retain, train, and motivate highly-skilled employees,
particularly project managers and other senior technical personnel. Any failure
on our part to do so would impair our ability to adequately manage and complete
our existing projects, bid for and obtain new projects, and expand our
business. There exists significant competition for employees with the skills
required to perform the services we offer. Qualified project managers and
senior technical staff are in great demand and are likely to remain a limited
resource for the foreseeable future. There can be no assurance that we will be
successful in attracting a sufficient number of highly-skilled employees in the
future, or that we will be successful in retaining, training, and motivating
the employees we are able to attract. If our employees are unable to achieve
expected performance levels, our business will be harmed.

Our growth and success depends on our ability to resell applications products;
however, we have only resold one applications product to date and our current
and future agreements with our customers may limit our ability to resell
applications products in the future

The success of our business is dependent upon our ability to develop
software applications for customers that we can resell to other customers in
the same industry without significant modification. If we are unable to develop
and license these applications successfully or within the timeframes
anticipated, our revenues, growth, and operating results will suffer. Some
customers have prohibited us from marketing the applications developed for them
generally or for specified periods of time or to specified third parties or
have required that we pay them a royalty on licenses of the application to
third parties. In addition, we have agreed with Perot Systems Corporation, a
systems integrator with whom we have a strategic relationship, that in some
cases Perot Systems or its customers will own applications that we develop
under our relationship with them. For a discussion of our relationship

10
<PAGE>

with Perot Systems see "Business--Strategic Alliance". Customers may continue
to make similar demands in the future. Furthermore, there can be no assurance
that we will be able to develop software applications that can be marketed
generally within a particular industry without the need for significant
modification. Our current product plans include the introduction of multiple
resellable products in the near term. To date we have resold one application,
TenFold Revenue Manager, to three customers. Revenue from these sales totalled
approximately $1.7 million through March 31, 1999.

We intend to expand our business by developing applications for new vertical
industries in which we have limited experience, and we may not be able to
successfully develop applications for these industries or compete in these
markets

We intend to expand our business into new vertical industries. If we are
unsuccessful in developing applications that meet the needs of companies in
these industries or if our applications are not competitive, our operating
results will suffer. We have limited experience in developing software
applications for companies outside of the industries we have targeted to date
and there can be no assurance that we will be able to successfully develop
these applications in the future. In addition, we will face competition from
companies that have significantly greater experience in developing applications
for the industries we intend to target and that have greater name recognition
than we do.

Our successful implementation of our vertical business strategy, which may pose
significant challenges, will be important in order for us to achieve
significant revenue growth; if we are unsuccessful in implementing this
strategy, our ability to grow our business will be impaired

Our vertical business strategy involves segmenting our business along
industry lines, likely through the creation of separate subsidiaries, and
having these subsidiaries evolve into separate operating companies. We may spin
off these separate subsidiaries and offer equity in them to strategic industry
partners or the subsidiary's management. We believe that the successful
implementation of this strategy will be important in order for us to achieve
significant growth. We may face significant challenges in implementing this
strategy, including the segmentation and valuation of the various subsidiaries,
the selection of strategic industry partners, and issues relating to conflicts
of interest among the subsidiaries, their stockholders and TenFold, and
potential charges and expenses resulting from any repurchases of equity
interests in the subsidiaries. Our failure to successfully address these
challenges could cause this business strategy to fail, which would impair our
ability to grow our business.

We plan to devote significant resources to the development of our relationship
with Perot Systems Corporation, and if we fail to generate substantial revenues
from this relationship, our operating results may suffer

We recently entered into a strategic relationship with Perot Systems
Corporation, a systems integrator, to develop and deliver applications,
products, and services to TenFold and Perot Systems customers. We plan to
devote significant resources to the development of this relationship. As a
result, if we fail to generate substantial revenues from this relationship,
whether due to the failure of the relationship or our inability to staff the
opportunities presented, our operating results may suffer.

If we are unable to expand our international operations, our growth will suffer

Although we currently have limited international operations, our ability to
achieve revenue growth in the future will depend in part on our ability to
develop international sales. Although we may invest significant resources to
establish additional sales and service operations outside the United States and
to enter additional international markets, there can be no assurance that these
efforts will be

11
<PAGE>

successful. In order to successfully establish international sales, we must
establish foreign operations, add an international sales and support
organization, hire additional personnel, and recruit international
distributors. To the extent that we are unable to do so in a cost-effective
manner, our growth and operating results could be materially adversely
affected. In addition, our TenFold Guarantee may not be appropriate in some
international markets for various reasons, including business practices in
these markets. As a result, we may not be able to derive value from the TenFold
Guarantee in these markets.

If our internal systems are not year 2000 compliant, our business could be
seriously disrupted

Although we do not believe that we will incur any material costs or
experience material disruptions in our business associated with preparing our
internal systems for the year 2000, there can be no assurance that we will not
experience serious unanticipated negative consequences and/or material costs
caused by undetected errors or defects in the technology used in our internal
systems. These systems include the hardware and third-party software products
that our applications developers and research and development staff use in
their day-to-day activities, as well as our management information systems. The
most likely worst case scenarios include:

. hardware or software failures that would prevent our applications
developers and research and development staff from effectively
performing their duties;

. corruption of data contained in our internal information systems; and

. the failure of infrastructure services provided by government agencies
and other third parties, including public utilities and internet
services.

If we cannot protect or enforce our intellectual property rights, which are
currently comprised primarily of our Universal Application and TenFold
ComponentWare technologies, our competitors may be able to introduce competing
products that are similar to ours, which would impair our competitive position,
and we may become involved in costly and time-consuming litigation

Our success is dependent, in part, upon our proprietary Universal
Application technology and other intellectual property rights. If we are unable
to protect and enforce these intellectual property rights, our competitors will
have the ability to introduce competing products that are similar to ours, and
our revenues, market share and operating results will suffer. To date we have
relied primarily on a combination of copyright, trade secret, and trademark
laws, and nondisclosure and other contractual restrictions on copying and
distribution to protect our proprietary technology. We have applied for two
separate patents in the United States and intend to continue to seek patents on
our technology where appropriate. There can be no assurance that the steps we
have taken in this regard will be adequate to deter misappropriation of our
proprietary information or that we will be able to detect unauthorized use and
take appropriate steps to enforce our intellectual property rights. The laws of
some foreign countries may not protect our intellectual property rights to the
same extent as do the laws of the United States. Furthermore, litigation may be
necessary to enforce our intellectual property rights, to protect our trade
secrets, to determine the validity and scope of the proprietary rights of
others, or to defend against claims of infringement or invalidity. This
litigation could result in substantial costs and diversion of resources which
would harm our business.

To date, we have not been notified that our products infringe the
proprietary rights of third parties, but there can be no assurance that third
parties will not claim infringement by us with respect to current or future
products. We expect software developers will increasingly be subject to
infringement claims as the number of products and competitors in our industry
segment grows and the functionality of products in different industry segments
overlaps. Any of these claims, with or without merit, could be time-consuming
to defend, result in costly litigation, divert management's attention and
resources, cause product shipment delays, or require us to enter into royalty
or

12
<PAGE>

licensing agreements. These royalty or licensing agreements, if required, may
not be available on terms acceptable to us, or at all. A successful claim
against us of product infringement and our failure or inability to license the
infringed or similar technology on favorable terms would harm our business.

No corporate actions requiring stockholder approval can take place without the
approval of our controlling stockholders

The executive officers, directors, and entities affiliated with them will,
in the aggregate, beneficially own approximately 67% of our outstanding common
stock following the completion of this offering, or 66% if the underwriters'
over-allotment option is exercised in full. Furthermore, Jeffrey L. Walker,
Chairman, Executive Vice President and Chief Technology Officer, and the Walker
Children's Trust, will, in the aggregate, beneficially own approximately 55% of
our outstanding common stock following the completion of this offering, or 54%,
if the underwriters' over-allotment option is exercised in full. Mr. Walker,
acting alone or with others, would be able to decide or significantly influence
all matters requiring approval by our stockholders, including the election of
directors and the approval of mergers or other business combination
transactions. This concentration of ownership may have the effect of delaying
or preventing a merger or other business combination transaction, even if the
transaction would be beneficial to our other stockholders. See "Principal and
Selling Stockholders" for more information concerning the ownership of our
stock by significant stockholders.

The antitakeover provisions in our charter documents and under Delaware law
could discourage a takeover that stockholders may consider favorable

Provisions of our Certificate of Incorporation, Bylaws, stock incentive
plans and Delaware law may discourage, delay, or prevent a merger or
acquisition that a stockholder may consider favorable. See "Management--Stock
Plans" and "Description of Capital Stock--Antitakeover Effect of Provisions in
Our Certificate of Incorporation and Bylaws" for more information concerning
antitakeover matters.

13
<PAGE>

Risks Related to Our Industry

We face significant competition principally from consulting and software
integration firms, application software vendors, and internal information
systems groups; if we fail to successfully compete, our growth and market share
will be adversely affected

The market for our products and services is highly competitive, and if we
are not successful in competing in this market, our growth and market share
will suffer. We believe that we currently compete principally with consulting
and software integration firms, application software vendors, and internal
information systems groups. Many of these competitors have significantly
greater financial, technical and marketing resources, generate greater
revenues, and have greater name recognition than we do. In addition, there are
relatively low barriers to entry into our markets and we have faced, and expect
to continue to face, additional competition from new entrants into our markets.

We believe that the principal competitive factors in our markets include
quality of services and products, speed of development and implementation,
price, project management capability, and technical and business expertise. We
believe that our ability to compete also depends in part on a number of
competitive factors outside our control, including the ability of our
competitors to hire, retain and motivate project managers and other senior
technical staff, the development by others of software and services that are
competitive with our products and services, and the extent of our
responsiveness to customer needs. There can be no assurance that we will be
able to compete successfully with our competitors.

Demand for our applications may decline as the year 2000 approaches and
potential customers focus their attention on solving their year 2000 problems

As the end of 1999 approaches, there is a risk that orders for our products
will be reduced or delayed as our customers or potential customers divert their
resources to prepare for the year 2000. If this reduction in orders occurs, it
could significantly impact our operating results which could cause our stock
price to materially decline.

We have experienced demand for our applications in recent years that may
have been generated by customers replacing and upgrading applications in order
to prepare for the year 2000. Once these customers have completed their year
2000 projects, the software industry, and TenFold, may experience a significant
deceleration in the annual growth rates from the rates recently experienced.

If we fail to release new versions of our products or product enhancements in a
timely manner to accommodate technological change, our ability to grow our
business will suffer

The market in which we compete is characterized by rapid technological
change, including new versions of operating systems, relational databases or
new hardware technologies. We may need to modify our products to accommodate
these changes. Our revenues and market share will decline if we fail to release
new versions of our products or product enhancements in a timely manner or if
these products and product enhancements fail to achieve market acceptance when
released. In addition, customers may defer or forego purchases of our products
if our competitors or major hardware, systems, or software vendors introduce or
announce new products or product enhancements.

14
<PAGE>

Risks Related to the Securities Markets

Future sales of our common stock may depress our stock price

If our stockholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options, in the public market
following this offering, the market price of our common stock could fall. These
sales also might make it more difficult for us to sell equity or equity-related
securities in the future at a time and price that we deem appropriate. Upon
completion of this offering, we will have outstanding 33,875,333 shares of
common stock (based upon shares outstanding as of March 31, 1999), assuming no
exercise of the underwriters' over-allotment option and no exercise of
outstanding options after March 31, 1999. Of the 4,700,000 shares sold in this
offering, approximately 3,525,000 shares will be freely tradeable and
approximately 1,175,000 shares will be subject to 180-day lock-up agreements.
The remaining 29,175,333 shares not sold in this offering will become eligible
for sale in the public market at various times after the offering. See "Shares
Eligible for Future Sale" for a discussion of how and when these shares will
become eligible for sale in the public market.

Our stock price could decline following the offering, and our stockholders
could bring a securities class action lawsuit against us as a result of any
decline

The market price of our common stock is likely to be highly volatile and may
be significantly affected by factors such as:

. actual or anticipated fluctuations in our operating results;

. announcements of technological innovations;

. new products or new contracts by us or our competitors;

. conditions and trends in the software and other technology industries;
and

. changes in financial estimates by securities analysts.

In addition, the stock market has from time to time experienced significant
price and volume fluctuations that have particularly affected the market prices
for the securities of technology companies. In the past, following periods of
volatility in the market price of a particular company's securities, securities
class action litigation has often been brought against the company. There can
be no assurance that we will not face this litigation in the future. This
litigation could result in substantial costs and a diversion of management's
attention and resources, which could materially harm our business.

New investors will incur immediate and substantial dilution in the amount of
$15.62 per share

The initial public offering price is substantially higher than the book
value per share of our outstanding common stock. As a result, investors
purchasing common stock in this offering will incur immediate and substantial
dilution in the amount of $15.62 per share. To the extent outstanding options
to purchase common stock are exercised, there will be further dilution. See
"Dilution" for information concerning dilution, including the factors used in
computing this dilution amount.

15
<PAGE>

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the sections entitled "Prospectus Summary", "Risk
Factors", "Management's Discussion and Analysis of Financial Condition and
Results of Operations", and "Business", contains forward-looking statements.
These statements relate to future events or our future financial performance,
and involve known and unknown risks, uncertainties, and other factors that may
cause our or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these forward-
looking statements. These risks and other factors include, among other things,
those listed under "Risk Factors" and elsewhere in this prospectus. In some
cases, you can identify forward-looking statements by terminology such as
"may", "will", "should", "expects", "plans", "anticipates", "believes",
"estimates", "predicts", "potential", "continue", or the negative of these
terms or other comparable terminology. These statements are only predictions.
Actual events or results may differ materially. In evaluating these statements,
you should specifically consider various factors, including the risks outlined
under "Risk Factors". These factors may cause our actual results to differ
materially from any forward-looking statement.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of these
statements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform these statements to
actual results.

16
<PAGE>

USE OF PROCEEDS

The net proceeds to TenFold from the sale of the shares of common stock
being offered by TenFold will be approximately $30,910,500, or approximately
$34,613,218 if the underwriters' over-allotment option is exercised in full, in
each case after deducting the underwriting discount and estimated offering
expenses payable by TenFold. TenFold will not receive any proceeds from the
sale of shares by the selling stockholders.

The principal purposes of this offering are to obtain additional capital, to
create a public market for TenFold's common stock, to facilitate TenFold's
future access to public equity markets, and to provide increased visibility and
credibility in a marketplace where many of TenFold's current and potential
competitors are or will be publicly held companies. TenFold intends to use the
net proceeds for general corporate purposes, including working capital and
capital expenditures. We may also use a portion of the proceeds for strategic
investments and acquisitions, although we have no current plans for these
investments or acquisitions. TenFold's management will retain broad discretion
in the allocation of a substantial portion of the net proceeds. Pending use of
the net proceeds for the above purposes, TenFold intends to invest these funds
in short-term, interest-bearing, investment-grade securities.

DIVIDEND POLICY

TenFold has never declared or paid any cash dividends on its capital stock.
TenFold currently intends to retain all available funds and any future earnings
for use in the operation of its business and does not anticipate paying any
cash dividends in the foreseeable future.

17
<PAGE>

CAPITALIZATION

The following table sets forth as of March 31, 1999: (1) TenFold's actual
capitalization; (2) TenFold's capitalization after giving pro forma effect to
the conversion of TenFold's outstanding preferred stock and redeemable common
stock into common stock upon the closing of this offering; and (3) TenFold's
pro forma capitalization as adjusted to reflect its receipt of the estimated
net proceeds from the sale of the 2,050,000 shares of common stock offered
hereby at the initial public offering price of $17.00 per share, after
deducting underwriting discounts and estimated offering expenses. This table
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and Notes thereto included elsewhere in this prospectus.
<TABLE>
<CAPTION>
March 31, 1999
------------------------------
Pro forma
Actual Pro forma As Adjusted
------- --------- -----------
(in thousands, except share
and per share data)
<S> <C> <C> <C>
Current portion of capital lease
obligations(1)................................. $ 525 $ 525 $ 525
Current portion of notes payable(1)............. 976 976 976
======= ======= =======

Long-term obligations, net of current
maturities..................................... $ 2,908 $ 2,908 $ 2,908
Series A and B Redeemable Convertible Preferred
Stock, $0.001 par value; 6,261,129 shares
authorized, issued, and outstanding, actual; no
shares authorized, issued, or outstanding pro
forma and pro forma as adjusted................ 9,803 -- --
Redeemable Common Stock, $0.001 par value;
200,000 shares authorized, issued, and
outstanding, actual; no shares authorized,
issued, or outstanding pro forma and pro forma
as adjusted.................................... 1,976 -- --
Stockholders' equity:
Common Stock, $0.001 par value, 43,800,000
shares authorized, actual; 120,000,000 shares
authorized pro forma and pro forma as
adjusted; 25,364,204 shares issued and
outstanding, actual; 31,825,333 shares issued
and outstanding pro forma; 33,875,333 shares
issued and outstanding pro forma as
adjusted(2).................................. 25 32 34
Preferred Stock, $0.001 par value, no shares
authorized, issued, or outstanding actual
2,000,000 shares authorized pro forma and pro
forma as adjusted; no shares issued and
outstanding pro forma and pro forma as
adjusted..................................... -- -- --
Additional paid-in capital.................... 12,178 23,950 54,859
Notes receivable from stockholders............ (678) (678) (678)
Deferred compensation......................... (7,856) (7,856) (7,856)
Retained earnings............................. 521 521 521
Accumulated other comprehensive income........ (12) (12) (12)
------- ------- -------
Total stockholders' equity.................. 4,178 15,957 46,868
------- ------- -------
Total capitalization...................... $18,865 $18,865 $49,776
======= ======= =======
</TABLE>
- --------
(1)See Notes 4 and 5 of Notes to Consolidated Financial Statements.
(2)Based on the number of shares outstanding as of March 31, 1999. Excludes:

. 7,065,000 shares issuable upon exercise of options outstanding under
TenFold's 1993 flexible stock incentive plan with a weighted average
exercise price of $3.14 per share;
. 6,500,000 shares reserved for issuance under TenFold's newly adopted
1999 stock incentive plan, excluding future annual automatic increases
to the number of shares reserved under the plan; and
. 1,000,000 shares reserved for issuance under TenFold's newly adopted
1999 employee stock purchase plan, excluding future annual automatic
increases to the number of shares reserved under the plan.

Subsequent to March 31, 1999, TenFold granted additional options to
purchase 740,500 shares of common stock at an exercise price of $12.60 per
share. See "Management--Stock Plans" and Note 8 of Notes to Consolidated
Financial Statements for more information concerning our stock plans and
option grants.

18
<PAGE>

DILUTION

TenFold's pro forma net tangible book value as of March 31, 1999 was
approximately $16.0 million, or $0.50 per share of common stock. Pro forma net
tangible book value per share represents the amount of total tangible assets
less total liabilities, divided by the total number of shares of common stock
outstanding, after giving pro forma effect to the automatic conversion of all
outstanding shares of preferred stock and redeemable common stock into common
stock. After giving effect to the sale of the 2,050,000 shares of common stock
offered under this prospectus by TenFold at the initial public offering price
of $17.00 per share, after deducting underwriting discounts and commissions and
estimated offering expenses payable by TenFold, TenFold's pro forma net
tangible book value at March 31, 1999 would have been approximately $46.9
million or $1.38 per share of common stock. This amount represents an immediate
increase in net tangible book value of $0.88 per share to existing stockholders
and an immediate dilution of $15.62 per share to new investors. The following
table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Initial public offering price per share........................... $17.00
Pro forma net tangible book value per share at March 31, 1999... $0.50
Increase per share attributable to new investors................ 0.88
-----
Pro forma net tangible book value per share after this offering... 1.38
------
Dilution per share to new investors............................... $15.62
======
</TABLE>

The following table summarizes, on a pro forma basis as of March 31, 1999,
the differences between the existing stockholders and new investors with
respect to the number of shares of common stock purchased from TenFold, the
total consideration paid to TenFold, and the average price per share paid:

<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ ------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 31,825,333 93.9% $13,494,000 27.9% $ 0.42
New investors.............. 2,050,000 6.1 34,850,000 72.1 17.00
---------- ----- ----------- -----
Total.................... 33,875,333 100.0% $48,344,000 100.0%
========== ===== =========== =====
</TABLE>

The information in the table is based upon the initial public offering price
of $17.00 per share before deducting underwriting discounts and commissions and
estimated offering expenses payable by TenFold. The information concerning
existing stockholders is based on the number of shares of common stock
outstanding on March 31, 1999 and gives effect to the conversion of all
outstanding shares of TenFold's preferred stock and redeemable common stock
into shares of common stock automatically upon the closing of this offering.
This information excludes:

19
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operation", the Financial Statements and the Notes thereto and
the other information contained in this prospectus. The selected consolidated
statements of operations data for the years ended December 31, 1996, 1997 and
1998, and the selected consolidated balance sheet data as of December 31, 1997
and 1998, are derived from, and are qualified by reference to, TenFold's
audited financial statements appearing elsewhere in this prospectus. The
selected consolidated statement of operations data for each of the three month
periods ended March 31, 1998 and 1999, and the selected consolidated balance
sheet data as of March 31, 1998 and 1999 are derived from, and are qualified by
reference to, TenFold's unaudited interim financial statements appearing
elsewhere in this prospectus. The selected consolidated statements of
operations data for the years ended December 31, 1994 and 1995, and the
selected consolidated balance sheet data as of December 31, 1994, 1995 and
1996, are derived from TenFold's unaudited consolidated financial statements
not included herein. The historical results are not necessarily indicative of
future results.

<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
------------------------------------------ ----------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------- ------- ------- ------- -------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenues:
License................ $ 11 $ 128 $ 271 $ 5,244 $13,382 $ 1,259 $ 5,656
Services............... 2,167 1,420 2,744 8,879 26,785 3,940 10,371
------- ------- ------- ------- ------- ------- -------
Total revenues....... 2,178 1,548 3,015 14,123 40,167 5,199 16,027
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Cost of revenues....... 202 302 370 4,661 14,529 2,176 6,246
Sales and marketing.... -- -- 87 2,765 11,070 1,442 4,736
Research and
development........... 1,182 1,774 2,289 4,739 9,690 1,807 3,401
General and
administrative........ 42 178 396 1,364 2,882 471 820
Amortization of
deferred
compensation.......... -- -- -- 34 153 13 305
Other charge........... -- -- -- 1,449 -- -- --
------- ------- ------- ------- ------- ------- -------
Total operating
expenses............ 1,426 2,254 3,142 15,012 38,324 5,909 15,508
------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations............. 752 (706) (127) (889) 1,843 (710) 519
------- ------- ------- ------- ------- ------- -------
Interest and other
income, net............ 9 52 28 179 375 102 88
------- ------- ------- ------- ------- ------- -------
Income (loss) before
income taxes........... 761 (654) (99) (710) 2,218 (608) 607
Provision (benefit) for
income taxes........... 242 (141) -- (110) 495 (207) 234
------- ------- ------- ------- ------- ------- -------
Net income (loss)....... $ 519 $ (513) $ (99) $ (600) $ 1,723 $ (401) $ 373
======= ======= ======= ======= ======= ======= =======
Accretion of Series A
and B redeemable
preferred stock........ $ -- $ -- $ -- $ (274) $ (915) $ (218) $ (248)
======= ======= ======= ======= ======= ======= =======
Net income (loss)
applicable to common
stock.................. $ 519 $ (513) $ (99) $ (874) $ 808 $ (619) $ 125
======= ======= ======= ======= ======= ======= =======
Basic earnings (loss)
per share.............. $ 0.03 $ (0.03) $ (0.00) $ (0.04) $ 0.04 $ (0.03) $ 0.01
======= ======= ======= ======= ======= ======= =======
Diluted earnings (loss)
per share.............. $ 0.03 $ (0.03) $ (0.00) $ (0.04) $ 0.03 $ (0.03) $ 0.00
======= ======= ======= ======= ======= ======= =======
Weighted average
shares--basic(1)...... 19,385 20,047 20,285 21,542 21,551 21,031 22,765
======= ======= ======= ======= ======= ======= =======
Weighted average
shares--diluted(1).... 19,385 20,047 20,285 21,542 26,663 21,031 28,176
======= ======= ======= ======= ======= ======= =======
Consolidated Balance
Sheet Data (at period
end):
Cash and cash
equivalents............ $ -- $ 723 $ 1,211 $ 9,022 $15,373 $ 7,943 $13,171
Total current assets.... 1,132 846 1,376 10,443 23,223 11,225 21,752
Total assets............ 1,179 963 1,890 12,044 29,566 13,447 28,395
Total current
liabilities............ 265 561 585 2,921 11,493 4,842 9,445
Long-term obligations,
redeemable preferred
and common stock, less
current portion........ -- -- -- 8,640 14,240 8,858 14,687
Stockholders' equity
(deficit).............. 914 403 1,305 483 3,748 (253) 4,178
</TABLE>
- --------
(1) See Note 10 of Notes to Consolidated Financial Statements for an
explanation of the determination of the method used to determine the number
of shares used in computing net earnings (loss) per share.

20
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto and with the other information
included elsewhere in this prospectus.

Overview

TenFold is an innovative software and services company, founded in 1993,
that builds and implements large-scale, complex applications rapidly and for a
fixed price. Our mission is to become the leading provider of industry-
specific, or "vertical", software applications in multiple industries. From
1993 through 1995, we engaged primarily in the development of our Universal
Application technology and derived revenue primarily from technology
development and consulting projects, generally on a time and materials basis.
In 1996, we began using our Universal Application to develop large-scale,
complex applications. In 1997 and 1998, we derived the majority of our license
and service revenues from fixed-price, fixed-time applications development
projects. Through March 31, 1999, we also generated approximately $1.7 million
in license and service revenues from the resale of our first vertical
applications product, TenFold Revenue Manager.

We derive our revenues from license fees, application development and
implementation services, support, and training services. License revenues
consist of fees for licensing our Universal Application and license fees for
the applications that we develop for our customers. We also derive license
revenues from the resale of our vertical applications products. Service
revenues consist of fees for applications development and implementation,
support and training. We recognized revenue consistent with Statement of
Position (SOP) 97-2, Software Revenue Recognition, as modified by SOP 98-9,
Modification of SOP 97-2 with Respect to Certain Transactions for 1998, and
using SOP 91-1, Software Revenue Recognition, for prior years.

For fixed-price contracts that include a service element that is essential
to the functionality of the software, we recognize license fees related to the
application, and the application development service fees, over time as we
perform the services, using the percentage-of-completion accounting method. We
determine our proposed fixed price for a project using a formal estimation
process that takes into account the project's timetable, complexity, technical
environment, and risks. Members of our senior management team approve each
fixed price proposal. On a limited basis, we also provide application
development and implementation services on a time and materials basis. We
recognize revenue on our time and material contracts as we perform the
services.

We recognize license revenues from applications products sales and Universal
Application development licenses, whether sold separately or with an
application development project, that do not require significant production,
modification, or customization of software, or the service-related element is
not essential to the functionality of the software, when the following criteria
are met: we have a signed noncancellable license agreement; we have shipped the
software product; there are no uncertainties surrounding product acceptance;
the fees are fixed and determinable; and collection is considered probable.

We recognize support revenue from contracts for ongoing technical support
and product updates ratably over the term of the contract, which is typically
twelve months. We recognize training revenues as we perform the services.

In mid 1998, we began offering a money-back guarantee on our fixed-price
contracts, for which we recognize revenue using the percentage-of-completion
accounting method. As a result, in some
of our contracts we have guaranteed that we will complete our projects within a
fixed-time period or

21
<PAGE>

we will refund the fees paid. This guarantee also requires the customer to
fulfill various responsibilities within a specified time period, including
reviewing and approving requirements, providing timely feedback, and providing
adequate staffing or the guarantee is voided. Accordingly, we treat this as a
conditional guarantee. None of our customers has exercised its guarantee to
date, nor was it probable as of the latest balance sheet date that a current
customer would exercise its guarantee. If necessary, we make provisions for
estimated refunds or losses on uncompleted contracts on a contract by contract
basis and recognize the provisions in the period in which the refunds or losses
are probable and we can reasonably estimate them.

During 1998, Unitrin, Provident Companies, Crawford & Company, and Utica
National Insurance Group accounted for 20%, 15%, 13%, and 10% of total
revenues, respectively. In 1997, Indus International, Unitrin, and Board of
Trading Clearing Corporation accounted for 39%, 31%, and 11% of total revenues,
respectively. In 1996, Board of Trading Clearing Corporation and CS First
Boston accounted for 87% and 11% of total revenues, respectively. Provident
Companies, Unitrin, and Indus International are also stockholders of TenFold
Corporation. In December 1998, Provident Companies and Unitrin each purchased
200,000 shares of common stock from us at a purchase price of $5.00 per share
and entered into additional license and service agreements with us. In the
additional license agreement with Provident Companies, we provide an expanded
application license. In the additional license and service agreement with
Unitrin, we provide an expanded application license, a Universal Application
development license, and implementation and training services. We subsequently
determined that the fair market value of a share of common stock at December
30, 1998 equaled $9.88. As a result, we have allocated $2.0 million from the
licensing and service agreements to the common stock transactions. We are
recognizing the balance, $6.1 million, in the licensing and service agreements
as revenue in the appropriate periods. We recorded $2.8 million of the total
$6.1 million as revenue in the fourth quarter of 1998. We expect to record the
remaining revenue in 1999.

The timing and amount of cash received from customers can vary significantly
depending on specific contract terms and can therefore have a significant
impact on the amount of deferred revenue and unbilled accounts receivable in
any given period. We record cash received in excess of revenue earned as
deferred revenue. Our deferred revenue balance at March 31, 1999 was
$3.0 million, which we expect to recognize as revenue within the next twelve
months. Our deferred revenue balance generally results from contractual
commitments made by customers to pay amounts to us in advance of revenues
earned. Our unbilled accounts receivable represents revenue that we have earned
but which we have not yet billed. We bill customers for this revenue as
payments become due under the terms of the customer's contract. Our unbilled
accounts receivable balance at March 31, 1999 was $4.0 million and we expect to
bill and collect this amount within twelve months.

We organize TenFold into discrete Vertical Business Groups to tailor
marketing, selling, product development, and business strategies for our target
vertical industries. As each Vertical Business Group grows in size, gains
multiple customers, and develops multiple resellable products, it achieves an
increasing level of autonomy. We offer employee incentives, including equity,
tied to the performance of these Vertical Business Groups, to attract,
motivate, and retain our Vertical Business Group staff. We may also offer
Vertical Business Group equity to strategic industry partners. Eventually,
these Vertical Business Groups may gain substantial autonomy and raise capital
independently or be spun off from TenFold. TenFold has agreed that it will
grant to Mr. Mazon, President of TenFold Insurance Systems Group, an option to
acquire three percent of the outstanding shares of capital stock of a TenFold
subsidiary to be formed during 1999 from which TenFold intends to operate its
insurance business. The exercise price of these options will equal the fair
market value, at the time of grant, of the subsidiary's common stock, as
determined by TenFold's board of directors.

22
<PAGE>

Results of Operations

The following table sets forth, for the periods indicated, the percentage
relationship of selected items from TenFold's statement of operations to total
net revenues.

<TABLE>
<CAPTION>
Three
Months
Ended
Year Ended December 31, March 31,
----------------------------- -----------
1996 1997 1998 1998 1999
------- ------- ------- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues:
License.............................. 9% 37% 33% 24% 35%
Services............................. 91 63 67 76 65
------- ------- ------- --- ---
Total revenues..................... 100 100 100 100 100
------- ------- ------- --- ---
Operating expenses:
Cost of revenues..................... 12 33 36 42 39
Sales and marketing.................. 3 20 28 28 30
Research and development............. 76 34 24 35 21
General and administrative........... 13 10 7 9 5
Amortization of deferred
compensation........................ -- -- -- -- 2
Other charge......................... -- 10 -- -- --
------- ------- ------- --- ---
Total operating expenses........... 104 106 95 114 97
------- ------- ------- --- ---
Income (loss) from operations.......... (4) (6) 5 (14) 3
Interest and other income, net......... 1 1 1 2 1
------- ------- ------- --- ---
Income (loss) before income taxes...... (3) (5) 6 (12) 4
Provision (benefit) for income taxes... -- (1) 1 (4) 1
------- ------- ------- --- ---
Net income (loss)...................... (3)% (4)% 4% (8)% 2%
======= ======= ======= === ===
</TABLE>

Three Months Ended March 31, 1998 and 1999

Revenues

Total revenues increased 208% from $5.2 million for the three months ended
March 31, 1998 to $16.0 million for the comparable period in 1999. License
revenues represented 24% of total revenues for the three months ended March 31,
1998, and 35% for the comparable period in 1999.

License Revenues. Our license revenues increased 349% from $1.3 million for
the three months ended March 31, 1998 to $5.7 million for the comparable period
in 1999. The growth in our license revenues resulted from an increase in the
number of customer contracts.

Service Revenues. Our service revenues increased 163% from $3.9 million for
the three months ended March 31, 1998 to $10.4 million for the comparable
period in 1999. The growth in our services revenues resulted primarily from an
increase in the number of customer contracts.

Operating Expenses

Cost of Revenues. Our cost of revenues consists primarily of compensation
and other related costs of personnel to provide applications development and
implementation, support, and training services. Cost of license revenues,
including product packaging, documentation, and reproduction have been
insignificant. Cost of revenues increased from $2.2 million for the
three months ended March 31, 1998 to $6.2 million for the comparable period in
1999. Our cost of revenues as a percentage of total revenues was 42% for the
three months ended March 31, 1998 and 39% for the comparable period in 1999.
The increase in cost of revenues in absolute dollars was due to increased costs
associated with the increase in the number of customer contracts. The decrease
in

23
<PAGE>

the cost of revenues as a percentage of total revenues was due mainly to an
increase in our total revenues and a decrease in our service revenues as a
percentage of total revenues.

Sales and Marketing. Sales and marketing expenses consist primarily of
compensation, travel, and other related expenses for sales and marketing
personnel, as well as advertising and other marketing expenses. Sales and
marketing expenses increased from $1.4 million for the three months ended March
31, 1998 to $4.7 million for the comparable period in 1999. Our sales and
marketing expenses as a percentage of total revenues was 28% for the three
months ended March 31, 1998 and 30% for the comparable period in 1999. The
increase in absolute dollars and as a percentage of total revenues was
primarily the result of hiring additional sales and marketing personnel and
expanding advertising and other marketing programs in connection with the
growth of our business.

Research and Development. Research and development expenses consist
primarily of compensation and other related costs of personnel dedicated to
development and enhancement of the Universal Application and TenFold
ComponentWare. Research and development expenses increased from $1.8 million
for the three months ended March 31, 1998 to $3.4 million for the comparable
period in 1999. Our research and development expenses as a percentage of total
revenues was 35% for the three months ended March 31, 1998 and 21% for the
comparable period in 1999. Our research and development expenses grew in
absolute dollars due to the addition of personnel required to support our
expanded development efforts.

General and Administrative. General and administrative expenses consist
primarily of the costs of executive management and finance and administrative
staff, recruiting, business insurance, and professional fees. General and
administrative expenses increased from $471,000 for the three months ended
March 31, 1998 to $820,000 for the comparable period in 1999. Our general and
administrative expenses decreased as a percentage of total revenues from 9% for
the three months ended March 31, 1998 to 5% for the comparable period in 1999.

Amortization of Deferred Compensation. We recorded total deferred
compensation of $5.9 million in connection with stock options granted during
the three months ended March 31, 1999. Our amortization of deferred
compensation increased from $13,000 for the three months ended March 31, 1998
to $305,000 for the comparable period in 1999 due to amortizing this additional
total deferred compensation over the vesting period of the applicable options.
We expect to incur deferred compensation amortization expense of approximately
$1.5 million in 1999, and approximately $1.6 million annually thereafter until
fully amortized.

Interest and Other Income, Net. Our net interest income decreased from
$102,000 for the three months ended March 31, 1998 to $88,000 for the
comparable period in 1999. Although we had higher interest income for the three
months ended March 31, 1999 than for the comparable period in 1998, this
increase was more than offset by the increase in interest expense from the
issuance of debt and bank borrowings to finance fixed asset purchases for the
three months ended March 31, 1999.

Provision (Benefit) for Income Taxes. Income tax expense for the three
months ended March 31, 1999 was $234,000 compared to an income tax benefit for
the three months ended March 31, 1998 of $207,000. This reflects an effective
tax rate of 34% in 1998 and 39% in 1999. The increase in the effective tax rate
is due mainly to a decrease in our research and development credits as a
percentage of our income (loss) before income taxes in 1999, compared to 1998.

Fiscal Years Ended December 31, 1996, 1997 and 1998

Revenues

Total revenues increased 368% from $3.0 million in 1996 to $14.1 million in
1997 and increased an additional 184% to $40.2 million in 1998. License
revenues represented 9% of total revenues in

24
<PAGE>

1996, 37% in 1997, and 33% in 1998. In 1998, we also generated approximately
$1.7 million in license and service revenues from the resale of our first
vertical applications product, TenFold Revenue Manager. We anticipate that
license revenues will represent an increasing percentage of total revenues over
time as we introduce more vertical applications products.

License Revenues. Our license revenues increased from $271,000 in 1996 to
$5.2 million in 1997 and increased an additional 155% to $13.4 million in 1998.
The growth in our license revenues from 1996 to 1997 and to 1998 resulted
primarily from an increase in the number of customer contracts. Our 1996
revenues were concentrated in the investment management vertical market. As we
began to grow in 1997, we entered into customer contracts in the insurance,
investment management, telecommunications, and utilities and energy vertical
markets. During 1998, we continued to increase our customer base in each of our
vertical markets and entered into our first customer contract in the healthcare
vertical market. See Note 11 of Notes to Consolidated Financial Statements for
more information about our vertical business group revenues.

Service Revenues. Our services revenues increased 224% from $2.7 million in
1996 to $8.9 million in 1997 and increased an additional 202% to $26.8 million
in 1998. The growth of our service revenues from 1996 to 1997 and to 1998
resulted primarily from an increase in the number of customer contracts. Our
1996 revenues were concentrated in the investment management vertical market.
As we began to grow in 1997, we entered into customer contracts in the
insurance, investment management, telecommunications, and utilities and energy
vertical markets. During 1998, we continued to increase our customer base in
each of our vertical markets and entered into our first customer contract in
the healthcare vertical market. See Note 11 of Notes to Consolidated Financial
Statements for more information about our vertical business group revenues.

Operating Expenses

Cost of Revenues. Our cost of revenues increased from $370,000 in 1996 to
$4.7 million in 1997 and to $14.5 million in 1998. Our cost of revenues as a
percentage of total revenues was 12% in 1996, 33% in 1997, and 36% in 1998. The
increases in the cost of revenues in absolute dollars were due to additional
costs associated with the increase in the number of customer contracts, and
building the applications development organization and infrastructure to
support business growth. The increases in the cost of revenues as a percentage
of total revenues were primarily due to the cost of building the applications
development organization and infrastructure to support business growth.

Sales and Marketing. Our sales and marketing expenses increased from $87,000
in 1996 to $2.8 million in 1997 and to $11.1 million in 1998. Sales and
marketing expenses represented 3% of total revenues in 1996, 20% in 1997, and
28% in 1998. The increases in absolute dollars and as a percentage of revenues
were primarily the result of hiring additional sales and marketing personnel
and expanding advertising and other marketing programs in connection with the
growth of our business.

Research and Development. Software development costs incurred between
achieving technological feasibility and release of the product to our customers
have been insignificant and therefore have been expensed as incurred. Our
research and development expenses increased from $2.3 million in 1996 to
$4.7 million in 1997 and to $9.7 million in 1998. Research and development
expenses represented 76% of total revenues in 1996, 34% in 1997, and 24% in
1998. Our research and development expenses grew in absolute dollars between
the comparison periods primarily due to the addition of personnel required to
support our expanded development efforts. We anticipate that we will continue
to devote substantial resources to research and development and that these
costs will continue to increase in absolute dollars, but continue to decrease
as a percentage of total revenues.

General and Administrative. Our general and administrative expenses
increased from $396,000 in 1996 to $1.4 million in 1997 and to $2.9 million in
1998. These increases were primarily the result of

25
<PAGE>

hiring executive and finance and administrative personnel to manage and support
the increased scale of our operations. In addition, general and administrative
expenses in 1998 included a $500,000 provision for bad debts, mostly related to
one customer's creditworthiness. Because of the nature of our customer base,
the bad debt provisions in prior periods have not been significant. General and
administrative expenses as a percentage of total revenues decreased from 13% in
1996, to 10% in 1997, and to 7% in 1998. We believe that our general and
administrative expenses will continue to increase in absolute dollars as a
result of the need to add additional finance and administrative staff to
support growing operations, and from costs related to being a publicly-held
company.

Amortization of Deferred Compensation. We recorded total deferred
compensation of $251,000 in 1997 and $2.2 million in 1998 in connection with
stock options granted during 1997 and 1998. These amounts represent the
difference between the exercise price of stock option grants and the deemed
fair value of our common stock at the time of these grants. We are amortizing
these amounts over the vesting periods of the applicable options, resulting in
amortization expense of $34,000 in 1997 and $153,000 in 1998.

Other Charge. During March 1997, we entered into a transaction where we sold
1,460,399 shares of Series A preferred stock and a software license to Indus
International. In the same transaction, our majority stockholder sold 1,460,400
shares of our common stock to Indus. Simultaneously, we granted Indus an option
to exchange the 1,460,400 shares of common stock for an equal number of Series
A preferred stock. Indus exercised this exchange option during 1997. Indus paid
a total of $8.0 million as consideration for this transaction, of which $2.5
million was received by the majority stockholder and we received $5.5 million.
Based on an independent valuation of our common and preferred stock, we
allocated the $8.0 million paid by Indus based on the respective fair values of
the preferred and common shares. Based on these valuations, we allocated $1.4
million to the Series A preferred stock and option, and $5.5 million to
revenue. As a result of the transaction, the majority stockholder received a
premium of $1.4 million on the sale of common shares. We have reflected that
premium as an other charge in our statement of operations.

Interest and Other Income, Net. Our net interest income increased from
$28,000 in 1996 to $179,000 in 1997 and to $375,000 in 1998. The increases
between the comparison periods was primarily the result of higher cash balances
resulting from preferred stock financings and cash flow from operations.

Provision (Benefit) for Income Taxes. We account for income taxes in
accordance with Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes. Our effective tax rate was 0% for 1996, 16% for 1997, and 22%
in 1998. The effective income tax rate differs from the statutory income tax
rate in each year primarily due to the use of research and development credits,
and permanent differences between the tax and financial accounting treatment of
various items. Our effective tax rate may vary from period to period based on
our future expansion into areas with varying country or state income tax rates.
As of December 31, 1998, we had foreign net operating loss carryforwards of
$890,000 that generally carryforward indefinitely. In addition, as of
December 31, 1998, we had credits for increasing research activities of
$264,000 for federal and $336,000 for state income tax purposes. The federal
credit carryover will begin to expire in 2012. The state credit carries over
until exhausted. The Internal Revenue Code contains provisions that limit the
use in any future period of credit carryforwards upon the occurrence of
specified events, including a significant change in ownership interests. We had
net deferred tax assets of $451,000 as of December 31, 1998. We recorded a
valuation allowance of $701,000 for a portion of the deferred tax asset due to
uncertainties regarding the realization of the asset balance. See Note 7 of
Notes to Consolidated Financial Statements for more information concerning
taxes.

26
<PAGE>

Quarterly Results of Operations

The following tables set forth unaudited quarterly results of our operations
for each of the nine quarters ended March 31, 1999. This information has been
derived from our unaudited financial statements, which, in management's
opinion, have been prepared on substantially the same basis as the audited
financial statements and include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
information for the quarters presented. This information should be read in
conjunction with the Consolidated Financial Statements and Notes thereto
included elsewhere in this prospectus. The operating results in any quarter are
not necessarily indicative of the results for any future period.

<TABLE>
<CAPTION>
Quarter Ended
----------------------------------------------------------------------------------
Mar 31, June 30, Sep 30, Dec 31, Mar 31, June 30, Sep 30, Dec 31, Mar 31,
1997 1997 1997 1997 1998 1998 1998 1998 1999
------- -------- ------- ------- ------- -------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenues:
License................ $ 601 $1,365 $1,014 $2,264 $1,259 $1,515 $4,089 $6,519 $5,656
Services............... 1,289 2,365 1,903 3,322 3,940 6,104 6,946 9,795 10,371
------- ------ ------ ------ ------ ------ ------ ------ ------
Total revenues....... 1,890 3,730 2,917 5,586 5,199 7,619 11,035 16,314 16,027
------- ------ ------ ------ ------ ------ ------ ------ ------
Operating expenses:
Cost of revenues....... $ 449 $ 953 $1,389 $1,870 $2,176 $2,761 $4,370 $5,222 $6,246
Sales and marketing.... 335 471 675 1,284 1,442 2,127 2,942 4,559 4,736
Research and
development........... 780 968 1,399 1,592 1,807 2,349 2,442 3,092 3,401
General and
administrative........ 193 307 414 450 471 507 539 1,365 820
Amortization of
deferred
compensation.......... -- 8 13 13 13 11 11 118 305
Other charge........... 1,449 -- -- -- -- -- -- -- --
------- ------ ------ ------ ------ ------ ------ ------ ------
Total operating
expenses............ 3,206 2,707 3,890 5,209 5,909 7,755 10,304 14,356 15,508
------- ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) from
operations............. (1,316) 1,023 (973) 377 (710) (136) 731 1,958 519
Interest and other
income, net............ 28 66 46 39 102 110 113 50 88
------- ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before
income taxes........... (1,288) 1,089 (927) 416 (608) (26) 844 2,008 607
Provision (benefit) for
income taxes........... -- -- -- (110) (207) (9) 287 424 234
------- ------ ------ ------ ------ ------ ------ ------ ------
Net income (loss)....... $(1,288) $1,089 $ (927) $ 526 $ (401) $ (17) $ 557 $1,584 $ 373
======= ====== ====== ====== ====== ====== ====== ====== ======
As a Percentage of Total
Revenues:
Revenues
License................ 32% 37% 35% 41% 24% 20% 37% 40% 35%
Services............... 68 63 65 60 76 80 63 60 65
------- ------ ------ ------ ------ ------ ------ ------ ------
Total revenues....... 100 100 100 100 100 100 100 100 100
------- ------ ------ ------ ------ ------ ------ ------ ------
Operating expenses:
Cost of revenues....... 24 26 48 34 42 36 40 32 39
Sales and marketing.... 18 13 23 23 28 28 27 28 30
Research and
development........... 41 26 48 29 35 31 22 19 21
General and
administrative........ 10 8 14 8 9 7 5 8 5
Amortization of
deferred
compensation.......... -- -- -- -- -- -- -- 1 2
Other charge........... 77 -- -- -- -- -- -- -- --
------- ------ ------ ------ ------ ------ ------ ------ ------
Total operating
expenses............ 170 73 133 93 114 102 93 88 97
------- ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) from
operations............. (70) 27 (33) 7 (14) (2) 7 12 3
Interest and other
income, net............ 2 2 2 1 2 1 1 -- 1
------- ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before
income taxes........... (68) 29 (32) 7 (12) -- 8 12 4
Provision (benefit) for
income taxes........... -- -- -- (2) (4) -- 3 3 1
------- ------ ------ ------ ------ ------ ------ ------ ------
Net income (loss)....... (68)% 29% (32)% 9% (8)% -- 5% 10% 2%
======= ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>

27
<PAGE>

We experienced fluctuations in quarterly license and service revenues during
the quarters of 1997 and 1998, due principally to our limited customer base.
The decrease in revenues in the third quarter of 1997 was mainly due to a
longer sales cycle for some customers than we had previously experienced due in
part to personnel changes in our sales organization. Several contracts which we
had expected to close in the third quarter were not closed until the fourth
quarter. Because our operating expenses are relatively fixed in advance of each
quarter, the decrease in revenue in the third quarter of 1997 caused our
operating expenses to represent a greater percentage of revenues during the
quarter. Similarly, operating expenses represented a greater percentage of our
revenue during the first quarter of 1998. We also experienced quarterly
fluctuations between our license and service revenue as a percentage of total
revenue, due in part to variations in the relative size of our contracts and
the mix of license and service revenues in those contracts.

Our cost of revenues, sales and marketing, and research and development
expenses have increased in absolute dollars during each of the nine quarters
ended March 31, 1999, due to increases in personnel, our growing sales and
marketing organization, and building our infrastructure to support business
growth. The fluctuations in these expenses as a percentage of revenue were due
mainly to fluctuations in our total revenues. The large increase in general and
administrative expenses in the fourth quarter of 1998 compared to prior
quarters was primarily due to an increase in the provision for bad debts,
mostly related to one customer's creditworthiness.

We expect to continue to experience significant fluctuations in our future
quarterly and annual results of operations due to a variety of factors, many of
which are outside our control. See "Risk Factors--There are many factors that
may cause fluctuations in our quarterly financial results, and if our results
are below the expectations of securities market analysts, our stock price will
likely decline" for a discussion of these factors.

Liquidity and Capital Resources

Since inception, we have financed our operations primarily through cash flow
from operations, private sales of capital stock totaling $13.4 million, and, to
a lesser extent, various types of equipment loans and lease lines of credit. At
March 31, 1999, our principal source of liquidity was $13.2 million of cash and
cash equivalents.

On January 18, 1999, we entered into an unsecured revolving line of credit
providing for borrowings of up to $5.0 million. Borrowings under the line of
credit, which expires on January 17, 2000, bear interest at the bank's prime
rate or LIBOR plus 250 basis points. The line of credit includes covenants
relating to the maintenance of financial ratios and limits the payment of
dividends. We have not borrowed against this line of credit to date.

Net cash generated by (used in) operating activities was $(92,000) in 1996,
$822,000 in 1997, $6.1 million in 1998, and $(3.8 million) during the three
months ended March 31, 1999. Net cash used for investing activities was
$423,000 in 1996, $1.4 million in 1997, $5.5 million in 1998, and $842,000
during the three months ended March 31, 1999. Net cash used for investing
activities in these periods was almost entirely the result of capital
expenditures for computer equipment, leasehold improvements, furniture and
fixtures, and other equipment to support business growth.

Net cash provided by financing activities was $1.0 million in 1996, $8.4
million in 1997, $5.7 million in 1998, and $2.5 million during the three months
ended March 31, 1999. The $8.4 million provided in 1997 resulted from the
issuance of preferred stock, net of issuance costs. In 1998, $3.8 million of
cash provided by financing activities resulted from the issuance of debt, bank
borrowings, and a sale-leaseback fixed asset financing offset by principal
payments. In 1998, we also raised $2.3 million from the issuance of common
stock.

28
<PAGE>

As of March 31, 1999, our aggregate payment commitments under bank
borrowings, debt and capital lease obligations, and noncancellable operating
leases were $3.8 million in 1999, $4.0 million in 2000, $3.6 million in 2001,
$905,000 in 2002, and $845,000 thereafter.

We believe that the net proceeds from this offering, together with existing
cash balances, anticipated cash flows from operations, and available borrowings
should be sufficient to meet our capital requirements for at least the next
twelve months. However, there can be no assurance that we will be successful in
generating anticipated levels of cash from operations or borrowings. If we are
unable to generate sufficient cash flow from operations, or additional
equipment loans or equipment and working capital lines of credit, we may be
required to scale down our operations and expansion plans, refinance all or a
portion of our existing indebtedness, or obtain other sources of financing
earlier than planned, any of which could have a material adverse effect on our
business, results of operations, and financial condition. There can be no
assurance that any refinancing would be available on commercially reasonable
terms, or at all. See "Use of Proceeds" and Notes 4 and 6 of Notes to
Consolidated Financial Statements for more information concerning our proposed
use of the proceeds of this offering and our obligations under various
financial commitments.

Year 2000

With respect to our internal information technology systems, including
information technology-based office facilities such as data and voice
communications, and building management and security systems, our year 2000
internal readiness program primarily covers taking inventory of hardware,
software and embedded systems, assessing business risks associated with these
systems, creating action plans to address known risks, executing and monitoring
action plans, and contingency planning. We currently are in the process of
requesting compliance certificates from vendors and service providers to
certify year 2000 readiness and conducting ongoing risk analysis. We expect to
substantially complete year 2000 readiness preparations at the end of May 1999
with respect to our core business and software systems and at the end of June
1999 with respect to our hardware systems. In each case, we expect to continue
extensive testing through calendar 1999.

. hardware or software failures that would prevent our applications
developers and research and development staff from effectively
performing their duties;

. corruption of data contained in our internal information systems; and

. the failure of infrastructure services provided by government agencies
and other third parties, including public utilities and internet
services.

We are in the process of completing our contingency planning for high risk
areas at this time and are scheduled to commence contingency planning for
medium to low risk areas in June 1999. We expect our contingency plans to
include, among other things, manual "work-arounds" for software and hardware
failures, as well as substitution of systems, if necessary.

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<PAGE>

or defects associated with year 2000 date functions that may result in material
costs to TenFold. Some commentators have stated that a significant amount of
litigation will arise out of year 2000 compliance issues, and we are aware of a
growing number of lawsuits against other software vendors. Because of the
unprecedented nature of this litigation, the extent to which it will affect
TenFold is uncertain.

We have experienced demand for our applications in recent years that may
have been generated by customers replacing and upgrading applications in order
to accommodate the change in date to the year 2000. Once these customers have
completed their year 2000 projects, the software industry and TenFold may
experience a significant deceleration in the annual growth rates recently
experienced in the applications software marketplace.

As the end of 1999 approaches, there is a risk that orders for our products
will be reduced or delayed as our customers or potential customers focus their
resources on preparing for the year 2000. If this reduction in orders occurs,
it could significantly impact our operating results which could cause our stock
price to materially decline.

Recent Accounting Pronouncements

The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. For a derivative not
designated as a hedging instrument, changes in the fair value of the derivative
are recognized in earnings in the period of change. We must adopt SFAS No. 133
by July 1, 1999. We do not believe the adoption of SFAS No. 133 will have a
material effect on the financial position or results of operations of the
Company.

Disclosures About Market Risk

The following discusses our exposure to market risk related to changes in
interest rates, equity prices, and foreign currency exchange rates. This
discussion contains forward-looking statements that are subject to risks and
uncertainties. Actual results could vary materially as a result of a number of
factors including those set forth in the Risk Factors section.

As of March 31, 1999, TenFold had short-term investments of $12.7 million.
Substantially all of these short-term investments consist of highly liquid
investments with remaining maturities at the date of purchase of less than
ninety days. These investments are subject to interest rate risk and will
decrease in value if market interest rates increase. A hypothetical increase or
decrease in market interest rates by 10 percent from the March 31, 1999 rates
would cause the fair value of these short-term investments to decline by an
insignificant amount. We have the ability to hold these investments until
maturity, and therefore we do not expect the value of these investments to be
affected to any significant degree by the effect of a sudden change in market
interest rates. Declines in interest rates over time will, however, reduce our
interest income.

TenFold does not own any equity investments. Therefore, we do not currently
have any direct equity price risk.

Substantially all of our revenues are realized currently in U.S. dollars and
are from customers in the United States. Therefore, we do not believe that we
currently have any significant direct foreign currency exchange rate risk.

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<PAGE>

BUSINESS

Overview

TenFold is an innovative software and services company that builds and
implements large-scale, complex applications rapidly and for a fixed price. We
offer the TenFold Guarantee, the industry's first money-back guarantee for
large-scale software applications. We deliver applications on time, for a fixed
price, and on target--or we refund our customer's money. Typical design,
development, and delivery of completed, tested, and documented applications is
four to eight months. We also offer the TenFold Guarantee when customers choose
our optional FastStart program to implement TenFold applications.

Our mission is to become the leading provider of industry-specific, or
"vertical", software applications in multiple industries. We intend to
accomplish this by developing innovative applications for customers and
reselling these applications to other companies in the same industry. Our
customers include industry leaders in insurance, investment management,
telecommunications, utilities and energy, healthcare, banking and credit, and
other industries. TenFold customers include Ameritech, Barclays Global
Investors, Crawford & Company, Enron, Mercy Health Services, Provident, and
Unitrin.

Using our unique TenFold Way methodology, combined with our Universal
Application and TenFold ComponentWare technologies, we deliver innovative
applications for these industries that are feature-rich, flexible, and high
quality. Often, these applications fill voids where packaged software solutions
lack functionality, lack flexibility, or simply do not exist. Our applications
support multi-tiered and Web-based environments, as well as leading database
platforms and operating systems.

We believe that our fixed-time, fixed-price business model, our Universal
Application and TenFold ComponentWare technologies, and our unique TenFold
Guarantee provide a significant benefit to customers who want to reduce risk
and achieve rapid time to market when developing and implementing mission-
critical applications.

Industry Challenge

Organizations worldwide face increasing pressure to install new software
applications and to replace their outdated applications with new systems as
they seek to increase productivity, leverage distributed computing environments
and the Internet, and address changing business and competitive demands.
Recently, many organizations have spent large amounts of money patching
existing systems to solve their year 2000 issues, without adding applications
functionality or business benefits. In many instances, these companies still
need new or replacement applications that are critical to their operations, if
not their survival. To obtain new or replacement applications, companies face a
"buy vs. build" dilemma: 1) they can buy packaged software; or 2) they can
build custom software, either internally or by hiring a services firm.

Companies generally turn to independent software vendors, such as Enterprise
Resource Planning (ERP) vendors or vertical software providers, when looking
for packaged applications. ERP vendors primarily offer horizontal applications
that address general business processes, such as accounting, human resources,
and manufacturing, but offer limited industry-specific functionality outside of
manufacturing. Traditional vertical software vendors provide more industry
functionality, but often with products built on aging technology. In general,
packaged applications promise proven quality and relatively quick
implementation, but lack the flexibility and customization that many companies
need and can force companies to alter their business processes. In addition,
customizing a packaged application can be costly and time-consuming, and also
makes it difficult to accept future software upgrades.

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<PAGE>

Alternatively, companies can build custom applications, either internally or
with third parties. This approach may give them the functionality and
flexibility they seek, but it carries a high risk of failure. According to
research from The Standish Group, a software industry research firm, most
large-scale applications development projects significantly exceed budgets and
schedules. Even after these excesses, many of these projects are canceled
without ever reaching production. This Standish Group research shows that only
8 percent of applications development projects costing $6-10 million succeed--
delivered on time, on budget, and according to original specifications. This
research also estimates that U.S. applications development failures and cost
overruns amounted to almost $100 billion in 1998.

TenFold believes that cost overruns and unsuccessful projects do not
necessarily reflect a lack of skilled personnel, but typically result from the
flawed process and technology used to develop large-scale applications. In many
cases, it takes six months to a year just to define requirements. It then takes
a large team of programmers two to three years to build the application, and
another year to test and deploy it. By the time the application is finished,
requirements may have changed dramatically. Ultimately, few projects are
completed on time, on budget, and with the promised capabilities.

Companies often hire software integration or services firms to build and
implement mission-critical applications. These firms generally work on a time-
and-materials basis, require large numbers of consultants who may remain on
site for years, and may exceed budgets and schedules without producing
significantly better results than internal development organizations. In
addition, these firms typically do not offer ongoing product enhancements
because they build custom solutions for a single customer.

Some services firms, such as Cambridge Technology Partners and Sapient,
offer fixed-time, fixed-price development, often linked to structured
methodologies that shorten development and increase predictability by breaking
large projects into multiple, smaller projects or phases. While this approach
delivers some benefits, it can lead to costly change orders for customers as
their requirements change during applications development. In addition, these
firms generally lack unique technology to significantly improve applications
development time frames.

Today's software purchasers want the best of both the "buy" and "build"
options: the rapid time-to-market and quality benefits of packaged
applications, with the tailored-to-their-business features of custom-built
software. They need flexible solutions that integrate with existing systems and
that can adapt as they grow. Most of all, they want assurance that applications
will arrive on time, for a fixed cost, and on target.

TenFold Solution

TenFold builds and implements large-scale, complex applications for a fixed
price in months, not years. We offer the TenFold Guarantee, the industry's
first money-back guarantee for large-scale software applications. We deliver
applications on time, for a fixed price, and on target--or we refund our
customer's money. We believe that it is the combination of our TenFold Way
methodology and our unique Universal Application and TenFold ComponentWare
technologies that lets us develop applications significantly faster than
alternative approaches. We also offer the TenFold Guarantee when customers
choose our optional FastStart program--we implement applications into
production on time, for a fixed price, or we refund their money. In addition,
we are beginning to license applications that we built for one customer to
other companies in the same industry.

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<PAGE>

Customer Benefits

We build applications that deliver rich functionality, offer significant
flexibility and quality, and solve the complex, expensive, and time-consuming
problems of replacing outdated systems and meeting today's business challenges.
We offer these customer benefits:

Guaranteed, Fixed-time, Fixed-price Delivery. Our straightforward promise is
that we successfully deliver large-scale applications on time, for a fixed
price, and on target, or we refund our customer's money. We deliver software
solutions that we believe reduce risk by meeting business requirements quickly,
reliably, and for a fixed price.

Rapid Development. We have re-engineered the process of building complex
software applications. Our unique development methodology, the TenFold Way,
lets us rapidly build complex applications. We show clear, visible results
within weeks and typically deliver completed, tested, and documented
applications in four to eight months. Our Universal Application and TenFold
ComponentWare automate and accelerate applications development and testing, and
let us build large-scale, sophisticated applications quickly and reliably with
little or no programming.

Rapid Implementation. Our optional FastStart program automates much of the
data conversion, data cleanup, applications interfacing, and parallel testing
needed to attain rapid production. We often begin FastStart concurrent with
applications development to shorten the time from the start of development to
production. We also offer FastStart with a fixed-time, fixed-price guarantee.

Lower Overall Cost. Because TenFold can deliver complex applications in
relatively short time frames, we believe that our applications typically cost
less than those offered by competitors. By reducing the overall development and
delivery time frame, we help customers avoid expensive projects that exceed
budgets and schedules. In addition, because we can easily enhance and modify
applications as customer needs evolve, we believe that our products can lower
the overall cost of owning and operating complex applications.

Custom Applications that Meet True Needs. We deliver applications that meet
precise business needs and adapt as needs change, rather than force companies
to alter their businesses to conform to packaged applications. We work closely
with customers through rapid, multiple iterations to develop applications that
meet true needs. True needs emerge when customers see what they asked for and
then realize what they really need. The TenFold Way accommodates multiple,
interim customer revisions and feedback, followed by successive applications
improvements.

Continuous Innovation and Product Enhancement. We design and build
applications with functionality and capabilities that not only meet the needs
of an individual customer, but are also intended to meet the needs of other
companies in the same vertical industry. We typically maintain intellectual
property rights to the original applications we build, so we can license them
as applications products to other companies. Because we expect many of our
applications to become resellable products, rather than individual solutions
for a single customer, we believe that customers will receive benefits not
typically offered by traditional service providers or custom applications
developers such as continuous innovation and enhancement, regular upgrades,
ongoing support, training, and certification.

TenFold Differentiators

We successfully deliver complex applications through four key
differentiators. While we believe that each is significant, it is the
combination of the four that lets us build and implement large-scale
applications rapidly and lets us offer real business value to our customers.

The TenFold Way. The TenFold Way is a start-to-finish approach to working
closely with our customers to design, develop, test, deliver, and evolve custom
applications. We use the TenFold

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<PAGE>

Way to identify requirements in four to eight weeks, and typically deliver the
complete, fully tested application in four to eight months. The TenFold Way
organizes a project into phases, each with well-defined activities and
deliverables. The TenFold Way combines continuous communication and customer
feedback with rapid, iterative development to keep projects on target.

Universal Application. We have invented a unique technology--the Universal
Application--for building complex applications dramatically faster than
current industry practice. The Universal Application is a sophisticated and
powerful applications architecture that reduces design effort and automates
and accelerates applications development and testing. The Universal
Application lets TenFold begin applications development projects having pre-
built significant functionality and having already solved many complex
applications design and implementation problems. Our applications developers
spend time describing business requirements and desired functionality--not
programming.

TenFold ComponentWare. TenFold ComponentWare is a library of components,
reusable across multiple applications and industries, that lets us add
complex, business-specific functionality to an application and lets us
virtually eliminate applications-specific programming. TenFold ComponentWare
includes capabilities such as billing, scoring, and workflow, as well as
integration engines. Each component contains features to serve many different
types of applications, across multiple vertical industries.

FastStart. FastStart provides both technology and implementation services
to quickly put TenFold applications into production. These services include
converting and cleansing existing data, integrating with other applications,
running a parallel, and managing the implementation project. We offer
FastStart with the same fixed-time, fixed-price, money-back guarantee that we
offer for applications development.

We believe that the integration of our unique applications development
process and innovative technology lets us provide significant business value
for our customers.

[ARTWORK: PROCESS & TECHNOLOGY = BUSINESS VALUE]
Three boxes with headings: Process + Technology = Business Value. Contents of
boxes as follows:
Process: TenFold Way, Requirements in weeks, Rapid iterative development,
Continuous automated testing, FastStart Services.
Technology: Universal Application; TenFold ComponentWare; FastStart
Application Portable, scalable, Web-enabled; Automated development with little
or no programming.
Business Value: Guaranteed, fixed-time, fixed-price delivery; Rapid
development and implementation; Lower overall cost; Custom applications that
meet true needs; Continuous innovation and product enhancement.

TenFold Strategy

Our mission is to become the leading provider of vertical software
applications by pursuing these strategies:

Create Resellable Products from Custom Development Projects. We design and
build applications to meet the needs of an original customer, with the
intention to license these applications as packaged products within vertical
industries. We often maintain intellectual property rights to applications
that we design and build. For example, we built and delivered an application
for

34
<PAGE>

Barclays Global Investors that we have packaged and licensed as TenFold Revenue
Manager to other institutional investment management companies. While revenue
from resales of packaged products has not been significant to date, we expect
this activity to become an increasingly important aspect of our business in the
future.

Organize into Vertical Business Groups. TenFold is organized into discrete
Vertical Business Groups to tailor marketing, selling, product development, and
business strategies for our target vertical industries. As each Vertical
Business Group grows in size, gains multiple customers, and develops multiple,
resellable products, it achieves increasing autonomy. We offer employee
incentives, including equity, tied to the performance of these Vertical
Business Groups. We may also offer Vertical Business Group equity to strategic
industry partners.

Further Penetrate Multiple Vertical Markets. We build mission-critical
applications that address under-served needs in large, multi-billion-dollar
vertical markets. By significantly reducing time to market, we believe we can
compete in industries such as insurance, investment management,
telecommunications, utilities and energy, healthcare, and banking and credit,
and attract market-leading customers as reference accounts. We intend to
further penetrate these industries by continuing to identify, build, and sell
additional, industry-specific applications.

Enter New Vertical Markets. We believe that we can also offer new and
replacement applications for additional vertical industries in the future. Our
strategy as we enter and compete in new vertical industries is to recruit
industry veterans with substantial domain knowledge and skills, and target
sales and marketing efforts at high-potential prospective customers.

Leverage Innovative Technology. The Universal Application and TenFold
ComponentWare automate and accelerate applications development and testing, and
let us build large-scale, sophisticated applications quickly and reliably. The
Universal Application speeds development, enforces consistency, and enables
extensive, automated testing throughout the applications life cycle. We
continually enhance and update the Universal Application and TenFold
ComponentWare to add functionality, improve performance and scalability, and
increase our applications development productivity. For example, in 1998 we
improved performance dramatically, Web-enabled the Universal Application, and
introduced a more intuitive and versatile user interface. As of March 31, 1999,
we had 89 people dedicated to enhancing and improving our technology.

Leverage Alternative Distribution Channels. We believe third parties can
successfully use the TenFold Way, the Universal Application, TenFold
ComponentWare, and FastStart to rapidly develop and implement applications. We
plan to establish relationships with applications service providers, value-
added resellers (VARs), and software distributors in the U.S. and international
markets, and we hope to broaden distribution of TenFold products and increase
software license revenues through these third-party relationships. We recently
entered into a strategic relationship with Perot Systems Corporation, a systems
integrator, to develop and deliver applications, products, and services to
TenFold and Perot Systems customers using the TenFold Way, Universal
Application, TenFold ComponentWare, and FastStart. See "--Strategic Alliance"
for more information concerning this relationship.

Practice Precision Execution. TenFold employees aspire to a well-defined
company culture and set of core values. We see TenFold as more than our company
name; it is a culture statement. Each employee attends an initial "Boot Camp"
and ongoing training to learn the TenFold Way, our technology, and our company
values. We strive for Precision Execution in all facets of our business, and
constantly monitor and improve our individual, team, and company productivity
and performance. We strive to continuously increase employee productivity and
product quality by enhancing our processes and technology.

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<PAGE>

Technology

A TenFold application is any application that TenFold or others build using
TenFold technology. A TenFold application consists of the Universal
Application, selected business-rule components from TenFold ComponentWare, and
a description of the desired functionality and attributes of the specific
application. Applications developers use the Universal Application to build
TenFold applications without programming.

[ARTWORK: UNIVERSAL APPLICATION RUNNING A TENFOLD APPLICATION]

Heading: Universal Application Running a TenFold Application
Graphic of layered technology architecture with following layers, from top to

bottom:
TenFold Application
TenFold ComponentWare
ApplicationXpress
Universal Application Client/Universal Application Server
LogicXpress
Universal Application Kernel

Universal Application

The Universal Application is a carefully layered applications architecture,
written in C and C++ programming languages, that lets applications developers
build an application by describing its semantic--desired functionality and
attributes--without programming. Since describing an application is
considerably different than traditional programming and does not require
programming skills, an applications development team can typically describe a
complex application in weeks. Once applications developers describe an
application or part of an application, the Universal Application reads the
description and becomes the described application. Thus, for many large,
complex applications, the Universal Application is a complete, already-written,
ready-to-execute application lacking only a specific definition of the desired
functionality and attributes. The Universal Application delivers these
benefits:

. little or no programming to create a complex application;

. significant automation of applications development by virtually
eliminating traditional programmer tasks such as writing SQL, writing
logic functions, converting business rules into logic, and designing
user interface screens;

. improved consistency, quality, and performance because programmers often
vary in their ability to achieve a high level of consistency, quality,
and performance;

. carefully layered architecture to facilitate portability, future
maintenance, feature additions, and migration to new or emerging
industry standards;

. already-solved, significant applications features such as
SecurityByValue, TimeRelational, ExoticUpdate, Hierarchies, cascading
defaults, and context-sensitive behavior;

. extensibility to add programmed logic if an application requires
capabilities that are unavailable from the Universal Application;

. demonstrated scalability as customers add users and computing capacity;
and

. typically sub-second performance when properly configured.

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<PAGE>

Describing an Application Using the Universal Application. Applications
developers use the ApplicationXpress portion of the Universal Application to
describe and test an application. Applications developers describe the
semantic--desired features and functionality--of the application without
programming.

ApplicationXpress
[ARTWORK: APPLICATIONXPRESS]

ApplicationXpress contains the following:

. TenFold Librarian lets applications developers describe the application
that they are building. TenFold Librarian provides menus, transactions,
and screens that applications developers use to describe the
application, and store the application description, or semantic, in the
TenFold Dictionary.

. TenFold Dictionary is a relational database that contains the semantic
of the application. The semantic precisely describes the application.

. TenFold Reporter is a powerful reporting system that applications
developers use to define, execute, and manage the production,
requesting, and distribution of reports--including outputs to print,
view interactively, or distribute via e-mail or fax--for an application.

. TenFold Analyzer is a powerful On-line Analytical Processing (OLAP)
engine that applications developers use to describe interactive analyses
to include in the application.

. TenFold AutoTest is an integrated testing system that applications
developers use to test individual applications components as they
complete them, and fully test the completed application. TenFold
AutoTest also lets applications developers regression test their
application to detect inadvertent errors that they might introduce into
one part of an application as they modify another part, or as they
change underlying technologies such as a database version.

Executing an Application. When end-users execute a TenFold application, they
are executing the Universal Application which points to the TenFold Dictionary
containing the applications semantic for their application. The Universal
Application automatically reads the applications semantic from the TenFold
Dictionary at the appropriate time and becomes the application described in the
applications semantic.

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<PAGE>

Configuring an Application. Customers can run the Universal Application on
the hardware and software, as well as the client and server configurations, of
their choice within the following environments and platforms:

. Relational databases--Sybase, Oracle, and DB2.

. Server operating systems--Microsoft Windows NT, Sun Solaris, IBM AIX,
Sequent Dynix, and HP UX.

. Client operating and windowing systems--Microsoft Windows NT, Windows
95, and Windows 98.

. Communications systems--TCP/IP, TIB.

. Client configurations include: StandardClient--database connections
occur directly from the client to a relational database; NonSQLClient--
database connections occur only from a server to the relational
database; UIClient--only display and validation logic exists on the
client computer; and BrowserClient--all transactions are available
through a browser such as Microsoft Internet Explorer or Netscape
Navigator.

. Server configurations include: single-tier--the entire application runs
on a single computer such as a portable computer; two-tier--many clients
and one server that also contains a relational database; three-tier--
many clients, one applications server, and one database server; n-tier--
many clients, many applications servers, and one database server; and
distributed--many clients, many applications servers, and many database
servers.

It is relatively easy for TenFold to support additional relational
databases, server operating systems, client operating and windowing systems,
and communications systems.

TenFold ComponentWare

TenFold ComponentWare is a family of pre-written applications components
that easily plug into the Universal Application to extend its functionality
without programming. TenFold ComponentWare delivers these benefits:

. no programming required to add complex processing capabilities to an
application;

. robust applications functionality as each component contains features to
serve many different types of applications, across multiple vertical
industries; and

. carefully layered architecture to facilitate portability, future
maintenance, feature additions, and migration to new or emerging
industry standards.

[ARTWORK: TENFOLD COMPONENT WARE]

Heading: TenFold ComponentWare
Graphic of layered technology architecture with following layers, from top to

bottom:
PowerImport/PowerAccounting/PowerScoring/PowerWorkflow/PowerBilling
ApplicationXpress
Universal Application Client/Universal Application Server
LogicXpress
Universal Application Kernel

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<PAGE>

TenFold ComponentWare currently includes these components:

. PowerImport automates most file and record inputs into a TenFold
application. PowerImport automates many application-to-application
integration activities.

. PowerExport automates most file and record outputs from a TenFold
application. PowerExport automates many application-to-application
integration activities.

. PowerAlert automates TenFold application exception reporting such as
automatic e-mail notification when an event occurs.

. PowerAccounting automates TenFold application integration with a
customer's existing general ledger system.

. PowerScoring lets end-users define and evolve business rules that
control applications behavior. PowerScoring is particularly useful in
regulated industries such as insurance where regulators change business
rules and companies must implement new business rules quickly.

. PowerWorkFlow lets end-users define and evolve workflow rules that
change applications behavior. PowerWorkFlow is particularly useful in
process-intensive industries where various departments, managers, or
staff need to approve or process transactions in sequence and in accord
with business rules.

. PowerBilling provides invoicing, statements, billing, collections, and
other related functionality.

FastStart

FastStart provides both technology and implementation services to quickly
put TenFold applications into production. Our TenFold FastStart application
uses the capabilities of the Universal Application and TenFold ComponentWare to
rapidly:

. cleanse, convert, import, and export data;

. configure applications, including client-based workflows, business
rules, and system security;

. conduct parallel testing; and

. create internal and external applications interfaces.

Services

TenFold builds and implements large-scale, complex applications rapidly and
for a fixed price. Our services, which have historically accounted for a
majority of our revenues, can be divided into three elements: building
applications, implementing applications, and post-implementation training and
support.

Building Applications--The TenFold Way

We call our unique process for rapidly delivering sophisticated applications
the "TenFold Way". We organize projects into phases, each with well-defined
activities and deliverables.

Executive Overview. In the Executive Overview phase, we write and deliver a
30-50 page executive overview that describes the application's scope and
functionality. We use applications research, detailed interviews with end-users
and senior managers familiar with applications needs, and our applications
expertise to prepare the executive overview. Our customers review and approve
each section. We typically deliver the completed document in three weeks.

Requirements. In the Requirements phase, we define and confirm requirements
and cross check them for accuracy and completeness. Requirements deliverables
are applications concepts training, an applications concepts manual, a
demonstration script, an acceptance tests book, a

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<PAGE>

reports book, and a database design book. Our customers review and approve
each deliverable. We typically complete requirements in four to eight weeks.

InitialPrepare and Grazing. In the InitialPrepare phase, we use the
Universal Application to rapidly build the first version of an application,
including end-user responsibilities, menus, transactions, reports, analyses,
and business engines. We build, test, and deliver a first release of the
application for customer feedback, a process we call "Grazing", and
incorporate this feedback into subsequent releases. End-users provide better
feedback after they have hands-on experience, and their Grazing comments help
us fine-tune the application's design. Interim releases of TenFold
applications are not applications prototypes, but are actual, working versions
of the entire application that customers can install and use.

FinishProject. During multiple Grazing cycles, we conduct the FinishProject
phase to complete the application on schedule and on target. During
FinishProject, the application passes all acceptance tests and we deliver the
completed application to our customers.

[ARTWORK: TENFOLD WAY TIMELINE]

Heading: TenFold Way and FastStart
Graphic of TenFold Way and FastStart timelines showing key phases of
applications development and implementation over a typical six-month
timeframe.

Text: Timing may vary based on applications scope. Although we have yet to
complete a FastStart implementation, the above timeline projects a typical
FastStart schedule.

Implementing Applications--FastStart--Fixed-Time, Fixed-Price Implementation

We offer FastStart--which is both a process and a technology--to
successfully install TenFold applications into production for a fixed price
and on a fixed schedule. FastStart services include converting and cleansing
legacy data, integrating with other applications, running a parallel, and
managing the implementation project. We often begin FastStart concurrent with
applications development to shorten the time from the start of development to
production. Although we have not yet completed a FastStart implementation, we
expect to deliver FastStart services in the following phases:

Executive Overview. In the Executive Overview phase, we write and deliver
an executive overview that describes implementation scope, conversion plans,
end-user training plans, parallel

40
<PAGE>

testing plans, go-live plans, and ongoing support plans. We use detailed
interviews with IT staff and senior managers familiar with legacy applications,
reviews of record layouts, and our implementation expertise to prepare the
executive overview. Our customers review and approve each section. We typically
deliver the completed document in three weeks.

Requirements. In the Requirements phase, we define and confirm
implementation requirements and cross check them for accuracy and completeness.
We produce a FastStart reference manual to describe data conversion, data
cleanup, imports, exports, database mapping, parallel testing details, and go-
live details as the basis for quickly deploying the application into
production. Our customers review and approve each section. We typically deliver
the completed document in about four weeks.

InitialPrepare. In the InitialPrepare phase, we use the TenFold FastStart
application to cleanse legacy-system data and convert it to the new
applications database. We prepare imports, exports, database mappings, and
alerts to integrate the new application with other existing applications.

PracticeParallel. In the PracticeParallel phase, we run the new TenFold
application in parallel with the legacy application to verify that the new
application efficiently processes daily workloads and produces results that
match legacy application outputs. In each practice parallel, we convert the
legacy beginning-of-day data to the new applications database, capture legacy
inputs for a day, manually enter those inputs, extract and compare the legacy
end-of-day data to the new applications end-of-day database, and resolve
differences. We use our AutoCapture technology to record TenFold application
inputs so that we can rerun a practice parallel multiple times until we resolve
differences. We run multiple practice parallel sessions until the customer is
confident that the application is ready for production.

QuietProduction. In the QuietProduction phase, we help the customer go live
on the new application, get their end-users productive, and evolve to long-term
support. We deliver to our customers a completed, production implementation.

Training and Support

We believe that superior customer service is critical to selling our
products and services to our customers. We offer training and support so that
customers can successfully operate, maintain, and evolve their applications.

Education and Certification. TenFold Education offers professional
certification programs to TenFold applications developers, end-users,
information technology professionals, and training professionals who need to
understand the TenFold Way, the Universal Application, TenFold ComponentWare,
FastStart, and TenFold applications products. Training programs include
classroom instruction, detailed courseware, and on-site training.

Customer and Technical Support. Our support arrangements provide customers
with new releases of their TenFold applications, new releases of the Universal
Application, on-site support immediately following project completion,
additional support when their applications go into production, and applications
consulting to adapt their applications.

Applications Products

Our strategy is to create resellable products from custom development
projects. We use the Universal Application to build all the applications we
develop for our customers. We believe that we can license many of the
applications we develop for individual customers as applications products to
other companies in the same vertical industry. While we have derived the
majority of our license

41
<PAGE>

revenue to date from custom applications that we have developed for specific
customers, we have successfully resold TenFold Revenue Manager, and we plan to
resell other applications products to other customers. Current TenFold
applications products that we offer to customers are:

TenFold Revenue Manager. TenFold Revenue Manager is a flexible, multi-
currency invoicing and revenue accounting system for institutional investment
managers. TenFold Revenue Manager automates invoicing tasks, ensures accuracy,
and produces complex invoices quickly and reliably so that investment managers
can improve cash flow and reduce operating costs. It lets decision-makers
define new fee structures for clients, easily change fee calculations, analyze
fee data to identify patterns and trends, and use "what-if" analyses to
proactively determine the revenue impact of proposed fee strategies. TenFold
Revenue Manager easily integrates with other applications such as accounts
receivable, general ledger, and asset management. We built TenFold Revenue
Manager for Barclays Global Investors and have licensed it to Dresdner RCM
Global Investors, Loomis Sayles & Company, and Oppenheimer Capital.

TenFold CardioTrac. TenFold CardioTrac is a Web-enabled, scalable
cardiovascular outcomes application that captures encounter and outcomes
information, patient demographics, lab data, and other procedure results for
physicians and researchers. Clinicians use TenFold CardioTrac to consistently
capture, validate, maintain, and access high-quality cardiovascular outcomes
data from multiple locations that may use different, customized interfaces.
TenFold CardioTrac delivers timely, accurate, and accessible cardiovascular
outcome data that healthcare providers can use to pinpoint effective
treatments. We built TenFold CardioTrac for Mercy Health Services and have not
yet licensed it to other customers.

TenFold Energy Data Manager. TenFold Energy Data Manager integrates multiple
sources of customer, meter, usage, and billing data into one source of
consistent, quality data. The application automatically obtains meter and usage
information, validates and edits the information, and exports settlement-ready
data to designated recipients. TenFold Energy Data Manager is rules-based, so
that energy and utilities companies can change the way they collect, validate,
and send data without programming. We built TenFold Energy Data Manager for
Enron and have not yet licensed it to other customers.

We are currently developing a number of applications with customers. We
expect to license the following applications currently under development as
resellable applications products:

TenFold Commercial Lines Manager. TenFold Commercial Lines Manager will be a
property and casualty insurance policy administration application that will
provide rules-based solutions for product definition, rating, expert
underwriting, line-and class-of-business-specific workflows, out-of-sequence
endorsements, and automated policy renewals. We believe that TenFold Commercial
Lines Manager will offer customers significantly faster processing of new and
renewal business, better risk selection capabilities, and enhanced customer
service. We expect to finish development of this application in the fourth
quarter of 1999.

TenFold Global Loan Manager. TenFold Global Loan Manager will be a global
securities lending management application that will automate negotiation,
initiation, collateral management, settlement, recall, returns, and overall
management of securities lending. We believe that TenFold Global Loan Manager
will help improve client service and lending profitability for our customers.
We expect to finish development of this application in the third quarter of
1999.

In many cases, the agreement with the original customer for a particular
application requires us to pay that original customer royalties, or restricts
in various ways our rights to resell the application to third parties. With
respect to TenFold Global Loan Manager, Barclays Global Investors' permission
is required for resales of this application during a five-year period. In
connection with our strategic

42
<PAGE>

relationship with Perot Systems Corporation, in some cases Perot Systems or
their customers will own rights to the applications that we develop.

Customers

As of March 31, 1999, we have earned revenues from more than 30 customers.
Some of our customers accounted for more than 10% of total annual revenues
during the past three years. Three of these customers, Indus, Provident, and
Unitrin, are stockholders of TenFold. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview" for
additional information regarding our revenues from these customers. We also
are offering to Westfield Companies and Utica National Insurance Group the
opportunity to purchase 250,000 and 70,000 shares of common stock,
respectively, in the offering at the initial offering price. The following
customers each accounted for more than $500,000 in total revenue (license and
service) to TenFold since January 1, 1997:

Insurance Services Investment Management Telecommunications

Crawford & Company Barclays Global Ameritech
Provident Companies Investors
TIG Insurance Dresdner RCM Global
Trinity (subsidiary of Investors
Unitrin) Franklin Templeton
United Casualty (subsidiary Loomis, Sayles &
of Unitrin) Company
Utica National Insurance
Group
Westfield Companies

Energy Healthcare Other

Enron Mercy Health Services NAI Block
Nielsen Media
Research

For financial information about TenFold's industry segments, see Note 11 of
Notes to Consolidated Financial Statements.

Sales and Marketing

TenFold products and services require a substantial financial commitment by
our customers. Sales cycles typically range from three to twelve months from
the time we initially meet with a prospective customer until the customer
hires TenFold to build an application. Decision-makers are primarily senior
executives of large companies in our target industries. The TenFold Guarantee
is an important selling point to executives experiencing significant problems
with their large-scale applications.

A significant amount of our business comes from additional projects from
existing customers, referrals from existing customers, and from relationships
within our target industries. To build demand for TenFold products, we
identify, educate, and qualify high-potential sales prospects through a
variety of marketing activities, including attendance at targeted conferences
and trade shows, mailings to senior business and information technology
executives, advertising, private briefings with individual companies, and
seminars that demonstrate our unique capabilities. We have an active public
relations program to create marketplace awareness and communicate our value
proposition to key audiences such as press, analysts, and other industry
influencers.

We primarily sell TenFold products and services through our direct sales
force, which includes seasoned applications sales staff. We incent the sales
force based on successful achievement of revenue and other targets. In
addition, we expect to broaden distribution of TenFold products through
relationships with applications service providers, value-added resellers
(VARs), and software

43
<PAGE>

distributors in the U.S. and international markets. We recently entered into a
strategic relationship with Perot Systems Corporation, a systems integrator, to
develop and deliver applications, products, and services to TenFold and Perot
Systems customers using the TenFold Way, Universal Application, TenFold
ComponentWare, and FastStart. Under the agreement, Perot Systems will provide
us with the opportunity to sign contracts with revenue of $30 million during
the first two years of the agreement. See "--Strategic Alliance" for more
information concerning this relationship.

We organize TenFold into Vertical Business Groups to tailor our marketing
and selling strategies for our target vertical industries. As each Vertical
Business Group grows, gains multiple customers, and begins to develop
resellable products, we add dedicated product marketing and sales staff with
vertical domain expertise and sales experience.

Strategic Alliance

We recently entered into a strategic alliance agreement with Perot Systems
Corporation, a systems integrator, which becomes effective May 1, 1999. The
agreement provides for the development and delivery of applications, products,
and services to TenFold and Perot Systems customers using the TenFold Way,
Universal Application, TenFold ComponentWare, and FastStart. The agreement
provides that:

. Perot Systems will provide us with opportunities to subcontract the
delivery of our products and services under Perot Systems customer
contracts and to deliver our products and services directly to customers
identified by Perot Systems;

. If Perot Systems does not provide us with opportunities to contract for
revenue of at least $15.0 million in each of the two years following May
1, 1999, Perot Systems will pay us 20% of the shortfall, subject to
reduction in the second year to the extent that the opportunities to
contract for revenue provided in the first or third year following May
1, 1999 exceed $15.0 million;

. If Perot Systems meets certain performance milestones, we will not
separately contract for or pursue business deals or applications
development opportunities with customers or businesses with whom Perot
Systems has an outsourcing relationship, and we will not issue any of
our securities to, provide application development services to, or
provide software licenses to, specific competitors of Perot Systems,
except under specific circumstances;

. If we propose to acquire another business and wish to raise cash in
exchange for an equity interest in the acquired company, we and Perot
Systems will negotiate to determine whether Perot Systems will fund a
portion of the acquisition in cash and receive a proportionate ownership
interest in the acquired business;

. If we spin off a division, we and Perot Systems will negotiate to
determine whether Perot Systems should participate in the spin-off;

. Perot Systems will have the opportunity to purchase up to 1,000,000
shares of our common stock being sold in this offering at the initial
public offering price, subject to Perot Systems agreeing not to sell
these shares for 180 days after the effective date of the offering;

. Perot Systems will pay us a license fee if Perot Systems sub-licenses
the Universal Application, TenFold ComponentWare, or FastStart software
to a Perot Systems customer;

. We grant to Perot Systems a perpetual, royalty-free license to use,
copy, modify, and distribute the TenFold Way and FastStart
methodologies; and

. Perot Systems will not develop products using the Universal Application
that are directly competitive with existing TenFold products, TenFold
products under development, or any new TenFold products, unless Perot
Systems already has a new product under development at the time that we
develop a new product.

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<PAGE>

With respect to applications developed in connection with this strategic
relationship, in some cases Perot Systems or their customers will own rights to
these applications. The term of the agreement is ten years and may be
terminated only for cause, except that after the third year of the agreement
either party may terminate the agreement if Perot Systems does not provide
TenFold with the opportunity to sign contracts during the third year or any
subsequent year providing for revenue of at least $7.5 million, increasing from
year to year based on TenFold revenue growth.

Research and Development

Our research and development organization consists of teams of development
engineers and product managers. The research and development organization uses
a "documentation-centric" development process that includes planning and
documenting deliverables in advance, rigorously adhering to coding standards,
and performing nightly acceptance tests of all technology. We continuously
monitor quality, analyze the root-cause of defects, report daily and weekly
status, and regularly communicate individual and team performance and adherence
to schedule and functionality requirements.

Our development infrastructure and processes produce documentation, quality
assurance, platform certification, release management, and delivery
capabilities (in addition to design and implementation functions) for our
technology and products. Notably, we do not employ traditional quality
assurance engineers or technical writers. Developers use TenFold AutoTest--our
integrated testing technology--to perform nightly acceptance tests on all
products, components, and technologies under development. We believe that these
approaches yield significantly higher quality than employing large teams of
software testers and technical documentation writers.

Research and development expenses were $9.7 million for the year ended
December 31, 1998. As of March 31, 1999, we had 89 dedicated research and
development staff. We intend to continue to make substantial investments in
research and development to maintain and enhance the TenFold Way, the Universal
Application, TenFold ComponentWare, and TenFold FastStart.

Competition

The principal competitive factors in our markets include quality of services
and products, speed of development and implementation, price, project
management capability, and technical and business expertise. We believe that we
compete favorably with respect to these factors and that our focus on providing
high-quality solutions to meet customer business needs and our guaranteed
delivery of fixed-time, fixed-price applications distinguishes us from our
competitors. We compete primarily with the following:

Vertical Packaged Software Vendors. We face competition from packaged
software vendors in our target industries such as Policy Management Systems
Corporation (PMSC) in insurance, and McKesson HBOC in healthcare. Vertical
packaged software vendors typically have domain expertise and an established
user base within a particular industry and their applications provide industry-
specific functionality.

ERP Packaged Software Vendors. We occasionally face competition from ERP
vendors who are beginning to offer industry-specific applications. Customers
primarily license software packages to limit the risks associated with new
software development and improve time to market. However, packaged ERP
applications often require modification or force companies to alter their
business processes. We believe that TenFold applications generally complement
our customers' ERP solutions, rather than compete directly with them.

Consulting and Software Integration Firms. We face competition from
consulting and software integration firms, such as Andersen Consulting and EDS,
who build applications for hire.

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<PAGE>

These firms generally work on a time-and-materials basis and typically do not
offer fixed-time, fixed-price services.

Fixed-Time, Fixed-Price Service Firms. We compete with services firms that
offer fixed-time, fixed-price applications development, such as Cambridge
Technology Partners and Sapient. These companies use structured methodologies
to shorten development time frames and often break large projects into
multiple, smaller ones. While this approach delivers some benefits, it can lead
to costly change orders for customers as their requirements change during
application development. We believe that TenFold's unique technology and our
money-back TenFold Guarantee give us an advantage over these competitors for
delivering large, complex applications for a fixed price.

Internal Development. We face competition from internal information
technology (IT) organizations that aim to develop and implement applications.
The skill level of IT professionals varies by customer, and the current IT
labor shortage makes it difficult for companies to attract and retain skilled
IT professionals. In addition, internal IT departments have limited resources
and few have the ability to devote staff exclusively to applications
development.

For information concerning risks associated with competition, see "Risk
Factors--We face significant competition principally from consulting and
software integration firms, application software vendors, and internal
information systems groups; if we fail to successfully compete, our growth and
market share will be adversely affected".

Intellectual Property Rights

We rely primarily on a combination of copyright, trade secret and trademark
laws, and nondisclosure and other contractual restrictions on copying and
distribution to protect our proprietary technology. We have applied for two
separate patents in the United States and intend to continue to seek patents on
our inventions where appropriate. We have seven trademark applications pending
in the United States and counterparts in various foreign jurisdictions for
distinct marks, including our distinctive TenFold logo.

In addition, as part of our confidentiality procedures, we generally enter
into nondisclosure agreements with our employees, customers, consultants and
corporate partners, and limit access to and distribution of our software,
documentation, and other proprietary information.

We retain ownership of the Universal Application, TenFold ComponentWare, and
TenFold FastStart. We often retain ownership of the applications we develop.
However, with respect to applications developed in connection with our
strategic relationship with Perot Systems Corporation, in some cases Perot
Systems or their customers will own rights to these applications. In some cases
we are obligated to pay royalties on future sales of specific applications, or
are prohibited from licensing applications for specified periods of time or to
specified third parties.

During March 1997, we entered into a transaction where we sold 1,460,399
shares of Series A preferred stock and a software license to Indus
International. The software license grants Indus the right to develop
applications using our Universal Application. The license restricts us from
developing and licensing applications with similar industry-specific
functionality as Indus' existing applications products (as of the effective
date of the license agreement) within the particular industry that Indus
operates, and restricts us from licensing the Universal Application to certain
named competitors of Indus. These licensing restrictions terminate upon the
earlier of five years or Indus reducing its ownership of us by 50%, which is
contemplated to occur in this offering. See Note 8 of Notes to Consolidated
Financial Statements for more information about our transaction with Indus.

For information concerning risks associated with intellectual property
rights, see "Risk Factors--If we cannot protect or enforce our intellectual
property rights, which are currently comprised primarily

46
<PAGE>

of our Universal Application and TenFold ComponentWare technologies, our
competitors may be able to introduce competing products that are similar to
ours, which would impair our competitive position, and we may become involved
in costly and time-consuming litigation".

Employees

We believe that our growth and success are attributable in large part to
high-caliber employees and an experienced management team, many with years of
industry experience in building, implementing, and selling mission-critical
applications. We focus on maintaining a strong corporate culture tied to key
values; namely, speed, integrity, customer satisfaction, commitment, employee
growth, long-term strategy, and precision execution. Each employee attends an
initial "Boot Camp" and ongoing training to learn the TenFold Way, our
technology, and our company values. To encourage these company values, we
recognize and reward employees who demonstrate them in their everyday work. We
intend to continue teaching and promoting our values and believe this will
provide us with a sustainable competitive advantage. We offer a work
environment that lets employees make meaningful contributions, as well as
incentive programs to continue to motivate and reward our employees.

As of March 31, 1999, we had 349 employees, including 174 in applications
development and support, 89 in research and development, 48 in sales and
marketing, and 38 in finance, administrative, and information technology
support functions. None of our employees is represented by a labor union. We
believe that our employee relations are good.

Facilities

Our principal executive offices are located near Salt Lake City, Utah where
we lease approximately 25,000 square feet under a lease that expires in
December 2001. We also lease office space (averaging approximately 10,000
square feet, and typically with 5-year lease terms) in Atlanta, Baltimore,
Chicago, Dallas, Raleigh, and San Francisco which we use for applications
development, research and development, sales, and vertical business management.
We also maintain smaller offices (typically less than 1,000 square feet and
with 1 year or less lease terms) in Austin, Boston, London, and New York which
we use for sales activities. We believe that our current facilities are
adequate to meet our needs and that additional space will be available as we
need it.

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<PAGE>

MANAGEMENT

Officers and Directors

The following table sets forth information regarding the officers and
directors of TenFold as of March 31, 1999:

<TABLE>
<CAPTION>
Name Age Position(s)
--------------------------- --- ---------------------------------------------
<C> <C> <S>
Gary D. Kennedy............ 45 President, Chief Executive Officer, and
Director
Jeffrey L. Walker.......... 56 Chairman, Executive Vice President, and Chief
Technology Officer
William M. Conroy.......... 39 Executive Vice President and Chief Operating
Officer
Max P. Brough.............. 57 Senior Vice President and Chief Information
Officer
Kyle E. Fowles............. 38 Senior Vice President of Customer Services
Robert P. Hughes........... 39 Senior Vice President and Chief Financial
Officer
Glen D. Mella.............. 41 Senior Vice President of Marketing
Sameer E. Shalaby.......... 30 Senior Vice President of Architecture
Development
Adam Slovik................ 32 Senior Vice President of Worldwide
Applications Development
Laurence F. Stevens........ 45 Senior Vice President of Technical Products
Richard W. VanderDrift..... 52 Senior Vice President of Applications
Products
Neil T. Brigham............ 43 President of TenFold Utilities and Energy
Group
Scott E. Calder............ 46 President of TenFold E-Commerce
Bernard C. Mazon........... 49 President of TenFold Insurance Systems Group
Michele W. McGovern........ 37 President of TenFold Investment Management
Group
James S. Smith............. 57 President of TenFold Healthcare Group
Charles R. Stucki.......... 35 President of TenFold Banking and Credit Group
H. Raymond Bingham(2)...... 54 Director
Robert W. Felton(1)........ 59 Director
Ralph W. Hardy, Jr.(1)..... 58 Director
Kay R. Whitmore(2)......... 66 Director
</TABLE>
- --------
(1) Member of compensation committee
(2) Member of audit committee

Gary D. Kennedy joined TenFold in September 1996 as its President and Chief
Executive Officer. Prior to joining TenFold, from 1993 to 1996, Mr. Kennedy
served a three-year mission in Brazil for The Church of Jesus Christ of Latter-
day Saints. From 1990 to 1993, except during periods of personal illness, he
served as President, Chief Executive Officer, and Chairman of PRC Incorporated,
a systems integrator company and wholly owned subsidiary of Black & Decker, an
appliance and tool company. Prior to joining PRC Incorporated, Mr. Kennedy
served in various sales and management positions at Oracle Corporation, a
database software company, from 1982 until 1990, including President of Oracle
USA during 1990. Prior to joining Oracle, Mr. Kennedy served as Marketing
Manager for Intel Corporation, a semiconductor company. Mr. Kennedy holds a BA
in finance from the University of Utah and an MBA from Northwestern University,
Kellogg Graduate School of Management.

Jeffrey L. Walker founded TenFold in February 1993 and has served as its
Chairman, Executive Vice President, and Chief Technology Officer since October
1996. From TenFold's inception to October 1996, Mr. Walker served as TenFold's
Chairman, President, Chief Executive Officer, and Chief Technology Officer.
Prior to founding TenFold, from 1991 to 1993, Mr. Walker was an independent
consultant. From 1985 to 1991, Mr. Walker held several management positions at
Oracle Corporation, including Executive Vice President from 1987 to 1991,
General Manager Applications Division from 1985 to 1991, Chief Financial
Officer from 1987 to 1991, and Senior Vice President of Marketing during 1986.
Prior to joining Oracle, Mr. Walker founded and served as Chief Executive
Officer of Walker Interactive Products, an application software company, from
1980 to 1985. Mr. Walker holds a BA in mathematics from Brown University.

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<PAGE>

William M. Conroy joined TenFold in November 1997 and has served as its
Executive Vice President and Chief Operating Officer since October 1998. From
November 1997 to October 1998, Mr. Conroy served as TenFold's Senior Vice
President of Sales. Prior to joining TenFold, from 1986 to 1997, Mr. Conroy
held several sales and management positions at Oracle Corporation, a database
software company, including Group Vice President in the U.S. Sales Division in
1996 and 1997, and Area Vice President of Sales from 1990 to 1996. Prior to
joining Oracle, Mr. Conroy worked at IBM in various account management
positions. Mr. Conroy holds a BA in marketing from Bowling Green State
University.

Max P. Brough joined TenFold in April 1998 as its Senior Vice President and
Chief Information Officer. Prior to joining TenFold, from 1996 to 1998 and from
1980 to 1985, Mr. Brough served as Director of Information Technology for the
University of Utah. From 1993 to 1996, Mr. Brough served a three-year mission
in Baton Rouge, Louisiana for The Church of Jesus Christ of Latter-day Saints.
From 1985 to 1993, Mr. Brough served as Vice President of Information Systems
at First Health, Inc., a health benefits company. Mr. Brough holds a BS in
education from the University of Utah.

Kyle E. Fowles joined TenFold in December 1997 as its Vice President of
Operations--Applications Development and has served as TenFold's Senior Vice
President of Customer Services since February 1999. Prior to joining TenFold,
from 1995 to 1997, Mr. Fowles served as Director of Consulting and Development
for Telos Bioinformatics, Inc., a healthcare and pharmaceuticals software
applications company. From 1994 to 1995, Mr. Fowles served as Director of
Information Systems for GE Capital Realty Group, Inc., a realty advisory
company. From 1991 to 1994, Mr. Fowles served as Senior Strategic Account
Consultant for The Softa Group, Inc., a property and asset management products
company. From 1987 to 1991, Mr. Fowles served as Vice President of Finance for
Glenwood Financial Group, Inc., a real estate syndications and asset management
company. Mr. Fowles holds a BA and MA in accountancy and an MaCC in Information
Systems from Brigham Young University.

Robert P. Hughes joined TenFold in February 1995 as its Chief Financial
Officer and has served as a Senior Vice President of TenFold since October
1998. Prior to joining TenFold, Mr. Hughes served in various finance and
administrative capacities at Oracle Corporation, a database software company,
from 1989 to 1995, including Senior Director of USA Revenue Administration and
Accounting from 1993 to 1995, Director of Revenue Accounting, Credit and
Collections from 1992 to 1993, and Director of Internal Audit from 1989 to
1992. Prior to joining Oracle, from 1982 to 1989, Mr. Hughes served in various
audit positions for KPMG LLP, a public accounting firm, including Audit
Manager. Mr. Hughes holds a BA in business administration from the Haas School
of Business, University of California, Berkeley, and is a Certified Public
Accountant.

Glen D. Mella joined TenFold in January 1997 as its Vice President of
Marketing and has served as TenFold's Senior Vice President of Marketing since
October 1998. Prior to joining TenFold, from 1996 to 1997, Mr. Mella served as
Vice President of Marketing for CyberPath Inc., a provider of electronic data
interface solutions for the Internet. From 1994 to 1996, Mr. Mella served as
Vice President of Marketing for Novell, Inc., a network software company. From
1993 to 1994, Mr. Mella served as Vice President of Marketing Communications
for WordPerfect Corporation, a business and office software products company.
From 1991 to 1993, Mr. Mella served as Marketing Director for Dial Corporation,
a personal and household products company. From 1987 to 1991, Mr. Mella served
as a Product Manager for the Frito-Lay division of PepsiCo., a beverage and
foods company. Mr. Mella holds a BA in business management from Brigham Young
University and an MBA from Northwestern University, Kellogg Graduate School of
Management.

Sameer E. Shalaby joined TenFold in August 1993 and has served as its Senior
Vice President of Architecture Development since October 1998. From August 1993
to October 1998, Mr. Shalaby served in various development and technical
capacities at TenFold, including its Vice President of

49
<PAGE>

Technical Architecture. Prior to joining TenFold, from 1991 to 1993, Mr.
Shalaby served in various development and technical capacities in the Network
Products Division at Oracle Corporation, a database software company. From 1988
to 1989, Mr. Shalaby served as a Software Engineer at Security Survival
Distributed Systems, a network infrastructure and applications company. During
1988, Mr. Shalaby served as a member of NASA's Advanced Technology Unit's
Technical Staff at PRC Incorporated, a systems integrator company and wholly
owned subsidiary of Black & Decker, an appliance and tool company. Mr. Shalaby
holds a BS in electrical engineering and computer science from The George
Washington University and an MS in electrical engineering and computer science
from the Massachusetts Institute of Technology.

Adam Slovik joined Jeffrey L. Walker to found TenFold in February 1993 and
has served as its Senior Vice President of Worldwide Applications Development
since October 1998. From February 1993 to October 1998, Mr. Slovik served in
various development and technical capacities at TenFold, including its Vice
President of Applications Architecture. Prior to joining TenFold, Mr. Slovik
served in various development and technical capacities in the Applications
Division of Oracle Corporation, a database software company, from 1988 to 1992,
including Product Manager from 1991 to 1992, Architect from 1990 to 1991,
Senior Development Manager from 1989 to 1990, and Senior Developer from 1988 to
1989. Mr. Slovik holds a BS in electrical engineering from the California
Institute of Technology.

Laurence F. Stevens joined TenFold in October 1998 as its Senior Vice
President of Technical Products. Prior to joining TenFold, Mr. Stevens held
several management positions at Oracle Corporation, a database software
company, including Vice President of Product Strategy for the On-Line
Analytical Processing Products Division from 1994 to 1998, Vice President of
Multimedia and Document Products from 1993 to 1994, Vice President of Office
Products from 1989 to 1992, Product Marketing Director from 1987 to 1989, New
Products Director from 1986 to 1987, and Senior Product Manager from 1985 to
1986. Mr. Stevens holds a BA in economics from the University of Kansas.

Richard W. VanderDrift joined TenFold in November 1996 and has served as its
Senior Vice President of Applications Products since October 1998. From
November 1997 to October 1998, Mr. VanderDrift served as TenFold's Vice
President of ComponentWare. From November 1996 to November 1997, Mr.
VanderDrift served as TenFold's Vice President of Applications. Prior to
joining TenFold, from 1992 to 1996, Mr. VanderDrift served as President of
Squire Systems, a software company he founded. From 1987 to 1992 Mr.
VanderDrift held various management positions at Oracle Corporation, a database
software company, including Vice President of Applications Architecture and
Design from 1988 to 1991, and Vice President of Financial Applications Research
and Development from 1991 to 1992. Mr. VanderDrift holds a BA in business from
the University of Texas, Austin and an MBA from the Haas School of Business,
University of California, Berkeley.

Neil T. Brigham joined TenFold in July 1997 and has served as its President
of TenFold Utilities and Energy Group since July 1998. From July 1997 to July
1998, Mr. Brigham served as Vice President of TenFold's Eastern U.S.
Applications Development. Prior to joining TenFold, from 1995 to 1997, Mr.
Brigham served as Vice President and Chief Information Officer at Northeast
Utilities System, an electric utilities company. From 1981 to 1995, Mr. Brigham
served in several management positions at Andersen Consulting, a business
consulting company, including equity partner from 1992 to 1995, associate
partner from 1990 to 1992, and manager from 1985 to 1990. Mr. Brigham holds a
BS in management and in architecture from Syracuse University.

Scott E. Calder joined TenFold in March 1999 as the President of TenFold E-
Commerce. Prior to joining TenFold, from 1985 to 1999, Mr. Calder held several
management positions at Mainstream Data, Inc., an information services company
which he co-founded, and its successor company, WavePhore Networks, Inc.,
including Chief Executive Officer from 1992 to 1998, President from 1990

50
<PAGE>

to 1992, and Executive Vice president and Chief Operating Officer from 1985 to
1990. Mr. Calder also served as a director of Mainstream from 1988 to 1998.
From 1982 to 1985, Mr. Calder served as Vice President of Marketing at
Bonneville Telecommunications Company, a satellite video and data
communications services company. Prior to joining Bonneville, from 1979 to
1982, Mr. Calder served as a consultant at Bain and Company, a management
consulting firm. Mr. Calder holds BA degrees in english and economics from the
University of Utah and an MBA from the Harvard University Graduate School of
Business.

Bernard C. Mazon joined TenFold in July 1998 and has served as the President
of TenFold Insurance Systems Group since October 1998. From July 1998 to
October 1998, Mr. Mazon served as TenFold's Vice President of Sales for the
Insurance Group. Prior to joining TenFold, from 1994 to 1998, Mr. Mazon served
as Executive Vice President in the Financial Services Group at Computer
Sciences Corporation, an information technology and services company. Mr. Mazon
served as Executive Vice President Group Manager (Information Services) at
Policy Management Systems Corporation, a provider of enterprise applications
and services (PMSC), from 1987 to 1994. Mr. Mazon holds a BA in business from
Duquesne University.

In February 1997, in connection with Mr. Mazon's role as Executive Vice
President Group Manager (Information Services) at PMSC, Mr. Mazon, and four
other executive officers of PMSC, entered into a stipulation and consent to
final judgment of permanent injunction with the Securities and Exchange
Commission. Mr. Mazon consented to the entry of a final judgment permanently
restraining and enjoining him from violating the internal control provisions of
the Securities Exchange Act of 1934 and ordering him to pay civil penalties in
the amount of $20,000. The SEC alleged in its complaint that, from January 1991
through March 1993, PMSC and various of its employees engaged in a number of
improper accounting practices which materially misstated PMSC's results of
operations. Mr. Mazon neither admits nor denies the allegations contained in
the SEC's complaint.

Michele W. McGovern joined TenFold in July 1997 and has served as President
of the TenFold Investment Management Group since July 1998. From July 1997 to
July 1998, Ms. McGovern served as Vice President of TenFold's Investment
Management Group. Prior to joining TenFold, from 1988 to 1997, Ms. McGovern
founded and served as President of McGovern Group, a technology project
management consulting firm serving the investment management industry. From
1987 to 1988, Ms. McGovern served as Assistant Controller in the International
Banking Group at Wells Fargo Bank. From 1984 to 1987, Ms. McGovern served as an
audit manager in the investment management practice at Pricewaterhouse Coopers
LLP. Ms. McGovern is a Certified Public Accountant and holds a BS in finance
and accounting from Northeastern University.

James S. Smith joined TenFold in February 1998 and has served as President
of the TenFold Healthcare Group since July 1998. From February 1998 to July
1998, Mr. Smith served as Vice President of TenFold's Healthcare Group. Prior
to joining TenFold, from 1995 to 1998, Mr. Smith served as President and Chief
Executive Officer at Telos Bioinformatics Inc., a healthcare and
pharmaceuticals software applications company. From 1990 to 1994, Mr. Smith
served as Director and General Manager of Financial Industry Software at Texas
Instruments Inc., a semiconductor company. From 1974 to 1990, Mr. Smith held
several management positions at Control Data Corporation, a systems integration
services and solutions company, including Vice President and General Manager of
its Business Information Services Division from 1988 to 1990, Vice President of
North American Sales from 1986 to 1988, Area Sales Manager from 1984 to 1986,
Director of Marketing from 1981 to 1984, District Manager from 1978 to 1981,
General Manager for a Japanese subsidiary from 1976 to 1978, and Marketing
Programs Manager from 1974 to 1976. Mr. Smith holds a BA in political science
from Stanford University and an MBA from the University of Southern California.

Charles R. Stucki joined TenFold in June 1997 and has served as the
President of the TenFold Banking and Credit Group since October 1998. From June
1997 to October 1998, Mr. Stucki served

51
<PAGE>

as TenFold's Vice President of WorldWide Applications Development. Prior to
joining TenFold, Mr. Stucki served as a principal at McKinsey & Company Inc., a
business consulting company, from 1996 to 1997, and as an associate from 1990
to 1996. Mr. Stucki served as a staff auditor at Arthur Andersen & Company, a
public accounting firm, from 1986 to 1988. Mr. Stucki holds a BS in accounting
from Brigham Young University and an MBA from the Harvard University Graduate
School of Business.

H. Raymond Bingham has served as a member of TenFold's board of directors
since March 1999. Mr. Bingham has served as Chief Executive Officer of Cadence
Design Systems, an electronic design automation software company, since April
1999 and served as Executive Vice President and Chief Financial Officer of
Cadence from 1993 to April 1999. Mr. Bingham has served as a director of
Cadence since 1997. Prior to joining Cadence, from 1985 to 1993, Mr. Bingham
served as Executive Vice President and Chief Financial Officer of Red Lion
Hotels and Inns, an owner and operator of a chain of hotels. Mr. Bingham
currently serves as a director of Sunstone Hotel Investors, Inc., a real estate
investment trust, Integrated Measurement Systems, Inc., a hardware and software
company, Legato Systems, Inc., a network storage management software company,
and Onyx Software Corporation, an enterprise relationship management software
company. Mr. Bingham holds a BA in economics from Weber State University and an
MBA from the Harvard University Graduate School of Business.

Robert W. Felton has served as a member of TenFold's board of directors
since March 1997. Mr. Felton has served as a member of the board of directors
of Indus International, Inc., a software applications company, since its
inception in 1988. Indus is a stockholder of TenFold. From 1988 to January
1999, Mr. Felton served as Indus's Chairman, President, and Chief Executive
Officer. Mr. Felton holds a BS in mechanical engineering from Cornell
University and an MS in nuclear engineering from the University of Washington.

Ralph W. Hardy, Jr., has served as a member of TenFold's board of directors
since February 1998. Mr. Hardy is a principal of First Media TF Holdings, LLC,
a stockholder of TenFold, and is the principal operating officer, director and
a stockholder of First Media Corporation, a company which, directly or through
its subsidiaries, holds investments in broadcasting, telecommunications, and
software companies, as well as in the five publicly-traded Marriott companies,
and which is the ultimate parent of First Media TF Holdings, LLC. First Media
Corporation is substantially owned by the Richard E. Marriott family of
Washington, D.C. Mr. Hardy has served as a member of the law firm of Dow,
Lohnes & Albertson PLLC since 1974. Mr. Hardy holds a BS in political science
from the University of Utah and a JD from the University of California at
Berkeley School of Law (Boalt Hall).

Kay R. Whitmore has served as a member of TenFold's board of directors since
February 1998. Mr. Whitmore served in various senior management capacities at
Eastman Kodak, a consumer and commercial imaging products company, including
Chairman, President and Chief Executive Officer from 1990 to 1993, and
President from 1983 to 1993. Mr. Whitmore is presently retired. Mr. Whitmore
holds a BS in chemistry from the University of Utah and an MS in management
science from the Sloan School of Management, Massachusetts Institute of
Technology.

Officers and Executive Officers

TenFold's officers and executive officers are appointed by, and serve at the
discretion of, the board of directors. Each officer and executive officer is a
full-time employee of TenFold. The board has determined that Messrs. Kennedy,
Walker, Conroy, Mazon, Mella, Hughes, and Slovik are the executive officers of
TenFold.

Board Composition

TenFold currently has authorized six directors. There are no family
relationships among any of the directors, executive officers, or key employees
of TenFold.

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<PAGE>

TenFold's board of directors will be divided into two classes effective upon
the closing of this offering. The Class I directors, Messrs. Felton, Hardy and
Kennedy, will serve an initial term until the 2000 annual meeting of
stockholders, and the Class II directors, Messrs. Bingham, Walker, and
Whitmore, will serve an initial term until the 2001 annual meeting of
stockholders. Each member of the Class will be elected for two-year terms
following his or her respective initial term.

Director Compensation

Except for reimbursement for reasonable travel expenses relating to
attendance at board and committee meetings, employee directors are not
compensated for their services as directors. Nonemployee directors receive
compensation for their services as directors at a rate of $2,000 for each board
meeting they attend, and $2,000 per board committee meeting they attend, if not
on the same day as a board meeting. Employee directors are eligible to
participate in TenFold's 1993 flexible stock incentive plan and, after this
offering, will also be eligible to participate in TenFold's 1999 stock plan and
1999 employee stock purchase plan. After this offering, nonemployee directors
of TenFold will be eligible to participate in TenFold's 1999 stock plan. In
connection with his appointment to the board of directors in February 1998, Kay
Whitmore, a nonemployee director of TenFold, purchased 10,000 shares of common
stock from TenFold at a price of $2.50 per share. In October 1997, TenFold
granted Mr. Whitmore an option for 25,000 shares of common stock at a per share
exercise price of $0.89. In March 1999, TenFold granted Mr. Bingham an option
to purchase 40,000 shares of common stock and granted Mr. Whitmore an option to
purchase 15,000 shares of common stock, each at a per share exercise price of
$12.60. See "Stock Plans" for descriptions of the material terms of the 1993
stock plan, 1999 stock plan, and 1999 purchase plan.

Board Committees

The board of directors has established three committees, an audit committee,
a compensation committee and a committee to grant options to employees under
the 1993 Stock Incentive Plan of an option exercisable for up to 10,000 shares
of common stock per employee. The board's audit committee currently consists of
Messrs. Whitmore and Bingham. The audit committee reviews TenFold's annual
audit and meets with TenFold's independent auditors to review TenFold's
internal accounting procedures and financial management practices. The
compensation committee currently consists of Messrs. Felton and Hardy. The
compensation committee to the board recommends compensation and benefits for
TenFold's executive officers, reviews general policy relating to compensation
and benefits of employees of TenFold, and administers TenFold's stock plans.
The board also has created a committee, consisting solely of Mr. Kennedy,
authorized to grant options under the 1993 Flexible Stock Incentive Plan and
the 1999 Stock Plan of up to 10,000 shares of common stock per employee.
TenFold does not have a nominating committee or a committee that performs the
functions of a nominating committee.

Compensation Committee Interlocks and Insider Participation

The compensation committee currently consists of Messrs. Felton and
Whitmore. None of the members of the compensation committee of the board is
currently or has been, at any time since the formation of TenFold, an officer
or employee of TenFold. No interlocking relationship exists between any of
TenFold's executive officers, directors or members of TenFold's compensation
committee and any executive officers or members of any other company's board of
directors or compensation committee.

Limitation of Liability and Indemnification Matters

TenFold's certificate of incorporation limits the liability of directors to
the fullest extent permitted by Delaware law. Delaware law provides that a
corporation's certificate of incorporation may contain

53
<PAGE>

a provision eliminating or limiting the personal liability of directors for
monetary damages for breach of their fiduciary duties as directors, except for
liability for:

. any breach of their duty of loyalty to the corporation or its
stockholders;

. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

. unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law; or

. any transaction from which the director derived an improper personal
benefit.

TenFold's bylaws provide that TenFold shall indemnify its directors and
officers and may indemnify its employees and agents to the fullest extent
permitted by law. TenFold believes that indemnification under its bylaws covers
at least negligence and gross negligence on the part of indemnified parties.

TenFold has entered into indemnification agreements with its directors and
Robert P. Hughes, Senior Vice President and Chief Financial Officer. These
agreements, among other things, indemnify directors and the executive officer
for expenses, including attorneys' fees, judgments, fines and settlement
amounts incurred by such persons in any action or proceeding, including any
action by or in the right of TenFold, arising out of such person's services as
a director or officer of TenFold, any subsidiary of TenFold or any other
company or enterprise to which the person provides services at the request of
TenFold. TenFold believes that these provisions and agreements are necessary to
attract and retain qualified directors and officers.

At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of TenFold where indemnification will be
required or permitted. TenFold is not aware of any threatened litigation or
proceeding that might result in a claim for such indemnification.

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<PAGE>

Executive Compensation

Summary Compensation Table. The following table provides summary information
concerning the compensation received for services rendered to TenFold in all
capacities during the fiscal year ended December 31, 1998 by the Chief
Executive Officer and each of the next four most highly compensated executive
officers, each of whose total compensation during TenFold's last fiscal year
exceeded $100,000. The executive officers listed below are sometimes referred
to as "named officers".

<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Annual Compensation Number of
----------------------------- Securities
Other Annual Underlying
Name and Principal Position Salary Bonus Compensation Options
- --------------------------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Gary D. Kennedy..................... $188,500 -- $1,900 --
President and Chief Executive
Officer
William M. Conroy................... 206,000 $75,000 -- --
Executive Vice President and
Chief Operating Officer
Bernard C. Mazon.................... 70,958 100,000 -- 150,000
President of TenFold Insurance
Systems Group
Glen D. Mella....................... 140,400 11,938 1,680 --
Senior Vice President of Marketing
Robert P. Hughes.................... 139,700 11,938 943 --
Senior Vice President and
Chief Financial Officer
</TABLE>

During 1998, Mr. Mazon was granted options to acquire 150,000 shares of
common stock, subject to a five-year vesting schedule. Pursuant to a letter
agreement between TenFold and Mr. Mazon, TenFold has agreed that it will grant
Mr. Mazon an option to acquire three percent of the outstanding shares of
capital stock of a TenFold subsidiary to be formed during 1999 from which
TenFold intends to operate its insurance business, at a per share exercise
price equal to the fair market value, at the time of grant of such subsidiary's
common stock, as determined by TenFold's board. Such option shall vest over
five years and have a vesting commencement date of July 20, 1998.

Option Grants in Last Fiscal Year. The following table provides summary
information regarding stock options granted to the named officers during the
fiscal year ended December 31, 1998. TenFold did not grant any stock options to
Messrs. Kennedy, Conroy, Mella and Hughes during the fiscal year ended December
31, 1998.

<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------
Potential Realizable
Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Options Price Appreciation
Underlying Granted to Exercise or for Option Term
Options Employees in Base Price Expiration ---------------------
Name Granted Fiscal Year ($/Share) Date 5% 10%
- ---- ---------- ------------- ----------- ---------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Bernard C. Mazon........ 150,000 3.69% $4.49 7/20/08 $ 423,000 $ 1,073,000
</TABLE>

Mr. Mazon received the individual grant described above under TenFold's 1993
Flexible Stock Incentive Plan. Mr. Mazon's stock option vests at the rate of
20% of the shares issuable upon exercise of such option on the first
anniversary of the vesting commencement date and on each annual anniversary
thereafter until fully vested. See "Stock Plans--1993 Flexible Stock Incentive
Plan" for additional information regarding the terms and conditions of TenFold
stock options. Mr. Mazon's option grant as a percent of total options granted
to employees in fiscal year 1998 is based on a total of 4,070,000 options
granted to employees, consultants, and directors during the

55
<PAGE>

fiscal year ended December 31, 1998. The exercise price per share of Mr.
Mazon's stock option is equal to the fair value of the common stock on the date
of grant as determined by the TenFold board of directors based upon such
factors as the purchase prices paid by investors for shares of TenFold's
preferred stock, independent appraisals, the absence of a trading market for
TenFold's securities, and TenFold's financial outlook and results of
operations. See Note 8 of Notes to Consolidated Financial Statements for
additional information regarding TenFold's capital stock. The 5% and 10%
assumed annual rates of compounded stock price appreciation for Mr. Mazon's
stock option set forth above are mandated by the rules of the Securities
Exchange Commission. There can be no assurance that the actual stock price
appreciation over the ten-year option term will be at the assumed 5% and 10%
levels or at any other defined level. Unless the market price of the common
stock appreciates over the option term, no value will be realized from Mr.
Mazon's stock option grant. The potential realizable value set forth above is
calculated by assuming that the stock price on the date of grant appreciates at
the indicated rate for the entire term of the option and that the option is
exercised at the exercise price and sold on the last day at the appreciated
price.

Fiscal Year-End Option Values. The following table provides summary
information concerning the shares of common stock represented by outstanding
stock options held by each of the named officers as of December 31, 1998. Mr.
Kennedy had no outstanding stock options as of December 31, 1998.

<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
December 31, 1998 at December 31, 1998
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
William M. Conroy........... 72,000 216,000 $1,159,920 $3,479,760
Bernard C. Mazon............ -- 150,000 -- 1,876,500
Glen D. Mella............... -- 80,000 -- 1,342,400
Robert P. Hughes............ -- 80,000 -- 1,358,400
</TABLE>

There was no public trading market for TenFold's common stock as of December
31, 1998. Accordingly, the value of unexercised in-the-money options as of such
date was calculated on the basis of the initial public offering price of $17.00
per share.

Employment Agreements

None of the named officers, other than Mr. Kennedy, has an employment
agreement with TenFold.

In September 1996, TenFold and Mr. Kennedy entered into an employment
agreement providing for Mr. Kennedy's employment as President and Chief
Executive Officer of TenFold for a period of eight years, subject to the right
of either party to terminate the agreement with or without cause upon 30 days'
prior written notice. The agreement provides for an annual base salary of
$168,000, subject to increase in the discretion of the TenFold board of
directors, and provides that Mr. Kennedy shall be entitled to up to six months'
severance pay in the event that he is terminated without cause. The agreement
includes a non-competition agreement which provides that, for a period of six
months after Mr. Kennedy's termination of employment, he will not compete with
TenFold or solicit its customers or employees.

Stock Plans

1999 Stock Plan. TenFold's 1999 Stock Plan was adopted by the board of
directors in March 1999 and was approved by the stockholders in March 1999. A
total of 6,500,000 shares of common stock has been reserved for issuance under
the 1999 stock plan, plus an automatic annual increase on the first day of
TenFold's fiscal years beginning in 2000, 2001, 2002, 2003, and 2004. This
automatic annual increase will be equal to the lesser of 1,000,000 shares or 3%
of TenFold's

56
<PAGE>

outstanding common stock on the last day of the immediately preceding fiscal
year, or such lesser number of shares as the board of directors determines. The
1999 stock plan becomes effective upon the effective date of this prospectus.
As of the effective date of this prospectus, no shares of common stock or
options to purchase common stock have been issued under the plan. Unless
terminated earlier, the 1999 stock plan will terminate in March 2009.

The purposes of the 1999 stock plan are to attract and retain the best
available personnel, to provide additional incentives to TenFold's employees
and consultants, and to promote the success of TenFold's business. The 1999
stock plan provides for the granting to employees, including officers and
directors, of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, and for the granting to employees
and consultants, including nonemployee directors, of nonstatutory stock options
and stock purchase rights. If an optionee would have the right in any calendar
year to exercise, for the first time, one or more incentive stock options for
shares having a total fair market value under all plans of TenFold in excess of
$100,000, any such excess options shall be treated as nonstatutory stock
options. In calculating the $100,000 threshold, the fair market value of the
underlying shares is determined as of the grant date of each option. TenFold
has historically granted only nonstatutory stock options rather than incentive
stock options.

The 1999 stock plan may be administered by the board of directors or a
committee of the Board. The 1999 stock plan's current plan administrator is the
compensation committee. The plan administrator determines the terms of options
and stock purchase rights granted under the 1999 stock plan, including the
number of shares subject to an option or purchase right, the exercise or
purchase price, and the term and exercisability of options. No individual
employee may receive option grants or stock purchase rights under the 1999
stock plan which would allow the employee to purchase more than 1,000,000
shares of common stock during any single fiscal year. The exercise price of all
incentive stock options granted under the 1999 stock plan must at least equal
the fair market value of the common stock of TenFold on the date of grant. The
exercise price of any incentive stock option granted to an optionee who owns
stock representing more than 10% of the voting power of the outstanding capital
stock of TenFold must equal at least 110% of the fair market value of the
common stock on the date of grant. The exercise price of any nonstatutory stock
option and the purchase price of any stock purchase right granted to TenFold's
named officers will generally equal at least 100% of the fair market value of
the common stock on the date of grant. Payment of the option exercise or stock
purchase price may be made in cash or other consideration as determined by the
plan administrator.

The plan administrator determines the term of all options, which may not
exceed 10 years, or 5 years in the case of an incentive stock option granted to
a 10% stockholder. No option may be transferred by the optionee other than by
will or the laws of descent or distribution, except that the plan administrator
has limited discretion to grant nonstatutory stock options that may be
transferred to affiliates and other entities or persons without consideration.
Generally, each option may be exercised during the lifetime of the optionee
only by such optionee. The plan administrator determines when options vest and
become exercisable. TenFold currently expects that options granted under the
1999 stock plan generally will vest at the rate of 20% of the total number of
shares subject to the options each year for five years following the date of
grant.

Stock issued upon exercise of stock purchase rights granted under the 1999
stock plan will generally be subject to a repurchase right exercisable by
TenFold upon termination of the holder's employment or consulting relationship
with TenFold for any reason, including death or disability.

In the event of the sale of all or substantially all of the assets of
TenFold, or the merger or consolidation of TenFold with or into another
corporation, outstanding options under the 1999 stock plan shall be assumed or
equivalent options substituted by the successor corporation, unless the
successor corporation does not agree to such assumption or substitution. In the
event the successor corporation does not so agree, the vesting of outstanding
options will accelerate so that the options will be fully exercisable and will
terminate if not exercised, and any repurchase rights in favor of

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<PAGE>

TenFold applicable to stock issued under the 1999 stock plan will lapse in
their entirety, in each case prior to consummation of the transaction. The
board of directors has the authority to amend or terminate the 1999 stock plan
as long as such action does not materially and adversely affect any outstanding
option and so long as stockholder approval for any amendments to the 1999 stock
plan shall be obtained if required by applicable law.

1993 Flexible Stock Incentive Plan. TenFold's 1993 Flexible Stock Incentive
Plan was adopted by the board of directors and approved by TenFold's
stockholders in February 1993. 10,000,000 shares of common stock are reserved
for issuance under the 1993 stock plan. The 1993 stock plan is administered by
the board of directors and, with respect to option grants to purchase up to
10,000 shares to any one employee, by a committee of the board. The 1993 stock
plan provides for the issuance of incentive stock options to employees,
including officers and employee directors, and of nonstatutory stock options,
stock purchase rights, stock bonus awards, and stock appreciation rights to
employees, including officers and directors, consultants and non-employee
directors.

As of March 31, 1999, options to purchase 2,084,500 shares of common stock
with a weighted average exercise price of $0.35 had been exercised, options to
purchase a total of 7,065,000 shares at a weighted average exercise price of
$3.14 per share were outstanding, and 850,500 shares remained available for
future grant. Unless terminated earlier, the 1993 stock plan will terminate in
February 2003. To date, TenFold has not issued any stock bonus or stock
appreciation rights under the 1993 stock plan.

The terms of options and stock purchase rights issued under the 1993 stock
plan are generally the same as those that may be issued under the 1999 stock
plan, except with respect to the following features. The 1993 stock plan does
not impose an annual limitation on the number of shares of stock subject to
options and stock purchase rights which may be issued to any individual
employee during a fiscal year. The 1993 stock plan does not allow for the
granting of nonstatutory stock options with any transferability rights. In
addition, stockholder approval must be sought with respect to any amendments to
the 1993 stock plan involving an increase in the maximum number of shares that
may be issued upon exercise of incentive stock options granted, or to change
the class of persons eligible to receive incentive stock options under the
plan.

Generally, upon a sale of all or substantially all of TenFold's assets in a
liquidation or dissolution, or a merger or consolidation of TenFold with or
into another corporation, all outstanding awards under the 1993 stock plan
shall vest and become exercisable in their entirety and, with respect to any
shares of stock subject to a right of repurchase in favor of TenFold, such
right shall lapse in its entirety. However, if the successor corporation
assumes such awards, no change will occur with respect to vesting or repurchase
rights applicable to awards under the plan.

1999 Employee Stock Purchase Plan. TenFold's 1999 Employee Stock Purchase
Plan was adopted by the board of directors in March 1999 and was approved by
the stockholders in March 1999. A total of 1,000,000 shares of common stock has
been reserved for issuance under the purchase plan. In addition, the number of
shares reserved for issuance under the purchase plan automatically increases on
the first day of each of TenFold's fiscal years beginning in 2000, 2001, 2002,
2003 and 2004 equal to the lesser of 300,000 shares, 0.75% of TenFold's
outstanding common stock on the last day of the immediately preceding fiscal
year, or such lesser number of shares as the board of directors shall
determine. The purchase plan becomes effective upon the date of this prospectus
and, unless terminated earlier by the board of directors, shall terminate
twenty years from such date.

The purchase plan, which is intended to qualify under Section 423 of the
Internal Revenue Code, will be implemented in two six-month offering periods
each year, with new offering periods (other than the first offering period)
commencing on February 1 and August 1 of each year. The initial offering period
will commence on the date of this offering and end on January 31, 2000. At the
end of each six-month offering period an automatic purchase will be made for
participants. The purchase plan will be administered by the board of directors
or by a committee appointed by the board of

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<PAGE>

directors. Employees (including officers and employee directors) of TenFold, or
of any majority-owned subsidiary designated by the board, are eligible to
participate in the purchase plan if they are employed by TenFold or any such
subsidiary for at least 20 hours per week and more than five months per year.
The purchase plan permits eligible employees to purchase common stock through
payroll deductions, up to 10% of an employee's compensation, at a price equal
to 85% of the lower of the fair market value of the common stock at the
beginning of the offering period or at the end of such period. The board of
directors shall have the discretion to increase, prior to the beginning of an
offering period, the percentage of participants' compensation that may be
withheld through the purchase plan, provided that such percentage may not
exceed 20%. Employees may end their participation in the purchase plan at any
time during an offering period, and participation ends automatically on
termination of employment.

No employee may purchase more than 3,000 shares of common stock under the
purchase plan in any single offering period. No employee may purchase shares in
an offering period if the purchase would cause such employee to own stock
and/or hold outstanding stock options equal to or in excess of 5% of the total
voting power of all classes of TenFold stock. In addition, no employee shall be
granted an option under the purchase plan if the option would permit an
employee to purchase stock under all employee stock purchase plans of TenFold
at a rate that exceeds $25,000 of fair market value of the stock for each
calendar year in which the option is outstanding.

The purchase plan provides that in the event of a merger or consolidation of
TenFold with or into another corporation or a sale of all or substantially all
of TenFold's assets, each right to purchase stock under the purchase plan will
be assumed or an equivalent right substituted by the successor corporation,
unless the successor corporation does not agree to assume or substitute
outstanding rights, in which case the offering period then in progress shall be
shortened so that employees' rights to purchase stock under the purchase plan
are exercised prior to the transaction. The board of directors has the power to
amend or terminate the purchase plan and to change or terminate offering
periods as long as such action does not adversely affect any outstanding rights
to purchase stock thereunder, provided however that the board of directors may
amend or terminate the Plan or an offering period even if it would adversely
affect outstanding options in order to avoid TenFold's incurring adverse
accounting charges.

401(k) Retirement Plan

Effective January 1996, TenFold established a 401(k) defined contribution
retirement plan covering all eligible employees who are employed by TenFold on
applicable plan entry dates, which are the first day of each calendar quarter.
All employees except those who are non-resident alien employees with no U.S.-
source income, or who have not reached at least 21 years of age are eligible to
participate as of the first plan entry date following their date of hire. The
401(k) Plan provides for voluntary compensation deferrals between 1% and 15% of
annual eligible compensation, subject to a maximum limit allowed under the
Internal Revenue Code, which is $10,000 for 1999. Each pay period, TenFold
makes a matching contribution to each participant's account equal to 20% of the
first 6% of that participant's compensation deferrals for that pay period, up
to a maximum of $2,000 per participant per year. TenFold's matching
contributions vest according to a graduated vesting schedule over three years,
except in the case of death, disability, or reaching age 65 while employed, in
which instances such contributions are fully vested. In addition, TenFold may
make additional discretionary contributions to the accounts of plan
participants at the end of each plan year, which are subject to the same
vesting rules as matching contributions. Participant compensation deferrals and
rollover contributions accepted by the 401(k) Plan are at all times fully
vested. The trustee under the 401(k) Plan, at the direction of each
participant, invests the assets of the 401(k) Plan in any of a number of
investment options allowable under the standardized prototype plan.
Participants are eligible for a distribution from the 401(k) Plan upon reaching
age 65 (normal retirement), death, disability, or separation from service with
TenFold, in the form of a lump sum payment or installments.

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<PAGE>

CERTAIN TRANSACTIONS

On October 31, 1996, TenFold sold 4,530,104 shares of common stock to Gary
D. Kennedy, President, Chief Executive Officer and director, for a total
purchase price of $1,000,000 under a restricted stock purchase agreement
entered into in connection with an employment agreement between TenFold and Mr.
Kennedy dated September 1, 1996. Of the total shares sold, 3,397,578 are
subject to a repurchase right in favor of TenFold that lapses ratably over a
seven and one-half year period beginning August 31, 1996. As of March 31,1999,
2,491,558 shares are subject to the repurchase right. Upon the closing of this
offering, 1,132,527 shares will be released from the repurchase right.
Furthermore, all of Mr. Kennedy's shares shall be released from the repurchase
right in the event of a change of control of TenFold, including an acquisition
of TenFold by merger or the sale of all or substantially all of the assets of
TenFold. For a description of Mr. Kennedy's employment agreement, see
"Management--Employment Agreements".

On March 4, 1997, TenFold sold The Indus Group, Inc. (the predecessor to
Indus International, Inc.) 1,460,399 shares of Series A preferred stock and
entered into a software license agreement with The Indus Group. On the same
date, Jeffrey L. Walker, TenFold's Chairman, Executive Vice President and Chief
Technology Officer, and the Walker Children's Trust each sold The Indus Group
730,200 shares of common stock. In connection with these transactions, TenFold
granted The Indus Group an option to purchase one share of Series A preferred
stock in exchange for each share of common stock that The Indus Group purchased
from either Mr. Walker or the Walker Children's Trust. The Indus Group paid a
total of $2,497,284 for the shares of common stock it purchased from Mr. Walker
and the Walker Children's Trust, and paid TenFold a total of $5,500,000 for the
shares of Series A preferred stock it purchased from TenFold, the option to
exchange the shares of common stock for shares of Series A preferred stock, and
for software license rights it acquired. On November 17, 1997, The Indus Group
exercised its option and exchanged the common stock it had purchased from
Mr. Walker and the Walker Children's Trust for shares of Series A preferred
stock. Each share of Series A preferred stock is convertible into one share of
common stock and will automatically convert into common stock upon the closing
of this offering. Prior to this transaction, the Indus Group did not have a
relationship with TenFold. As a result, TenFold believes that the terms of this
transaction with the Indus Group were determined on an arms' length basis.

On October 30, 1997, TenFold granted William M. Conroy, Executive Vice
President and Chief Operating Officer, an option to purchase 360,000 shares of
common stock. Twenty percent of the total number of shares issued or issuable
upon the exercise of Mr. Conroy's option vested on each of November 10, 1997
and 1998. Twenty percent of the total number of shares issued or issuable upon
the exercise of Mr. Conroy's option shall vest on each of November 10, 1999,
2000, and 2001. If Mr. Conroy is involuntarily terminated by TenFold, other
than for cause, then 50% of the then-unvested shares subject to the option
shall become immediately exercisable. On February 5, 1998, Mr. Conroy exercised
72,000 of these options at an exercise price of $0.89 per share. On April 14,
1999, TenFold granted Mr. Conroy an option to purchase 240,000 additional
shares of common stock at a per share exercise price of $12.60. This option
vests over five years beginning April 14, 1999.

On November 24, 1997, TenFold sold Winter Harbor, LLC 3,340,330 shares of
TenFold's Series B preferred stock at a price of $2.10 per share. Each share of
Series B preferred stock is convertible into one share of common stock and will
automatically convert into common stock upon the closing of this offering.
Ralph W. Hardy, Jr., a director of TenFold, is a principal of Winter Harbor,
LLC. In March 1999, Winter Harbor, LLC transferred all of its shares of Series
B preferred stock to First Media TF Holdings, LLC, an affiliate of Winter
Harbor, LLC.

On February 2, 1998, Adam Slovik, Senior Vice President of Worldwide
Applications Development, exercised options to purchase 100,000 shares and
150,000 shares of common stock

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<PAGE>

at exercise prices of $0.02 per share and $0.22 per share, respectively. In
connection with these option exercises, TenFold loaned Mr. Slovik $119,919.
This full-recourse loan is due December 12, 2001, bears interest at an annual
rate of 5.69%, and is secured by the related shares. Also in connection with
his February 1998 option exercise, in March 1999, TenFold loaned Mr. Slovik
$50,000. The second full-recourse loan is due December 13, 2001, bears
interest at an annual rate of 4.99%, and is secured by the related shares. On
February 25, 1999, Mr. Slovik exercised options to purchase 20,000 shares of
common stock at an exercise price of $2.50 per share. In connection with Mr.
Slovik's February 1999 option exercise, TenFold loaned Mr. Slovik $70,523.
This full recourse loan is due August 25, 2000, bears interest at an annual
rate of 4.62%, and is secured by the related shares.

On July 22, 1998, TenFold granted Bernard C. Mazon, President of TenFold
Insurance Systems Group, an option to purchase 150,000 shares of common stock,
subject to vesting requirements. Pursuant to a letter agreement between
TenFold and Mr. Mazon, TenFold has agreed that it will grant to Mr. Mazon an
option to acquire three percent of the outstanding shares of capital stock of
a TenFold subsidiary to be formed during 1999 from which TenFold intends to
operate its insurance business, at a per share exercise price equal to the
fair market value, at the time of grant, of such subsidiary's common stock, as
determined by TenFold's board. This option vests over five years beginning
July 20, 1998. See "Management--Executive Compensation" for additional
information regarding Mr. Mazon's stock option grants.

On February 22, 1999, Robert P. Hughes, Senior Vice President and Chief
Financial Officer, exercised options to purchase 40,000 shares of common stock
at an exercise price of $0.02 per share. In connection with such option
exercise, TenFold loaned Mr. Hughes $75,024. This full recourse loan is due
August 22, 2000, bears interest at an annual rate of 4.62%, and is secured by
the related shares.

On April 14, 1999, TenFold granted Glen D. Mella, Senior Vice President of
Marketing, an option to purchase 50,000 shares of common stock at a per share
exercise price of $12.60. This option vests over five years beginning April
14, 1999.

The Company has entered into indemnification agreements with its directors
and Robert P. Hughes, Senior Vice President and Chief Financial Officer,
containing provisions which may require TenFold, among other things, to
indemnify its directors and the executive officer against liabilities that may
arise by reason of their status or service as officers or directors (other
than liabilities arising from willful misconduct of a culpable nature) and to
advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified. See "Management--Limitation of Liability
and Indemnification Matters" for additional information regarding TenFold's
indemnification obligations.

Voting Agreements

TenFold and Mssrs. Walker and Kennedy are parties to a voting agreement
dated September 1, 1996, as amended on March 4, 1997, under which Mr. Kennedy
is given the power to vote that number of shares of common stock held of
record by Mr. Walker which would permit Mr. Kennedy to vote 50% of the
aggregate number of shares of common stock held by Mr. Walker and Mr. Kennedy
on all matters on which the holders of TenFold common stock are entitled to
vote. Under the voting agreement, Mr. Kennedy retains such voting rights with
respect to shares held by Mr. Walker for so long as Mr. Kennedy is employed by
TenFold as its President and Chief Executive Officer.

TenFold, Indus International, Inc., First Media TF Holdings, LLC and
Messrs. Walker and Kennedy are parties to a voting agreement dated November
24, 1997 which provides that, with respect to proposed change of control
transactions of TenFold, Indus and First Media will each vote all shares of
preferred stock then held by them in the same manner and in the same
percentage as the holders of TenFold common stock, in the aggregate, vote
their shares on such matter.

Both voting agreements described above shall terminate by their respective
terms upon the closing of this offering.

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<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth (1) information regarding the beneficial
ownership of TenFold's common stock as of March 31, 1999 after giving pro forma
effect to the automatic conversion of all outstanding preferred stock and
redeemable common stock into common stock upon completion of this offering and
(2) such pro forma ownership information as adjusted to reflect the sale of
TenFold common stock offered by this prospectus, in each case reflecting the
common stock beneficially held by the following individuals or groups:

. each of TenFold's directors and named officers;

. all directors and executive officers as a group; and

. each person who is known by TenFold to own beneficially more than 5% of
TenFold's common stock, including the selling stockholder.

Unless otherwise indicated, the address of each of the individuals listed
below is the address of TenFold's principal executive offices, which is 180
West Election Road, Draper, Utah 84020.

The information in the table assumes no exercise of the underwriters' over-
allotment option. In the event the underwriters exercise their over-allotment
option in full, Jeffrey L. and Cassandra M. Walker will sell 100,000 shares,
the Walker Children's Trust will sell 100,000 shares, Indus International, Inc.
will sell 270,799 shares, and the Company will sell 234,201 shares. Except as
provided under applicable community property laws or as indicated in the
footnotes to this table, TenFold believes that each stockholder identified in
the table possesses sole voting and investment power with respect to all shares
of common stock shown as beneficially owned by such stockholder. The percentage
ownership listed for each stockholder is based on 31,825,333 shares of common
stock outstanding as of March 31, 1999 together with applicable options for
such stockholder. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission, and includes voting and
investment power with respect to the shares. Shares of common stock subject to
options under the 1993 stock plan that are exercisable within 60 days of March
31, 1999 are deemed outstanding for the purpose of computing the percentage
ownership of the person holding such options but are not deemed outstanding for
the purpose of computing the percentage ownership of any other person.

<TABLE>
<CAPTION>
Shares Shares
Beneficially Beneficially
Owned Number Owned
Prior to Offering of After Offering
------------------ Shares ------------------
Name and Address Number Percent Offered Number Percent
- ---------------- ---------- ------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
Jeffrey L. & Cassandra M. 14,229,800 44.7% -- 14,229,800 42.0%
Walker.......................
Gary D. Kennedy(1)............ 4,442,174 14.0 -- 4,442,174 13.1
Walker Children's Trust(2).... 4,269,800 13.4 -- 4,269,800 12.6
First Media TF Holdings, 3,340,330 10.5 -- 3,340,330 9.9
LLC(3).......................
Ralph W. Hardy, Jr
11400 Skipwith Lane
Potomac, MD 20854
Indus International, Inc.(4).. 2,920,799 9.2 2,650,000 270,799 *
Robert W. Felton
60 Spear Street
San Francisco, CA 94105
Robert P. Hughes.............. 160,000 * -- 160,000 *
William M. Conroy(5).......... 144,000 * -- 144,000 *
Glen D. Mella................. 40,000 * -- 40,000 *
Kay R. Whitmore(6)............ 15,000 * -- 15,000 *
Bernard C. Mazon.............. -- -- -- -- --
Scott E. Calder............... -- -- -- -- --
H. Raymond Bingham............ -- -- -- -- --
All Directors and Executive
Officers as a Group (12 per-
sons)(7)..................... 25,562,103 80.1% 2,650,000 22,912,103 67.6%
</TABLE>

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<PAGE>

- --------
* Less than one percent of the outstanding shares of common stock.
(1) Includes 40,080 shares owned by Star Valley LLC, a limited liability
company in which Mr. Kennedy is a co-managing member and as such exercises
shared voting and investment power with respect to the shares. Mr. Kennedy
disclaims beneficial ownership of the shares held by Star Valley LLC.
(2) The Walker Children's Trust is an irrevocable trust in which Mr. Walker,
Mr. Walker's wife, and Paul M. Ginsburg are co-trustees. Mr. Ginsburg has
sole voting and investment power with respect to shares of TenFold held by
the trust. These shares include 300,000 shares distributed by the trust as
of May 1, 1999 to beneficiaries of the trust.
(3) Mr. Hardy, a member of TenFold's board of directors, is a principal of
First Media TF Holdings, LLC, a wholly owned subsidiary of First Media
Corporation. Mr. Hardy is an officer, director, and stockholder of First
Media Corporation. Mr. Hardy disclaims beneficial ownership of the shares
held by First Media TF Holdings, LLC except to the extent of his pecuniary
interest in such shares.
(4) Mr. Felton, a member of TenFold's board of directors, is a member of the
board of directors of Indus International, Inc. Mr. Felton disclaims
beneficial ownership of the shares held by Indus International, Inc. except
to the extent of his pecuniary interest in such shares.
(5) Includes 72,000 shares issuable upon exercise of vested options.
(6) Includes 5,000 shares issuable upon exercise of vested options.
(7) Includes 40,080 shares held by an entity affiliated with Mr. Kennedy as
described in Note (1) above and 77,000 shares issuable upon exercise of
vested options. Does not include the 4,269,800 shares held by the Walker
Children's Trust.

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<PAGE>

DESCRIPTION OF CAPITAL STOCK

Upon the completion of this offering, the authorized capital stock of
TenFold will consist of 120,000,000 shares of common stock, $0.001 par value
per share, and 2,000,000 shares of undesignated preferred stock, $0.001 par
value per share. The following description of capital stock sets forth the
material provisions of the capital stock of TenFold.

Common Stock

As of March 31, 1999, there were 31,825,333 shares of common stock
outstanding (as adjusted to reflect the conversion of all outstanding shares of
Series A preferred stock, Series B preferred stock, and redeemable common stock
into common stock upon the completion of this offering), held of record by
approximately 130 stockholders, and options outstanding to purchase a total of
7,065,000 shares of common stock. After giving effect to the sale of the shares
of common stock to the public offered by this prospectus, there will be
33,875,333 shares of common stock outstanding, assuming no exercise of the
underwriter's over-allotment option and no exercise of options outstanding
under TenFold's stock plans after March 31, 1999.

The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferential rights with respect to any outstanding preferred stock, holders of
common stock are entitled to receive ratably such dividends as may be declared
by the board of directors out of funds legally available for such purpose. In
the event of liquidation, dissolution or winding up of TenFold, the holders of
common stock are entitled to share ratably in all assets remaining after
payment of liabilities and satisfaction of preferential rights of any
outstanding preferred stock. The common stock has no preemptive or conversion
rights or other subscription rights. The outstanding shares of common stock
are, and the shares of common stock to be issued upon completion of this
offering will be, fully paid and non-assessable.

Preferred Stock

Upon the closing of this offering, all outstanding shares of preferred stock
will be converted into 6,261,129 shares of common stock. Thereafter, the board
of directors is authorized to issue 2,000,000 shares of preferred stock in one
or more series and to fix the rights, preferences, privileges and restrictions
of the preferred stock, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the designation
of such series, without further vote or action by the stockholders.

The issuance of preferred stock may have the effect of delaying, deferring
or preventing a change in control of TenFold without further action by the
stockholders. The issuance of preferred stock with voting and conversion rights
may adversely affect the voting power of the holders of common stock. This
issuance could have the effect of decreasing the market price of the common
stock. As of the closing of this offering, no shares of preferred stock will be
outstanding. TenFold currently has no plans to issue any shares of preferred
stock.

Registration Rights

Following this offering, the holders of 26,952,903 shares of common stock
will be entitled to registration under the Securities Act with respect to such
shares. Under the applicable agreement, at any time after six months following
the effective date of this prospectus, upon the request of the holders of a
majority of the shares of common stock entitled to registration rights, TenFold
must use its best efforts to effect, within 60 days of the receipt of such
request, the registration for public resale under the Securities Act of all of
the then-outstanding shares of common stock entitled to registration rights. In
addition, the holders of not less than 25% of the shares of common stock
entitled to

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<PAGE>

registration rights may require TenFold, not more than twice in any twelve-
month period, to register all or a portion of such shares on Form S-3 when use
of such form becomes available to TenFold, as long as the proposed total
selling price of the shares to be registered under the applicable Form S-3, net
of any underwriters' discounts or commissions, is at least $1,000,000. TenFold
must pay all registration expenses, other than underwriting discounts and
commissions, relating to the shares entitled to registration rights.

Antitakeover Effect of Provisions in Our Certificate of Incorporation and
Bylaws

Provisions of Delaware General Corporation Law and TenFold's certificate of
incorporation could make more difficult the acquisition of TenFold by means of
a tender offer, a proxy contest or otherwise and the removal of incumbent
officers and directors. These provisions are expected to discourage coercive
takeover practices and inadequate takeover bids and to encourage persons
seeking to acquire control of TenFold to first negotiate with the board of
directors of TenFold. TenFold believes that the benefits of increased
protection of its board members' potential ability to negotiate with the
proponent of an unfriendly or unsolicited proposal to acquire or restructure
TenFold outweigh the disadvantages of discouraging such proposals because,
among other things, negotiation of such proposals could result in an
improvement of their terms.

Approval for Business Combinations. TenFold will be subject to the
provisions of Section 203 of the Delaware General Corporation Law. In general,
the statute prohibits a publicly-held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date that the person became an interested stockholder unless
the business combination or the transaction in which the person became an
interested stockholder is approved in a prescribed manner. Generally, a
"business combination" includes a merger, asset or stock sale, or other
transaction resulting in a financial benefit to the stockholder. Generally, an
"interested stockholder" is a person who, together with affiliates and
associates, either owns, or within three years prior, did own, 15% or more of
the corporation's voting stock. These provisions may have the effect of
delaying, deferring or preventing a change in control of TenFold without
further action by TenFold's stockholders.

Election and Removal of Directors. Commencing upon the closing of this
offering, the certificate of incorporation of TenFold will provide for the
board of directors to be divided into two classes, with staggered two-year
terms. As a result, only one class of directors will be elected at each annual
meeting of stockholders of TenFold, with the other class continuing for the
remainder of its respective two-year term. Upon the closing of this offering,
stockholders shall not have cumulative voting rights and TenFold's stockholders
representing a majority of the shares of common stock outstanding will be able
to elect all of the directors. The classification of the board of directors and
elimination of cumulative voting make it more difficult for TenFold's existing
stockholders to replace the board of directors as well as for another party to
obtain control of TenFold by replacing the board of directors. Since the board
of directors has the power to retain and discharge officers of TenFold, these
provisions could also make it more difficult for existing stockholders or
another party to effect a change in management.

Restrictions on Stockholder Actions and Meetings. TenFold's certificate of
incorporation will provide that, effective upon the closing of this offering,
stockholder action can be taken only at an annual or special meeting of
stockholders and may not be taken by written consent. The bylaws will provide
that special meetings of stockholders can be called only by the board of
directors, the chairman of the board, if any, and the President of TenFold.
Moreover, the business permitted to be conducted at any special meeting of
stockholders is limited to the business brought before the meeting by the board
of directors, the chairman of the board, if any, or the President of TenFold.
The bylaws set forth an advance notice procedure with regard to the nomination,
other than by or at the direction of the board of directors, of candidates for
election as directors and with regard to business to be brought before an
annual meeting of stockholders of TenFold.

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<PAGE>

TenFold's certificate of incorporation will contain a provision requiring
the affirmative vote of the holders of at least two-thirds of the voting stock
of TenFold to amend the foregoing provisions of the certificate of
incorporation or bylaws.

Transfer Agent and Registrar

The transfer agent and registrar for TenFold common stock is First Chicago
Trust Company of New York. The transfer agent's address and telephone number is
525 Washington Boulevard, Jersey City, New Jersey 07310, (201) 222-5661.

Nasdaq Stock Market Listing

TenFold's common stock has been approved for quotation on The Nasdaq Stock
Market under the symbol "TENF".

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<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no market for the common stock of
TenFold. Future sales of substantial amounts of common stock in the public
market could adversely affect prevailing market prices. Furthermore, since only
a limited number of shares will be available for sale shortly after this
offering because of contractual and legal restrictions on resale, as described
below, sales of substantial amounts of common stock of TenFold in the public
market after the restrictions lapse could adversely affect the prevailing
market price and the ability of TenFold to raise equity capital in the future.

Upon completion of this offering, TenFold will have outstanding 33,875,333
shares of common stock. Of the 4,700,000 shares sold in this offering,
approximately 3,525,000 shares plus any shares issued upon exercise of the
underwriters' over-allotment option, will be freely tradable without
restriction under the Securities Act, unless purchased by "affiliates" of
TenFold as that term is defined in Rule 144 under the Securities Act.
Approximately 1,175,000 of the remaining shares sold in this offering will be
subject to 180-day lock-up agreements.

The 29,175,333 outstanding shares of common stock not sold in this offering
are "restricted securities" within the meaning of Rule 144 under the Securities
Act. Restricted shares may be sold in the public market only if registered or
if they qualify for an exemption from registration under Rules 144, 144(k) or
701 promulgated under the Securities Act, which are summarized below. Sales of
the Restricted Shares in the public market, or the availability of such shares
for sale, could adversely affect the market price of the common stock.

The directors, officers, and stockholders of TenFold have entered into lock-
up agreements generally providing that they will not offer, sell, contract to
sell or grant any option to purchase or otherwise dispose of a total of
approximately 29,782,083 shares of common stock of TenFold or any securities
exercisable for or convertible into TenFold's common stock owned by them prior
to this offering for a period of 180 days after the effective date of the
registration statement filed for this offering without the prior written
consent of a designated representative of the underwriters. As a result of
these contractual restrictions, and despite possible earlier eligibility for
sale under the provisions of Rules 144, 144(k) and 701, shares subject to lock-
up agreements will not be saleable until such agreements expire or are waived
by the designated underwriters' representative. Taking into account the lock-up
agreements, and assuming the designated underwriters' representative does not
release stockholders from these agreements, the following shares will be
eligible for sale in the public market at the following times:

. beginning on the effective date of the registration statement,
approximately 3,525,000 shares sold in this offering that are not
subject to lock-up agreements and 62,160 additional shares will be
immediately available for sale in the public market;

. beginning 90 days after the effective date, 506,090 additional shares
will be eligible for sale under Rules 144 and 701;

. beginning 180 days after the effective date, approximately 29,382,083
additional shares will be eligible for sale under Rules 144 and 701; and

. after the date 180 days following the date of this prospectus, 400,000
additional shares will become eligible for sale under Rule 144 at
various times.

Shares eligible to be sold by affiliates under Rule 144 are subject to
volume restrictions as described below.

In general, under Rule 144 as currently in effect, a person, or persons
whose shares are aggregated, who has beneficially owned restricted shares for
at least one year would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of:

. one percent of the number of shares of common stock then outstanding,
which will equal approximately 338,753 shares immediately after this
offering; or

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<PAGE>

. the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale.

Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
TenFold. Under Rule 144(k), a person who is not deemed to have been an
affiliate of TenFold at any time during the three months preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least two
years, is entitled to sell such shares without complying with the manner of
sale, public information, volume limitation, or notice provisions of Rule 144.

Under Rule 701 as currently in effect, beginning 90 days after the effective
date, officers, directors, employees, consultants, and others who purchase
shares under a written compensatory plan or contract may be entitled to rely on
the resale provisions of Rule 701. Rule 701 permits affiliates of TenFold to
sell their Rule 701 shares under Rule 144 without complying with the holding
period requirements of Rule 144. Rule 701 further provides that non-affiliates
may sell such shares in reliance on Rule 144 without having to comply with the
holding period, public information, volume limitation, or notice provisions of
Rule 144. In addition, TenFold intends to file registration statements under
the Securities Act as promptly as possible after the effective date to register
shares to be issued under TenFold's employee benefit plans. As a result, any
options exercised under the 1993 stock plan, the 1999 stock plan, or any other
benefit plan after the effective date of the registration statement will also
be freely tradable in the public market, except that shares held by affiliates
will still be subject to the volume limitation, manner of sale, notice, and
public information requirements of Rule 144 unless otherwise resaleable under
Rule 701. As of March 31, 1999, there were outstanding options for the purchase
of 7,065,000 shares, of which 425,200 were exercisable as of that date. No
shares have been issued to date under TenFold's 1999 stock plan or TenFold's
purchase plan. See "Risk Factors--Future sales of our common stock may depress
our stock price", "Management--Stock Plans" and "Description of Capital Stock--
Registration Rights" for additional information regarding TenFold's capital
stock.

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LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for
TenFold by Venture Law Group, A Professional Corporation, Menlo Park,
California. Donald M. Keller, Jr., a director of Venture Law Group, is the
Secretary of TenFold. Certain legal matters will be passed upon for the
underwriters by Wilson Sonsini Goodrich & Rosati, Professional Corporation,
Palo Alto, California.

EXPERTS

The consolidated financial statements and schedule of TenFold Corporation
and subsidiary as of December 31, 1997 and 1998, and for each of the years in
the three-year period ended December 31, 1998, have been included herein and in
the registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common stock
offered in this offering. This prospectus does not contain all of the
information set forth in the registration statement and the exhibits and
schedules thereto. For further information with respect to TenFold and the
common stock offered in this offering, we refer you to the registration
statement and to the attached exhibits and schedules. With respect to each such
document filed as an exhibit to the registration statement, we refer you to the
exhibit for a more complete description of the matter involved.

You may inspect our registration statement and the attached exhibits and
schedules without charge at the public reference facilities maintained by the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the Commission located at Seven World
Trade Center, 13th Floor, New York, New York 10048, and the Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Please
call the Securities and Exchange Commission at 1-800-SEC-0330 for further
information about public reference rooms. You may obtain copies of all or any
part of our registration statement from the Securities and Exchange Commission
upon payment of prescribed fees. You may also inspect reports, proxy, and
information statements and other information regarding registrants that file
electronically with the Securities and Exchange Commission without charge at a
Web site maintained by the Securities and Exchange Commission at
http://www.sec.gov.

69
<PAGE>

TENFOLD CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Independent Auditors' Report............................................... F-2

Consolidated Balance Sheets as of December 31, 1997 and 1998, and March 31,
1999 (unaudited).......................................................... F-3

Consolidated Statements of Operations for the three years ended December
31, 1998, and the three months ended March 31, 1998 (unaudited) and 1999
(unaudited)............................................................... F-4

Consolidated Statements of Changes in Stockholders' Equity for the three
years ended December 31, 1998, and the three months ended March 31, 1999
(unaudited)............................................................... F-5

Consolidated Statements of Cash Flows for the three years ended December
31, 1998, and the three months ended March 31, 1998 (unaudited) and 1999
(unaudited)............................................................... F-6

Notes to Consolidated Financial Statements................................. F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors
TenFold Corporation

We have audited the consolidated financial statements of TenFold Corporation
and subsidiary as listed in the accompanying index. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of TenFold
Corporation and subsidiary as of December 31, 1997 and 1998, and the results of
their operations and their cash flows for each of the years in the three years
ended December 31, 1998, in conformity with generally accepted accounting
principles.

/s/ KPMG LLP

Salt Lake City, Utah
January 21,
1999, except as
to Note 13,
which is as of
April 22, 1999

F-2
<PAGE>

TENFOLD CORPORATION

CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

<TABLE>
<CAPTION>
December 31, Pro-forma
---------------- March 31, March 31,
1997 1998 1999 1999
------- ------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents........... $ 9,022 $15,373 $13,171 $13,171
Accounts receivable (net of
allowance for doubtful accounts of
$0 in 1997, $500 in 1998 and as of
March 31, 1999).................... 1,149 1,691 3,200 3,200
Unbilled accounts receivable........ -- 3,258 4,046 4,046
Due from stockholder................ -- 1,976 -- --
Prepaid expenses and other assets... 123 389 692 692
Income tax receivable............... 149 -- -- --
Deferred income taxes............... -- 536 536 536
Deferred costs...................... -- -- 107 107
------- ------- ------- -------
Total current assets................ 10,443 23,223 21,752 21,752
Property and equipment, net......... 1,569 6,157 6,458 6,458
Other assets........................ 32 186 185 185
------- ------- ------- -------
Total assets........................ $12,044 $29,566 $28,395 $28,395
======= ======= ======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable.................... $ 344 $ 941 $ 1,213 $ 1,213
Income taxes payable................ -- 498 94 94
Accrued liabilities................. 827 3,306 3,617 3,617
Deferred revenue.................... 1,750 5,505 3,020 3,020
Current installments of obligations
under capital leases............... -- 525 525 525
Current installments of notes
payable............................ -- 718 976 976
------- ------- ------- -------
Total current liabilities........... 2,921 11,493 9,445 9,445
Long-term liabilities:
Deferred income taxes............... -- 85 85 85
Obligations under capital leases,
excluding current installments..... -- 1,116 1,034 1,034
Notes payable, excluding current
installments....................... -- 1,593 1,874 1,874
------- ------- ------- -------
Total long-term liabilities......... -- 2,794 2,993 2,993
Redeemable preferred stock........... 8,640 9,555 9,803 --
Redeemable common stock.............. -- 1,976 1,976 --
Stockholders' equity:
Common stock, $0.001 par value:
Authorized: 43,800,000 shares;
issued and outstanding:
23,603,704 shares in 1997,
25,074,404 shares in 1998, and
25,364,204 shares as of March 31,
1999 (unaudited)
31,825,333 shares as of March 31,
1999 (unaudited pro forma)......... 24 25 25 32
Additional paid-in capital.......... 1,087 5,906 12,178 23,950
Notes receivable from stockholders.. -- (329) (678) (678)
Deferred compensation............... (217) (2,258) (7,856) (7,856)
Retained earnings (accumulated
deficit)........................... (412) 396 521 521
Accumulated other comprehensive
income (loss)...................... 1 8 (12) (12)
------- ------- ------- -------
Total stockholders' equity.......... 483 3,748 4,178 15,957
------- ------- ------- -------
Total liabilities and stockholders'
equity............................. $12,044 $29,566 $28,395 $28,395
======= ======= ======= =======
</TABLE>

See accompanying notes to consolidated financial statements

F-3
<PAGE>

TENFOLD CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)

<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
--------------------------- --------------------
1996 1997 1998 1998 1999
------- -------- -------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
License.................. $ 271 $ 5,244 $ 13,382 $ 1,259 $ 5,656
Services................. 2,744 8,879 26,785 3,940 10,371
------- -------- -------- --------- ---------
Total revenues......... 3,015 14,123 40,167 5,199 16,027
------- -------- -------- --------- ---------
Operating expenses:
Cost of revenues......... 370 4,661 14,529 2,176 6,246
Sales and marketing...... 87 2,765 11,070 1,442 4,736
Research and
development............. 2,289 4,739 9,690 1,807 3,401
General and
administrative.......... 396 1,364 2,882 471 820
Amortization of deferred
compensation............ -- 34 153 13 305
Other charge............. -- 1,449 -- -- --
------- -------- -------- --------- ---------
Total operating
expenses.............. 3,142 15,012 38,324 5,909 15,508
------- -------- -------- --------- ---------
Income (loss) from
operations................ (127) (889) 1,843 (710) 519

Other income (expense):
Interest income.......... 28 179 395 102 159
Interest expense......... -- -- (20) -- (71)
------- -------- -------- --------- ---------
Total other income..... 28 179 375 102 88
------- -------- -------- --------- ---------
Income (loss) before income
taxes..................... (99) (710) 2,218 (608) 607
Provision (benefit) for
income taxes.............. -- (110) 495 (207) 234
------- -------- -------- --------- ---------
Net income (loss).......... $ (99) $ (600) $ 1,723 $ (401) $ 373
======= ======== ======== ========= =========
Accretion of Series A and B
preferred stock........... -- (274) (915) (218) (248)
------- -------- -------- --------- ---------
Net income (loss)
applicable to common
stock..................... $ (99) $ (874) $ 808 $ (619) $ 125
======= ======== ======== ========= =========
Basic earnings (loss) per
common share.............. $ (0.00) $ (0.04) $ 0.04 $ (0.03) $ 0.01
======= ======== ======== ========= =========
Diluted earnings (loss) per
common share.............. $ (0.00) $ (0.04) $ 0.03 $ (0.03) $ 0.00
======= ======== ======== ========= =========
Weighted average common and
common equivalent shares
used to calculate earnings
(loss) per share:
Basic.................... 20,285 21,542 21,551 21,031 22,765
======= ======== ======== ========= =========
Diluted.................. 20,285 21,542 26,663 21,031 28,176
======= ======== ======== ========= =========
</TABLE>

See accompanying notes to consolidated financial statements

F-4
<PAGE>

TENFOLD CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except share data)

<TABLE>
<CAPTION>
Note Accumulated
Common Stock Additional Comprehensive Receivable Retained Other
------------------ Paid-in Income Deferred from Earnings/ (Accumulated Comprehensive
Shares Amount Capital (Loss) Compensation Stockholders Deficit) Income (Loss)
---------- ------ ---------- ------------- ------------ ------------ ---------------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1995............ 20,076,000 $20 $ 96 $ -- $ -- $ 287 $ --
---------- --- ------- ------- ----- ----- ----
Common stock
issued for
cash............ 4,530,104 5 996 -- -- -- --
Common stock
issued upon
exercise of
options......... 44,000 -- 1 -- -- -- --
Net loss........ -- -- -- $ [(99)] -- -- (99) --
-------
Comprehensive
loss............ -- -- -- $ [(99)] -- -- -- --
---------- --- ------- ======= ------- ----- ----- ----
Balance at
December 31,
1996............ 24,650,104 25 1,093 -- -- 188 --
---------- --- ------- ------- ----- ----- ----
Conversion of
Common Stock for
Series A
redeemable
convertible
preferred
stock........... (1,460,400) (1) -- -- -- -- --
Common stock
issued upon
exercise of
options......... 414,000 -- 17 -- -- -- --
Deferred
compensation
related to
grants of stock
options......... -- -- 251 (251) -- -- --
Amortization of
deferred
compensation.... -- -- -- 34 -- -- --
Accretion of
redeemable
convertible
preferred
stock........... -- -- (274) -- -- -- --
Net loss........ -- -- -- $ [(600)] -- -- (600) --
Foreign currency
translation
adjustments..... -- -- -- 1 -- -- -- 1
-------
Comprehensive
loss............ -- -- -- $ [(599)] -- -- -- --
---------- --- ------- ======= ------- ----- ----- ----
Balance at
December 31,
1997............ 23,603,704 24 1,087 (217) -- (412) 1
---------- --- ------- ------- ----- ----- ----
Common stock
issued upon
exercise of
options......... 1,260,700 1 326 -- -- -- --
Common stock
issued for
cash............ 210,000 -- 2,000 -- -- -- --
Notes receivable
from
stockholders'... -- -- -- -- (329) -- --
Deferred
compensation
related to
grants of stock
options......... -- -- 2,230 (2,230) -- -- --
Amortization of
deferred
compensation.... -- -- -- 153 -- -- --
Cancellation of
stock options... -- -- (36) 36 -- -- --
Accretion of
redeemable
convertible
preferred
stock........... -- -- -- -- -- (915) --
Tax benefit from
exercise of
stock options... -- -- 664 -- -- -- --
Tax charge
related to the
reallocation of
revenue to
equity.......... -- -- (365) -- -- -- --
Net income...... -- -- -- $[1,723] -- -- 1,723 --
Foreign currency
translation
adjustments..... -- -- -- 7 -- -- -- 7
-------
Comprehensive
income.......... -- -- -- $[1,730] -- -- -- --
---------- --- ------- ======= ------- ----- ----- ----
Balance at
December 31,
1998............ 25,074,404 25 5,906 (2,258) (329) 396 8
---------- --- ------- ------- ----- ----- ----
Common stock
issued upon
exercise of
options
(unaudited)..... 289,800 -- 369 -- -- -- --
Notes receivable
from
stockholders'
(unaudited)..... -- -- -- -- (349) -- --
Deferred
compensation
related to
grants of stock
options
(unaudited)..... -- -- 5,915 (5,915) -- -- --
Amortization of
deferred
compensation
(unaudited)..... -- -- -- 305 -- -- --
Cancellation of
stock options
(unaudited)..... -- -- (12) 12 -- -- --
Accretion of
redeemable
convertible
preferred stock
(unaudited)..... -- -- -- -- (248) --
Net income
(unaudited)..... -- -- -- $ [373] -- -- 373 --
Foreign currency
translation
adjustment
(unaudited)..... -- -- -- (20) -- -- -- (20)
-------
Comprehensive
income
(unaudited)..... -- -- -- $ [353] -- -- -- --
---------- --- ------- ======= ------- ----- ----- ----
Balance at March
31, 1999
(unaudited)..... 25,364,204 $25 $12,178 $(7,856) $(678) $ 521 $(12)
========== === ======= ======= ===== ===== ====
<CAPTION>
Total
Stockholders'
Equity
-------------
<S> <C>
Balance at
December 31,
1995............ $ 403
-------------
Common stock
issued for
cash............ 1,001
Common stock
issued upon
exercise of
options......... 1
Net loss........ (99)
Comprehensive
loss............ --
-------------
Balance at
December 31,
1996............ 1,306
-------------
Conversion of
Common Stock for
Series A
redeemable
convertible
preferred
stock........... (1)
Common stock
issued upon
exercise of
options......... 17
Deferred
compensation
related to
grants of stock
options......... --
Amortization of
deferred
compensation.... 34
Accretion of
redeemable
convertible
preferred
stock........... (274)
Net loss........ (600)
Foreign currency
translation
adjustments..... 1
Comprehensive
loss............ --
-------------
Balance at
December 31,
1997............ 483
-------------
Common stock
issued upon
exercise of
options......... 327
Common stock
issued for
cash............ 2,000
Notes receivable
from
stockholders'... (329)
Deferred
compensation
related to
grants of stock
options......... --
Amortization of
deferred
compensation.... 153
Cancellation of
stock options... --
Accretion of
redeemable
convertible
preferred
stock........... (915)
Tax benefit from
exercise of
stock options... 664
Tax charge
related to the
reallocation of
revenue to
equity.......... (365)
Net income...... 1,723
Foreign currency
translation
adjustments..... 7
Comprehensive
income.......... --
-------------
Balance at
December 31,
1998............ 3,748
-------------
Common stock
issued upon
exercise of
options
(unaudited)..... 369
Notes receivable
from
stockholders'
(unaudited)..... (349)
Deferred
compensation
related to
grants of stock
options
(unaudited)..... --
Amortization of
deferred
compensation
(unaudited)..... 305
Cancellation of
stock options
(unaudited)..... --
Accretion of
redeemable
convertible
preferred stock
(unaudited)..... (248)
Net income
(unaudited)..... 373
Foreign currency
translation
adjustment
(unaudited)..... (20)
Comprehensive
income
(unaudited)..... --
-------------
Balance at March
31, 1999
(unaudited)..... $4,178
=============
</TABLE>

See accompanying notes to consolidated financial statements

F-5
<PAGE>

TENFOLD CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
--------------------------- ----------------
1996 1997 1998 1998 1999
------- -------- -------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss).............. $ (99) $ (600) $ 1,723 $ (401) $ 373
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation.................. 53 305 1,146 148 541
Provision for bad debt........ -- -- 500 -- --
Change in deferred income
taxes........................ (121) -- (302) -- --
Tax benefit from exercise of
stock options................ -- -- 664 -- --
Tax charge related to the
reallocation of revenue to
equity....................... -- -- (365) -- --
Amortization of deferred
compensation associated with
stock options................ -- 34 153 13 305
Changes in operating assets
and liabilities:
Accounts receivable.......... (42) (984) (1,042) (1,137) (1,509)
Unbilled accounts
receivable.................. -- -- (3,258) (415) (788)
Prepaid expenses............. (28) (123) (266) (101) (302)
Deferred costs............... -- -- -- -- (107)
Other assets................. -- 1 (154) -- --
Accounts payable............. 100 245 597 155 272
Accrued liabilities.......... 16 781 2,479 (117) 311
Income taxes................. 91 (239) 498 (207) (404)
Deferred revenues............ (62) 1,402 3,755 1,883 (2,485)
------- -------- -------- ------- -------
Net cash provided by (used
in) operating activities... (92) 822 6,128 (179) (3,793)
Cash flows from investing
activities:
Additions to property and
equipment..................... (423) (1,393) (5,464) (769) (842)
------- -------- -------- ------- -------
Net cash used in investing
activities................. (423) (1,393) (5,464) (769) (842)
Cash flows from financing
activities:
Proceeds from issuance of
preferred stock, less issuance
costs......................... -- 8,365 -- -- --
Proceeds from issuance of
common stock.................. 1,001 -- 25 -- 1,976
Proceeds from issuance of
redeemable common stock....... -- -- 1,976 -- --
Exercise of common stock
options....................... 1 17 327 201 369
Notes receivable from
stockholders.................. -- -- (329) (329) (349)
Proceeds from notes payable.... -- -- 2,425 -- 733
Principal payments on notes
payable....................... -- -- (114) -- (194)
Proceeds from sales-leaseback.. -- -- 1,424 -- --
Principal payments on capital
lease obligations............. -- -- (54) -- (82)
------- -------- -------- ------- -------
Net cash provided by (used
in) financing activities... 1,002 8,382 5,680 (128) 2,453
------- -------- -------- ------- -------
Effect of exchange rate
changes........................ -- 1 7 (3) (20)
------- -------- -------- ------- -------
Net increase (decrease) in cash
and cash equivalents........... 487 7,812 6,351 (1,079) (2,202)
Cash and cash equivalents at
beginning of period............ 723 1,210 9,022 9,022 15,373
------- -------- -------- ------- -------
Cash and cash equivalents at end
of period...................... $ 1,210 $ 9,022 $ 15,373 $7,943 $13,171
======= ======== ======== ======= =======
Supplemental disclosure of cash
flow information:
Cash paid for income taxes..... $ 2 $ 129 -- -- $ 638
Cash paid for interest......... -- -- $ 20 -- 69
Supplemental schedule of noncash
investing and financing
activities:
Issuance of common stock in
exchange for receivable due
from stockholder.............. -- -- $ 1,976 -- --
Deferred compensation related
to grants of stock options.... -- $ 251 $ 3,264 -- $ 5,915
Equipment purchased with
capital leases................ -- -- $ 272 -- --
</TABLE>

See accompanying notes to consolidated financial statements

F-6
<PAGE>

TENFOLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998 (UNAUDITED AS TO
MARCH 31, 1998 AND 1999 AND FOR THE THREE MONTHS THEN ENDED)

1. Organization and Summary of Significant Accounting Policies

Organization

TenFold Corporation (the "Company"), develops, markets, supports, and
resells large-scale software applications. The Company provides the majority of
its services on a fixed-price and fixed-time basis. The Company was
incorporated in the state of Delaware in February 1993.

Basis of Presentation

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary in the United Kingdom. All intercompany
accounts and transactions have been eliminated.

Revenue Recognition

The Company derives its revenues from license fees, application development
and implementation services, support, and training services. License revenues
consist of fees for licensing the Universal Application and license fees for
the applications that the Company develops for its customers. The Company also
derives license revenues from the resale of vertical applications products.
Service revenues consist of fees for application development and
implementation, support and training.

In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 97-2, Software Revenue
Recognition, which supersedes SOP 91-1, Software Revenue Recognition.
Additionally, in 1998 the AICPA issued SOP 98-9 Modification of SOP 97-2 with
Respect to Certain Transactions. Effective January 1, 1998, the Company adopted
the provisions of SOP 97-2 as modified by SOP 98-9. Revenue was recognized in
accordance with SOP 97-2 in 1998, and SOP 91-1 in prior years.

SOP 97-2 generally requires revenue earned on software arrangements
involving multiple elements such as software products, enhancements, post-
contract customer support, installation and training to be allocated to each
element based on the relative fair values of the elements. The fair value of an
element must be based on evidence which is specific to the vendor. The revenue
allocated to software products is generally recognized upon delivery of the
products. The revenue allocated to unspecified upgrades and updates and post
contract customer support is generally recognized as the services are
performed.

For fixed-price contracts that include a service element that is essential
to the functionality of the software, the Company recognizes license fees
related to the application and the application development service fees over
time as services are performed, using the percentage-of-completion accounting
method based on costs incurred relative to total estimated costs. Full
provision is made for any anticipated losses. On a limited basis, the Company
also provides application development and implementation services on a time and
materials basis. The Company recognizes revenue on time and material contracts
as services are performed.

The Company recognizes license revenues from applications products sales and
Universal Application development licenses (whether sold separately or with an
application development project) that do not require significant production,
modification, or customization of software, or the services-related element is
not essential to the functionality of the software, when the following criteria
are met: the Company has signed a noncancellable license agreement; the Company
has shipped the software product; there are no uncertainties surrounding
product acceptance; the fees are fixed and determinable; and collection is
considered probable.

F-7
<PAGE>

TENFOLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company recognizes support revenue from contracts for ongoing technical
support and product updates, ratably over the term of the contract, which is
typically twelve months. The Company recognizes training revenues as services
are performed.

In mid 1998, the Company began offering a money-back guarantee on its fixed-
price contracts for which the Company recognizes revenue using the percentage-
of-completion accounting method. As a result, in certain contracts the Company
guaranteed project completion within a fixed time period or the customer may
return the software and receive a refund of fees paid. This guarantee also
requires the customer to fulfill certain responsibilities within a specified
time period, including reviewing and approving requirements, providing timely
feedback and providing adequate staffing; or the guarantee is voided.
Accordingly, this is considered a conditional money-back guarantee. None of the
Company's customers has exercised its guarantee to date, nor was it probable as
of the latest balance sheet date that a current customer would exercise its
guarantee. If necessary, the Company makes provisions for estimated refunds or
losses on uncompleted contracts on a contract by contract basis and recognizes
the provisions in the period in which such refunds or losses are probable and
can be reasonably estimated.

The timing and amount of cash received from customers can vary significantly
depending on specific contract terms and can therefore have a significant
impact on the amount of deferred revenue and unbilled accounts receivable in
any given period. The Company records cash received in excess of revenue earned
as deferred revenue. The deferred revenue balance at December 31, 1998 was $5.5
million. The Company's deferred revenue balance generally results from
contractual commitments made by customers to pay amounts to us in advance of
revenues earned. Unbilled accounts receivable represents revenue that the
Company has earned but not yet billed for. The Company bills customers for this
revenue as payments become due under the terms of the customer's contract. The
unbilled accounts receivable balance at December 31, 1998 was $3.3 million, and
is expected to be billed and collected within twelve months.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three
months or less at the date of acquisition to be cash equivalents. The Company
generally invests its cash and cash equivalents in money market accounts and
certificates of deposit.

Due from Stockholder

The due from stockholder amount represents an outstanding balance resulting
from a sale of 200,000 shares of common stock on December 28, 1998. The amount
was received in January 1999.

Property and Equipment

Property and equipment, including leasehold improvements, are stated at
cost. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, generally three to five years, or the
life of the lease, whichever is shorter.

Accounting for Impairment of Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of their carrying amount or fair value
less cost to sell.

F-8
<PAGE>

TENFOLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Cost of Revenues

Cost of revenues consists primarily of the compensation and other related
cost of services personnel. Costs of license revenues, including product
packaging, documentation, and reproduction have not been significant.

Research and Development Costs

Research and development expenses consist primarily of costs for development
and enhancement of the Universal Application and TenFold ComponentWare.
Software development costs incurred between achieving technology feasibility
and release of the product to our customers have been insignificant and
therefore have been expensed as incurred.

Income Taxes

The Company records income taxes using the asset and liability method.
Deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement basis
amounts of existing assets and liabilities and their respective income tax
bases. Future tax benefits, such as net operating loss carryforwards, and tax
credits, are recognized to the extent that realization of such benefits are
more likely than not. Deferred income tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred income tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.

Stock-Based Compensation

The Company adopted the footnote disclosure provisions of SFAS No. 123,
Accounting for Stock-Based Compensation. SFAS No. 123 encourages entities to
adopt a fair-value based method of accounting for stock options or similar
equity instruments. However, it also allows an entity to continue measuring
compensation cost for stock-based compensation using the intrinsic-value method
of accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees. The Company has elected to continue
to apply the provisions of APB 25 and provide pro forma footnote disclosures
required by SFAS No. 123.

Foreign Currency Translation

For non-U.S. operations, the functional currency is the applicable local
currency. The translation of the functional currencies into U.S. dollars is
performed for balance sheet accounts using current exchange rates in effect at
the balance sheet date and for revenue and expense accounts using average rates
of exchange prevailing during the reporting period. Adjustments resulting from
the translation of foreign currency financial statements are included in
accumulated other comprehensive income as a component of stockholders' equity.
Gains or losses resulting from foreign currency transactions are included in
the results of operations and have not been significant to date.

Use of Estimates

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements.
Actual results could differ from these estimates.

Advertising

Advertising costs are expensed as incurred. Advertising costs amounted to
$460,000 in 1998. The Company did not incur advertising costs in prior years.

F-9
<PAGE>

TENFOLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Warranty Expense

The Company provides reserves for warranty costs expected to be incurred. To
date the Company has not incurred significant warranty costs.

Financial Instruments

The carrying value of accounts receivable, unbilled accounts receivable,
accounts payable, and accrued expenses approximates their estimated fair value
due to the relative short maturity of these instruments.

Recent Accounting Pronouncements

The FASB recently issued SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives), and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. For a derivative not designated as a hedging
instrument, changes in the fair value of the derivative are recognized in
earnings in the period of change. The Company must adopt SFAS No. 133 by
July 1, 1999. Management does not believe the adoption of SFAS No. 133 will
have a material effect on the financial position or results of operations of
the Company.

Unaudited Interim Consolidated Financial Statements

The accompanying unaudited interim consolidated financial statements as of
March 31, 1999, and for the three months ended March 31, 1998 and 1999, have
been prepared on substantially the same basis as the audited consolidated
financial statements and include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
information set forth herein.

Unaudited Pro Forma Consolidated Balance Sheet

If the offering contemplated by this prospectus is consummated, all of the
redeemable preferred and redeemable common stock outstanding will automatically
be converted into common stock. The unaudited pro forma consolidated balance
sheet at March 31, 1999, as adjusted for the assumed conversion of the
outstanding shares of redeemable preferred and redeemable common stock at March
31, 1999, is disclosed on the consolidated balance sheet.

2. Property and Equipment

Property and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
December 31, March 31,
--------------- -----------
1997 1998 1999
------ ------- -----------
(Unaudited)
<S> <C> <C> <C>
Computer equipment under capital lease...... $ -- $ 1,695 $ 1,695
Computer equipment.......................... 1,241 3,427 3,736
Software.................................... 52 571 772
Furniture and fixtures...................... 414 1,107 1,326
Leasehold improvements...................... 72 354 391
Office equipment............................ 170 531 607
------ ------- -------
Total cost................................ 1,949 7,685 8,527
Less accumulated depreciation and
amortization............................... (380) (1,528) (2,069)
------ ------- -------
$1,569 $ 6,157 $ 6,458
====== ======= =======
</TABLE>

F-10
<PAGE>

TENFOLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

3. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

<TABLE>
<CAPTION>
December 31,
------------- March 31,
1997 1998 1999
------------- -----------
(Unaudited)
<S> <C> <C> <C>
Accrued compensation.......................... $ 659 $ 2,043 $1,744
Other accrued expenses........................ 168 1,263 1,873
----- ------- ------
$ 827 $ 3,306 $3,617
===== ======= ======
</TABLE>

4. Notes Payable

Notes payable consists primarily of three year notes collateralized by fixed
assets with monthly payment terms. At December 31, 1998, the Company's notes
payable had an average interest rate of 7.0%. The aggregate maturities for
long-term debt for the three years ending December 31, 1999, 2000, and 2001 are
$718,000, $836,000, and $757,000, respectively. The fair values of the
Company's notes payable at December 31, 1998, approximate the carrying amounts.

5. Lease Commitments

The Company leases office space and equipment under non-cancelable lease
agreements, which expire at various dates through 2004. These leases generally
require the Company to pay all executory costs such as maintenance and
insurance. Future minimum lease payments under non-cancelable leases as of
December 31, 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
Total Operating Capital
------ --------- -------
<S> <C> <C> <C>
1999.............................................. $3,135 $2,561 $ 574
2000.............................................. 2,274 1,646 628
2001.............................................. 2,211 1,583 628
2002.............................................. 905 905 --
2003.............................................. 692 692 --
Thereafter........................................ 153 153 --
------ ------ ------
Total minimum lease payments.................... $9,370 $7,540 1,830
====== ======
Less: Amount representing interest................ (189)
------
Present value of net minimum capital lease
payments......................................... 1,641
Less: Current installments of obligations under
capital leases................................... (525)
------
Obligations under capital leases excluding current
installments..................................... $1,116
======
</TABLE>

Total rental expense under operating leases was approximately $142,000,
$514,000, and $1,420,000 for 1996, 1997 and 1998, respectively. Rent expense in
1997 and 1998 is net of sublease income of approximately $221,000 and $158,000,
respectively. The Company did not have sublease income in 1996.

At December 31, 1997 and 1998, the Company had issued stand-by letters of
credit for $100,000 and $406,000, respectively, as security for the Company's
office leases. These letters of credit will terminate by December 31, 2003.
These letters of credit had not been drawn upon at December 31, 1997 and 1998.

The Company sold certain fixed assets for $1.4 million in 1998. The assets
were leased back from the purchaser over a period of 3 years. There was no gain
or loss on this transaction and the resulting lease is being accounted for as a
capital lease.

F-11
<PAGE>

TENFOLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

6. Commitments and Contingencies

The Company has entered into agreements with certain of its customers
requiring the Company to make royalty payments ranging from 10% to 15% of
specified future product sales. These royalties will become payable by the
Company if and when application products developed for these customers are
subsequently re-sold to other customers. Through December 31, 1998, no such
royalties have been paid.

The Company has agreed it will grant to a senior member of the TenFold
Insurance Business Group an option to acquire three percent of the outstanding
shares of capital stock of a subsidiary to be formed during 1999 from which
TenFold intends to operate its insurance business. The exercise price of such
options will equal the fair market value, at the time of grant, of such
subsidiary's common stock, as determined by the Company's Board of Directors.

The Company is involved with potential claims which have arisen in the
normal course of business. While the ultimate results of these matters cannot
be predicted with certainty, management does not expect them to have a material
adverse effect on the financial position or results of operations of the
Company.

7. Income Taxes

The components of the provision for income taxes for the years ended
December 31, 1996, 1997, and 1998, are presented below (in thousands):

<TABLE>
<CAPTION>
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Provision (benefit) for income taxes:
Current:
Federal............................................. $ 122 $(111) $ 567
State............................................... 2 1 79
----- ----- -----
124 (110) 646
----- ----- -----
Deferred:
Federal............................................. (110) -- (439)
State............................................... (14) -- (11)
----- ----- -----
(124) -- (450)
----- ----- -----
Charge in lieu of taxes attributable to employee stock
plans................................................ -- -- 664
Tax charge related to the re-allocation of revenue to
equity............................................... -- -- (365)
----- ----- -----
Total............................................. $ -- $(110) $ 495
===== ===== =====
</TABLE>

The tax charge related to the reallocation of revenue to equity for
financial reporting purposes resulted from a transaction the Company entered
into for the sale of common and redeemable common stock simultaneously with the
sale of software products and services. This transaction created a difference
as indicated above for the difference between the contractual value (tax basis)
and fair value (book basis) of common stock and redeemable common stock on the
transaction date. The tax impact of this transaction was recorded as a debit to
paid-in-capital.

F-12
<PAGE>

TENFOLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company's deferred tax assets are comprised of the following as of
December 31, 1997 and 1998, respectively (in thousands):

<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Deferred tax assets:
Reserves and accruals...................................... $ 98 $ 202
Allowance for receivables.................................. 20 190
Stock option compensation.................................. 13 68
Credits for research activities............................ 759 600
Foreign loss carryovers.................................... 40 277
U.S. loss carryovers....................................... 80 --
------ ------
Total deferred tax assets................................ 1,010 1,337
Valuation allowance........................................ (973) (701)
------ ------
Net deferred tax assets.................................. $ 37 $ 636
====== ======
Deferred tax liabilities:
Accelerated depreciation................................... $ 37 $ 185
------ ------
Total deferred tax liabilities........................... 37 185
------ ------
Total net deferred tax asset............................. $ -- $ 451
====== ======
Deferred income tax asset--current........................... $ -- $ 536
Deferred income tax liability--long-term..................... -- (85)
------ ------
Total net deferred tax asset............................. $ -- $ 451
====== ======
</TABLE>

As of December 31, 1998, the Company had foreign net operating loss
carryforwards of approximately $890,000 that generally carryforward
indefinitely. In addition, as of December 31, 1998, the Company had federal and
state credits for increasing research activities of approximately $264,000 and
$336,000, respectively. The federal credit carryover will begin to expire in
2012. The state credit will carryover until exhausted.

During the year ended December 31, 1998, the valuation allowance decreased
approximately $272,000. The reduction is the result of the associated
utilization of research credits (a reduction of approximately $510,000), and
increasing the valuation allowance attributable to foreign loss carryovers (an
increase of approximately $238,000.) The valuation allowance is primarily
attributable to research credits and foreign loss carryovers. The Company
believes that it is more likely than not that the remaining deferred tax assets
will be utilized.

The table below reconciles the U.S. federal statutory income tax rate (34%)
to the recorded income tax provision (in thousands):

<TABLE>
<CAPTION>
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Tax at U.S. statutory rates............................. $ (34) $(241) $ 754
State tax, net of federal tax benefit................... -- -- 113
Meals & entertainment................................... 14 39 88
Credits for research activities......................... (109) (441) (253)
Change in valuation allowance........................... 138 502 (272)
Other................................................... (9) 31 65
----- ----- -----
$ -- $(110) $ 495
===== ===== =====
</TABLE>

F-13
<PAGE>

TENFOLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

8. Redeemable Convertible Preferred Stock, Redeemable Common Stock, and
Stockholders' Equity

Stock Split

In December 1996, the Board of Directors approved a two-for-one stock split
of the Company's common stock. The stock split was completed on February 2,
1997 in the form of a 100% stock dividend. Accordingly, all references to
applicable share and per share data, stock option data, and prices of the
Company's common stock, for all periods presented, have been retroactively
restated to reflect the stock split.

Redeemable Common Stock

On December 30, 1998, the Company issued 200,000 shares of Redeemable Common
Stock at a contractual purchase price of $5.00 per share and concurrently
entered into additional license and service agreements with the purchaser of
the shares. The Company subsequently determined that the fair market value of a
share of redeemable common stock equaled $9.88, and allocated $2.0 million of
the amounts paid in the licensing and service agreements to the purchase of the
shares. At any time after January 1, 2003, the holders of Redeemable Common
Stock have the right to cause the Company to redeem such shares at a redemption
amount of $8.00 per share. The redemption rights terminate upon completion of
an initial public offering.

Redeemable Convertible Preferred Stock

On March 4, 1997, the Company established a series of voting preferred
shares designated as Series A Preferred Stock, consisting of 2,920,799 shares
with $0.001 par value. On November 24, 1997, the Company increased the
authorized number of common shares to 44,000,000, and established a series of
voting preferred shares designated as Series B Preferred Stock, consisting of
3,340,330 shares with $0.001 par value, increasing the number of authorized
preferred shares to 6,261,129.

During March 1997, the Company entered into a transaction wherein the
Company sold 1,460,399 shares of Series A Preferred Stock and a software
license to a third party. The software license grants the third party the right
to develop applications using the Company's Universal Application. The license
restricts the Company from developing and licensing applications with similar
industry-specific functionality as this third party's existing applications
products (as of the effective date of the license agreement) within the
particular industry that this third party operates, and restricts the Company
from licensing the Universal Application to certain named competitors of the
third party. These licensing restrictions terminate upon the earlier of five
years or the third party reducing its ownership of the Company by 50%, which is
contemplated to occur in the Company's initial public offering, as described in
Note 13. In the same transaction, the majority stockholder of the Company sold
1,460,400 shares of common stock of the Company to the third-party.
Simultaneously, the Company granted the third party an option to exchange the
1,460,400 shares of common stock for an equal number of Series A Preferred
Stock. This conversion option was exercised during 1997. The third-party paid a
total of $8.0 million as consideration for this transaction, of which $2.5
million was received by the majority stockholder and $5.5 million was received
by the Company. Based on an independent valuation of the Company's common and
preferred stock, the Company allocated the total consideration paid by the
third party of $8 million based on the respective fair values of the preferred
and common shares. Based on these valuations, the Company allocated $1.4
million to the Series A Preferred Stock and option, and $5.5 million to
revenue. As a result of the transaction, the

F-14
<PAGE>

TENFOLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

majority stockholder received a premium of $1.4 million on the sale of common
shares. The Company has reflected that premium as an other charge in the 1997
Consolidated Statements of Operations.

In November 1997, the Company issued 3,340,330 shares of Series B Preferred
Stock resulting in net proceeds to the Company of approximately $7.0 million.

The rights, preferences, and privileges of the Series A and Series B
preferred stockholders are as follows:

Dividends. The holders of Series A and Series B Preferred Stock are entitled
to non-cumulative dividends, in preference to any dividend on any other
outstanding shares of capital stock of the Company, when and if declared by the
Board of Directors at the rate of $0.14 and $0.17, per share per annum,
respectively. As of December 31, 1998, no dividends had been declared or paid.

Liquidation. Upon the liquidation of the Company, the holders of Series A
and Series B Preferred Stock are entitled to receive, prior and in preference
to any distribution of any of the assets of the Company to the holders of
shares of any other outstanding shares of capital stock, an amount equal to
$2.74 and $3.36 per share, respectively, plus declared but unpaid dividends.
After the per share amounts above, plus declared and unpaid dividends per share
on Series A and Series B Preferred Stock, have been paid in full, the holders
of Series A and Series B Preferred Stock participate pro rata in the funds
available for distribution, up to a maximum of $5.13 and $6.30 per share,
respectively.

Redemption. At any time after January 1, 2003 and October 1, 2003, the
holders of more than 66.66% of the Series A and Series B Preferred Stock,
respectively, will have the right to cause the Company to redeem such portion
of the issued and outstanding shares of such series as are held by the holders
exercising such right. The redemption amount will be paid in four quarterly
installments to the holders of Series A and Series B Preferred Stock, at $2.74
and $3.36 per share, respectively. The Company will redeem as many shares of
Preferred Stock as possible out of funds legally available, on a pro rata basis
among the holders of Preferred Stock in proportion to the Preferred Stock then
held by them and the respective redemption amounts to which they are entitled.

The difference between the carrying amount of the preferred stock and the
redemption amount is being accreted, using the interest method, so the carrying
amount will equal the redemption amount at the redemption date. During 1997 and
1998, the Company increased the carrying amount of Series A Preferred Stock by
$227,000 and $328,000, respectively; and increased the carrying amount of
Series B Preferred Stock by $47,000 and $587,000, respectively. The Company
estimates accretion for 1999 through 2003 for Series A and B Preferred Stock as
$1.1 million, $1.3 million, $2.0 million, $4.6 million, and $700,000,
respectively. Upon successful completion of a public offering, the Company's
Series A and B Preferred Stock will convert into common stock, which would
eliminate any future accretion.

Conversion. The preferred stock is convertible, at the option of the holder,
at any time after the date of issuance into common stock on a one-for-one
basis. Conversion is automatic upon the closing of a public offering of the
Company's common stock in which the aggregate proceeds equal or exceed $15.0
million and the per share common offering price is not less than $4.00.

Voting. Each holder of shares of preferred stock shall be entitled to the
number of votes equal to the number of whole shares of common stock into which
such shares of preferred stock are then convertible. In addition, each holder
of preferred stock shall have full voting rights and powers similar to those of
the common stockholders.

F-15
<PAGE>

TENFOLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Other. There are 6,261,129 shares of redeemable, $0.001 par value, preferred
stock authorized. Additionally, there are 200,000 shares of redeemable $0.001
par value, common shares authorized. The following table summarizes the issued
and outstanding shares and related amounts from December 31, 1995 through
December 31, 1998 and for the three months ended March 31, 1999 (unaudited) for
these classes of stock (in thousands, except share data):

<TABLE>
<CAPTION>
Series A Series B Redeemable
Preferred Stock Preferred Stock Common Stock
---------------- ---------------- --------------
Shares Amount Shares Amount Shares Amount
--------- ------ --------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995
and 1996 ................... -- $ -- -- $ -- -- $ --
Issuance of Series A
redeemable convertible
preferred stock, net of
issuance costs of $52....... 1,460,399 1,380 -- -- -- --
Conversion of Common Stock
for Series A redeemable
convertible preferred
stock....................... 1,460,400 1 -- -- -- --
Issuance of Series B
redeemable convertible
preferred stock, net of
issuance costs of $30....... -- -- 3,340,330 6,985 -- --
Accretion of redeemable
convertible preferred
stock....................... -- 227 -- 47 -- --
--------- ------ --------- ------ ------- ------
Balance at December 31,
1997........................ 2,920,799 1,608 3,340,330 7,032 -- --
--------- ------ --------- ------ ------- ------
Redeemable common stock
issued for cash............. -- -- -- -- 200,000 1,976
Accretion of redeemable
convertible preferred
stock....................... -- 328 -- 587 -- --
--------- ------ --------- ------ ------- ------
Balance at December 31,
1998........................ 2,920,799 1,936 3,340,330 7,619 200,000 1,976
--------- ------ --------- ------ ------- ------
Accretion of redeemable
convertible preferred stock
(unaudited)................. -- 94 -- 154 -- --
--------- ------ --------- ------ ------- ------
Balance at March 31, 1999
(unaudited)................. 2,920,799 $2,030 3,340,330 $7,773 200,000 $1,976
========= ====== ========= ====== ======= ======
</TABLE>

Restricted Stock

On October 31, 1996, the Company sold 4,530,104 shares of common stock to
the Chief Executive Officer ("CEO ") for an aggregate price of $1.0 million
pursuant to a restricted stock purchase agreement entered into in connection
with an employment agreement between the Company and the CEO dated September 1,
1996. Approximately 2,491,558 shares are currently subject to a repurchase
right in favor of the Company that expires over time. Of these shares, 453,010
shares subject to such repurchase right shall be immediately released from the
repurchase right in the event that the Company achieves a market capitalization
of $200 million or more, and an additional 679,517 shares subject to such
repurchase right shall be released from the repurchase right in the event that
the Company achieves a market capitalization of $500 million or more.

F-16
<PAGE>

TENFOLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Stock Option Plans

Under the Company's 1993 Flexible Stock Incentive Plan (the "Plan"), the
Company may grant incentive stock options to employees (including officers and
directors who are employees) of the Company, and nonqualified stock options to
employees, officers, directors, independent contractors, and consultants of the
Company. The Plan provides for the sale or bonus of stock to eligible
individuals in connection with the performance of services for the Company. The
Plan also authorizes the grant of stock appreciation rights (SARs). The Board
of Directors administers the Plan. Options generally vest ratably over a five-
year period and expire ten years from the date of grant.

Stock option activity under the Plan is as follows:

<TABLE>
<CAPTION>
Weighted
Average
Option Exercise Price
Shares Per Share
--------- --------------
<S> <C> <C>
Outstanding at December 31, 1995.................... 1,320,000 $0.02
Granted........................................... 1,612,000 $0.21
Exercised......................................... 44,000 $0.02
Canceled.......................................... 111,000 $0.05
--------- -----
Outstanding at December 31, 1996.................... 2,777,000 $0.13
Granted........................................... 2,531,000 $0.84
Exercised......................................... 414,000 $0.05
Canceled.......................................... 440,800 $0.23
--------- -----
Outstanding at December 31, 1997.................... 4,453,200 $0.53
Granted........................................... 4,070,000 $3.88
Exercised......................................... 1,260,700 $0.26
Canceled.......................................... 845,200 $1.71
--------- -----
Outstanding at December 31, 1998.................... 6,417,300 $2.36
--------- -----
Granted (unaudited)............................... 1,047,300 $7.47
Exercised (unaudited)............................. 289,800 $1.29
$3.48
Canceled (unaudited).............................. 109,800
--------- -----
Outstanding at March 31, 1999 (unaudited)........... 7,065,000 $3.14
========= =====
</TABLE>

At December 31, 1996, 1997, and 1998, 546,000, 592,200, and 384,200 options
were vested and exercisable, respectively, under the Plan. In October 1998, the
Company's Board of Directors amended the Plan to increase the number of shares
of common stock authorized for issuance under the Plan from eight million to
ten million shares. Included in the table above were options granted to
consultants which were recorded at their estimated fair value. To date the
number of options granted to consultants and the related fair value of such
options has been insignificant.

F-17
<PAGE>

TENFOLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following table summarizes information about stock options under the
Plan outstanding at December 31, 1998:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------- --------------------
Weighted
Average Weighted Weighted
Options Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 12/31/98 Life Price at 12/31/98 Price
--------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.02 to $0.05........ 234,900 6 Years $0.02 80,500 $0.02
$0.22 to $0.89........ 2,278,800 8 Years $0.55 275,200 $0.38
$1.78 to $2.84........ 1,835,100 9 Years $2.53 28,500 $2.47
$4.49........ 2,068,500 10 Years $4.49 -- $ --
--------- --------- ----- ------- -----
$0.02 to $4.49........ 6,417,300 8.9 Years $2.36 384,200 $0.46
========= ========= ===== ======= =====
</TABLE>

The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees ("APB 25") in accounting for its
option plans. Had compensation expense for the Company's stock option plan been
determined based on the fair value at the grant date for awards under these
plans consistent with the methodology prescribed under SFAS No. 123, Accounting
for Stock Based Compensation, the Company's net income (loss) for the years
ended December 31, would have been as follows (in thousands except per share
information):

<TABLE>
<CAPTION>
1996 1997 1998
------ ------ -----
<S> <C> <C> <C>
Net income (loss) applicable to common stock--as
reported........................................... $ (99) $ (874) $ 808
====== ====== =====
Pro forma net income (loss) applicable to common
stock.............................................. $ (101) $ (922) $ 435
====== ====== =====
Net income (loss) per share as reported:
Basic............................................. $(0.00) $(0.04) $0.04
====== ====== =====
Diluted........................................... $(0.00) $(0.04) $0.03
====== ====== =====
Pro forma net income (loss) per share:
Basic............................................. $(0.00) $(0.04) $0.02
====== ====== =====
Diluted........................................... $(0.00) $(0.04) $0.02
====== ====== =====
</TABLE>

The effect of SFAS 123 on pro forma net loss and net loss per share
disclosed for 1996, 1997, and 1998 may not be representative of the effects on
pro forma results in future years.

The weighted-average fair value of the options granted under the Plan in
1996, 1997, and 1998 was $0.08, $0.38, and $1.79, respectively. The fair value
for these options was estimated at the date of grant using the minimum value
method with the following weighted-average assumptions for 1996, 1997, and
1998: risk-free interest rate of 6.2% in 1996, 6.33% in 1997, and 5.35% in
1998; a dividend yield of 0%, and a weighted-average expected life of 7 years.

During 1997 and 1998, the Company recorded deferred compensation of $251,000
and $2.2 million, respectively, relating to stock options which were granted at
a price below the estimated fair market value of the underlying common stock,
pursuant to APB 25. The Company recognized compensation expense of $34,000 in
1997 and $153,000 in 1998.

During the three months ended March 31, 1999, the Company granted 1,047,300
(unaudited) stock options at a weighted average exercise price of $7.47
(unaudited). During the same period, the

F-18
<PAGE>

TENFOLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Company recorded compensation expense of $193,000 (unaudited) related to
options granted during the three months ended March 31, 1999, which amount is
included in the amortization of deferred compensation of $305,000 in the
Company's March 31, 1999 (unaudited) Consolidated Statements of Operations.

9. Retirement Plan

The Company established a 401(k) retirement savings plan for employees in
January 1996. All employees age 21 and over are eligible to participate. Each
participant may elect to have amounts deducted from his or her compensation and
contributed to the plan. The Company matches 20% of the first 6% of the
employees contributions, up to a maximum of $2,000 per employee per year. Total
Company contributions for 1997 and 1998 were approximately $57,000 and
$157,000, respectively.

10. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings
per share (in thousands except per share data):

<TABLE>
<CAPTION>
Three Months
Ended March
Year ended December 31, 31,
------------------------- --------------
1996 1997 1998 1998 1999
------- ------- ------- ------ ------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Numerator:
Net income (loss)................. $ (99) $ (600) $ 1,723 $ (401) $ 373
Accretion of Series A and B
preferred stock.................. -- (274) (915) (218) (248)
------- ------- ------- ------ ------
Numerator for basic earnings
(loss) per share-income (loss)
available to common
stockholders..................... $ (99) $ (874) $ 808 $ (619) $ 125
======= ======= ======= ====== ======
Numerator for diluted earnings
(loss) per share-income (loss)
available to common stockholders
after assumed dilutive
conversions...................... $ (99) $ (874) $ 808 $ (619) $ 125
======= ======= ======= ====== ======
Denominator:
Denominator for basic earnings
(loss) per share-weighted-average
shares........................... 20,285 21,542 21,551 21,031 22,765
======= ======= ======= ====== ======
Employee stock and options........ -- -- 5,112 -- 5,411
------- ------- ------- ------ ------
Denominator for diluted earnings
(loss) per share-adjusted
weighted-average shares and
assumed conversions.............. 20,285 21,542 26,663 21,031 28,176
======= ======= ======= ====== ======
Earnings (loss) per common share:
Basic earnings (loss) per common
share............................ $ (0.00) $ (0.04) $ 0.04 $(0.03) $ 0.01
======= ======= ======= ====== ======
Diluted earning (loss) per common
share............................ $ (0.00) $ (0.04) $ 0.03 $(0.03) $ 0.00
======= ======= ======= ====== ======
</TABLE>

The computation of diluted earnings per common share during 1997, 1998, and
for the three months ended March 31, 1998 (unaudited) and 1999 (unaudited)
excludes the assumed conversion of 6,261,129 shares of Series A and B
convertible preferred stock because the impact of the conversion, including the
assumed elimination of the accretion of such preferred stock, would be anti-
dilutive. No Series A or B Preferred Stock were outstanding in 1996.

F-19
<PAGE>

TENFOLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Employee stock and options of 6,174,578, 7,397,768, and 7,441,768
outstanding during the periods ended December 31, 1996, 1997, and for the three
months ended March 31, 1998 (unaudited) respectively, that could potentially
dilute basic earnings per share in the future were not included in the
computation of diluted earnings per share because to do so would have been
anti-dilutive for the period.

11. Operating Segments

The Company has adopted the provisions of SFAS No. 131, Disclosure About
Segments of an Enterprise and Related Information. SFAS No. 131 establishes
standards for the reporting by public business enterprises of information about
operating segments, products and services, geographic areas, and major
customers. The method for determining what information to report is based on
the way that management organizes the operating segments within the Company for
making operating decisions and assessing financial performance.

The Company's chief operating decision maker is considered to be the
Company's CEO. The CEO reviews financial information presented on a
consolidated basis accompanied by disaggregated information about revenues by
Vertical Business Group for purposes of making operating decisions and
assessing financial performance. Revenues from operations outside of North
America were less than 1% of revenues for 1998 and zero in all prior years. The
consolidated financial information reviewed by the CEO is identical to the
information presented in the accompanying consolidated statement of operations.
Therefore, the Company operates in a single operating segment: applications
products and services.

F-20
<PAGE>

TENFOLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Revenue information regarding operations for different products and services
is as follows (in thousands):
<TABLE>
<CAPTION>
Banking & Investment Tele- Utilities &
Credit Insurance Management Healthcare Communications Energy Other Total
--------- --------- ---------- ---------- -------------- ----------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, 1999
(unaudited)
Licenses.............. $200 $ 4,662 $ 683 $ 27 $ 8 $ -- $ 76 $ 5,656
Services.............. 548 7,405 1,329 593 66 44 386 10,371
---- ------- ------ ------ ------ ------ ------ -------
$748 $12,067 $2,012 $ 620 $ 74 $ 44 $ 462 $16,027
==== ======= ====== ====== ====== ====== ====== =======
March 31, 1998
(unaudited)
Licenses.............. $ -- $ 275 $ 545 $ -- $ 214 $ -- $ 225 $ 1,259
Services.............. -- 1,861 191 -- 656 502 730 3,940
---- ------- ------ ------ ------ ------ ------ -------
$ -- $ 2,136 $ 736 $ -- $ 870 $ 502 $ 955 $ 5,199
==== ======= ====== ====== ====== ====== ====== =======
1998
Revenues:
Licenses.............. $ -- $ 9,524 $2,318 $ 351 $ 456 $ -- $ 733 $13,382
Services.............. -- 16,427 2,902 751 2,362 1,264 3,079 26,785
---- ------- ------ ------ ------ ------ ------ -------
$ -- $25,951 $5,220 $1,102 $2,818 $1,264 $3,812 $40,167
==== ======= ====== ====== ====== ====== ====== =======
1997
Revenues:
Licenses.............. $ -- $ 1,698 $ 561 $ -- $ 229 $2,750 $ 6 $ 5,244
Services.............. -- 2,790 1,742 -- 496 3,348 503 8,879
---- ------- ------ ------ ------ ------ ------ -------
$ -- $ 4,488 $2,303 $ -- $ 725 $6,098 $ 509 $14,123
==== ======= ====== ====== ====== ====== ====== =======
1996
Revenues:
Licenses.............. $ -- $ -- $ 271 $ -- $ -- $ -- $ -- $ 271
Services.............. -- -- 2,657 -- -- -- 87 2,744
---- ------- ------ ------ ------ ------ ------ -------
$ -- $ -- $2,928 $ -- $ -- $ -- $ 87 $ 3,015
==== ======= ====== ====== ====== ====== ====== =======
</TABLE>

F-21
<PAGE>

TENFOLD CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

12. Concentration of Credit Risk

The Company's customers are generally large companies in the insurance,
investment management, utilities and energy, healthcare, and telecommunications
industries. The Company does not require collateral from its customers. The
following table provides customer concentration for the three years ended
December 31.

<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Customer A.................................................. -- 31% 20%
Customer B.................................................. -- -- 15%
Customer C.................................................. -- -- 13%
Customer D.................................................. -- -- 10%
Customer E.................................................. -- 39% --
Customer F.................................................. 87% 11% --
Customer G.................................................. 11% -- --
</TABLE>

13. Subsequent Event

On January 18, 1999, the Company entered into an unsecured Revolving Line of
Credit providing for borrowings of up to $5.0 million. Borrowings under the
line of credit, which expires on January 17, 2000, bear interest at the bank's
prime rate or LIBOR plus 250 basis points. The line of credit includes
covenants relating to the maintenance of certain financial ratios and limits
the payment of dividends.

On March 2, 1999 the Board of Directors approved an employee stock purchase
plan ("ESPP") and the 1999 stock option plan. Both plans were approved by the
stockholders on March 29, 1999. The Company reserved 1,000,000 shares of common
stock for future purchases by eligible employees under the ESPP. The Company
reserved 6,500,000 shares of common stock for issuance under the 1999 stock
option plan.

On March 2, 1999, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission permitting
the Company to sell shares of its common stock to the public. If the offering
is consummated, all of the currently outstanding redeemable preferred and
redeemable common stock will automatically convert into 6,461,129 shares of
common stock.

On April 22, 1999, the Company entered into a strategic alliance agreement
with Perot Systems Corporation, a systems integrator, which provides for the
development and delivery of applications, products, and services to TenFold and
Perot Systems customers. Perot Systems agreed to provide the Company with
opportunities to contract for revenue of at least $15.0 million of products and
services in each of the two years following May 1, 1999 or pay 20% of the
shortfall, subject to certain specific provisions. Perot Systems will not
develop new products using the Company's technology that are directly
competitive with the Company's existing products, unless Perot Systems already
has a new product under development. The Company granted Perot Systems the
right to license its technology, the right to participate in future business
acquisitions and potential division spin offs under certain circumstances, and
the right to purchase up to 1,000,000 shares of common stock being sold in this
offering. If Perot Systems meets certain performance milestones, the Company
agreed not to pursue business deals with Perot Systems customers, businesses,
or competitors, except under specific circumstances.

F-22
<PAGE>

UNDERWRITING

TenFold, the selling stockholders and the underwriters for the offering
named below have entered into an underwriting agreement with respect to the
shares being offered. Subject to certain conditions, each underwriter has
agreed to purchase the number of shares indicated in the following table.
Goldman, Sachs & Co., BT Alex. Brown Incorporated and U.S. Bancorp Piper
Jaffray Inc. are the representatives of the underwriters.

<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Goldman, Sachs & Co......................................... 1,826,000
BT Alex. Brown Incorporated................................. 1,094,000
U.S. Bancorp Piper Jaffray Inc. ............................ 729,000
BancBoston Robertson Stephens Inc........................... 111,000
EVEREN Securities, Inc...................................... 111,000
Edward D. Jones & Co., L.P.................................. 111,000
Prudential Securities Incorporated.......................... 111,000
SG Cowen Securities Corporation............................. 111,000
Wasserstein Perella Securities, Inc......................... 111,000
Robert W. Baird & Co. Incorporated.......................... 55,000
J.C. Bradford & Co.......................................... 55,000
The Chapman Company......................................... 55,000
Dain Rauscher Wessels
a division of Dain Rauscher Incorporated.................... 55,000
First Union Capital Markets Corp............................ 55,000
SoundView Technology Group, Inc............................. 55,000
Volpe Brown Whelan & Company, LLC........................... 55,000
---------
Total..................................................... 4,700,000
=========
</TABLE>

----------------

If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional 234,201
shares from TenFold and up to an additional 470,799 shares from the selling
stockholders to cover such sales. They may exercise that option for 30 days. If
any shares are purchased upon exercise of this option, the underwriters will
severally purchase shares in approximately the same proportion as set forth in
the table above.

The following tables show the per share and total underwriting discounts and
commissions to be paid to the underwriters by TenFold and the selling
stockholders. Such amounts are shown assuming both no exercise and full
exercise of the underwriters' option to purchase 705,000 additional shares.

<TABLE>
<CAPTION>
Paid by TenFold No Exercise Full Exercise
--------------- ----------- -------------
<S> <C> <C>
Per Share.......................................... $ 1.19 $ 1.19
Total.............................................. $2,439,500 $2,718,199
<CAPTION>
Paid by the
Selling Stockholders No Exercise Full Exercise
-------------------- ----------- -------------
<S> <C> <C>
Per Share.......................................... $ 1.19 $ 1.19
Total.............................................. $3,153,500 $3,713,751
</TABLE>

Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus.
Any shares sold by the underwriters to securities dealers may be sold at a
discount of up to $0.70 per share from the initial public offering price. Any
such securities dealers may resell any shares purchased from the underwriters
to certain other brokers or dealers at a discount of up to $0.10 per share from
the initial public offering price. If all the shares are not sold at the
initial offering price, the representatives may change the offering price and
the other selling terms.

U-1
<PAGE>

TenFold and the selling stockholders have agreed with the underwriters not
to dispose of or hedge any of their common stock or securities convertible into
or exchangeable for shares of common stock during the period from the date of
this prospectus continuing through the date 180 days after the date of this
prospectus, except with the prior written consent of Goldman, Sachs & Co. This
agreement does not apply to any existing employees benefit plans. See "Shares
Eligible for Future Sale" for a discussion of certain transfer restrictions.

Prior to this offering, there has been no public market for the shares. The
initial public offering price has been negotiated among TenFold and the
representatives. Among the factors considered in determining the initial public
offering price of the shares, in addition to prevailing market conditions, were
TenFold's historical performance, estimates of the business potential and
earnings prospects of TenFold, an assessment of TenFold's management and the
consideration of the above factors in relation to market valuation of companies
in related businesses.

At TenFold's request, the underwriters have reserved 602,500 shares of
common stock for sale to directors, officers, employees, and friends of TenFold
in a directed share program. These shares will be sold at the initial public
offering price. Of these shares, 250,000 shares are being reserved for
Westfield Companies and 70,000 shares are being reserved for Utica National
Insurance Group. Both of these companies are customers of TenFold. In addition,
at TenFold's request, the underwriters have also reserved 1,000,000 shares for
sale to Perot Systems Corporation, a systems integrater with whom TenFold has
entered into a strategic relationship. For more information concerning
TenFold's relationship with Perot Systems, see "Business--Strategic Alliance".
The number of shares available to the general public in this offering will be
reduced to the extent that the reserved shares are purchased. Any reserved
shares not purchased will be offered to the general public on the same terms as
the other shares.

The common stock has been approved for quotation on The Nasdaq Stock Market
under the symbol "TENF".

In connection with this offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in this offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while this offering is in progress.

The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares
sold by or for the account of such underwriter in stabilizing or short covering
transactions.

These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on The Nasdaq
Stock Market, in the over-the-counter market, or otherwise.

The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.

TenFold and the selling stockholders estimate that the total expenses of
this offering, excluding underwriting discounts and commissions, will be
approximately $1,500,000. TenFold shall pay all such expenses.

TenFold and the selling stockholders have agreed to indemnify the several
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.

U-2
<PAGE>

Inside Back Cover of Prospectus:
- --------------------------------

Comparison table of Custom-built Application, Software Package, and TenFold
Application with the following key benefits:

Custom-built application: Customized solution, Highly flexible
Software package: Fast time to market, High quality
TenFold Application: Fast time to market, High quality, Customized solution, and
Highly flexible

Other text similar to the following:

The best of both the "buy" and "build" worlds: TenFold products provide the
rapid deployment that customers expect from packaged applications, while
offering the innovative, tailored-to-their-business features that they need from
custom-built software.

Collage of images of people and scenes related to vertical industries such as
utilities, banking, telecommunications, and healthcare.

<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the shares offered hereby, but only under circumstances and in juris-
dictions where it is lawful to do so. The information contained in this pro-
spectus is current only as of its date.

-------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Special Note Regarding Forward-Looking Statements........................ 16
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Dilution................................................................. 19
Selected Consolidated Financial Data..................................... 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 21
Business................................................................. 31
Management............................................................... 48
Certain Transactions..................................................... 60
Principal and Selling Stockholders....................................... 62
Description of Capital Stock............................................. 64
Shares Eligible for Future Sale.......................................... 67
Legal Matters............................................................ 69
Experts.................................................................. 69
Where You Can Find More Information...................................... 69
Index to Consolidated Financial Statements............................... F-1
Underwriting............................................................. U-1
</TABLE>

-------------------

Through and including June 14, 1999 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealer's obligation to deliver a prospectus when
acting as an underwriter and with respect to an unsold allotment or subscrip-
tion.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

4,700,000 Shares

TenFold Corporation

Common Stock

------------------------

[TENFOLD LOGO]

------------------------

Goldman, Sachs & Co.

BT Alex. Brown

U.S. Bancorp Piper Jaffray

Representatives of the Underwriters

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------