SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1999.
[ ] Transition report under section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from _________ to _____________.
Commission file number 0-27453
WORDCRUNCHER INTERNET TECHNOLOGIES, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Nevada 84-1370590
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
405 East 12450 South, Suite B, Draper, Utah 84020
- ------------------------------------------- -----
(Address of principal executive office) (Zip Code)
801.816.9904
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(Issuer's telephone number)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange
------------------- On Which Registered
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None None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), Yes __X__ No _____, and (2) has
been subject to such filing requirements for the past 90 days. Yes __X__ No
_____.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which the common equity was sold, or the
average bid and asked prices of such common equity, as of a specified date
within 60 days prior to the date of filing: $63,683,299.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 13,467,698.
<PAGE>
Part I
Item 1. Business.
Introduction. We are a development state company engaged in the
development and marketing of a focused Internet site which serves the needs of
the business professional. Content and services found at logio.com, which we
launched on March 19, 2000, are tailored to provide, under one roof, a broad
spectrum of the information and services that are required by business people in
their daily work activities. Information resources include a unique, readily
accessible "drill-down" directory that organizes thousands of business-oriented
web sites according to specific job function. The directory is augmented by an
advanced search technology that can search either the abstracts or the full text
of all the sites listed in the directory, and then displays the search results
in a "hits in context" format. We couple this information with the services that
the average business professional uses on a daily basis, including travel
arrangements, stock quotes, news, weather, maps, financial calculators, e-mail
and calendaring. This combination creates a full service destination site
designed specifically for the business professional. We intend to expand the
delivery of this full service concept to other electronic means of communication
such as cell phones, pagers, personal digital assistants and set top boxes. All
of these services will be marketed under the brand name "Logio."
Although there is a great deal of free information on the Internet,
publishers still own valuable content that is not currently available on the
Internet. This information can be very useful to business people. For example,
research reports, market analyses, industry specific newsletters and commentary,
studies produced by analyst and research firms, are routinely sold in print form
to the business community. We believe that sales and delivery of this kind of
content via the Internet is a logical step in the development of information
distribution channels, and are positioning Logio to take a leading role in this
effort. Logio is developing a method whereby this type of business-oriented
content can be sold and delivered through our Logio site.
We believe that Logio will be used by business professionals for a
number of different activities. Our objective is to have our customers naturally
keep Logio open ("on their desktop") all day long, and when they are away from
their computers, to access Logio-delivered information using whatever device is
practical.
The rapid growth of the Internet and the proliferation of Internet
sites has increasingly challenged consumers, content providers and advertisers
to effectively reach one another. Consumers are often challenged to quickly find
the most relevant information, products and services related to a particular
interest or topic. Content providers are typically challenged to differentiate
their products and services in an increasingly crowded medium, and to improve
the visibility of their web sites. Advertisers are challenged to more
effectively deliver their advertising messages to interested audiences and
target groups. Because of these trends, Internet development is in some ways
mirroring the recent history of the print publishing industry. For example, over
the past thirty years, the number of newspapers and magazines devoted to
specialized subjects has exploded while general interest publications are
experiencing hard times.
Logio has chosen to create a site that meets the needs of business
people, and address some of the more well-documented functional problems that
plague Internet users. For example, most search engines do not differentiate
between the types of sites they search. Hence, a search initiated through a
general interest portal is run against all the sites they have indexed,
regardless of category. With literally billions of web pages on the Internet,
the body of information that is being searched is too broad. Logio has assembled
a team of editors that constantly combs the web to find only sites that deal
with business topics. This means that a business person who searches using Logio
has a much higher level of confidence that search results will come from sites
that pertain to the area of interest.
Because we are focusing solely on the "business subset" of the web, we
can use a far more specialized and powerful search engine that addresses some
common Internet user complaints. General web portals generally return lists of
hundred or even thousands of potential pages for further review. As a result,
Internet users may spend substantial time searching through the list of returned
documents to find out which documents are relevant. This frequently requires the
user to call up the referenced page and either visually scan the page or conduct
another page search to find the specific reference in question.
In contrast, Logio provides advanced search capabilities that display
the desired search result "in context," surrounding several lines of text on
either side of the search result. This allows the user to make some judgement of
a web sites' value prior to leaving the Logio site to more fully examine the
search result. While Logio's "hits-in-context" display is not its sole method of
differentiating itself in the market, it is indicative of the attention
management has paid to refining the Internet experience for the benefit of its
users. For further information on other Logio advantages, see "Our Solution"
below.
Logio Markets. We believe business professionals will use Logio. The
Internet is an interactive worldwide network of computers and data systems that
allow its users to retrieve data, purchase products, send and receive
communications and purchase or provide services. The Internet is based on a
technology platform that incorporates a series of standards that allow computers
in various locations and of various makes and models to communicate effectively
with one another. The use of the Internet has grown substantially since it was
first commercially introduced in the 1990s. Forrester Research Corporation
estimates that by 2003, approximately 200 million business people will be using
the Internet. The significant increase in the number of Internet users has
resulted in a rapid increase in the number of advertisers, products and services
on the Internet. Forrester estimates that approximately $3.3 billion was spent
on Internet and online advertising in 1998, growing to approximately $22.6
billion by the year 2002.
We believe Logio will become an important source not only for free
content, but also for business information that can be purchased for delivery in
electronic form from the Internet. According to a January 2000 study conducted
by Forrester Research, the market for business information sold via the Internet
will reach $11 billion by the year 2004.
The magnitude of the business-to-business market, estimated to be at
minimum $1.3 trillion by 2003, provides Logio with an avenue to focus on the
needs of business people, regardless of industry, while most of the B2B websites
focus on very tight vertical markets (such as steel, waste water treatment,
chemicals). We believe that Logio's `horizontal' focus will create opportunities
for networking and cooperation within the business-to-business marketplace.
Our Solution. Business professionals use the Internet for many reasons
- -- to acquire needed information and/or knowledge, to make business connections,
to obtain business tools and to make purchases. All these resources are
currently available, but scattered about in traditional places and on the
Internet. We seek to bring these solutions together at the Logio business
information service. The Logio.com business portal has the resources to help
business professionals quickly find information they seek:
o A focused, targeted directory of comprehensive information, organized
by occupation.
o A powerful, superior search function that returns results in context
and suggests related concepts.
o News and current events, updated constantly.
Logio also adds the tools and services business professionals generally
need to be efficient:
o Free email and Internet-based group calendaring and scheduling
o Travel services: city guides; hotel, car, airplane reservations
o Maps and directions
o Stock and financial information, portfolio tracking
o Weather information
o Financial calculators
The guiding strategy that we use to achieve our objectives and
differentiate ourselves from our competitors rests on a commitment to timely
relevance, to providing today's business professionals with what they need, when
they need it. This is achieved by constantly identifying and then consolidating
in one place the content and services that business people use. Current
components of Logio product and strategy include:
Robust, Proprietary Business Directory. One of Logio's most useful and
unique information resources is a proprietary business directory. The
directory's organizational structure is simple, but unique. Sites are organized
among broad industries, such as accounting, finance, marketing, sales, human
resources and administration. Business professionals can scan the directory,
find the right category tree, review the titles and abstracts of sites
pertaining to a given subject, and find the ones that should help them get their
job done. Logio's directory will start out with over twenty-five thousand hand
picked business websites.
"Hits in Context" Search Results. The Logio search engine overcomes one
of the most tedious and time-consuming problems on the web. After you do a
search, most search engines make you follow a hyperlink to see if search results
really have what you wanted. Logio shows "hits in context." In other words,
several lines of text surround the search terms you entered. This way, you can
see at a glance if a hit is relevant without leaving the Logio site.
Relevant Products, Services and Features. Because today's business
people don't use the Internet just to find information, part of Logio's charter
is to add features and functionality that will keep users there as much of the
time as possible. Creating individual and group calendars, booking travel and
airline reservations, checking the weather, getting directions and maps, using
the free e-mail service, checking news, and keeping track of investments is just
a start.
Personalization. To develop product affinity with the target audience,
Logio is flexible and able to adjust to the diverse needs of the business
community. The ability to personalize the content stream and functional layout
of the web pages enables the user to define a series of web pages tailored to
their specific taste and needs.
I-Commerce. There are times when needed information is simply not
available for free. At other times, it is less expensive and more efficient to
buy information than to search for it on the Internet. In both cases, the needed
data can often be acquired from a publisher for a price. We are therefore
exploring opportunities and technologies that will enable Logio to deliver
pay-per-view access to a large and valuable library of business reports.
Internationalization. Over the period between 2000 and 2002, our goal
is to create, maintain and support a global presence and develop the ability to
distribute content to all major geographies. We intend to make our service
available in multiple languages and in multiple countries.
Business Model / Revenue Generation. Unlike most other information
services and e-commerce ventures, Logio's value proposition for its customers is
based on convenience, control and choice rather than price. Logio offers its
viewers control and personal management of the vast offerings for business
information and related services. We plan to generate revenue from several key
areas, including advertising, fee-based content, affiliate programs, e-commerce,
co-branding relationships, sponsorships, licensing and merchandising.
Technology Infrastructure. A successful business-to-business Internet
site is available all the time. The Logio site architecture is state-of-the-art.
Designed to be highly available, technically advanced and readily scalable, this
hardware and software configuration can accommodate growth and flex to increased
loads on virtually a moment's notice.
Portfolio of Broadcast Platforms. Although the primary initial platform
is the Internet, we are aggressively exploring content distribution to other
devices, information appliances and platforms.
Partnering. We expect to create long-term, mutually beneficial
partnerships. These partnerships will focus on business media and technology
companies who have a worldwide presence and/or content. We are seeking
affiliations with companies that lend credibility to the Logio brand, and can
benefit from our forward-looking strategies.
Our Business Objectives and Strategy. Logio's objective is to be an
indispensable service for business professionals competing in today's
marketplace, thereby becoming a leading site on the Internet for business
people. We expect to provide the most popular services and the most valuable
content to our customers, with the goal of keeping them on our site for as many
of their Internet-based activities as possible. We will continue to pursue a
convergent media strategy so that we can give business professionals instant
access, anywhere and anytime, to information and services. By supplying them
with cutting edge, comprehensive content, combined with useful features and
powerful tools that can be personalized to meet individual needs, we believe
that Logio will offer today's connected business professional a competitive
edge.
Our research shows that business people typically fall into a highly
desirable demographic profile. They are often well-educated, and possess both
disposable income and business budget dollars to spend on personal and business
purchases. As such, they represent a target market that advertisers have
historically been willing to pay a premium to reach. By tailoring our
destination website to meet the needs of this target market, we believe we will
be able to more quickly generate revenues. According to Zona Research, focused
portals and directories will have an increased impact on the revenues and
advertising expenditures on the Internet. During the next five years online
directory spending for focused portals and directories should increase from 10%
of the overall Internet advertising budget to 80% of the overall Internet
advertising budget.
We believe that, as business people become increasingly familiar with
and dependent on the Internet for information, the market for "paid" content
will continue to accelerate. Logio is positioning itself, from both a
technological and a strategic relationship standpoint, to capitalize on this
trend.
We intend to achieve our business objectives using the following
strategies:
Position Logio as the premier Internet destination for
business professionals. We are developing a comprehensive and strategic brand
strategy that we expect will position Logio as the premier business information
service. Through advertising, we are working to develop market awareness of our
product, and provide strong site traffic. We believe that the site experience
will be such that users will develop loyalty to the brand.
Increase Logio Brand Recognition. We believe brand recognition
on the Internet will be crucial to the growth of Logio. We will actively seek to
develop relationships with companies whose brands will lend credibility and
momentum to ours.
Sales and Marketing. We expect that Logio will generate a large
percentage of its initial revenue from sales of advertising on the site. The
more rapidly we can develop traffic to the site, the more rapidly we will be
able to increase advertising sales. Our ability to fund an aggressive
advertising program that will promote Logio is important. This campaign will
consist of both online and offline components. The online campaign will include
banners and sponsorships, and the offline campaign will include radio,
newspaper, outdoor and funds permitting, television. The company's key partner
in developing the advertising strategy in an internationally recognized firm,
Pittard / Sullivan, headquartered in Los Angeles, California.
Logio's public relations efforts are geared towards developing strong
interest in the site. The company will undertake a full scale publicity campaign
at launch, targeting online, print, and broadcast press for maximum exposure and
site traffic. Our key partner in developing the public relations strategy is
Bailey Gardiner Communications, whose headquarters are in San Diego, California.
The site's "personalization" database is expected to occupy
increasingly greater importance in the marketing strategy. When users come to
the Logio site, they have the option of `customizing' or `personalizing' the
view of the site that they see. This means that they can choose which industry
news feeds they require, what maps and weather reports are first available, and
similar customized functionalities. Some of the information that we will ask for
includes occupation, business type, and industry and information. While
providing this kind of information makes the site all the more useful to the
individual user, it also makes our customers more valuable to advertisers. We
will be able to provide e-mail updates on a periodic basis, and offer specials
based on user preferences.
Customer Support and Services. We believe that our Internet site should
be available virtually all the time. The customer support and services aspect of
the company is therefore reliant on a round-the-clock team that constantly
monitors the operations of the Logio website.
Competition. Our market is new, very competitive and subject to rapid
technological and content change. We expect competition to persist, increase,
and intensify in the future as the markets for our products and services
continue to develop and as additional companies enter our markets. A number of
companies are now participating in the development and operation of portals. For
the sake of this discussion, we have divided them into three categories:
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Type Mega Portals General Portals Business Portals
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Examples AOL Lycos Dowjones.com
Yahoo! GO BizProLink
MSN Snap VerticalNet
Excite Brint.com
Office.com
- --------------------------------------------------------------------------------
The Mega Portals focus on satisfying the needs of every internet user.
They are large, well-funded and established companies that have millions of
daily users. Each has a section devoted to business.
The General Portals compete with the Mega Portals for a share of the
consumer market. The difference between general and mega portals is primarily
related to prominence in the market. For example, GO (owned by Disney) recently
announced that they were refocusing their efforts and would be refocusing their
site on Entertainment and Recreational activities. This decision occurred after
spending a year trying to grow the number of unique visitors to the site. We
believe that Go's decision is a good indicator of the trend towards
specialization on the Internet.
Business Portals can be broken down into three different groups. The
first group represents the Internet presence of an established print
publication. The second group specializes in delivering information to highly
specialized vertical markets. The third and final group is focused on meeting
the needs of small businesses.
Several of the participants in each of these market sectors have
established web presence and brands, and have been offering their services for a
number of years. The increased use and visibility of Logio will depend, in large
part, on our ability to continue adding content and services to our site,
maintaining operational performance levels, and effectively marketing our
product. We also believe it will be essential for us to develop long-term
business alliances with parties with which we can enter into strategic
relationships. We believe we will need to make significant investments in
research and development in order to keep up with the technological and
operational demands imposed by the anticipated ongoing developments in the
Internet.
At the present time, we have not identified any other companies that
are using precisely the same approach as Logio, or are targeting the horizontal
market as we are. Nonetheless, there is always the potential that other, larger
interests will choose to enter the market we are developing, or that a new
market may emerge. We may not be able to compete effectively with current and
future competitors.
Product Development.
The existing Logio site represents and investment of approximately
$3.5 million in equipment, software, interface design, underlying application
development software, and general costs. The site is connected to the Internet
using Cisco gear, and is hosted by Qwest communications. The technology
selection process for the site is governed by several fundamental principles.
o Internet users want sites to be up constantly, and to load fast.
Hardware is chosen and code is written accordingly.
o The site must be easily and quickly expanded or modified without
adversely affecting performance.
o Equipment and software is supplied by manufacturers with proven track
records and a commitment to timely and effective support.
o The solution must be cost effective.
We elected to use Sun Microsystems Enterprise computers for the core
hardware. These systems have been proven in Internet applications. They are also
readily available should we need to either grow the system quickly, or if a
system should fail. All systems are built using standard components, such that
all hard drives in all systems are the same. This means we have a consolidated
inventory list for field service, and enables us to reuse or re-purpose
individual systems or components as the need demands.
In addition to our proprietary application software, the Logio site
uses iPlanet's (formerly the Sun/Netscape Alliance) Application and Enterprise
Servers, Oracle's 8I Parallel Database Server, the Veritas Volume Management
System, and Dataware's InQuery Search and Retrieval engine.
Our initial target platform for distribution of business relevant
information and services is the Internet. Logio will aggressively develop
distribution capabilities for other digital-enabled devices. These may include;
Intranet, personal digital assistants (PDA), pagers, cellular and smart phones,
electronic books, global positioning systems (GPS), set top boxes and
traditional broadcast channels.
Our ability to successfully develop and release new products and
enhancements to Logio in a timely manner will be subject to a variety of
factors, including our ability to solve technical problems and test products,
the availability of financial, sales and management resources, and other
factors, some of which we may not be able to control. We may experience
difficulties that could delay or prevent our successful development,
introduction or marketing of new products and enhancements.
Material Contracts. We are a party to the following material contracts
and arrangements:
Brigham Young University License. On February 14, 1997 we signed a
master license agreement with BYU, under which we obtained the exclusive
worldwide rights to use, develop, manufacture, market, and modify the
WordCruncher technology. BYU retained the ownership rights to any improvements
to the WordCruncher technology that we develop. We issued BYU (and certain
individuals who developed the licensed technology while they were employed by
BYU) 110,742 shares of common stock for this license. In July 1998, we issued
BYU an additional 434,019 shares of common stock in connection with our
acquisition of WordCruncher Publishing Technologies. The WordCruncher technology
constitutes the core search technology we use in our "Logio" product.
The term of this license is for as long as allowed by law, but it may
be terminated if we materially breach the license. We are required to pay BYU a
royalty of 3% of our adjusted gross sales. Annual minimum royalties began in
January 1999, and $20,000 was due for 1999. The minimum royalty payments
increase annually and, in 2002, will be capped at $150,000. In addition, when we
acquired the License, BYU had already sublicensed the technology to several
other parties for royalty payments ranging from 3% to 8% of the sublicensee's
gross sales. Under the term of the license, we are required to pass through to
BYU 50% of the royalty payments we receive from these sublicenses.
Dataware License. In July 1999 we signed a three year source code
software license agreement with Dataware Technologies, Inc. granting us access
to code for Dataware's proprietary search engine technology. We intend to blend
this technology with our search technologies as we continue to develop our
overall product line. The license has a two year renewal option and cost us
$350,000. In connection with this agreement, we also signed a Consulting
Agreement with Acsiom Inc., an affiliate of Dataware, to provide consulting
services relating to the integration of the Dataware search engine into our
existing technology, including our business professional portal site. This
agreement requires us to pay hourly developer consulting fees ranging from $100
- - $150 per hour.
Pittard Sullivan Contract. In July 1999 we retained Pittard Sullivan, a
marketing communications company in the media and entertainment industries, to
provide us with brand strategy, brand identity and site design consulting
services. Brand strategy and identity efforts include the development of the
brand vision, brand mission, brand positioning policies, and an articulation of
our core branding values. Site development consulting efforts include creative
conceptualization and strategic analysis, design creation, production and
implementation, and testing. This contract runs through year end 1999 and has
cost $365,000.
Digital Boardwalk Agreement. In June 1999 we signed a strategic
agreement with Digital Boardwalk, a commercial website developer and e-commerce
specialist, to integrate business information resources and services offered
within our portal site for business professionals. Components of this effort
include specifications and development of user services and features, web
application flow, site security, third-party data sources, and methods for
connecting the application to our existing data infrastructure. The contract was
for $50,000 and expired in July, 1999. We are currently negotiating an
additional contract with Boardwalk that will be for approximately $200,000.
Purchase Agreement. In February and March 1999, we sold 6,300 shares of
our newly designated Series A Preferred Stock to eight investors under the terms
of a purchase agreement. We received a total of $6.3 million in the transaction.
After we paid the expenses of the placement agent ($378,000) and our other
expenses for the transaction ($15,000), we netted $5,907,900 from the sale. In
connection with the transaction, we also issued warrants to both the purchasers
and the placement agent and granted those parties certain registration rights
for the shares of common stock they can acquire by converting the Series A
Preferred Stock and exercising the warrants.
Columbia Financial Group Services Agreement. In January 1999, we
entered into a services agreement with Columbia Financial Group. Columbia
provides investor relations services for a number of public companies,
particularly those companies that are involved in the Internet business. Under
the agreement, we agreed to grant Columbia warrants to purchase for five years
up to 200,000 shares of our common stock for $5 per share.
Sierra Systems Consulting and Development Agreement. In September 1999,
we entered into a consulting and development contract agreement with Sierra
Systems Consultants, Inc. Under the terms of the agreement, Sierra provides web
site development support services for launching our web site, including the
development, delivery, testing and debugging of our web site technology. We are
required to pay a fixed price of $500,000 in exchange for these services, to be
paid in four installment payments based upon meeting certain milestones.
Veritas Software Financial Agreement. In November 1999, we entered into
a software purchase agreement with Veritas Software. Under the agreement, we are
purchasing software products that will be used in the delivery of our web site
for $60,830. The purchase price must be paid in full by May 2000.
Netscape Software Financial Agreement. In November 1999, we entered
into a software purchase agreement with Netscape. Under the terms of the
agreement, we are purchasing software products, including maintenance services,
for the delivery of our web site. The purchase price for the software products
and maintenance services is $268,068.72, which must be paid in full by November
2000.
Oracle Software Agreement. In November 1999, we entered into a software
license agreement with Oracle Corporation. Under the terms of the agreement, we
have a non-exclusive license to use certain Oracle software products which
manage our database. The purchase price under the license agreement is
approximately $257,000, which is paid in four quarterly payments after an
initial payment and includes support services for one year. The term of the
agreement is for two years, with a November 2001 expiration date.
Sun Microsystems License Agreement. In December 1999, we entered into a
master lease agreement with Sun Microsystems Finance. Under the lease agreement,
we lease the server equipment necessary to host our web site. The term of the
lease is for two years, with a December 2001 expiration date. The monthly
payments under this agreement are approximately $28,500 per month, for the two
year period.
Qwest Dedicated Internet Access Service Agreement. In January 2000, we
entered into an internet access agreement with Qwest Internet Solutions, Inc.
Under the terms of the agreement, Qwest hosts and provides internet access to
our web site for a monthly fee of $2,200 and variable charges based on usage of
our site. The term of the agreement is for two years, expiring in January 2002,
but automatically renews for successive two year terms unless either party gives
60 days notice prior to the expiration date.
Netdotworks Consulting and Support Agreement. In February 2000, we
entered into a consulting and support agreement with Netdotworks, Corporation.
Under the agreement, Netdotworks provides web site administration and management
consulting and support services for our web site. We are required to pay $90,000
per month for the initial 120 day term. Upon expiration of the initial 120 day
term, we have the option to extend the agreement for an additional 240 day term,
or on a month to month basis until February 2001.
DoubleClick, Inc. DART Service Agreement. In February 2000, we entered
into an agreement with DoubleClick Inc. Under the terms of the agreement,
DoubleClick provides advertisement delivery services for our web site. We are
required to pay monthly service fees based on the number of banner impressions
that are delivered to our web site through the service. The agreement expires in
December 2000, after which we would have to renegotiate a new agreement with
DoubleClick if we wished to continue receiving the services.
Corporate Development. Our predecessor in interest was incorporated in
the State of California on May 2, 1997, as Dunamis, Inc. Dunamis, Inc. was
formed for the purpose of publishing and marketing books and audio and video
tapes. On June 25, 1998, Dunamis, Inc. completed a merger with a Nevada
corporation that had been created for the sole purpose for changing Dunamis,
Inc.'s domicile from California to Nevada. On July 14, 1998, the surviving
entity in that transaction completed a merger with WordCruncher Publishing
Technologies, Inc., formerly known as Redstone Publishing, Inc., a Utah
corporation. The Nevada corporation was the surviving entity in that transaction
and, as part of the transaction, changed its name to "WordCruncher Internet
Technologies, Inc."
Patents, Licenses and Intellectual Property. Our success will depend,
in part, on our ability to obtain and protect patents, maintain trade secrets
and operate without infringing on the proprietary rights of others in the United
States and other countries. We intend to file patent applications relating to
our technology, products and processes as the need arises. However, any of these
patents or patent applications could be challenged, invalidated or circumvented
by our competitors.
If we were to become involved in a dispute regarding our intellectual
property, we may have to participate in interference proceedings before the
United States Patent and Trademark Office to determine who has the first claim
to the rights involved. We could also be forced to seek a judicial determination
concerning the rights in question. These types of proceedings can be costly and
time consuming, even if we eventually prevail. If we did not prevail, we could
be forced to pay potentially significant damages, obtain a license to the
technology in question, or stop commercializing a certain product.
We also rely on trade secrets, proprietary know-how and confidentiality
provisions in agreements with employees and consultants to protect our
intellectual property rights. These other parties may not comply with the terms
of their agreements with us, and we may not be able to adequately enforce our
rights against those parties.
We have adopted a policy of requiring our employees and collaborators
to execute confidentiality agreements when they commence employment or
consulting relationships with us. These agreements generally provide that all
confidential information developed or made known to the individual during the
course of his or her relationship with us is to be kept confidential and not
disclosed to third parties, except under certain specific circumstances. In the
case of employees, the agreements also provide that all inventions conceived by
the individual in the course of his or her employment will be our exclusive
property.
Employees. As of March 20, 2000, we had 23 employees 19 independent
contractors. Approximately 20 of our employees are engaged in development
activities, 10 are engaged in operational activities, 6 are engaged in
administrative and finance functions, and 6 are engaged in sales or marketing.
Our employees are not presently covered by any collective bargaining agreement.
We believe our relations with our employees are good, and we have not
experienced any work stoppages.
Item 2. Properties.
On December 31, 1999, we leased 3,600 square feet of administrative,
office and developmental space at the Town Square Professional Plaza in Draper,
Utah 84020. On March 21, 2000, we amended the lease to include an additional
1,800 square feet of administration and development space, and the term of the
lease is from March 15, 1999 until March 31, 2002. Beginning on April 1, 2000,
the rental for the space will be $5,728 per month, which we believe is typical
for similar premises in the area. We believe that our current office space is
adequate for our needs.
Item 3. Legal Proceedings.
We are not a party to any proceeding or threatened proceeding as of the
date of this annual report.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of our stockholders during the
fourth quarter of the fiscal year ended December 31, 1999.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Since July 1998, our common stock has been traded over-the-counter and
quoted on the OTC Electronic Bulletin Board under the symbol "WCTI." Standard
Registrar and Transfer Company, Inc. currently, acts as transfer agent and
registrar for the common stock. The following table presents the range of the
high and low bid prices of our common stock as reported by the Nasdaq Trading
and Market Services for each of the periods indicated. The quotations shown
below represent prices between dealers, may not include retail markups,
markdowns, or commissions and may not necessarily represent actual transactions:
Year Quarter High Low
--------- ------------------- ----------- -----------
1999 First Quarter $36.25 $ 4.78
Second Quarter $ 7.81 $ 3.56
Third Quarter $ 6.13 $ 3.63
Fourth Quarter $ 5.75 $ 3.19
First Quarter $14.00 $ 5.75
2000 (through 3/20/00)
There were approximately 147 holders of record of our common stock and
8 holders of record of our Series A Preferred Stock as of December 31, 1999.
We have never declared or paid any cash dividends on our common stock.
We do not intend to pay any cash dividends on our common stock for the
foreseeable future.
The following discussion describes all securities we have sold within
the past three years without registration:
On May 16, 1997 we issued 1,500,000 shares of WordCruncher Publishing
common stock for $1,500 in cash to Carol N. Purcell and Wilford Purcell, the
founders of Dumanis, Inc. In July 1998, these shares were exchanged for
1,500,000 shares of WordCruncher Internet Technologies common stock.
Beginning on May 15 and ending on June 11, 1997, we sold, in exchange,
1,500,000 shares of common stock at $.05 per share, for an aggregate offering
amount of $75,000 pursuant to Rule 504 of Regulation D of the Securities Act.
On July 14, 1998, the Company issued an aggregate of 2,433,334 shares
of common stock to the stockholders of WordCruncher Publishing in a merger of
that company into ours.
On July 1, 1998, we issued 13,500 shares of common stock, valued at
$13,000, to M. Daniel Lunt, one of our officers and directors, in satisfaction
of a note we issued to Mr. Lunt.
On October 30, 1998 we issued an aggregate of 39,000 shares of common
stock, for $70,200, to four individuals in consideration for services they
provided to us. Specifically, 29,000 restricted shares were issued to Timothy J.
Riker, 5,000 shares to Peter T. Stoop, and 5,000 shares to Robert J. Stevens.
In October 1998, we issued 13,000 shares of common stock to Jeffrey B.
Peterson to acquire certain intellectual property rights held by Mr. Peterson.
We valued those shares at $24,000.
In November 1998, we issued 25,000 shares of common stock to Universal
Business Insurance in satisfaction of insurance premiums we owed to it. We
valued those shares at $25,000. On December 7, 1999, we converted approximately
$26,000 of debt to Universal Business Insurance into 8,000 shares of our common
stock, which we valued at $3.25 per share.
On February 8 and March 15, 1999, we issued an aggregate of 6,300
shares of Series A Convertible Preferred Stock to eight persons pursuant to a
purchase agreement. The Series A Convertible Preferred Stock was issued for an
aggregate of $6.3 million. Through March 2000, all of the holders of the issued
Series A Convertible Preferred Stock elected to convert such preferred stock
into 625,000 shares of our common stock. We have issued an additional 727,756
shares of our common stock to our Series A Convertible Preferred Stockholders
pursuant to the provisions of the purchase agreement by which the preferred
stock was purchased. We also issued 61,650 shares of our common stock to our
Series A Convertible Preferred Stockholders through March, 2000, as a cumulative
dividend.
In June, 1999 we issued 2,000 shares valued at $22,000 to two of our
former employees in connection with their termination of employment with us.
During fiscal year 1999, our employees exercised a total of 4,000
options at an exercise price of $.10 per share. In each of January and March,
2000, we issued an additional 2,000 shares, for a total of an additional 4,000
shares, upon the exercise of options held by our employees at an exercise price
of $.10 per share.
In January, 2000, Columbia Financial Group exercised its warrant in
part and purchased from us 100,000 shares of our common stock at a price of
$5.00 per share.
In March, 2000, Cardinal Capital and three of its assignees exercised
its warrant to purchase an aggregate of 58,000 shares of our common stock at an
exercise price of $7.00 per share.
In connection with each of these isolated issuances of our securities,
we believe that each purchaser (i) was aware that the securities had not been
registered under federal securities laws, (ii) acquired the securities for its
own account for investment purposes and not with a view to or for resale in
connection with any distribution for purposes of the federal securities laws,
(iii) understood that the securities would need to be indefinitely held unless
registered or an exemption from registration applied to a proposed disposition
and (iv) was aware that the certificate representing the securities would bear a
legend restricting their transfer. We believe that, in light of the foregoing,
the sale of our securities to the respective acquirers did not constitute the
sale of an unregistered security in violation of the federal securities laws and
regulations by reason of the exemptions provided under ss.ss. 3(b) and 4(2) of
the Securities Act, and the rules and regulations promulgated thereunder.
Item 6. Selected Financial Data.
The financial information set forth below with respect to our
statements of operations for each of the years in the two-year period ended
December 31, 1998, and with respect to our balance sheets at December 31, 1997
and 1998 is derived from the financial statements that have been audited by our
former independent certified public accountants, Crouch, Bierwolf & Chisholm,
and is qualified by reference to such financial statements and notes related
thereto. The financial information set forth below with respect to our
statements of operations for the one-year period ended December 31, 1999, and
with respect to our balance sheet at December 31, 1999 is derived from the
financial statements that have been audited by our current independent certified
public accountants, Grant Thornton, and is qualified by reference to such
financial statements and notes related thereto. The following selected financial
data should be read in conjunction with our financial statements and notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Result of Operations."
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1999 1998 1997
------------- ------------- -------------
Revenues:
<S> <C> <C> <C>
Product Sales.................................. $ 15,289 $ 32,884 $ 16,034
Contract research revenues, royalties and
license fees 8,066 49,794 8,450
------------- ------------- -------------
Total revenues............................. 23,355 $ 82,678 $ 24,484
Cost of sales & royalties...................... 15,071 $ 15,864 $ 806
------------- ------------- -------------
Gross Profit (loss) 8,284 66,814 23,678
Operating costs and expenses:
Research & development......................... 1,198,546 266,563 126,281
Sales & marketing.............................. 953,708 34,554 5,274
General & administrative....................... 1,340,486 217,318 206,874
Depreciation & amortization.................... 179,169 10,406 6,419
Compensation expense for common stock and
options 1,452,610 - -
------------- ------------- -------------
Total operating expense.................... 5,124,519 528,841 344,848
------------- ------------- -------------
Operating loss................................... (5,116,235) (462,027) (321,170)
Other income and (expense)
Interest income and other, net................. 196,310 7,276 3,077
Interest expense............................... (9,955) (28,158) (17,125)
------------- ------------- -------------
Total other income and (expense), net...... 186,355 (20,882) (14,048)
Loss before income taxes......................... (4,929,880) (482,909) (335,218)
Provision for income taxes....................... - - -
------------- ------------- -------------
Net loss......................................... $ (4,929,880) $ (482,909) $ (335,218)
============= ============= =============
Deduction for dividends and accretion............ (6,469,861) - -
------------- ------------- -------------
Net loss attributable to common stockholders..... $(11,399,741) $ (482,909) $ (335,218)
============= ============= =============
Basic and Diluted loss per common share.......... $(0.96) $(0.08) $(0.61)
Weighted average outstanding shares.............. 11,879,919 6,100,679 545,535
============= ============= =============
Balance Sheet Data:
Cash and cash equivalents........................ $ 1,055,371 $ 425,702 $ 10,369
Total Assets..................................... 4,769,737 623,617 139,928
Long term liabilities, including current portion. 553,333 147,620 342,272
Deficit accumulated during the development stage. (12,217,868) (818,127)
Total Stockholders' Equity (deficit)............. 3,164,054 441,084 (208,943)
See Notes to Financial Statements for information concerning the computation of
per share amounts.
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of a number of
factors.
Overview. We are a development stage company and our initial product,
has only recently been available for use in the marketplace. We launched on
website at www.logio.com on March 19, 2000. We are continuing to develop and
market Logio for the business professional.
We have devoted most of our resources since inception in November 1996
to the research and development of Logio and are now beginning to expend
additional resources on the development of brand awareness of "Logio." As of
December 31, 1999, we had an accumulated earnings deficit of $12,217,868. We
expect our operating losses to continue until we develop a sufficient customer
and advertising base to cover our operating expenses.
Reverse Acquisition Treatment. Our predecessor in interest was
incorporated in the state of California on May 2, 1997, as Dunamis, Inc. Dunamis
was formed for the purpose of publishing and marketing books and audio and video
tapes. On June 25, 1998, Dunamis completed a merger with a Nevada corporation
that had been created for the sole purpose of changing Dunamis' domicile from
California to Nevada. On July 14, 1998, the surviving entity in that transaction
completed a merger with WordCruncher Publishing Technologies, Inc., formerly
"Redstone Publishing, Inc.", a Utah corporation that was formed in November,
1996. The Nevada corporation was the surviving entity in that transaction and,
as part of the transaction, changed its name to "WordCruncher Internet
Technologies, Inc." At the time of the merger, WordCruncher Publishing
Technologies held the rights to a significant portion of the intellectual
property upon which our site was initially designed. As a result of the merger,
the former shareholders of WordCruncher Publishing Technologies, Inc. also
obtained a majority of the voting power of the combined companies. Accordingly,
in conformance with generally accepted accounting principles, the merger has
been accounted for as a "reverse acquisition." Consistent with reverse
acquisition accounting treatment, our accounting statements are the financial
statements of WordCruncher Publishing Technologies, Inc. and differ from the
financial statements of Dunamis, Inc.
Stock Split and Change in Par Value. In July 1998, we authorized a 3
for 1 forward stock split. We have retroactively restated our financial
statements to reflect that stock split. In connection with the reverse merger
with Dunamis, we also changed the par value of our common stock to $.001. That
change has also been retroactively applied in our financial statements. Unless
otherwise noted in this prospectus, all share amounts reflect the forward stock
split.
Results of Operation. The following summarizes the results of our
operations for the years ended December 31, 1999 and 1998 and 1997.
Year Ended December 31,
-----------------------
1999 1998 1997
------------ ----------- -----------
Revenues $23,355 $82,678 24,484
Cost of sales 15,071 15,864 806
------------ ----------- -----------
Gross profit (loss) $ 8,284 $66,814 $23,678
Research & development 1,198,546 266,563 126,281
Sales & marketing 953,708 34,554 5,274
General & administrative 1,340,486 217,318 206,874
Depreciation & amortization 179,169 10,406 6,419
Compensation expense for common stock
and options 1,452,610 - -
------------ ----------- -----------
Total operating expense 5,124,519 528,841 344,848
Operating Loss $(5,116,235) (462,027) (321,170)
Interest income 196,310 7,276 3,077
Interest Expense (9,955) (28,158) (17,125)
------------ ----------- -----------
Total interest income (expense) 186,345 (20,882) (14,048)
Net loss $(4,929,880) $ (482,909) $ (335,218)
============ =========== ===========
Our expenses have exceeded our revenues for each fiscal period since
our inception. The revenues we have generated to date have been nominal and
almost exclusively related to product sales and licensing fees for our personal
computer based version of our software. Those revenues will continue to decrease
as we switch our development and marketing emphasis to an Internet version of
Logio. Accordingly, we believe a comparison of the results of our operations on
a period-by-period basis is of limited benefit. We expect that, as we continue
to implement our business plan, our revenues will grow, along with the burdens
generally associated with larger revenues, including increased expenses for our
managerial, accounting and technical personnel.
Comparison of Year End Periods. Following is a comparison of our
operating results for the year ended December 31, 1999 with the year ended
December 31, 1998:
Revenue. Revenues decreased $59,323 from $82,678 for the year
ended December 31,1998, to $23,355 for the year ended December 31, 1999. This
72% decrease was due to the discontinuation of our PC-based product and our
intense focus on the development of our Logio.com site which has only recently
become available to the marketplace.
Costs of Revenues. Cost of revenues remained relatively flat
with 1998 cost of sales amounting to $15,864 and 1999 amounting to $15,071. This
slight decrease in cost of sales in the face of significant declines in revenue
is attributed to the added cost of discontinuing our PC based lines.
Research & Development. Research and development expense
increased nearly 450% from $266,563 in 1998 to $1,198,546 in 1999. This was due
to the significant level of expenditure involved in the development of our
Logio.com site over the past 12 months.
Selling Expenses. Sales and marketing expenses also increased
significantly from $34,554 in 1998 to $953,708 in 1999, an increase of nearly
2800%, as we prepared to and initiated the sales effort in connection with our
Logio.com site. Nearly 50% of these monies were spent in connection with our
advertising and branding campaign with Pittard Sullivan and a majority of the
balance was devoted to salaries and marketing fees.
General and Administrative. General and administrative expense
increased significantly in 1999, as we increased staff in preparation for
commercial operations. During 1999, as compared to 1998, our general and
administrative expenses increased 617% to $1,340,486 from $217,138.
Depreciation and Amortization. Depreciation and amortization
expense increased from $10,406 in 1998 to $179,169 in 1999 primarily due to the
additional property, equipment and software that we acquired in 1999 to support
our website operations.
Total Operating Expenses. Total operating expenses increased
$4,595,678 from $528,841 in 1998 to $5,124,519 in 1999. This 969% increase in
operating expenses resulted in an operating loss for 1999 of $5,116,235, an
increased loss of $4,654,208 over the 1998 loss of $462,027.
Other Income. Other income increased from $7,276 in 1998 to
$196,310 in 1999, a 2700% increase, as interest and dividends on invested cash
increased significantly based on higher cash balances associated with the cash
proceeds received from the Series A Preferred Share offering. These cash
balances are temporarily invested pending their ultimate use in funding
development activities.
Interest Expense. As a result of decreased borrowing, our
interest expense decreased from $28,158 in 1998 to $9,955 in 1999.
Net Loss. Our net loss for 1999 grew $4,446,971 to $4,929,880,
compared to a loss of $482,909 for 1998 as a result of our increased costs and
expenses related to the research, development and implementation of our
Logio.com website operations.
Net Loss Attributable to Common Shareholders. Giving effect to
the beneficial conversion feature of our Series A Preferred Share offering, our
total loss attributable to common shareholders was $11,399,741 in 1999. This
resulted in an increase to additional paid in capital and a corresponding
accumulated increase in deficit. This was the first year that the beneficial
conversion feature was available to the preferred stockholders.
Quarterly Trends. We do not anticipate significant "seasonal" changes
in our operations. We expect revenues to grow consistently over the next five
years, but we believe they should grow reasonably even from quarter to quarter.
We believe revenues will come initially from advertising sales at our site. We
believe we will generate additional revenues through our partnership
arrangements with other sites that use Logio in other commerce-related areas
over the Internet and through the sale of information through the Logio site.
Liquidity and Capital Resources. Since our inception, we have funded
our cash requirements through debt and equity financings. We have used the funds
from those transactions to fund our investment in the development of our
Logio.com business information site, provide working capital and for general
corporate purposes. As of the year ended December 31, 1997, we had total assets
of $139,928, and total liabilities of approximately $348,872, resulting in a
negative net worth of $208,943. Our operating losses totaled $335,218. These
losses were funded primarily by related party loans, which were backed by a
revolving bank line of credit. In connection with the merger between
WordCruncher Publishing Technologies, Inc. and Dunamis, Inc. in July 1998, we
obtained a significant new source of operating capital. At the time of the
merger, Dunamis, Inc. held cash reserves of approximately $1 million, and had no
liabilities. As a result of that transaction, our total assets for the year
ended December 31, 1998 were $623,617, including cash or cash equivalents of
$425,702. Our liabilities totaled $182,533, resulting in a stockholders equity
of $441,084, including an operating loss of $482,909 for the year ending
December 31, 1998. Cash provided by financing activities in 1999 included $6.3
million, from our sale of our Series A Preferred Stock to eight investors. Our
expenses for the offering totaled $392,100, resulting in net proceeds to us of
$5,907,900. As a result, as of December 31, 1999, we had total assets of
$4,769,737. Our total liabilities as of that date were $1,605,683 and our
stockholders' equity was $3,164,054. This includes an increase to accumulated
deficit of $6,469,861 and a corresponding increase to paid-in capital in
recognition of the beneficial conversion feature of our convertible preferred
shares issued during the period. We used $2,986,246 in cash for operations. Cash
was used to pay salaries related to development, marketing and administrative
personnel, building operating lease and other operating payables. Cash was used
in investing related activities, including $1,260,831 in property and equipment
purchases and purchases of short-term investments totaling $1,454,207. Our cash,
cash equivalents and short term investments at December 31, 1999 totaled
$2,517,518.
A summary of our audited balance sheets for the years ended December
31, 1999, 1998 and 1997 are as follows:
Year Ended December 31,
-----------------------
1999 1998 1997
Cash and Cash Equivalents and Short- ----------- ----------- ----------
Term Investments $2,517,518 $425,702 $10,369
Current Assets $2,833,391 $425,702 $15,369
Total Assets $4,769,737 $623,617 $139,928
Current Liabilities $1,352,333 $170,919 $321,307
Total Liabilities $1,605,683 $182,533 $348,872
Total Stockholders' Equity $3,164,054 $441,084 $(208,943)
Total Liabilities & Stockholders' Equity $4,769,737 $623,617 $139,928
We have the resources to continue our product development efforts,
commence commercial operations and to initiate our sales, marketing and
promotional activities for Logio through the end of the third quarter of 2000,
based upon our current estimates of projected expenditures during the period. We
operate in a very competitive industry that requires continued large amounts of
capital to develop and promote its products. Many of our competitors have
significantly greater capital resources. We believe it will be essential to
continue to raise additional capital, both internally and externally to compete
in this industry.
Our need to raise external capital in the future will depend upon many
factors, including, but not limited to, the rate of sales growth and market
acceptance of our product lines, the amount and timing of our necessary research
and development expenditures, the amount and timing of our expenditures to
sufficiently market and promote our products and the amount and timing of any
accessory new product introductions. In addition to accessing the public equity
markets, we will pursue bank credit lines and equipment lease lines for certain
capital expenditures. However, there can be no assurance that we will be able to
access the capital we need.
We currently estimate that we will require between $25 and $30 million
to develop our products and launch our operations in accordance with our
business plan through 2002. The actual costs will depend on a number of factors,
including
o our ability to negotiate favorable prices for purchases of necessary
portal components,
o the number of our customers and advertisers,
o the services for which they subscribe,
o the nature and success of the services that we offer,
o regulatory changes, and
o changes in technology.
In addition, our actual costs and revenues could vary from the amounts
we expect or budget, possibly materially, and those variations are likely to
affect how much additional financing we will need for our operations.
Accordingly, there can be no assurance our actual financial needs will not
exceed the amounts available to us.
To the extent that we acquire the amounts necessary to fund our
business plan through the issuance of equity securities, our then-current
shareholders may experience dilution in the value per share of their equity
securities. The acquisition of funding through the issuance of debt could result
in a substantial portion of our cash flows from operations being dedicated to
the payment of principal and interest on that indebtedness, and could render us
more vulnerable to competitive and economic downturns.
Recent Accounting Pronouncements . In June 1998, Statement of Financing
Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging
Activities" was released. The Statement requires recognition of all derivatives
as either assets or liabilities on a company's balance sheet and the measurement
of those instruments at fair market value. The Statement provides for the
accounting treatment of changes in the fair value of a derivative depending on
the planned use of the derivative and the resulting designation. We are required
to implement the Statement in the first quarter of fiscal 2000. We have not used
derivative instruments, however, and we believe that the impact of the adoption
of this Statement will not have a significant effect on our financial
statements.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for Costs of Computer Software
Developed or Obtained for Internal Use." The Statement is effective for fiscal
years beginning after December 15, 1998. The statement provides guidance and
accounting for the cost of computer software developed or obtained for internal
use by a company. We adopted this Statement on January 1, 1999, but do not
believe that it will have a significant effect on our financial statements.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-4, "Deferral of the Effective Date of a
Provision of Statement of Position 97-2." The Statement of Position 98-4 defers
for one year the application of certain provisions of Statement of Position
97-2, "Software Revenue Recognition." Different informal and non-authoritative
interpretations of certain provisions of Statement of Position 97-2 have been
printed and, as a result, the American Institute of Certified Public Accountants
issued Statement of Position 98-9 in December 1998 which is effective for
periods beginning on or after March 15, 1999. Statement of Position 98-9 extends
the effective date of Statement of Position 98-4 and provides additional
interpretative guidance. The adoption of Statement of Position 97-2, Statement
of Position 98-4, and Statement of Position 98-9 have not have and are not
expected to have a material impact on our results of operations, financial
position or cash flows. However, due to the uncertainties related to the outcome
of these amendments, we cannot determine the impact of the Statement on our
future financial results.
Statement of Financial Accounting Standards, or SFAS, No. 130,
"Reporting Comprehensive Income," requires that all items that are required to
be recognized under accounting standards as components of comprehensive income
be reported in a financial statement that is displayed with the same prominence
as other financial statements. We adopted the provisions of SFAS No. 130
beginning January 1, 1998, as required. Our comprehensive losses and net losses
are not materially different for all periods presented.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," establishes standards for reporting information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. We adopted the
provisions of SFAS No. 131 for the year ending December 31, 1998 as required.
Currently, we do not believe we have any separately reportable business segments
or other disclosure information required by the Statement.
New Accounting Pronouncements. We have reviewed all recently issued,
but not yet adopted, accounting standards to determine their effects, if any, on
our results of operations or financial position. Based on our review, we believe
that none of these pronouncements will have a significant effect on our current
or future earnings or operations.
Item 8. Financial Statements and Supplementary Data.
<PAGE>
<TABLE>
<CAPTION>
WORDCRUNCHER INTERNET TECHNOLOGIES, INC.
INDEX TO FINANCIAL STATEMENTS
Page
-----
INDEPENDENT AUDITORS' REPORTS
<S> <C>
Report of Grant Thornton LLP, independent certified public accountants
on the December 31, 1999 financial statements F-2
Report of Crouch, Bierwolf and Chisholm independent certified public accountants
on the December 31, 1998 and 1997 financial statements F-3
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets as of December 31, 1999 and 1998 F-4
Statements of Operations for the Years Ended
December 31, 1999, 1998, 1997, and cumulative amounts since inception F-5
Statement of Stockholders' Equity for the Years Ended
December 31, 1999, 1998, 1997, and cumulative amounts since inception F-6
Statements of Cash Flows for the Years Ended
December 31, 1999, 1998, 1997, and cumulative amounts since inception F-9
Notes to Financial Statements F-11
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
WordCruncher Internet Technologies, Inc.
We have audited the accompanying consolidated balance sheet of
WordCruncher Internet Technologies, Inc. (a development stage company), as of
December 31, 1999, and the related consolidated statements of operations,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements, audited by other auditors, for the period
from November 5, 1996 (inception) to December 31, 1998 reflect total revenues
and net loss of $107,162 and $818,127, respectively, of the related totals. Our
opinion insofar as it relates to the cumulative amounts since inception included
for such prior period, is based solely on the report of other auditors.
We conducted our audit 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 audit and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audit and the report of other auditors,
the 1999 financial statements referred to above present fairly, in all material
respects, the consolidated financial position of WordCruncher Internet
Technologies, Inc. (a development stage company), as of December 31, 1999, and
the consolidated results of their operations and their consolidated cash flows
for the year then ended and cumulative amounts since inception in conformity
with generally accepted accounting principles.
The Company is in the development stage as of December 31, 1999. Recovery of the
Company's assets is dependent on future events, the outcome of which is
indeterminable. In addition, successful completion of the Company's development
plan and its transition, ultimately, to attaining profitable operations, is
dependent upon obtaining adequate financing to fulfil its development activities
and achieving a level of sales adequate to support the Company's cost structure.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As shown in the financial statements,
the Company has incurred consolidated cumulative net losses attributable to
common stockholders of $12,217,868 since inception of operations. This factor,
among others, as discussed in Note B to the financial statements, raises
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note B. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/GRANT THORNTON LLP
Salt Lake City, Utah
March 6, 2000
F-2
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of WordCruncher Internet Technologies, Inc.
We have audited the accompanying consolidated balance sheets of WordCruncher
Internet Technologies, Inc. (a development stage company) as of December 31,
1998 and 1997 and the related statements of operations, stockholders' equity and
cash flows for the years ended December 31, 1998, 1997 and 1996 and from
inception of the development stage on November 5, 1996 through December 31,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 WordCruncher
Internet Technologies, Inc. (a development stage company) as of December 31,
1998 and 1997 and the results of its consolidated operations and cash flows for
the years ended December 31, 1998, 1997 and 1996 and from inception of the
development stage on November 5, 1996 through December 31, 1998 in conformity
with generally accepted accounting principles.
Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
January 21, 1999
F-3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
WordCruncher Internet Technologies, Inc.
(a development stage company)
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS
1999 1998
---------------- -------------
Current assets
<S> <C> <C>
Cash and cash equivalents $ 1,055,371 $ 425,702
Short-term investments (Note C) 1,462,147 -
Prepaid expenses 311,199 -
Interest receivable 1,983 -
Current maturities of notes receivable (Note F) 1,955 -
Accounts receivable 736 -
---------------- -------------
Total current assets 2,833,391 425,702
---------------- -------------
PROPERTY And Equipment, at cost (Note E) 1,930,335 81,419
NOTES RECEIVABLE, less current maturities (Note F) - 100,200
Other assets (Note D) 6,011 16,296
---------------- -------------
$ 4,769,737 $ 623,617
================ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term obligations (Note G) $ - $ 120,000
Current maturities of capital lease obligations (Note H) 299,983 16,006
Notes payable 659,682 -
Accounts payable 306,349 10,421
Accrued expenses 86,319 24,492
---------------- -------------
Total current liabilities 1,352,333 170,919
CAPITAL LEASE OBLIGATIONS, less current maturities (Note H) 253,350 11,614
COMMITMENTS (Notes H and I) - -
Stockholders' equity (Notes B, C, I, J, K, M and N)
6% preferred stock, par value $0.01; liquidation preference $1,000;
authorized 15,000 shares; issued and outstanding 6,300 shares 63 -
in 1999 and none in 1998
Common stock, par value $0.001; authorized 60,000,000 shares;
issued and outstanding 11,891,002 shares in 1999
and 11,877,002 shares in 1998 11,891 11,877
Additional paid-in capital 15,362,028 1,247,334
Accumulated other comprehensive income 7,940 -
Deficit accumulated during the development stage (12,217,868) (818,127)
---------------- -------------
Total stockholders' equity 3,164,054 441,084
---------------- -------------
$ 4,769,737 $ 623,617
================ =============
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WordCruncher Internet Technologies, Inc.
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
Cumulative
amounts Year ended December 31,
since -------------------------------------------------
inception 1999 1998 1997
-------------- --------------- ---------------- --------------
<S> <C> <C> <C> <C>
Revenues $ 130,517 $ 23,355 $ 82,678 $ 24,484
Cost of sales 31,741 15,071 15,864 806
-------------- --------------- ---------------- --------------
Gross profit 98,776 8,284 66,814 23,678
Selling expenses 993,536 953,708 34,554 5,274
Research and development 1,591,390 1,198,546 266,563 126,281
General and administrative 1,764,678 1,340,486 217,318 206,874
Depreciation and amortization 195,994 179,169 10,406 6,419
Compensation expense for common
stock and options (Note K) 1,452,610 1,452,610 - -
-------------- --------------- ---------------- --------------
Total operating expenses 5,998,208 5,124,519 528,841 344,848
-------------- --------------- ---------------- --------------
Loss from operations (5,899,432) (5,116,235) (462,027) (321,170)
Other income (expense)
Interest income and other 206,663 196,310 7,276 3,077
Interest expense (55,238) (9,955) (28,158) (17,125)
-------------- --------------- ---------------- --------------
151,425 186,355 (20,882) (14,048)
-------------- --------------- ---------------- --------------
Net Loss $ (5,748,007) $ (4,929,880) $ (482,909) $ (335,218)
============== =============== ================ ==============
Deduction for dividends and accretion (Note J) $ (6,469,861) $ (6,469,861) $ - $ -
============== =============== ================ ==============
Net loss attributable to common stockholders $ (12,217,868) $ (11,399,741) $ (482,909) $ (335,218)
============== =============== ================ ==============
Net loss per common share - basic and diluted
(Note M) $ (2.09) $ (0.96) $ (0.08) $ (0.61)
============== =============== ================ ==============
Weighted-average number of shares outstanding
- basic and diluted 5,850,408 11,879,919 6,100,679 545,535
============== =============== ================ ==============
The accompanying notes are an integral part of these statements.
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
WordCruncher Internet Technologies, Inc.
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years ended December 31, 1999, 1998, 1997, and period from November 5, 1996 (inception) to December 31, 1996
Preferred stock Common stock
--------------------------- ---------------------------
Price per Number Number
Date share of shares Amount of shares Amount
------------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balances at November 5, 1996 - $ - - $ - - $ -
Net loss - - - - - -
- - ------------ ------------ ------------ ----------
Balances at December 31, 1996 - - - - - -
Issuance of stock for cash to Jan 97 0.001 - - 622,500 623
organizers
Issuance of stock for cash Feb 97 0.001 - - 67,500 67
Issuance of stock for license Feb 97 - - - 110,742 111
agreement (Note I)
Issuance of stock to employees Sep 97 0.333 - - 252,450 252
for services
Issuance of stock for services Aug 97 1.092 - - 37,875 38
performed
Net loss for the year - - - - - -
- - ------------ ------------ ------------ ----------
Balances at December 31, 1997 - - - - 1,091,067 1,091
Issuance of stock for cash Jul 98 4.17 - - 120,000 120
Reverse acquisition and Jul 98 - - - 9,885,435 9,886
reorganization adjustment
(Continued)
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
WordCruncher Internet Technologies, Inc.
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years ended December 31, 1999, 1998, 1997, and period from November 5, 1996 (inception) to December 31, 1996
--CONTINUED--
Deficit
Accumulated accumulated
Additional other during
paid-in comprehensive development
capital income stage
------------ --------------- ------------
<S> <C> <C> <C>
Balances at November 5, 1996 $ - $ - $ -
Net loss - - -
------------ --------------- ------------
Balances at December 31, 1996 - - -
Issuance of stock for cash to 52 - -
organizers
Issuance of stock for cash 8 - -
Issuance of stock for license (111) - -
agreement (Note I)
Issuance of stock to employees 83,898 - -
for services
Issuance of stock for services 41,337 - -
performed
Net loss for the year - - (335,218)
------------ --------------- ------------
Balances at December 31, 1997 125,184 - (335,218)
Issuance of stock for cash 499,880 - -
Reverse acquisition and (8,550) - -
reorganization adjustment
</TABLE>
F-6(a)
<PAGE>
<TABLE>
<CAPTION>
WordCruncher Internet Technologies, Inc.
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - CONTINUED
Years ended December 31, 1999, 1998, 1997, and period from November 5, 1996 (inception) to December 31, 1996
Preferred stock Common stock
--------------------------- ---------------------------
Price per Number Number
Date share of shares Amount of shares Amount
------------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of stock for cash Jul 98 0.725 - - 690,000 690
Issuance of stock for debt Jul 98 0.96 - - 13,500 13
conversion
Issuance of stock for services Oct 98 1.90 - - 39,000 39
Issuance of stock for software Oct 98 1.80 - - 13,000 13
technology
Issuance of stock for insurance Nov 98 1.00 - - 25,000 25
coverage
Net loss for the year - - - - - -
------------ ------------ ------------ ------------
Balances at December 31, 1998 - - - - 11,877,002 11,877
Issuance of warrants for Jan 99 - - - - -
consulting services (Note K)
Issuance of preferred stock for Feb 99 1,000 6,100 61 - -
cash, net of offering costs
(Note J)
Issuance of preferred stock for Mar 99 1,000 200 2 - -
cash, net of offering costs
(Note J)
(Continued)
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
WordCruncher Internet Technologies, Inc.
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - CONTINUED
Years ended December 31, 1999, 1998, 1997, and period from November 5, 1996 (inception) to December 31, 1996
--CONTINUED--
Deficit
Accumulated accumulated
Additional other during
paid-in comprehensive development
capital income stage
------------ --------------- ------------
<S> <C> <C> <C>
Issuance of stock for cash 499,310 - -
Issuance of stock for debt 12,987 - -
conversion
Issuance of stock for services 70,161 - -
Issuance of stock for software 23,387 - -
technology
Issuance of stock for insurance 24,975 - -
coverage
Net loss for the year - - (482,909)-
------------ --------------- ------------
Balances at December 31, 1998 1,247,334 - (818,127)
Issuance of warrants for 258,000 - -
consulting services (Note K)
Issuance of preferred stock for 5,719,839 - -
cash, net of offering costs
(Note J)
Issuance of preferred stock for 187,998 - -
cash, net of offering costs
(Note J)
</TABLE>
F-7(a)
<PAGE>
<TABLE>
<CAPTION>
WordCruncher Internet Technologies, Inc.
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - CONTINUED
Years ended December 31, 1999, 1998, 1997, and period from November 5, 1996 (inception) to December 31, 1996
Preferred stock Common stock
--------------------------- ---------------------------
Price per Number Number
Date share of shares Amount of shares Amount
------------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock to Jun 99 0.11 - - 2,000 2
employees for compensation
Issuance of common stock for Aug 99 0.10 - - 4,000 4
exercise of options
Issuance of common stock for Dec 99 3.25 - - 8,000 8
conversion of debt
Issuance of stock options to Jan-Dec 99 - - - - -
employees for compensation
Accretion of intrinsic value of Feb-Dec 99 - - - - -
preferred stock (Note J)
Dividends on preferred stock (Note J) Feb-Dec 99 - - - - -
Unrealized gain on marketable - - - - - -
securities (Note C)
Net loss for the year - - - - - -
------------ ------------ ------------ ------------
Balances at December 31, 1999 - - 6,300 $ 63 11,891,002 $ 11,891
============ ============ ============ ============
The accompanying notes are an integral part of this statement.
</TABLE>
F-8
<PAGE>
<TABLE>
<CAPTION>
WordCruncher Internet Technologies, Inc.
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - CONTINUED
Years ended December 31, 1999, 1998, 1997, and period from November 5, 1996 (inception) to December 31, 1996
--CONTINUED--
Deficit
Accumulated accumulated
Additional other during
paid-in comprehensive development
capital income stage
------------ --------------- -------------
<S> <C> <C> <C>
Issuance of common stock to 21,998 - -
employees for compensation
Issuance of common stock for 396 - -
exercise of options
Issuance of common stock for 25,992 - -
conversion of debt
Issuance of stock options to 1,430,610 - -
employees for compensation
Accretion of intrinsic value of 6,131,944 - (6,131,944)
preferred stock (Note J)
Dividends on preferred stock (Note J) 337,917 - (337,917)
Unrealized gain on marketable - 7,940 -
securities (Note C)
Net loss for the year - - (4,929,880)
------------ --------------- -------------
Balances at December 31, 1999 15,362,028 $ 7,940 $(12,217,868)
============ =============== =============
</TABLE>
F-8(a)
<PAGE>
<TABLE>
<CAPTION>
WordCruncher Internet Technologies, Inc.
(a development stage company)
STATEMENTS OF CASH FLOWS
Cumulative
Amounts Year ended December 31,
Since -------------------------------------------------
Inception 1999 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net loss $ (5,748,007) $ (4,929,880) $ (482,909) $ (335,218)
Adjustments to reconcile net loss
to net cash used in operating activities
Depreciation and amortization 195,994 179,169 10,406 6,419
Issuance of common stock and
options for compensation and
other expenses 1,673,335 1,452,610 95,200 125,525
Issuance of warrants for consulting services
258,000 258,000 - -
Changes in assets and liabilities
Prepaid expenses (311,199) (311,199) - -
Interest receivable (1,983) 8,035 (7,141) (2,877)
Accounts receivable (736) (736) - -
Accounts payable 301,349 295,928 4,251 1,170
Accrued expenses 86,319 61,827 19,063 5,429
--------------- --------------- --------------- ---------------
Total adjustments 2,201,079 1,943,634 121,779 135,666
--------------- --------------- --------------- ---------------
Net cash used in
operating activities (3,546,928) (2,986,246) (361,130) (199,552)
--------------- --------------- --------------- ---------------
Cash flows from investing activities
Purchases of property and equipment (1,279,458) (1,260,831) (18,627) -
Increase in short-term investments (1,454,207) (1,454,207) - -
Repayment of notes receivable
from related parties 115,745 110,745 5,000 -
Notes receivable issued to related parties (117,700) (12,500) (23,200) (82,000)
Increase in deposits (5,076) - (5,076) -
--------------- --------------- --------------- ---------------
Net cash used in investing activities (2,740,696) (2,616,793) (41,903) (82,000)
--------------- --------------- --------------- ---------------
</TABLE>
(Continued)
F-9
<PAGE>
<TABLE>
<CAPTION>
WordCruncher Internet Technologies, Inc.
(a development stage company)
STATEMENTS OF CASH FLOWS - CONTINUED
Cumulative
Amounts Year ended December 31,
Since ------------------------------------------------
Inception 1999 1998 1997
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Cash flows from financing activities
Proceeds from issuance of common stock 1,001,150 400 1,000,000 750
Proceeds from issuance of preferred stock 6,300,000 6,300,000 - -
Payment of fees associated with issuance
of preferred stock (392,100) (392,100) - -
Proceeds from issuance of notes payable 685,682 685,682 - -
Proceeds from issuance of long-term obligations
313,000 - 13,000 300,000
Principal payments under capital lease obligations
(256,423) (241,274) (6,320) (8,829)
Principal payments of long-term obligations (308,314) (120,000) (188,314) -
--------------- -------------- -------------- --------------
Net cash provided by
investing activities 7,342,995 6,232,708 818,366 291,921
--------------- -------------- -------------- --------------
Net increase in cash and
cash equivalents 1,055,371 629,669 415,333 10,369
Cash and cash equivalents at beginning of period - 425,702 10,369 -
--------------- -------------- -------------- --------------
Cash and cash equivalents at end of period $ 1,055,371 $ 1,055,371 $ 425,702 $ 10,369
=============== ============== ============== ==============
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 49,128 $ 4,584 $ 29,888 $ 14,656
Income taxes - - - -
Noncash financing activities
Purchase of equipment through lease obligations $ 818,177 $ 766,987 $ - $ 51,190
Unrealized gain on available-for-sale securities 7,940 7,940 - -
Issuance of common stock for
debt conversion 39,000 26,000 13,000 -
The accompanying notes are an integral part of these statements.
</TABLE>
F-10
<PAGE>
WordCruncher Internet Technologies, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation
of the accompanying financial statements follows:
1. Organization and principles of consolidation
WordCruncher Internet Technologies, Inc. (the Company) was incorporated on
November 5, 1996 in the State of Utah under the name of Redstone
Publishing, Inc. On March 10, 1997, the Company changed its name to
WordCruncher Publishing Technologies, Inc. During July 1998, the Company
merged with Dunamis, Inc. a public company organized in the State of
California. Dunamis had approximately $1 million of cash and essentially no
other assets and liabilities. Management of Dunamis resigned and management
of the Company now manages the consolidated entity. The merger was recorded
as a reverse acquisition, therefore WordCruncher is the accounting
survivor.
In connection with the merger, Dunamis, the legal survivor, changed its
name to WordCruncher Internet Technologies, Inc. and changed its domicile
to the State of Nevada. The Company's headquarters are in Draper, Utah,
where the Company is engaged in the development and marketing of a business
information Internet site. The Internet site is specialized for business
professionals and the business-to-business marketplace. The Company has
acquired a license agreement from a University wherein the Company has an
exclusive, worldwide right to sell, develop and manufacture the
"WordCruncher" technology.
2. Stock split and change in par value
In July 1998, the Company authorized a 3 for 1 forward stock split. These
financial statements have been retroactively restated to reflect the stock
split. Pursuant to the reverse merger with Dunamis, the Company's par value
of its common stock changed to $.001 per share. This change has also been
retroactively applied.
3. Development stage company
The Company is a development stage company and is concentrating
substantially all of its efforts in raising capital and developing its
business information Internet site for future commercial release.
4. Software development costs
Software development costs incurred in the development of software related
products are charged to expense as incurred. Material software development
costs incurred subsequent to the establishment of technological feasibility
are capitalized. Technological feasibility is established by the Company
upon completion of a working model. Software development costs incurred by
the Company subsequent to technological feasibility have been
insignificant.
F-11
<PAGE>
WordCruncher Internet Technologies, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
5. Recognition of revenue
The Company recognizes income and expense on the accrual basis of
accounting. During the development stage, the Company has received revenues
for certain services provided for indexing printed materials to online
format. Revenue is recorded when the services are completed. The Company
also generates revenues during the development stage from the sale of its
publishers' proprietary version of the search engine technology. This
technology is sold separately without future performance such as upgrades
or maintenance, and is not sold with support services, therefore revenue is
recorded upon the sale and delivery of the product. Licensing fees are also
received from the sublicensing of this technology which is included in the
software of certain sublicenses. Licensing fees are recorded as revenue as
software is reported as sold by the sublicensee.
6. Cash and cash equivalents
The Company considers all highly liquid investments with original
maturities of three months or less when purchased to be cash equivalents.
7. Short-term investments
Short-term investments are comprised of various government securities,
commercial paper and other securities, which mature in one year or less and
are classified as available-for-sale. Available-for-sale securities are
measured at fair value with net unrealized gains and losses reported in
equity.
8. Fair value of financial instruments
The fair value of the Company's cash equivalents, receivables, accounts
payable and accrued liabilities approximate carrying value due to the
short-term maturity of the instruments. The fair value of long-term
obligations approximate carrying value based on their effective interest
rates compared to current market rates.
9. Use of estimates
In preparing the Company's financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ significantly from those estimates.
10. Depreciation and amortization
Depreciation of property and equipment is provided on the straight-line
method over the estimated useful lives of the assets. Accelerated methods
of depreciation of property and equipment are used for income tax purposes.
F-12
<PAGE>
WordCruncher Internet Technologies, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
10. Depreciation and amortization - continued
Property and equipment under capital leases are amortized over the lessor
of the life of the asset or the term of the lease.
Maintenance, repairs, and renewals which neither materially add to the
value of the property nor appreciably prolong its life are charged to
expense as incurred. Gains or losses on dispositions of property and
equipment are included in earnings.
11. Income taxes
In 1997, WordCruncher Publishing Technologies, Inc. elected to file federal
and state income taxes under the provisions of Subchapter S of the Internal
Revenue Code. Under those provisions, the Company did not pay corporate
income taxes on its taxable income during that period of time. Instead, the
stockholders were liable for individual income taxes on their respective
shares of the Company's net operating income in their individual income tax
returns. Effective July 1, 1998, the Company filed consolidated tax returns
with its parent and terminated its S-Corporation status.
Since July 1, 1998, the Company utilizes the liability method of accounting
for income taxes. Under the liability method, deferred income tax
liabilities are provided based on the difference between the financial
statement and tax bases of assets and liabilities as measured by the
currently enacted tax rates in effect for the years in which these
differences are expected to reverse. Deferred tax expense or benefit is the
result of changes in deferred tax assets and liabilities.
12. Comprehensive income
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 130 (SFAS 130), "Reporting Comprehensive Income." SFAS 130 establishes
standards for disclosure and financial statement display for reporting
total comprehensive income and its individual components. Comprehensive
income, as defined, includes all changes in equity during a period from
nonowner sources. The Company's comprehensive income includes net loss and
unrealized gains on investments and is displayed in the statement of
stockholders' equity.
13. Net loss per common share
The computation of net loss per common share is based on the
weighted-average number of shares outstanding during each period presented.
Diluted loss per common share would include the dilutive potential effects
of options, warrants, and convertible and reset features of Series A
preferred stock, but were not included in the calculation of diluted EPS
because their effects were antidilutive.
F-13
<PAGE>
WordCruncher Internet Technologies, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
14. Certain reclassifications
Certain nonmaterial reclassifications have been made to the 1998 and 1997
financial statements to conform to the 1999 presentation.
NOTE B - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of
the Company as a going concern. However, the Company is a development stage
company, has generated only limited revenue through December 31, 1999, and
has sustained losses from operations each period since inception. In
addition, it has a deficit accumulated during the development stage of
$12,217,868. Also, the Company has used cash in, rather than provided cash
from, its operations.
In view of the matters described in the preceding paragraph, recoverability
of a major portion of the recorded asset amounts shown in the accompanying
balance sheets is dependent upon continued operations of the Company, which
in turn is dependent upon the Company's ability to meet its financing
requirements on a continuing basis, to maintain present financing and to
succeed in its future operations. The financial statements do not include
any adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classification of liabilities that
might be necessary should the Company be unable to continue in existence.
The Company has taken the following steps to revise its operating and
financial requirements which it believes are sufficient to provide the
Company with the ability to continue in existence:
o During February and March 1999, Company received a total of $6,300,000
for a preferred stock offering (Note J).
o During December 1999, the Company's pending S-1 Registration Statement
became effective.
o Through January 2000, the Company entered into agreements with
prominent ad serving and reporting technology companies to utilize
various technologies for its site management.
o Also in January 2000, the Company has selected a full-service
advertising agency to promote its planned business information
Internet site.
o In March of 2000, negotiations were underway to obtain up to
$15,000,000 of additional financing.
o In March 2000, the Company completed a working model of its planned
business information Internet site.
F-14
<PAGE>
WordCruncher Internet Technologies, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
NOTE C - SHORT-TERM INVESTMENTS
At December 31, 1999, the cost, fair value and unrealized gain on
short-term investments are as follows:
Fair value $ 1,462,147
Cost 1,454,207
------------
Unrealized gain $ 7,940
============
NOTE D - OTHER ASSETS
Other assets consist of the following:
1999 1998
------------ ------------
Deposits $ 5,076 $ 5,076
Other 935 1,202
Interest receivable - 10,018
------------ ------------
$ 6,011 $ 16,296
============ ============
NOTE E - PROPERTY AND EQUIPMENT
Property and equipment, at cost and estimated useful lives are as follows:
<TABLE>
<CAPTION>
Estimated
useful
1999 1998 lives
------------ ------------- -------------
<S> <C> <C> <C>
Computer equipment $ 1,217,668 $ 54,352 5
Furniture and fixtures 49,392 5,358 7
Software technology 858,868 38,400 3
------------ -------------
2,125,928 98,110
Less accumulated depreciation 195,593 16,691
------------ -------------
Total property and equipment $ 1,930,335 $ 81,419
============ =============
</TABLE>
F-15
<PAGE>
WordCruncher Internet Technologies, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
NOTE F - NOTES RECEIVABLE - RELATED PARTIES
Notes receivable consist of the following:
1999 1998
------------- ------------
<S> <C> <C> <C>
8% note receivable from a former employee, interest and
principal due in full April 2000, not collateralized $ 1,955 $ -
8% note receivable from an officer, interest and principal
due in full January 1, 2000, received in full in 1999 - 66,700
8% note receivable from an officer, interest and principal
due in full January 1, 2002, received in full in 1999 - 29,500
8% note receivable from a corporation owned by an officer,
interest and principal due in full January 1, 2000,
received in full in 1999 - 4,000
------------- ------------
1,955 100,200
Less current maturities 1,955 -
------------- ------------
$ - $ 100,200
============= ============
</TABLE>
NOTE G - LONG-TERM OBLIGATIONS
At December 31, 1998, the Company had prime plus 1.5 percent (9.25
percent) notes payable to officers in the amount of $120,000. Interest
payments were due monthly, and principal was due in December 1999. The
notes were not collateralized and were paid in full in 1999.
NOTE H - LEASES
1. Operating leases
The Company leases their office facilities under an operating lease,
which expires in March 2002. Future minimum lease payments are as
follows:
Year ending December 31,
2000 $ 44,933
2001 44,933
2002 11,233
Thereafter -
-------------
$ 101,099
=============
F-16
<PAGE>
WordCruncher Internet Technologies, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
NOTE H - LEASES - CONTINUED
2. Capital lease obligations
Included in property and equipment is $818,177 and $51,101 of computer
equipment under capital leases at December 31, 1999 and 1998, respectively.
The related accumulated amortization is $56,411 and $16,333 at December 31,
1999 and 1998, respectively.
Future minimum lease payments at December 31, 1999, are as follows:
Year ending December 31,
2000 $ 335,930
2001 260,923
2002 3,388
Thereafter -
-------------
Total minimum lease payments 600,241
Less amount representing interest 46,908
Present value of net minimum lease payments 553,333
Less current maturities 299,983
-------------
Noncurrent portion $ 253,350
=============
NOTE I - COMMITMENTS
1. Licenses
On February 14, 1997, the Company signed an exclusive license agreement
with Brigham Young University (BYU), a Utah nonprofit corporation and
educational institution, wherein the Company has the worldwide rights to
market, modify, develop and manufacture the "WordCruncher" technology,
which is a software program used to search data for specific items (search
engine). The term of the license covers the underlying period of the patent
as provided for by federal law, which is 17 years. The agreement calls for
license fees and royalties of three percent of adjusted gross sales, and 50
percent of royalty payments from sublicenses. Annual minimum royalties
begin for the calendar year 1999 and are due the quarter following the year
end, as specified below. Minimum royalty payments will be capped at
$150,000 from 2002 forward. The Company acquired the license through stock
issuance, and was required to maintain BYU's equity interest of 10 percent
through July 1998.
F-17
<PAGE>
WordCruncher Internet Technologies, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
NOTE I - COMMITMENTS - CONTINUED
1. Licenses - continued
The Company is committed to minimum royalty payments as follows:
Year ending December 31,
2000 $ 50,000
2001 100,000
2002 150,000
2003 150,000
2004 150,000
Thereafter 1,368,750
-------------
$ 1,968,750
=============
These minimum royalties are due as long as the license agreement is in
effect.
2. Employment agreements
The Company has six employment and severance agreements with certain
officers and a manager of the Company. Salaries covered by these agreements
range from $100,000 to $120,000 annually, subject to annual adjustment.
Contracts with three individuals provide for annual salaries of $120,000
(plus annual increases of at least eight percent and cash bonuses
determined by the board of directors or the compensation committee), and
are for terms of three years expiring in August 2001. The agreements
provide for severance equal to one year's salary if the individual is
terminated without cause. Furthermore, if there is a change in control as
defined by these three agreements, the contracts provide for compensation
equal to five times the average of the sum of amounts paid to the executive
for salary for the five fiscal years immediately preceding the date of the
change in control. The other three contracts provide for annual salaries of
$84,000 to $100,000 (plus monthly commissions equal to 50 percent of
monthly base salary and/or annual incentive bonuses equal to 30-60 percent
of annual base salary), and are for terms of two years expiring April
through December 2001. The agreements also provide for severance equal to
90 days of the employee's base salary plus the maximum amount of incentive
pay the employee would have earned in the same 90 day period. Furthermore,
if there is a change in control, as defined by these agreements, the
contracts provide for compensation equal to the employee's annual base
salary. There is no provision for any severance payments under these
employment contracts.
3. Consulting and development contract
The Company has entered into a consulting and development contract in
connection with the launch of its website. The Company is required to pay a
fixed price of $500,000 in exchange for these services, to be paid in four
installments based upon meeting certain milestones. At December 31, 1999,
$275,000 remains payable under this contract.
F-18
<PAGE>
WordCruncher Internet Technologies, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
NOTE J - PREFERRED STOCK
In January of 1999, the Board of Directors approved the creation of Series
A Convertible Preferred Stock (Preferred Stock) and authorized 15,000
shares. The Preferred Stock has a stated value of $1,000 per share, and a
cumulative dividend of 6 percent. The Company issued 6,100 and 200 shares
of the Preferred Stock in February and March of 1999, respectively. The
Preferred Stock is convertible into a total of 625,000 shares of the
Company's common stock at a conversion rate of $10.08 per share. The
conversion price is based on the average closing price of the Company's
common stock during the 20 day period immediately preceding the closing of
the preferred issuance. The Preferred shares hold no voting rights and have
liquidation preferences of $1,000 per share and cumulative dividends.
The Preferred shareholders have a limited right to receive additional
shares of common stock ("reset shares") if the market price of the common
stock is less than the "reset price" of $12.096 per share for a ten day
period of time following certain reset dates (adjustment price). The
additional shares are calculated as the difference between the reset price
and the adjustment price, multiplied by one third of the purchase price of
Preferred stock divided by the conversion price, divided by the adjustment
price. The reset dates commence 150, 240 and 360 calendar days following
the issuance of the Preferred Stock. As of December 31, 1999, the holders
of Preferred stock are entitled to receive 574,867 shares of common stock
under this provision.
On the dates that the Preferred Stock was issued, the intrinsic values of
the beneficial conversion feature were $10,995,740 and $31,994 in February
and March, respectively. The intrinsic values were derived by the
difference between the conversion price and the market value of the common
stock on the day of the preferred stock issuance multiplied by the number
of common shares into which the Preferred Stock is convertible. The closing
price of the stock was $28.25 and $11.69 at each of the respective closing
dates. The proceeds received from the sale of these convertible instruments
were $6,100,000 and $200,000, respectively. Because the intrinsic values of
the beneficial conversion features are greater than the proceeds received,
the discounts assigned to the convertible instruments are $6,100,000 and
$31,944, respectively, creating a total discount of $6,131,944. The
Preferred Stock became fully convertible into common stock as of November
of 1999 and the discount was accreted accordingly during 1999 and is
reflected on the statement of operations as a deduction for dividends and
accretion.
Offering cost related to the issuance of Preferred Stock total $392,100 and
have been netted with the proceeds for reporting purposes.
Cumulative Preferred dividends total $337,917 as of December 31, 1999.
F-19
<PAGE>
WordCruncher Internet Technologies, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
NOTE K - STOCK OPTIONS AND WARRANTS
1. Stock options
The Company provides for issuance of stock options to certain employees,
directors, officers and others. There has been no formal stock option plan
adopted as of December 31, 1999. The Board of Directors has approved the
granting of options as follows:
Directors, officers and key employees have been granted options to acquire
1,079,000 shares of common stock. The options were granted at various dates
at prices ranging from $0.10 to $5.54 per share, which amounts represent
prices below market price of the Company's shares on the dates granted as
determined by the Board of Directors. The options vest periodically through
November 2002 and expire through June 2003.
Fair market value of options granted
The Company has adopted only the disclosure provisions of Statement of
Financial Accounting Standard No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation". Therefore, the Company accounts for stock based
compensation under Accounting Principles Board Opinion No. 25, under which
compensation cost has been recognized using the intrinsic value method.
Under this method, compensation cost is recognized over the vesting period
based on the difference, if any, on the date of grant between the fair
value of the Company's stock and the amount an employee must pay to acquire
the stock. Had compensation cost been determined based upon the fair value
of the options at the grant date consistent with the methodology prescribed
by SFAS 123, the Company's net loss and loss per share would have been
changed to the following pro forma amounts:
1999
----------------
Net loss attributable to As reported $ (11,399,741)
common stockholders Pro forma (11,453,549)
Net loss per common share - As reported (.96)
basic and diluted Pro forma (.96)
The fair value of these options was estimated at the date of grant using
the Black-Scholes American option-pricing model with the following
weighted-average assumptions: expected volatility of 120 percent; risk-free
interest rate of 6.5 percent; and expected life of 3.50 years. The
weighted-average fair value of options granted was $4.75.
Option pricing models require the input of highly sensitive assumptions,
including the expected stock price volatility. Also, the Company's stock
options have characteristics significantly different from those of traded
options, and changes in the subjective input assumptions can materially
affect the fair value estimate. Management believes the best input
assumptions available were used to value the options and that the resulting
option values are reasonable.
F-20
<PAGE>
WordCruncher Internet Technologies, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
NOTE K - STOCK OPTIONS AND WARRANTS - CONTINUED
Information with respect to the Company's stock options is as follows:
<TABLE>
<CAPTION>
Weighted-
average
Stock Exercise exercise
options price price
------------ ------------- -------------
<S> <C> <C> <C>
Outstanding at January 1, 1997 - $ - $ -
Granted - - -
Exercised - - -
Canceled/expired - - -
------------ ------------- -------------
Outstanding at December 31, 1997 - - -
Granted - - -
Exercised - - -
Canceled/expired - - -
------------ ------------- -------------
Outstanding at December 31, 1998 - - -
Granted 1,079,000 0.10 - 5.54 1.79
Exercised (4,000) 0.10 0.10
Canceled/expired - - -
------------ ------------- -------------
Outstanding at December 31, 1999 1,075,000 $ 0.10 - 5.54 $ 1.80
============ ============= =============
Exercisable at December 31, 1999 116,833 $ 0.10 $ 0.10
============ ============= =============
</TABLE>
Additional information regarding stock options outstanding and exercisable
at December 31, 1999 is summarized as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------------- --------------------------------------
Weighted-
average Weighted- Weighted-
remaining average average
Number contractual exercise Number exercise
Range of exercise prices outstanding life (years) price xercisable price
------------------------ ------------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
$ 0.10 440,000 13.3 $ 0.10 116,833 $ 0.10
$ 2.72 - $ 2.77 550,000 21.0 2.73 - -
$ 3.00 - $ 3.47 35,000 1.3 3.17 - -
$ 5.54 50,000 1.9 5.54 - -
------------- ------------
1,075,000 37.5 $ 1.80 116,833 $ 0.10
============= ============
</TABLE>
F-21
<PAGE>
WordCruncher Internet Technologies, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
NOTE K - STOCK OPTIONS AND WARRANTS - CONTINUED
2. Warrants
Series A, B and C warrants
In connection with the sale of Series A Convertible Preferred Stock (Note
J), purchasers, were issued Series A and B warrants to purchase the
Company's common stock. Series C warrants were also issued to a third party
for a finder's fee.
Series A warrants allow holders to purchase up to an aggregate of 71,069
shares of common stock at a weighted-average price of $34.53 per share.
Series B warrants allow holders to purchase up to an aggregate of 47,380
shares of common stock at a weighted-average of $41.44 per share.
Series C warrants allow holders to purchase up to 189,000 shares of common
stock at a weighted-average price of $29.01 per share.
All 307,449 Series A, B and C warrants expire in February 2004.
Other warrants issued for services
In January of 1999, and in conjunction with the sale of Series A
Convertible Preferred Stock (Note J), the Company issued warrants to
purchase 200,000 shares of the Company's common stock to its investor
relations consultant. The warrants were issued with an exercise price of
$5.00 per share and are fully vested at December 31, 1999. The fair value
of $1.29 was estimated as the value of the services performed. Consulting
expenses relating to these warrants totaled $258,000 during 1999.
Information with respect to the Company's warrants is as follows:
Weighted-
Number average
of shares exercise price
------------ -------------
Outstanding at January 1, 1997 - $ -
Granted - -
Exercised - -
Forfeited - -
------------ -------------
Outstanding at December 31, 1997 - -
Granted - -
Exercised - -
Forfeited - -
------------ -------------
Outstanding at December 31, 1998 - -
Granted 507,449 $ 21.48
Exercised - -
Forfeited - -
------------ -------------
Outstanding at December 31, 1999 507,449 $ 21.48
============ =============
Warrants exercisable at December 31, 1999 507,449 $ 21.48
============ =============
F-22
<PAGE>
WordCruncher Internet Technologies, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
NOTE L - INCOME TAXES
The income tax expense (benefit) reconciled to the tax computed at the
federal statutory rate of 34 percent is as follows:
1999 1998
------------ -----------
Income tax benefit at statutory rate $ (1,676,159) $ (164,189)
Income tax attributed to the S-Corporation - 8,560
State income tax benefit, net of federal
tax benefit (115,157) (15,936)
Nondeductible option compensation 493,887 -
Deductible stock option compensation (6,068) -
Change in valuation allowance 1,301,627 169,896
Other, net 1,870 1,669
------------ -----------
Income tax expense $ - $ -
============ ===========
Deferred income tax assets and liabilities
are as follows:
1999 1998
------------ -----------
Deferred tax assets
Deferred expenses $ 146,465 $ -
Net operating losses 1,442,150 169,896
------------ -----------
1,588,615 169,896
Less valuation allowance (1,471,524) (169,896)
------------ -----------
117,091 -
------------ -----------
Deferred tax liabilities
Deferred income (117,091) -
------------ -----------
Net deferred tax assets (liability) $ - $ -
============ ===========
The Company has sustained net operating losses in each of the periods
presented. There were no deferred tax assets or income tax benefits
recorded in the financial statements for net deductible temporary
differences or net operating loss carryforwards because the likelihood of
realization of the related tax benefits cannot be established. Accordingly,
a valuation allowance has been recorded to reduce the net deferred tax
asset to zero and consequently, there is no income tax provision or benefit
for any of the period presented. The increase in the valuation allowance
was $1,301,628 and $169,896 for the years ended December 31, 1999 and 1998,
respectively.
As of December 31, 1999, the Company had net operating loss carryforwards
for tax reporting purposes of approximately $3,866,354 expiring in various
years through 2019.
Through June 30, 1998, the Company elected to file federal and state income
taxes under the provisions of Subchapter S of the Internal Revenue Code.
Effective July 1, 1998, the Company revoked its S election, and will
therefore be a taxable entity under the provisions of Subchapter S of the
Internal Revenue Code.
F-23
<PAGE>
WordCruncher Internet Technologies, Inc.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
NOTE M - NET LOSS PER COMMON SHARE
<TABLE>
<CAPTION>
Cumulative
amounts Year ended December 31,
since --------------------------------------------
inception 1999 1998 1997
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Common shares outstanding during
the entire period - 11,877,002 1,091,067 -
Weighted-average common shares
issued during the period 5,850,408 2,917 5,009,612 545,535
------------ ------------- ------------ -------------
Weighted-average common shares
used in basic EPS 5,850,408 11,879,919 6,100,679 545,535
Dilutive effects of potential common
shares - - - -
------------ ------------- ------------ -------------
Weighted-average number of common
shares and dilutive potential
common stock
used in diluted EPS 5,850,408 11,879,919 6,100,679 545,535
============ ============= ============ =============
</TABLE>
For the years ended December 31, 1999, 1998 and 1997, and for cumulative
amounts since inception, all of the convertible securities, reset
provisions, options and warrants discussed in Notes J and K were not
included in the computation of diluted EPS because to do so would have been
antidilutive.
NOTE N - SUBSEQUENT EVENTS
1. Company name change
In January 2000, the Company began conducting business under the name
"Logio".
2. Preferred stock conversion
Through March 2000, 6,300 shares of the Company's preferred stock were
converted into 625,000 common shares and 728,046 "reset shares" of the
Company's common stock were issued to preferred shareholders (Note J).
Also, through March 2000, cumulative dividends were paid to preferred
shareholders in the form of 61,650 shares of the Company's common stock.
3. Options granted
Through March 2000, options for 5,000 shares of the Company's common stock
were granted to an employee.
4. Options and warrants exercised
Through March 2000, warrants were exercised for 158,000 shares of the
Company's common stock and options were exercised for 4,000 shares of the
Company's common stock.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.
On February 1, 2000, our Board of Directors authorized the engagement
of Grant Thornton LLP as our auditor for the fiscal year ended December 31,
1999. Our decision to change accountants was prompted by the ability of Grant
Thornton LLP to provide audit services for us on an extended scale as our
operations are expected to expand. We entered into an engagement letter with
Grant Thornton on February 23, 2000, and concurrently with that engagement, we
dismissed Crouch Bierwolf & Chisholm, P.C., which had served as our independent
accountants since 1998. Our Board of Directors participated in and approved the
decision to change independent accountants.
The reports of Crouch Bierwolf on our financial statements for the past
fiscal year contained no adverse opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting principles.
In connection with its audit for the most recent fiscal year and through
February 23, 2000, there were no disagreements with Crouch Bierwolf on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements if not resolved to the
satisfaction of Crouch Bierwolf would have caused Crouch Bierwolf to make
reference thereto in their report on the financial statements for such year.
During the most recent fiscal year and through February 23, 2000, we
had not consulted with Grant Thornton LLP regarding either: (i) the application
of accounting principles to a specified transaction, either completed or
proposed, or the type of audit opinion that might be rendered on our financial
statements, and neither a written report was provided to us nor oral advice was
provided that Grant Thornton LLP concluded was an important factor considered by
us in reaching a decision as to the accounting, auditing or financial reporting
issue; or (ii) any matter that was either the subject of a disagreement or a
reportable event.
Item 10. Directors and Executive Officers of the Registrant.
Our directors, executive officers and key employees, as of the date
hereof, and their respective ages and positions with us are set forth below.
Biographical information for each of those persons is also presented below. Our
executive officers are chosen by our Board of Directors and serve at its
discretion. There are no existing family relationships between or among any of
our directors or executive officers.
Name Age Position Held
- ----------------- --- ----------------------------------------------------
M. Daniel Lunt 46 President, Chief Executive Officer, Director
James W. Johnston 47 Chairman of the Board, Executive Vice President,
Director
Kenneth W. Bell 50 Senior Vice President, Chief Financial Officer,
Treasurer, Secretary, Director
Edward Sullivan 47 Director
David Grow 43 Director
Michael Fowler 56 Director
Peter T. Stoop 38 Vice President of Marketing
Martin E. Cryer 39 Vice President of Product Development
M. Daniel Lunt: Mr. Lunt was a co-founder of WordCruncher Publishing
and has served as our President, Chief Executive Officer and Director since
November 1996. Mr. Lunt has over 20 years experience in the computer software
industry. Between 1983 and 1993, he was employed by WordPerfect Corporation,
most recently as Vice President of Worldwide Marketing. In that capacity, he was
responsible for the development and implementation of WordPerfect's marketing,
sales and support divisions. After leaving WordPerfect in 1993, Mr. Lunt became
the president of a residential real estate development company. Mr. Lunt
attended Brigham Young University.
James W. Johnston: Mr. Johnston was a co-founder WordCruncher
Publishing and has served as our Director, Chairman of the Board and Executive
Vice President since November 1996. From December 1990 to November 1996, he was
president of Johnston & Company, which published virtual works using Logio
technology, including the Constitution Papers (CD ROM). Mr. Johnston has 15
years of expertise in developing and marketing products involving content
presentation, analysis software and virtual publishing.
Kenneth W. Bell: Mr. Bell joined us as our Senior Vice President, Chief
Financial Officer, Secretary and Treasurer and Director in February 1997.
Between April 1990 and December 1996, he served as President and Chief Financial
Officer of Kelmarc Corporation, a financial and management advisory company. He
has twenty-five years experience in a variety of finance and management
positions, including employment in the commercial banking area for fifteen years
in Utah and California. Mr. Bell received his B.S. from BYU in 1972.
Edward Sullivan: Mr. Sullivan joined us as one of our directors in
February 2000. Since 1989, he served as President and Chief Executive Officer of
Pittard Sullivan, a brand and marketing communications company. Mr. Sullivan has
twenty years of experience in advertising, marketing and media management, with
over 250 channel launches around the world. Mr. Sullivan was educated at the
University of Cincinnati and Central Academy of Commercial Arts. He has also
attended Harvard Business School's Accelerated Business Administration Program
as well as Carnegie Mellon's Oral Communications Program
David R. Grow: Mr. Grow joined us as one of our Directors on February
1, 2000. Since 1995, Mr. Grow has served as Executive Vice President, Chief
Operating Officer and Chief Financial Officer for Daw Technologies, Inc. Prior
to joining Daw Technologies, Mr. Grow was employed by Novell, Inc. from 1992 to
1995, most recently as director of operations for Novell's $500 million software
applications division. Mr. Grow also served as Corporate Controller for
WordPerfect Corporation from 1992 to 1994 where he was responsible for the
accounting, financial analysis and reporting for the $700 million,
multi-national software publishing company. He was employed by Price Waterhouse
as a Senior Audit Manager for the years 1982 to 1992. Mr. Grow is a certified
public accountant, licensed in the State of Utah.
Michael D. Fowler: Mr. Fowler joined us as one of our Directors on
February 1, 2000. Since 1997, Mr. Fowler serves as the Vice President, Chief
Financial Officer of Howa Construction, Inc. During the period of 1995 through
1997, Mr. Fowler was a small business consultant to companies involved in
medical services, microbrewery/restaurants, telecommunications and employee
leasing. From 1990 to 1995, Mr. Fowler served as Vice President, Treasurer and a
director of Grand Valley Gas Company, where he was responsible for the company's
accounting, treasury, risk management, legal affairs and investor relations.
Peter T. Stoop: In September 1998, Mr. Stoop joined us as our Vice
President of Sales and Marketing. He was employed by Novell, Inc. from February
1994 through June 1997, most recently as senior director of product management
for Novell's $70 million product division. Mr. Stoop has eight years of
experience in the computer industry. Mr. Stoop received his MBA in marketing
from the William E. Simon School of Business at the University of Rochester in
1989.
Martin Cryer: Mr. Cryer joined us as our Vice President of Product
Development in March 1999. Mr. Cryer has nearly 20 years experience in the
computer industry. He has designed and developed several generations of computer
systems, covering both symmetrical multi-processing and parallel architectures.
Between 1996 and 1999, Mr. Cryer oversaw the Salt Lake City based Siemens
Research and Development Centre. Mr. Cryer also served 12 years in the Unisys
UNIX Systems Group, contributing significantly to many of its innovative server
system designs. He graduated from Queen Mary College, University of London and
has been residing in the United States for the past 10 years.
Board of Directors. Our Board of Directors is comprised of six persons.
The number of directors can be increased as provided in our by-laws, which allow
either our board of directors or our stockholders to approve the change. Our
directors serve for terms of one-year.
Board of Directors Committees. Our Board of Directors has established
three committees, the audit committee, the compensation committee and the
executive committee. Each of these committees is be responsible to the full
Board of Directors, and, in general, its activities will be subject to the
approval of the full Board of Directors.
The audit committee is primarily charged with the review of
professional services provided by our independent auditors, the determination of
the independence of those auditors, our annual financial statements, and our
system of internal accounting controls. The audit committee also reviews such
other matters with respect to our accounting, auditing and financial reporting
practices and procedures as it finds appropriate or as is brought to its
attention, including our selection and retention of independent accountants. Our
audit committee is currently comprised of Messrs. Bell, Grow and Fowler.
The compensation committee is charged with the responsibility of
reviewing executive salaries, administering bonuses, incentive compensation and
our stock option plans and approving our other executive officer benefits. The
compensation committee also consults with our management regarding pension and
other benefit plans, and our compensation policies and practices in general. Our
compensation committee is currently comprised of Messrs. Lunt, Johnston and
Sullivan.
The executive committee is charged with the performance of the duties
of the Board of Directors between regularly scheduled meetings of our Board, and
with the functions of the full Board of Directors with regard to matters
addressed by it. The executive committee is currently comprised of Messrs. Lunt,
Johnston and Bell.
Compensation of Directors. We do not have any standard arrangement for
compensating our directors for the services they provide to us in their capacity
as directors, including services for committee participation or for special
assignments. We have, however, approved a stock option package for the year 2000
under which our independent directors, Messrs. Grow, Fowler and Sullivan, may
each earn options on up to 10,000 shares of our common stock with an exercise
price of $5.86 a share.
Employment Agreements. We have adopted a policy of entering into
employment agreements with our senior management, and have entered into such
agreements with Messrs. Lunt, Bell, Johnston, Cryer and Stoop. The terms of the
employment agreements for Messrs. Lunt, Bell and Johnston begun on September 1,
1998 and have initial terms of three years. Under the agreements, each is
entitled to receive a base annual salary of $102,000 during the first year of
the agreements. The salary will be increased annually, effective in September of
each year, by an amount equal to the greater of 8% or an amount determined by
the Board of Directors. In addition to the base salary amounts, each of Messrs.
Lunt, Bell and Johnston will receive incentive bonuses, as determined by our
Board of Directors, standard benefits such as health and life insurance,
disability payments and reimbursement of reasonable business expenses.
We have also entered into an employment agreement with each of Messrs.
Stoop and Cryer. The initial term of each agreement is two years and each
provides for a base salary of $100,000. The agreements also provide for standard
health and medical insurance, incentive bonuses, disability coverage and
reimbursement for reasonable business expenses. In addition, through of March
15, 2000 Mr. Stoop received 500,000 options and Mr. Cryer received 300,000
options to acquire shares of our common stock vesting over a three year period.
We may terminate the employment contracts for cause, as defined in the
agreements, or without cause. If the contract is terminated without cause or as
a result of a "change of control", as defined in the agreements, the employee is
generally entitled to receive severance pay. In the event of a change of
control, Messrs. Lunt, Bell and Johnston will each receive a payment equal to
five times the sum of his average annual salary, bonus and profit sharing, based
on a per year average over the five preceding years. The term "change of
control" is defined in their agreements as
o any tender offer, stock exchange offer or other take-over device in
which any person becomes the beneficial owner of 30% or more of the
total voting power of our outstanding securities;
o any realignment of the Board of Directors or change in officers due to
shareholder action;
o our sale by 30% or more of our assets; or
o any merger or reorganization where we are not the surviving entity or
our shareholders fail to retain substantially the same direct or
indirect ownership in us immediately after the merger or
reorganization.
If Mr. Stoop or Cryer is terminated for cause under his agreement, he
will not be entitled to receive any severance compensation. If the termination
is without cause, we are obligated to pay him a severance payment equal to 90
days' of base salary, payable in three equal monthly installments, and if the
termination is because of a change of control, he is entitled to receive a
severance payment equal to his annual salary, payable in three installments. A
change of control is defined in his agreement as any sale or other disposition
by the us of all or substantially all of our assets, any merger or consolidation
with another corporation in which our shareholders as a group do not hold at
least 50% of the voting power of the surviving corporation, or any person
becomes the beneficial owner of 50% or more of our voting power.
Section 16(a) of the Securities Exchange Act of 1934. Section 16(a) of
the Securities Exchange Act of 1934 requires our executive officers and
directors, and persons who own more than ten percent of a registered class of
our equity securities, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission ("SEC"). Executive officers,
directors and greater than 10% shareholders are required by SEC regulation to
furnish us with copies of all Section 16(a) forms they file. Based solely on our
review of the copies of such forms received by us, or written representations
from certain reporting persons, we believe that during fiscal 1999 all filing
requirements applicable to our executive officers and directors and greater than
10% shareholders were complied with, except that Messrs. Lunt, Johnston and Bell
each filed one report on Form 4 late.
<PAGE>
Item 11. Executive Compensation.
The following table summarizes the compensation paid to or earned by
our chief executive officer and our four most highly-compensated executive
officers whose total salary and bonus exceed $100,000 during each of the past
two fiscal years:
<TABLE>
<CAPTION>
Summary Compensation Table
- -----------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term
Compensation Awards
----------------------------------------------------------------
Other Annual Securities Underlying
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($) Options / SARs (#)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
M. Daniel Lunt 1999 $120,000 - - -
President, CEO, Director 1998 $102,000 - - -
James W. Johnston 1999 $120,000 - - -
Executive V.P.,Chairman 1998 $102,000 - - -
Kenneth W. Bell 1999 $120,000 - - -
Senior V.P., CFO, Director 1998 $102,000 - - -
Peter Stoop 1999 $100,000 - - 500,000
V.P. Sales and Marketing 1998 $66,200 - - -
Martin Cryer 1999 $100,000 - - 300,000
V.P. Product Development 1998 - - - -
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The following table presents additional information concerning the
option awards made during fiscal year 1999 to each of our named executive
officers:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------------------------------------------
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option
-------------------------------------------------------- Term
Percent
of Total Market
Number of Options Price
Securities Granted Exercise on
Underlying to Emp. of Base Grant
Options in Fiscal Price Date Expiration
Name Granted (#) Year ($/Sh) ($/Sh) Date 5% ($) 10% ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
M. Daniel Lunt - - - - - - -
President, CEO, Director
James W. Johnston - - - - - - -
Executive V.P.,Chairman
Kenneth W. Bell - - - - - - -
Senior V.P., CFO,
Director
Peter Stoop 50,000 4.6% $0.10 $2.375 3/21/02 $135,905 $160,959
V.P. Sales and Marketing 250,000 23.2% $0.10 $3.562 11/18/02 $1,031,637 $1,219,518
200,000 18.5% $2.72 $3.625 6/23/03 $316,260 $469,224
Martin Cryer 50,000 4.6% $0.10 $8.875 9/22/02 $521,538 $615,162
V.P. Product Development 250,000 23.2% $2.72 $3.625 6/23/03 $395,325 $586,530
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The intrinsic value of each respective grant to Mr. Stoop as of the
date of such grant was $113,750, $865,500, and $181,000 respectively. The
intrinsic value of each respective grant to Mr. Cryer as of the date of such
grant was $438,750 and $226,250 respectively.
<PAGE>
The following table summarizes the exercise of stock options during
fiscal year 1999 by each of our named executive officers, and the fiscal
year-end value of unexercised stock options held by each of them:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
- -------------------------------------------------------------------------------------------------------------------
Number of Securities Value of
Shares Value Underlying Unexercised Unexercised In-The-
Acquired on Realized Options at Fiscal Year-End (#) Money Options at
Name Exercise (#) ($) Exercisable / Unexercisable Fiscal Year-End ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
M. Daniel Lunt - - - -
President, CEO, Director
James W. Johnston - - - -
Executive V.P.,Chairman
Kenneth W. Bell - - - -
Senior V.P., CFO, Director
Peter Stoop - - 103,333 / 396,667 $2,875,000
V.P. Sales and Marketing
Martin Cryer - - 5,000 / 295,000 $1,725,000
V.P. Product Development
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of December 31, 1999, the beneficial
ownership of our outstanding common stock by
o each of our executive officers,
o each of our directors, and
o all executive officers and directors as a group.
As of December 31, 1999, no other person held five percent or more of our common
stock. Beneficial ownership is determined in accordance with the rules of the
SEC and generally includes voting or investment power with respect to
securities. For purposes of calculating the percentages shown in the chart, each
person listed is also deemed to beneficially own any shares issuable on either
the exercise of vested options or warrants held by that person and that are
exercisable within 60 days after December 31, 1999. Except as indicated by
footnote, the persons named in the table have sole voting and investment power
with respect to all shares of common stock shown as beneficially owned by them.
The inclusion of any shares as beneficially owned does not constitute an
admission of beneficial ownership of those shares. The percentage calculation of
beneficial ownership is based on 11,891,002 shares of common stock outstanding
as of December 31, 1999.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Name of Beneficial Owner, Common Stock Beneficially Owned
Title of Class Relationship to Us Shares Percent
- -------------------------- ---------------------------------------------- ----------------- --------------------
Officers and Directors
<S> <C> <C> <C>
Common Stock M. Daniel Lunt 1 1,798,383 15.1%
President, CEO, Director
Common Stock James W. Johnston 2 2,021,223 17.0%
Chairman of the Board, Executive V.P.
Common Stock Kenneth W. Bell 3 1,510,608 12.7%
Senior V.P., CFO, Treasurer, Secretary,
Director
Common Stock Edward Sullivan 4 2,500 *
Director
Common Stock Michael Fowler 4, 5 3,000 *
Director
Common Stock David Grow 4 2,500 *
Director
Common Stock Peter T. Stoop 103,333 *
V.P. Marketing and Sales
Common Stock Martin Cryer 5,000 *
V.P. Product Development
Common Stock All Executive Officers and Directors as 5,446,047 45.8%
a Group (8 persons)
- ------------------------------ -----------------------------------------------------------------------------------
</TABLE>
1 Mr. Lunt shares voting power and investment power with his wife, Lori
Lunt.
2 Mr. Johnston shares voting power and investment power of 1,953,339 shares
held jointly with his wife, Catherine F. Johnston, 66,408 of such shares are
held in the name of his wife, Catherine F. Johnston. He also influences the
investment power and voting power of 1,476 shares held by his son, LeGrand
Johnston. Mr. Johnston does not disclaim beneficial ownership of his wife's and
son's shares.
3 Mr. Bell has sole voting power and investment power of 330,000 shares and
shares voting power and investment power of 1,180,608 shares with his wife,
Roberta L. Bell.
4 Represents options to acquire shares of our common stock within sixty
days of the date of this report at an average weighted exercise price of $5.86
per share.
5 Includes 2,500 options to acquire shares of our common stock within sixty
days of the date of this report at an average weighted exercise price of $5.86
per share.
Item 13. Certain Relationships and Related Transactions.
The following information summarizes certain transactions either we
engaged in during the past two years or we propose to engage in involving our
executive officers, directors, 5% stockholders or immediate family members of
those persons:
Management Loans to Us. James Johnston, Kenneth Bell and Daniel Lunt
secured a line of credit in the amount of $250,000, which they agreed to use to
loan us up to that amount on a revolving basis, and loaned us an additional
$50,000, for a total of $300,000 in 1997. Mssers. Johnston, Bell, and Lunt have
received no direct or indirect consideration for their securing this line of
credit. We subsequently drew down the entire $250,000 loan commitment. As of
December 31, 1998, we owed $120,000 of the $300,000. In October 1998, we repaid
the $50,000 loan and the line of credit was paid down to zero in January 1999,
but it still remains available to be drawn on, if we need it, through December
31, 1999. In May 1998, Mr. Lunt loaned us $13,000, which we repaid in July 1998
though our issuance of additional common stock to Mr. Lunt.
Indebtedness of Management. We advanced a total of $66,700 to James
Johnston during 1997 and 1998. The amounts outstanding on these loans as of
December 31, 1998 was $66,700. The interest rate is 8%, with interest and
principle due on January 1, 2000, but was paid in full by Mr. Johnston in March
1999. We also advanced a total of $29,500 to Kenneth Bell in 1997 and 1998. Mr.
Bell repaid those amounts to us in March 1999. We also loaned an entity owned by
M. Daniel Lunt $10,000 in 1997, and loaned him $4,000 personally in 1998. Five
thousand dollars of the $10,000 loan was repaid by offsetting amounts we
otherwise owed Mr. Lunt, and the other $5,000 was repaid in cash, and the $4,000
loan was paid to us in March 1999.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
The following documents are filed as part of this Annual Report on Form
10-K.
(a) Financial Statements and Schedules.
Consolidated Balance Sheets at December 31, 1999 and 1998
Consolidated Statements of Operations for the years ended December 31,
1999, 1998 and 1997
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997
Notes to Consolidated Financial Statements
All schedules have been omitted since the required information is not
present, is not present in amounts sufficient to require submission of the
schedule or because the required information is included in the financial
statements or notes thereto.
(b) Exhibits
Exhibit Number Description
2.1* Agreement and Plan of Reorganization between the Company and
WordCruncher Publishing Technologies, Inc., dated July 14
1998
3.1* Articles of Incorporation of the Company
3.2* Articles of Merger, filed June 20, 1998
3.3* Articles of Merger, filed July 15, 1998
3.4* Articles of Merger
3.5* Certificate of Amendment, filed February 1, 1999
3.6* Bylaws of the Company
4.1* Reference is made to Exhibit 3.4
4.2* Specimen of Common Stock Certificate
10.1* Lease between the Company and SLT III, LLC, dated December
24, 1998
10.2* License Agreement between the Company and Brigham Young
University, dated February 14, 1997
10.3* Purchase Agreement between the Company and Jeffrey B.
Petersen, dated December 28, 1998
10.4* Employment Agreement between the Company and Kenneth W.
Bell, dated September 1, 1998
10.5* Employment Agreement between the Company and James W.
Johnston, dated September 1, 1998
10.6* Employment Agreement between the Company and M. Daniel Lunt,
dated September 1, 1998
10.7* Employment Agreement between the Company and Peter T. Stoop
10.8* Preferred Stock Purchase Agreement between the Company and
certain Series A Preferred investors, dated February 8, 1999
10.9* Letter Amendment Regarding Preferred Stock Purchase
Agreement, dated April 21, 1999
10.10* Escrow Agreement among the Company, the Goldstein Law Group
and certain Series A Preferred Investors, dated February 8,
1999
10.11* Registration Rights Agreement among the Company and certain
Series A Preferred Investors, dated February 8, 1999
10.12* Form of Warrant issued to certain Series A Preferred
Investors on February 8, 1999
10.13* Warrant issued to Placement Agent, dated February 8, 1999
10.14* Dataware License Agreement, dated July 1999
10.15* Pittard Sullivan Contract, dated July 1999
10.16* Digital Boardwalk Agreement, dated July 1999
10.17* Acsiom, Inc. Consulting Agreement, dated July 1999
10.18 Columbia Financial Group Services Agreement, dated January,
1999
10.19 Sierra Systems Consulting and Development Agreement, dated
September, 1999
10.20 Veritas Software Financial Agreement, dated November, 1999
10.21 Netscape Software Financial Agreement, dated November,1999
10.22 Oracle Software Agreement, dated November, 1999
10.23 Sun Microsystems License Agreement, dated December, 1999
10.24 Qwest Dedicated Internet Access Service Agreement, dated
January 2000
10.25 Netdotworks Consulting and Support Agreement, dated
February, 2000
10.26 DoubleClick, Inc. DART Service Agreement, dated February,
2000
16.1** Letter of Crouch, Bierwolf & Chisholm
24.1 Power of Attorney (see signature page)
27.1 Financial Data Schedule
- -------------------------
* Incorporated by reference to Registration Statement Form S-1, File No.
333-79357, filed on May 28, 1999, and amended on August 17, 1999, September 24,
1999, October 25, 1999, November 19, 1999 and December 6, 1999.
** Incorporated by reference to Current Report Form 8-K, File No. 000-27453,
filed on March 1, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WORDCRUNCHER INTERNET TECHNOLOGIES, INC.
By: /s/
---------------------------------------
M. Daniel Lunt, Chief Executive Officer
Dated:
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on March 30, 2000.
By: /s/
----------------------------------------
James W. Johnston, Chairman of the Board,
Executive Vice President
By: /s/
----------------------------------------
Kenneth W. Bell, Senior Vice President,
Chief Financial Officer, Treasurer,
Secretary, Director
By: /s/
----------------------------------------
M. Daniel Lunt, President, Chief
Executive Officer, Director
By: /s/
----------------------------------------
Michael Fowler, Director
CONSULTANT AGREEMENT
Columbia Financial Group is an investor relations, direct marketing,
publishing, public relations and advertising firm with expertise in the
dissemination of information about publicly traded companies. Also in the
business of providing investor relations services, public relations services,
publishing, advertising services, fulfillment services, as well as Internet
related services.
Agreement made this 1st day of January, 2000, between WordCruncher Internet
Technologies, Inc. (hereinafter referred to as "Corporation"), and Columbia
Financial Group, Inc. (hereinafter referred to as "Consultant"), (collectively
referred to as the "Parties"):
Recitals:
The Corporation desires to engage the services of the Consultant to perform
for the Corporation consulting services regarding all phases of the
Corporation's "Investors Relations" to include direct investor relations and
broker/dealer relations as such may pertain to the operation of the
Corporation's business.
The Consultant desires to consult with the Board of Directors, the Officers
of the Corporation, and certain administrative staff members of the Corporation,
and to undertake for the Corporation consultation as to the company's investor
relations activities involving corporate relations and relationships with
various broker/dealers involved in the regulated securities industry.
AGREEMENT
1. The respective duties and obligations of the contracting Parties shall
be for a period of twelve (12) months commencing on the date first
appearing above. This Agreement may be terminated by either parties
only in accordance with the terms and conditions set forth in
Paragraph 8.
Services Provided by Consultant
2. Consultant will provide consulting services in connection with the
Corporation's "investor relations" dealings with NASD broker/dealers
and the investing public. (At no time shall the Consultant provide
services which would require Consultant to be registered and licensed
with any federal or state regulatory body or self-regulating agency.)
During the term of this Agreement, Consultant will provide those
services customarily provided by an investor relations firm to a
Corporation, including but not limited to the following:
(a) Aiding the Corporation in developing a marketing plan directed at
informing the investing public as to the business of the
Corporation; and
(b) Providing assistance and expertise in devising an advertising
campaign in conjunction with the marketing campaign as set forth
in (1) above; and
(c) Advise the Corporation and provide assistance in dealing with
institutional investors as it pertains to the Corporation's
offerings of its securities; and
(d) Aid and assist the Corporation in the Corporation's efforts to
secure "marketing makers" which will trade the Corporation's
stock to the public by providing such information as may be
required; and
(e) Aid and advise the Corporation in establishing a means of
securing nationwide interest in the Corporation's securities; and
(f) Aid and assist the Corporation in creating an "institutional site
program" to provide ongoing and continuous information to fund
managers; and
(g) Aid and consult with the Corporation in the preparation and
dissemination of press releases and news announcements; and
(h) Aid and consult with the Corporation in the preparation and
dissemination of all "due diligence" packages requested by and
furnished to NASD registered broker/dealers, the investing
public, and/or other institutional and/or fund managers
requesting such information from the Corporation; and
(i) At the Corporation's direction, work with the Corporation's
Public Relations firm to jointly support the Corporation's
overall public relations program.
Compensation
3. In consideration for the services provided by Consultant to the
Corporation, the Corporation shall, on behalf of the Consultant cause
to be vested at the time of execution of this Agreement 25% of the
warrants set forth in A) and B) below and shall cause an additional
25% of such warrants to vest on June 30, 2000. The balance of the
warrants, or an additional 50% of the amounts set forth in A) and B)
below, shall vest on September 30, 2000 if no termination of this
Agreement has taken place prior to that date. If a notice of
termination, as described in Section 8 Termination, has been issued by
either party then a pro rata number of the warrants to be vested in
the final 50% amount shall be vested through the date of termination.
All warrants vested shall have a term of five (5) years and shall
contain piggyback registration rights. The warrants shall be issued at
the following exercise prices:
A) 200,000 warrants at $5.00 per share
B) 200,000 warrants at $6.00 per share
(Collectively hereinafter referred to as "compensation")
Compliance
4. At the time of Consultant's execution of the warrants referred to in
#3, Compensation above, common shares underlying the warrants,
delivered by Corporation to Consultant will, at that particular time,
be free trading, or if not the shares shall be included n the next
registration filed by the Corporation. The warrants shall have "piggy
back" registration rights and will, at the expense of the Corporation,
be included in said registration.
Representation of Corporation
5. (a) The Corporation, upon entering this Agreement, hereby warrants
and guarantees to the Consultant that to the best knowledge of
the Officers and Directors of the Corporation, all statements,
either written or oral, made by the Corporation to the Consultant
are true and accurate, and contain no misstatements of a material
fact. Consultant acknowledges that estimates of performance made
by Corporation are based upon the best information available to
Corporation officers at the time of said estimates of
performance. The Corporation acknowledges that the information it
delivers to the Consultant will be used by the Consultant in
preparing materials regarding the Company's business, including
but not necessarily limited to, its financial condition, for
dissemination to the public. Therefore, in accordance with
Paragraph 6, below, the Corporation shall hold harmless the
Consultant from any and all errors, omissions, misstatements,
except those made in a negligent or intentionally misleading
manner in connection with all information furnished by
Corporation to Consultant.
(b) Consultant shall agree to release information only with written
or verbal approval of the Corporation.
6. WordCruncher Internet Technologies, Inc.
1. Authorized: 60 million shares
2. Issued: 13,395,407 shares
3. Outstanding: 13,395,407 shares
4. Free trading (float): 7,115,108 shares (approx.)
5. Shares subject to Rule 144 restrictions: 4.45 million shares
(approx.)
Limited Liability
7. With regard to the services to be performed by the Consultant pursuant
to the terms of this Agreement, the Consultant shall not be liable to
the Corporation, or to anyone who may claim any right due to any
relationship with the Corporation, for any acts or omissions in the
performance of services on the part of the Consultant, except when
said acts or omissions of the Consultant are due to its willful
misconduct or culpable negligence.
Termination
8. After June 30, 2000 this Agreement may be terminated by either party
upon the giving of not less than thirty (30) days written notice,
delivered to the parties at such address or addresses as set forth in
Paragraph 9, below. In the event of termination final compensation
shall be treated as outlined in Section 3, Compensation.
Notices
9. Notices to be sent pursuant to the terms and conditions of this
Agreement, shall be delivered as follows:
Timothy J. Rieu Kenneth W. Bell
Columbia Financial Group, Inc. WordCruncher Internet Technologies,
1301 York Road, Ste. 400 Inc.
Lutherville, Maryland 21093 405 East 12450 South, Ste. B
Draper, UT 84021
Attorney's Fees
In the event any litigation or controversy, including arbitration, arises
out of or in connection with this Agreement between the Parties hereto, the
prevailing party in such litigation, arbitration or controversy, shall be
entitled to recover from the other party or parties, all reasonable attorney's
fees expenses and suit costs, including those associated within the appellate or
post judgment collections proceedings.
Arbitration
10. In connection with any controversy or claim arising out of or relating
to this Agreement, the Parties hereto agree that such controversy
shall be submitted to arbitration, in conformity with the Federal
Arbitration Act (Section 9 U.S. Code Section 901 et seq), and shall be
conducted in accordance with the Rules of the American Arbitration
Association. Any judgment rendered as a result of the arbitration of
any dispute herein, shall upon being rendered by the arbitrators be
submitted to a Court of competent jurisdiction with the state of
Maryland, if initiated by Consultant, or in the state of Utah if
initiated by the Corporation.
Governing Law
11. This Agreement shall be construed under and in accordance with the
laws of the State of Utah, and all parties hereby consent to Utah as
the proper jurisdiction for said proceeding provided herein.
Parties Bound
12. This Agreement shall be binding on and inure to the benefit of the
contracting parties and their respective heirs, executors,
administrators, legal representatives, successors, and assigns when
permitted by this Agreement.
Legal Construction
13. In case any one or more of the provisions contained in this Agreement
shall for any reason be held to be invalid, illegal, or unenforceable
in any respect, the invalidity, illegality, or unenforceability shall
not affect any other provision of the Agreement, and this Agreement
shall be construed as if the invalid, illegal, or unenforceable
provision had never been contained in it.
Prior Agreements Superseded
14. This Agreement constitutes the sole and only Agreement of the
contracting parties and supersedes any prior understandings or written
or oral agreements between the respective parties. Further, this
Agreement may only be modified or changed by written agreement signed
by all the parties hereto.
Multiple Copies or Counterparts of Agreement
15. The original and one or more copies of this Agreement may be executed
by one or more of the parties hereto. In such event, all of such
executed copies shall have the same force and effect as the executed
original, and all of such counterparts taken together shall have the
effect of a fully executed original. Further, this Agreement may be
signed by the parties and copies hereof delivered to each party by way
of facsimile transmission, and such facsimile copies shall be deemed
original copies for all purposes if original copies of the parties'
signatures are not delivered.
Liability of Miscellaneous Expenses
16. The Corporation shall be responsible for any miscellaneous fees and
costs which are pre-approved in writing by the Corporation prior to
their expenditure.
Headings
17. Headings used throughout this Agreement are for reference and
convenience, and in no way define, limit or describe the scope or
intent of this Agreement or effects its provisions.
IN WITNESS WHEREOF, the Parties have set their hands and seal as of the
date written above.
BY:
----------------------------------------
Timothy J. Rieu, President
Columbia Financial Group, Inc.
BY: /s/ Kenneth W. Bell
----------------------------------------
Kenneth W. Bell, Sr. Vice President
WordCruncher Internet Technologies, Inc.
SIERRA SYSTEMS CONSULTANTS, INC.
CONSULTING AND DEVELOPMENT CONTRACT
AGREEMENT #__________________
This Consulting and Development Contract (the "Agreement") is made as of
September 16, 1999 between WordCruncher Internet Technologies, Inc.
("WordCruncher") and Sierra Systems consultants, Inc. ("Sierra").
To the extent that prior to the date or execution of this Agreement Sierra has
begun performed or completed any Services, Deliverables or other work or
performance called for by this Agreement, all such Services, Deliverables, work
and performance shall be governed by this Agreement.
1. Services.Sierra agrees to perform for WordCruncher the services listed in
Attachment A ("Services") and to develop, test, debug and deliver to
WordCruncher the computer programs and other deliverables identified in
Attachment A ("Deliverables"). WordCruncher agrees that Sierra will have
ready access to WordCruncher's staff and resources as necessary to perform
the Services. Where such access is not consistently provided, WordCruncher
agrees to accept any resulting delays in the Time Schedule included in
Attachment A.
A. Development of the Deliverables. Sierra agrees to develop Deliverables
which conform to the Specifications. The "Specifications" are the
features, compatibility, functionality, performance, descriptions,
requirements and other specifications set forth in Attachment A and in
the sierra document, "Spyhop Architecture and Design," dated October
4, 1999, the Sierra document, "Project Charter," dated October 1,
1999, the Digital Boardwalk document, "Project Plan," dated November
11, 1999, the WordCruncher document, "Spyhop Product Requirements
Document," version 0.89, the WordCruncher document, "Spyhop Search
Engine Design Document," version 1.6. The Specifications may be
changed by WordCruncher, provided that if such changes cause a net
increase in development cost or time to Sierra, then Sierra shall be
entitled to a reasonable increase in compensation under Section 2
below. If the increase in compensation is unacceptable to
WordCruncher, then WordCruncher may withdraw the changes to the
Specifications and the compensation shall not be increased. If and
when WordCruncher presents Specification changes to Sierra, Sierra
will promptly consult with WordCruncher on the increase in
compensation, if any, caused by the changes. Any changes by
WordCruncher to the Specifications will be reduced to writing and
added to this Agreement.
B. Development and Deliver Schedule. The development and delivery of the
Deliverables and the performance of the Services shall proceed in
accordance with the Time Schedule in Attachment A.
C. Progress Reports. Sierra shall provide written progress reports to
WordCruncher when requested by WordCruncher describing the status and
progress of the Services and Deliverables.
D. Delivery,Testing and Correction. When Sierra has completed a working
version of the Deliverables, the Deliverables will be delivered to
WordCruncher for review and testing. Nonconformities with the
Specifications, programming errors and other problems with the
Deliverables shall be promptly corrected by Sierra and then the
corrected Deliverables shall be re-delivered to WordCruncher. Review,
testing and correction will be repeated until all discovered
nonconformities with the Specifications and all programming errors and
other problems have been corrected to WordCruncher's reasonable
satisfaction. When review and testing by WordCruncher show that all
corrections have been made and that the Deliverables are satisfactory
to WordCruncher, WordCruncher shall accept the Deliverables.
WordCruncher shall not unreasonably withhold acceptance.
E. Source Code and Development Environment. Sierra shall deliver to
WordCruncher any and all source code, object code, executable code,
pseudo code, designs, programming documentation, flow charts, logic
diagrams, specifications, and other works of authorship that may be
written or created as part of or in connection with the Services or
the Deliverables or their development, testing or correction and all
of the foregoing are deemed part of the "Deliverables" for the
purposes of this Agreement. Sierra shall include comments in the
source code. The source code comments and organization and the
programming documentation given to WordCruncher shall be in
conformance with professional standards of computer programming and
shall be sufficient to enable programmers employed by WordCruncher to
maintain and enhance the Deliverables. Sierra shall also deliver to
WordCruncher the "Development Environment" for the Deliverables. The
"Development Environment" means the software tools, utilities,
development automation software, and other code, materials and items
used by Sierra's programmers to design, develop, compile, build, test,
maintain, and enhance the Deliverables. Anything needed to compile or
build the Deliverables (other than commercially available operating
systems, compilers, tool kits and products) shall be included in and
with the Development Environment. If a component of the Development
Environment is commercially available to the public, Sierra need only
identify the component in a written document included with the
Development Environment. The Development Environment does not include
any Deliverables (i.e., it is in addition to the Deliverables).
2. Payment. Subject to the other provisions of this Agreement, WordCruncher
agrees to pay Sierra for Services and Deliverables in accordance with the
payment schedule in Attachment B. WordCruncher shall reimburse Sierra for
all reasonable travel expenses outside the Los Angeles area incurred by
Sierra in the performance of Services, at Sierra's net cost. Travel must be
approved in advance by WordCruncher. Invoices will be issued in accordance
with the payment schedule of Attachment B, and will include travel expenses
incurred. Travel expenses that are covered by this contract are shown in
Attachment C. Payment is due within 340 days of invoice date. Sales taxes,
if any, are additional.
3. Confidential Information. Sierra shall not disclose to any other
organization or individual any confidential information that Sierra may
obtain from WordCruncher or any of the other contractors, vendors, and
third party content providers working with WordCruncher. Confidential
information means information, technology, plans, documents, research,
development, financial information, information about the Spyhop Site,
trade secretes or business affairs, but does not include information which
is generally known to the public or to individuals or organizations of
ordinary skill in computer design and programming.
A. Deliverables and Source Code. Sierra shall not disclose or transfer to
any third party any Deliverables or any source code or documentation
for the Deliverables.
B. Restrictions on Use. Except as necessary in the performance of the
Services or the development, testing or debugging of the Deliverables,
Sierra shall not use any of said confidential information.
C. Return of Materials. Any and all designs, templates, documents, code,
items and other materials provided by WordCruncher or any of the other
contractors, vendors, and third party content providers working with
WordCruncher in connection with this Agreement and all copies and
embodiments thereof shall be returned or delivered by Sierra to
WordCruncher upon WordCruncher's request, and Sierra shall retain no
copy thereof. Upon WordCruncher's request, Sierra shall certify in
writing its compliance with this Section 3.
D. Rights of Other Persons. Sierra shall not disclose to WordCruncher or
use in the Services or the development of any Deliverables any code,
work of authorship, technology or intellectual property which is
proprietary to any other person, company or entity, except as
permitted by WordCruncher (e.g., the designs, templates, content and
contributions from WordCruncher or its contractors such as Digital
Boardwalk, Inc. and Pittard Sullivan).
E. Injunctive Relief. Sierra agrees that a breach by Sierra of this
Agreement will cause irreparable injury to WordCruncher not adequately
compensable in monetary damages alone or through other legal remedies.
Therefore, in the event of a breach, WordCruncher shall be entitled to
preliminary and permanent injunctive relief and other equitable relief
in addition to damages and other legal remedies.
4. Staff. Sierra's staff is not and shall not be deemed to be employees of
WordCruncher. Sierra shall take appropriate measures to insure that its
staff who perform Services are competent to do so and that they do not
breach or act inconsistent with this Agreement. Sierra agrees that for a
period of twelve months following the termination of the Services and any
other work for WordCruncher under this Agreement, Sierra will not solicit
or offer employment to WordCruncher's employees engaged in any efforts
under this Agreement without WordCruncher's prior written approval.
WordCruncher will have final approval on all Sierra staff assigned to the
Services.
A. Development by Employees. The development of the Deliverables shall be
done only by employees of Sierra within the scope of their employment
(with the exceptions of designs, templates, content and contributions
from WordCruncher or its contractors such as Digital Boardwalk, Inc.
and Pittard Sullivan). If Sierra must engage the services of any
independent contractor, Sierra shall first obtain WordCruncher's
written approval and a written contract satisfactory to WordCruncher
with the independent contractor. The contract must include an
assignment to WordCruncher all of the independent contractor's right,
interest and title in and to the Deliverables (including copyrights,
trade secrets and other intellectual property), reasonable
non-disclosure and non-use provisions binding on the independent
contractor, and such other provisions as WordCruncher reasonably
requests.
5. Use and Ownership of Work Product. WordCruncher shall have ownership of the
Deliverables and other work product of Sierra under this Agreement. Sierra
hereby assigns to WordCruncher the copyrights and other intellectual
property and rights in and to the Deliverables and other works product. In
the event that the Deliverables contain any Development Objects (as defined
below), then such Development Objects are licensed on a nonexclusive,
unlimited, irrevocable, worldwide basis to WordCruncher. Such license
includes the right to grant sublicenses and includes the right to use,
copy, publish, distribute, display, modify, enhance, create derivative
works and commercialize. "Development Objects" shall mean any code,
objects, algorithms or subroutines which have been used repeatedly by
programmers in the development of other computer programs and which are
intended to be used repeatedly in the development of future computer
programs. Furthermore, the Development Environment and all of the Sierra's
intellectual property and rights in and to the Development Environment are
licensed on a non-exclusive, unlimited, irrevocable, world-wide basis to
WordCruncher for use in connection with the Deliverables and their
maintenance and enhancement, including the right to grant sublicenses.
A. Registration of Copyrights. WordCruncher may register the copyright(s)
to the Deliverables with U.S. Copyright Office. Sierra shall cooperate
in all respects with the reasonable requests of WordCruncher necessary
to facilitate such registration.
B. Recordation. WordCruncher may record this Agreement, or at
WordCruncher's election, a notice and/or description of this Agreement
or any assignment or license herein, with the U.S. Copyright Office,
U.S. Patent and Trademark Office, and/or any other government
agencies, entities or offices. Sierra shall provide any cooperation
reasonably requested by WordCruncher to facilitate such recordation.
C. Enforcement and Defense. Sierra shall cooperate with all reasonably
requests by WordCruncher in connection with the enforcement or defense
of any copyrights or other intellectual property assigned by Sierra to
WordCruncher, or any litigation, arbitration, mediation or settlement
proceedings or meetings relating to the Deliverables or such
copyrights to other intellectual property.
D. Moral Rights. For purposes of this Agreement, "Moral Rights" shall
mean any rights of paternity or integrity, any right to claim
authorship of the Deliverables, to object to any distortion,
mutilation or other modification of, or other derogatory action in
relation to, the Deliverables, whether or not such would be
prejudicial to Sierra's or the author's honor or reputation, and any
similar right, existing under judicial or statutory law of any country
in the world, or under any treaty, regardless whether or not such
right is denominated or generally referred to as a "moral" right.
Sierra hereby irrevocably transfers and assigns to WordCruncher any
and all Moral Rights that Sierra or any of its employees may have in
or to the Deliverables. Sierra, on behalf of itself and its employees,
also hereby forever waives and agrees never to assert any and all
Moral Rights it or its employees may have in or to the Deliverables,
at any time. Notwithstanding anything herein to the contrary, this
Section D is subject to the following: (1) This Section D applies only
if and to the extent that it is valid and enforceable under, and not
in conflict with, applicable law, applicable international copyright
treaties. (2) This Section D shall require no assignment or transfer
that is in conflict with applicable law or any applicable
international copyright treaties.
E. Further Assurances. Sierra shall execute and deliver to WordCruncher
such documents, assignments and further assurances as are reasonably
requested by WordCruncher to better evidence or document any
assignment, license or rights under this Agreement or to further or
support any of the purposes or provisions of this Agreement.
6. WordCruncher and Sierra Representatives. Mr. Daniel Lunt (or a replacement
designated by WordCruncher) will represent WordCruncher during the
performance of this Agreement with respect to the Services and Deliverables
or any other matter under this Agreement and has authority to execute
written modifications or additions to this Agreement on behalf of
WordCruncher. Mr. Bill McGraw (or a replacement designated by Sierra) will
represent Sierra during the performance of this Agreement with respect to
the Services and Deliverables or any other matter under this Agreement and
has authority to execute written modifications or additions to this
Agreement on behalf of Sierra.
7. Limited Warranty. Sierra warrants that it shall perform the Services and
this Agreement in accordance with the standards of care and diligence
normally practiced by recognized software companies and professionals
performing similar services. Except for the warranties expressly stated in
this Agreement, Sierra makes no other warranties, whether written, oral,
statutory or implied, including without limitation the implied warranties
of fitness for a particular purpose and merchantability. In no event except
for a breach of an express warranty in this Agreement, shall either Party
be liable to the other Party for special or consequential damages, whether
or not the possibility of such damages has been disclosed in advance or
could have been reasonably foreseen.
A. Right to Enter Into Agreement. Each Party warrants that it has the
right to enter into this Agreement and that this Agreement is not in
conflict with any other agreement or obligation of said Party.
B. Deliverables. Sierra warrants that the Deliverables will conform to
their Specifications and that any nonconformities, defects or errors
will be promptly remedied by Sierra.
C. Year 2000 Compliance. Sierra represents and warrants that the
Deliverables delivered by Sierra to WordCruncher will be properly
designed and coded to be used prior to, during, and after the calendar
year 2000 A.D., and that the Deliverables will operate during each
such time period without error relating to date data, specifically
including, without limitation, any error relating to, or the product
of, date data which represents or references different centuries or
more than one century. Without limiting the generality of the
foregoing, Sierra further represents and warrants the following for
the Deliverables:
(i) The Deliverables will not abnormally end or provide invalid or
incorrect results as a result of date data, specifically
including date data which represents or references different
centuries or more than one century.
(ii) The Deliverables will be designed and coded to ensure year 2000
compatibility, including, but not limited to, date data century
recognition, calculations which accommodate same century and
multi-century formulas and date values, and date data interface
values that reflect the century.
(iii)All date-related interfaces and data fields will include an
indication of century.
(iv) All date processing by the Deliverables will include a four digit
year format and will recognize and correctly process dates for
leap years.
(v) The Deliverables will require that all date data (whether
received from users, systems, applications or other sources)
include an indication of century in each instance.
(vi) All date output and results, in any form, will include an
indication of century in each instance.
The term "date data" shall mean any data, output or input which
includes an indication of or reference date.
D. No Self-Help Code or Unauthorized Code. Sierra warrants to
WordCruncher that no copy of the Deliverables provided by Sierra under
this Agreement will contain or be accompanied by any Self-Help Code or
Unauthorized Code (as defined below).
"Self-Help Code" means any back door, time bomb, drop dead device, or
other routine, code, algorithm or hardware component designed or used:
(i) to disable, erase, alter or harm the Deliverables or any computer
system, program, database, data, hardware or communications software,
automatically with the passage of time, or under the control of, or
through some affirmative action by, a person other than WordCruncher,
or (ii) to access any computer system, program, database, data,
hardware or communications system of WordCruncher. "Self-Help Code"
does not include any code in the Deliverables or any accompanying
hardware component designed and used to permit Sierra to obtain access
to the Deliverables on WordCruncher's computer system (e.g., remote
access via modem) solely for purposes of providing maintenance or
technical support to WordCruncher, provided that such code or hardware
component is first disclosed to WordCruncher and approved by
WordCruncher in writing.
"Unauthorized Code" means any virus, Trojan horse, worm, or other
routine, code, algorithm or hardware component designed or used to
disable, erase, alter, or otherwise harm any computer system, program,
database, data, hardware or communications system, or to consume, use,
allocate or disrupt any computer resources.
E. Infringement. Sierra warrants that the Deliverables will be of
original development and design and will not infringe, misappropriate
or violate any copyright, patent, trade secret, intellectual property,
privacy or other right of a third party.
F. Indemnification. Sierra shall indemnify WordCruncher and its officers,
directors, shareholders, affiliates, contractors, licensees,
customers, employees and representatives against, and hold them
harmless from, any claim by a third party that the Deliverables (or
their reproduction, sale, distribution or use) constitutes an
infringement of said third party's copyright, patent, trade secret,
intellectual property, privacy or other right, and all litigation,
arbitration, judgments, awards, settlements, damages, costs, expenses,
attorneys' fees, losses, liabilities, penalties and fines resulting
from or relating to such claim. Sierra shall have no obligation under
the preceding sentence for infringement based upon any modification or
addition by WordCruncher to the Deliverables. Sierra shall indemnify
and hold harmless WordCruncher and WordCruncher's officers, directors,
shareholders, affiliates, employees, contractors, licensees,
customers, and representatives from and against any and all claims,
litigation, arbitration, judgments, awards, settlements, damages,
costs, expenses, attorneys' fees, losses, liabilities, penalties and
fines resulting from or relating to Sierra's (or its employees')
fault, negligence, willful misconduct, fraud or strict liability.
8. Additional Work. If WordCruncher requests additional services, Section 3
through 11 of this Agreement will apply to the extent reasonable, unless a
new written Agreement is entered into by WordCruncher and Sierra. Such
additional services will be covered on additional Attachments or statement
of work.
A. Available at WordCruncher's Request. For at least two years following
acceptance of the deliverables by WordCruncher, Sierra shall be
available to provide WordCruncher and its designees with such
additional technical support, consultation, training, maintenance and
enhancement as may be requested from time to time by WordCruncher.
Such technical support, consultation, training, maintenance and
enhancement shall be at Sierra's then-current standard fees and
charges, which shall not be unreasonable. However, prior to and during
the first year of said two-year period there shall be no fee or other
charge for any programming errors, unless the correction is for a
version of the Deliverables where the source code has been modified by
WordCruncher or its other contractors. WordCruncher is not obligated
to request any additional technical support, consultation, training,
maintenance or enhancement. This Section 8 does not require
WordCruncher to pay any additional fees or charges for the Services or
Deliverables as they are included in the $500,000 fixed fee of
Appendix B.
9. Delays. Example of WordCruncher actions which may affect scheduled success
include change requests, changes in Specifications or standards, or
unavailability of test data, test computer, information staff or technical
support needed by Sierra. In these and similar cases, the term for
completion of the Services will be extended by a mutually agreed upon
period not to exceed a period equal to the time of delay. Sierra will use
its best efforts to overcome delays and complete the Services and
deliverables on schedule.
10. Arbitration. Any claim or controversy between WordCruncher and Sierra
arising out of or relating to this Agreement shall be resolved in the
following manner:
A. Notice. Prior to filing any claim in a court of competent jurisdiction
or initiating any arbitration proceeding, a Party shall give the other
Party at least 10 days' advance written notice of its intention to do
so. Each Party agrees to make its representative reasonably available
to meet (either in person or by teleconference) with the other Party
to resolve the claim controversy.
B. Meeting. If the other Party desires to have such a meeting, neither
Party may file a claim or begin arbitration prior to the occurrence of
such meeting. The Parties shall meet in good faith at the offices of
the other Party or the other Party's attorney.
C. Arbitration. In the event the other Party does not agree within the 10
days to such meeting or if after such meeting the Parties are still
unable to resolve their differences, any claim or controversy shall be
finally decided by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association by a single
arbitrator appointed in accordance with such rules. Such arbitration
shall be conducted in Los Angeles if brought by WordCruncher or in
Salt Lake County if brought by Sierra. The award rendered by the
arbitrator shall be final, and judgment may be entered upon it at any
court having jurisdiction.
11. Miscellaneous.
A. Entire Agreement. This Agreement (including its Attachments) contains
the entire Agreement between WordCruncher and Sierra with respect to
the matters covered herein. Each Party acknowledges that, in entering
into this Agreement, it is not relying on any other representations of
the other Party other than the representations contained or referenced
herein.
B. Force Majeure. Neither WordCruncher nor Sierra will be responsible for
any failure by it to perform its obligations under this Agreement, if
failure is due to causes beyond the non-performing party's reasonable
control, including, without limitation, acts of God, war and labor
disputes. The non-performing Party shall give prompt written notice to
the other Party of the cause and its effects on performance and shall
diligently exercise all best efforts to overcome the cause and resume
performance. The other Party may cancel this Agreement if the
performance is not resumed within five days.
C. Assignment. This Agreement may not be assigned by Sierra without the
prior written consent of WordCruncher. WordCruncher may assign or
transfer this Agreement to any person or entity who acquires
substantially all of WordCruncher's intellectual property in or to the
Spyhop web site. Except for this prohibition on assignment, the
Agreement shall be binding upon the heirs, successors and assigns of
WordCruncher and Sierra.
D. Severability. If any provision of this Agreement is found to be
invalid, illegal or unenforceable by a court of competent
jurisdiction, the remaining provisions shall not be affected and will
continue in full force and effect.
E. Notices.
(i) Notices to WordCruncher should ii) Notices to Sierra should be
be to: sent to:
President Bill McGraw
WordCruncher Technologies Inc. Sierra Systems Consultants Inc.
405 East 12450 South, Suite B 19800 MacArthur Boulevard
Draper, Utah 84020 Irvine, CA 92612
or to such substitute address as the Party to receive such notice
designates by written notice to other Party.
F. Costs and Expenses. Each Party shall be responsible for the costs and
expenses incurred by it and its employees and representatives, except
as otherwise stated herein.
G. Relationship. Neither Party is the partner, joint venturer, agent or
representative of the other Party. Neither Party has the authority to
make any representations or warranties or incur any obligations or
liabilities on behalf of the other Party. Neither Party shall make any
representation to a third party inconsistent with this Section G.
H. Construction. This Agreement represents the wording selected by the
Parties to define their agreement and no rule of strict construction
shall apply against any Party. Whenever the context reasonably
permits, the singular shall include the plural, the plural shall
include the singular, and the whole shall include any part thereof.
I. Waiver. Any waiver of, or promise not to enforce, any right under this
Agreement shall not be enforceable unless evidenced by a writing
signed by the Party making said waiver or promise.
J. Executionand Authority. This Agreement may be executed in any number
of duplicate counterparts, each of which shall be deemed an original,
but all of which taken together shall constitute one and the same
instrument. The persons signing below represent that they are duly
authorized to execute this Agreement for and on behalf of the Party
for whom they are signing.
The signatures below of the authorized representative of WordCruncher and Sierra
indicate their acceptance of the terms and conditions of this Agreement.
WordCruncher Internet Sierra Systems Consultants, Inc.
Technologies, Inc.
/s/ /s/
----------------------------- --------------------------------
Martin Cryer, Vice President Bill McGraw, Vice President
ATTACHMENT A: SCOPE OF SERVICE
DATE: Jan 6, 2000
------------------
WORDCRUNCHER INITIALS: /s/ (not legible)
------------------
SIERRA INITIALS: /s/ (not legible)
------------------
AGREEMENT #:
-----------------
Services:
Services will be provided to WordCruncher as proposed in the Sierra letter to
WordCruncher dated September 22, 1999, and in Sierra document, "Spyhop
Architecture and Design," dated October 4, 1999, the Sierra document, "Project
Charter," dated October 1, 1999, the Digital Boardwalk document, "Project Plan,"
dated November 11, 1999, the WordCruncher document, "Spyhop Product Requirements
Document," version 0.8, and the WordCruncher document, "Spyhop Search Engine
Design Document," version 1.6. Services also include the development, delivery,
testing and debugging of the Deliverables. These services will be provided in
support of the development of the Spyhop web site.
Deliverables:
Deliverables will be provided to WordCruncher as proposed in the same documents
listed above under "Services." The deliverables include but are not limited to
HTML templates, data bases, scripts, integration modules, and any other Sierra
or Digital Boardwalk software components required to deliver a fully functioning
web site that conforms to the specifications set forth in the above referenced
documents. It is understood that certain other software licenses for products
required to build the Spyhop site (i.e., NAS, NES, Oracle, and Solaris) will be
acquired by WordCruncher separate from this contract.
Specifications:
The specifications for the deliverables are defined in the same documents listed
above under "Services."
Time Schedule:
The time schedule for this project is defined by the Digital Boardwalk document,
"Project Plan," dated November 4, 1999. As of November 3, 1999, it has been
agreed between the involved parties that the target release date is now February
15, 2000.
<PAGE>
ATTACHMENT B: PAYMENT
DATE: Jan 6, 2000
------------------
WORDCRUNCHER INITIALS: /s/ (not legible)
------------------
SIERRA INITIALS: /s/ (not legible)
------------------
AGREEMENT #:
-----------------------
The total fees for this project, including the Services and Deliverables, will
be in the form of a fixed-price amount of $500,000. This shall be the total
compensation to Sierra.
The $500,000 fee will be paid as follows:
(a) An initial payment of $100,000 representing 20% of the total fees upon
satisfactory completion of the first phase including design
specifications and a detailed project. Sierra acknowledges receipt of
$100,000 of this amount prior to execution of this Agreement.
(b) A second payment of $125,000 representing 25% of the total fees was
due upon acceptance of the Spyhop Architecture document by
WordCruncher. Sierra acknowledges receipt of $125,000 of this amount
prior to execution of this Agreement.
(c) A third payment of $125,000 representing 25% of the total fees will be
due upon delivery of the Deliverables for the beta site to begin
testing (scheduled for January 4, 2000).
(d) A final payment of $150,000 representing 30% of the total fees will be
due upon final acceptance by WordCruncher of the Deliverables. Due to
the extreme importance of meeting the launch date of February 15,
2000, Sierra agrees to share in the urgency by agreeing to the
following terms. If the Spyhop web site fails to launch by February
15, due to factors within Sierra's control or Sierra's failure to
perform in a timely manner under this Agreement, 10% of the final
payment will be withheld. If it fails to launch by February 22, 30% of
the final payment will be withheld. If it fails to launch by February
29, 100% of the final payment will be withheld.
Additional Services:
If any additional services, technical support, consultation, training,
maintenance and enhancement are requested by WordCruncher (see Section 8 of the
Agreement), they will be performed by Sierra at the following rates:
[Insert rates]
Such rates shall not be increased until one year from the date of this
Agreement. Thereafter, Sierra's then-current standard rates shall apply.
ATTACHMENT C: TRAVEL EXPENSES
DATE: Jan 6, 2000
------------------
WORDCRUNCHER INITIALS: /s/ (not legible)
------------------
SIERRA INITIALS: /s/ (not legible)
------------------
AGREEMENT #:
--------------------
Sierra will make every attempt to minimize travel expenses by assigning
qualified resources from our Los Angeles office to address WordCruncher's
requirements and priorities.
Travel expenses will be invoiced at cost, in the event that consultants need to
be brought in from other locations to meet WordCruncher's schedule and
requirements. No travel will be reimbursed without prior authorization from
WordCruncher. WordCruncher's reasonable guidelines applicable to travel will be
followed.
VERITAS SOFTWARE
FINANCIAL AGREEMENT
November 4, 1999
The following software products will be offered to WordCruncher for purchase
through the following financial agreement between the parties: WordCruncher, IBS
and Veritas. This agreement will be in effect upon software order placement and
will conclude upon final payment made by WordCruncher.
1. Veritas Software products to be purchased for $60,830.25. Please see the
IBS Quotation WCVTS-01 dated 11/4/99.
2. WordCruncher will be extended a 40-day net purchase arrangement on the
transaction. WordCruncher has the option of paying any amount of money upon
order. The total amount payable on the invoice after the 40-day period will
carry a 1-% carry fee per 30-day period.
3. WordCruncher may elect to pay the 1-% carry charge for a six-month period.
On or before the 6th month, the total amount of the invoice must be paid in
full.
4. This transaction is final upon order.
/s/ illegible
11/4/99
NETSCAPE SOFTWARE
FINANCIAL AGREEMENT
November 4, 1999
The following software products will be offered to WordCruncher for purchase
through the following financial agreement between the parties: WordCruncher, IBS
and Access Graphics. This agreement will be in effect upon software order
placement and will conclude upon final payment made by WordCruncher.
1. Netscape Software products to be purchased for $268,068.72. Please see the
IBS Quotation NAS201 dated 11/4/99.
2. WordCruncher will be extended a 40-day net purchase arrangement on the
transaction. WordCruncher may pay prior to net 30 and receive a 1-%
discount on the invoice amount. WordCruncher has the option of paying any
amount of money upon order. The total amount payable on the invoice after
the 40-day period will carry a 1-% carry fee per 30-day period.
3. WordCruncher may elect to pay the 1-% carry charge for a twelve-month
period. On or before the 12th month, the total amount of the invoice must
be paid in full.
4. This transaction is final upon order.
Sun-Netscape Alliance Right To Use (RTU) Certificate of Authenticity
This Certificate of Authenticity is your assurance that you have legally
licensed from Sun Microsystems these products(s).
508028
Enduser Address: Enduser PO Number: 1059444
WORD CRUNCHER INTERNET TECHNOLOGIES RTU Number: US-1318042-0
DRAPER, UT 94020 Issue Date: November 17, 1999
Attn.: MARTIN CRYER Effective Date: November 17, 1999
Expiration Date: November 17, 2000
IT Support Contact:
Name: MARTIN CRYER
Email: MARTIN_CRYER@WORDCRUNCHER. COM
Tech Support Contact:
Name: MARTIN CRYER
Email: MARTIN_CRYER@WORDCRUNCHER. COM
Product Description Alliance Product Number Quantity
- --------------------------------------------------------------------------------
WEB SERVER ENT LICENSE IWEM9-400-9929 4
WEB SERVER ENT MAINTENANCE IWEM9-MNT-9929 4
BRONZE MAINTENANCE KIT AMB99-MNT-99D9 1
Customer agrees to comply with the terms of any license agreement or product
specific terms included in or with the above-referenced products.
Sun-Netscape Alliance Right To Use (RTU) Certificate of Authenticity
This Certificate of Authenticity is your assurance that you have legally
licensed from Sun Microsystems these products(s).
508028
Enduser Address: Enduser PO Number: 1063512
WORD CRUNCHER INTERNET TECHNOLOGIES RTU Number: US-1354753-0
405 EAST 12450 SOUTH Issue Date: December 22, 1999
STE B Effective Date: December 22, 1999
DRAPER, UT 94020 Expiration Date: December 22, 2000
Attn.: MARTIN CRYER
IT Support Contact:
Name: MARTIN CRYER
Email: MARTIN_CRYER@WORDCRUNCHER. COM
Tech Support Contact:
Name: MARTIN CRYER
Email: MARTIN_CRYER@WORDCRUNCHER. COM
Product Description Alliance Product Number Quantity
- --------------------------------------------------------------------------------
NETSCAPE APPLICATION SERVER LICENSE NAS29-LCO-R999 8
NETSCAPE APPLICATION SERVER MAINTENANCE NAS29-MNT-4999 8
Customer agrees to comply with the terms of any license agreement or product
specific terms included in or with the above-referenced products.
Sun-Netscape Alliance Right To Use (RTU) Certificate of Authenticity
This Certificate of Authenticity is your assurance that you have legally
licensed from Sun Microsystems these products(s).
508028
Enduser Address: Enduser PO Number: ibs4005/1067674
WORD CRUNCHER INTERNET TECHNOLOGIES RTU Number: US-1384536-0
DRAPER, UT 94020 Issue Date: February 01, 2000
Attn.: MARTIN CRYER Effective Date: February 01, 2000
Expiration Date: February 01, 2001
IT Support Contact:
Name: MARTIN CRYER
Email: MARTIN_CRYER@WORDCRUNCHER. COM
Tech Support Contact:
Name: MARTIN CRYER
Email: MARTIN_CRYER@WORDCRUNCHER. COM
Product Description Alliance Product Number Quantity
- --------------------------------------------------------------------------------
UPGRADE SILVER TO GOLD AMG29-MNT-9989 1
GOLD MAINTENANCE KIT AMG99-MNT-99D9 1
Customer agrees to comply with the terms of any license agreement or product
specific terms included in or with the above-referenced products.
SUN MAJOR WORLDWIDE AGREEMENT
SUN MAINTENANCE
(Sun-Netscape Alliance Software)
BY CONTACTING SUN FOR TECHNICAL SUPPORT THROUGH THE TELEPHONE NUMBER O
URL ADDRESS PROVIDED WITH THIS AGREEMENT OR BY DOWNLOADING ANY UPGRADES PROVIDED
WITH THIS AGREEMENT, THE INDIVIDUAL OR ENTITY WHO PURCHASED THE MAINTENANCE PLAN
(`CUSTOMER") IS CONSENTING TO BE BOUND BY AND IS BECOMING A PARTY TO THIS
AGREEMENT. IF CUSTOMER DOES NOT AGREE TO ALL OF THE TERMS OF THIS AGREEMENT,
CUSTOMER SHOULD NOT CONTACT SUN FOR SUPPORT OR DOWNLOAD UPGRADES AND PROMPTLY
CONTACT CUSTOMER'S PLACE OF PURCHASE FOR CANCELLATION OF MAINTENANCE, CUSTOMER
WILL RECEIVE A REFUND OF ANY MONEY PAID ONLY IF CUSTOMER CONTACTS THE PLACE OF
PURCHASE TO CANCEL CUSTOMER'S MAINTENANCE ORDER WITHIN THIRTY (30) DAYS OF
PURCHASE. THIS AGREEMENT WILL BE VALID FOR ONE (1) YEAR FROM CUSTOMER'S DATE OF
PURCHASE ("MAINTENANCE PERIOD").
1. DEFINITIONS
1.1 "End User" means each individual within each corporation or entity
licensed to use Software under Sun's standard Binary Code License,
which includes the Software product terms and conditions accompanying
the Software ("BCL"). If Software is licensed to be used to provide
further services for individuals outside of the corporation or entity
licensing the Software, regardless if for a fee, then "End User"
includes such individuals.
1.2 "Errors" means one or more reproducible deviations in the standard,
unmodified Software from the applicable specifications shown in the
documentation.
1.3 "Maintenance Option" means additional Maintenance Program features set
forth in a Schedule that Customer may choose to purchase.
1.4 "Maintenance Period" means twelve (12) months from the Maintenance
Effective Date.
1.5 "Maintenance Program" means the Sun program pursuant to which Customer
may obtain technical support and maintenance Services, including any
Maintenance Options for which Customer has paid the applicable
Maintenance fee.
1.6 "Maintenance Release" means a Software revision or patch that improves
the functionality of Software that does not contain any new features
or enhancements. A Maintenance Release is not an upgrade.
1.7 "Schedule" means the additional terms applicable to each Maintenance
Program, which are incorporated herein, including any optional terms
set forth in attachments thereto. The terms of a Schedule will take
precedence over any terms in this Exhibit to the extent that they are
inconsistent.
1.8 "Software" means the software licensed by Customer pursuant to the
Software Exhibit.
1.9 "SoftwareRelease" means a release of Software that is designated by
Sun in its sole discretion by a change in the digit(s) to the left of
the decimal point in the Software version number [(x).x.x].
1.10 "Update" means a release of Software that is designated by Sun in its
sole discretion by a change in the digit(s) to the right of the tenths
digit in the Software version number [x.x.(x)].
1.11 "Upgrade"means Updates, Version Releases, or Software Releases that
Sun makes generally commercially available and excludes Software
Releases or Software designated by Sun as a separate Software or new
component.
1.12 "Version Release" means a release of Software that is designated by
Sun in its sole discretion by a change in the tenths digit in the
Software version number [x.(x).x].
2. TECHNICAL SUPPORT
2.1 Sun will provide back-end support to Customer for Errors not resolved
by Customer pursuant to Customer's support policies and in accordance
herewith.
2.2 Sun will provide Customer with a telephone number that Customer may
use to report Errors during Sun business hours. If stated in the
Schedule for a particular Maintenance Program, Sun will also provide
Customer with a website URL.
2.3 Sun will make reasonable efforts to correct significant Errors that
Customer identifies, classifies and reports to Sun and that Sun
substantiates. Sun may reclassify Errors if it reasonably believes
that Customer's classification is incorrect.
2.4 Customer will provide sufficient information to Sun to enable Sun to
duplicate the Error before Sun's response obligations will commence.
Unless otherwise authorized in writing by Sun, Sun will not be
required to correct any Error caused by: (i) incorporation of,
attachment of a feature, program, or device to the Software, or any
part thereof, by Customer; (ii) any nonconformance caused by accident,
transportation, neglect, misuse, alteration, modification, or
enhancement of the Software by or on behalf of Customer; (iii)
Customer's failure to provide an installation environment recommended
for the Software; (iv) Customer's use of the Software for other than
the specific purpose for which the Software is intended; (v)
Customer's use of the Software on any systems other than the specified
hardware platform for such Software; (vi) Customer's use of defective
media or defective duplication of the Software; or (vii) Customer's
failure to incorporate any Maintenance Releases previously released by
Sun which corrects such Error.
2.5 Provided Error reports are received by Sun during Sun business hours,
Sun will use reasonable commercial efforts to communicate with
Customer about the Error, via telephone within the target response
times specified in the Schedule for the applicable Maintenance
Program(s).
2.6 Sun will use reasonable commercial efforts to identify defective
source code and to resolve each significant Error by providing either
a reasonable workaround, an object code patch or a specific action
plan for how Sun will address the problem and an estimate of how long
it will take to rectify the defect.
2.7 Sun agrees to support a given revision, to include Software Releases,
Upgrades and Version Releases of the Software, for twelve (12) months.
2.8 Sun may subcontract the provision of Services under any Maintenance
Program, in which case Sun will remain primarily responsible for the
provision of such Services.
3. MAINTENANCE RELEASES AND UPGRADES
3.1 Provided that Customer has paid the applicable Maintenance Program
fees, Customer will be entitled to receive any Maintenance Releases
and/or Upgrades made generally available during the Maintenance Period
for the Software licensed from Sun by Customer and covered under a
Maintenance Program.
3.2 Provided that Customer has paid for and has current Maintenance
Program for Software Releases and Upgrades, Customer will be entitled
to all commercially released major and minor Updates included in such
Maintenance Program for the period thereof, regardless of whether such
Updates result from independent development by Netscape or Sun, or
joint development by the Sun-Netscape Alliance.
3.3 Netscape client products are excluded from coverage under any
Maintenance Program.
3.4 Any Upgrades released during the Maintenance Period shall be made
available on a Sun-designated web site for access or electronic
download by Customer. Sun shall register Customer for such access or
electronic downloads, and will provide Customer with instructions in
writing or electronically. When a Maintenance Release or Upgrade is
available for access or download, Sun will issue to an address
designated by Customer an electronic communication indicating such
availability.
3.5 Use of Software Updates, Version Releases, Software Releases,
Maintenance Releases and Upgrades is governed by the applicable BCL
obtained with the original Software.
4. TERM AND TERMINATION
4.1 This Maintenance Exhibit will come in force on the Maintenance
Effective Date and, unless earlier terminated by either party as set
forth below, remain in effect for a period of one (1) year.
4.2 Prior to the expiration of the current term, Sun may invoice Customer
for annual renewal of the Maintenance Program pursuant to the terms,
conditions, and pricing then in effect. If Customer does not wish to
renew the Maintenance Program, Customer must contact Sun prior to the
expiration of the current term in order to decline the renewed
Maintenance Program.
4.3 Reinstatement of a lapsed Maintenance Program is subject to Sun's
then-current Services reinstatement fees in effect on the date the
reinstatement of Services is ordered.
4.4 Either party may terminate this Maintenance Agreement: (i) immediately
upon written notice to the other party of a non-remediable breach;
(ii) immediately, upon written notice to the other party if the other
party fails to cure a remediable breach not involving non-payment of
amounts due within thirty (30) days of being notified of such breach;
(iii) by thirty (30) days' written notice to the other party in the
event that no Maintenance Program is in effect under this Maintenance
Exhibits; or (iv) immediately, upon written notice to the party to
which termination for cause of any other Exhibit to the Master Terms
is imputed.
4.5 Each party waives and releases the other from any claim to
compensation or indemnity related to the permitted or lawful
termination of the business relationship established under this
Exhibit. However, terminated shall not affect the right of either
party to receive or recover: (i) damages sustained by reason of
material breach of this Maintenance Exhibit by the other party; or
(ii) any payments which may then be owing under the terms of this
Maintenance Exhibit.
5. PRICE AND LICENSE FEES
5.1 Prices and license fees for Maintenance Programs will be
non-refundable and based on the applicable Sun Price List at the time
Customer places an order. Payment will be made in US Dollars.
5.2 Customer may place written purchase orders for renewal or different
Maintenance Program provided that each purchase order contains the
following: (i) the Agreement number; (ii) the name of the Maintenance
Program; (iii) the service fees and charges therefor; (iv) bill to
address (if different); and (v) the names and email addresses of
Customer's technical liaisons.
5.3 Sun reserves the right to charge Customer additional technical support
fees at its then standard rates for technical support services
performed in connection with reported Errors which are later
determined to have been due to hardware or software not supplied by
Sun or caused by any of the items set forth in Section 2.4 (i)-(vii).
5.4 Sun's service offerings are continually evolving. Accordingly, Sun
reserves the right to make Maintenance Program substitutions and
modifications at any time that do not cause a materially adverse
effect on overall service performance.
6. CUSTOMER OBLIGATIONS
6.1 Customer,and not Sun, will be responsible for, and will bear all
expenses associated with, providing front-line technical support,
Maintenance Releases, and Upgrades to its End Users. Until Customer
has paid Sun the annual Services fee for an End User, Customer shall
not be entitled to provide Maintenance Releases and/or Upgrades to any
End User or use any back-end support received from Sun to provide
front-line technical support to such End User.
6.2 Customer must comply with all trouble-shooting and technical database
procedures relevant to an Error prior to contacting Sun.
6.3 Customer must establish and maintain a procedure external to systems
for reconstruction of lost or altered files, data or programs.
6.4 Customer agrees to use reasonable commercial efforts to answer its End
Users' support questions. Customer's technical liaisons who contact
Sun for technical support must have sufficient technical expertise for
Customer to perform its obligations hereunder. Only the Customer
technical liaisons identified to Sun will contact Sun for technical
support and notify Sun in writing or electronically of changes in the
technical liaisons.
6.5 Customer agrees that any information or documentation distributed by
Customer to its End Users will clearly and conspicuously state that
End Users should call Customer for technical support for the Software.
6.7 Sun will have no obligation to furnish any assistance, information or
documentation with respect to the Software, directly to End Users. If
Sun customer support representatives are being contacted by a
significant number of Customer's End Users then, upon Sun's request,
Customer and Sun will cooperate to minimize such contact.
7. INSURANCE
7.1 If the Maintenance Program Customer has purchased includes provision
of onsite support by Sun or Netscape at Customer's location, Sun and
Netscape shall each be responsible, at their expense, for securing and
maintaining Worker's compensation insurance in accordance with the
local laws applicable to such onsite support. If Sun or Netscape is
permitted by state law to be a self-insurer, they may maintain the
equivalent of such insurance.
7.2 Sun and Netscape further agree to be responsible, at their expense,
for securing and maintaining adequate Comprehensive General Liability
insurance for claims for damages based on bodily injury (including
death) and property damage caused by or arising from acts or omissions
of their respective employees.
8. ADDITIONAL LIMITATIONS
In no event will any entity working with Sun on the development and supply of
any Upgrades or services or part thereof by liable under the terms of this
Agreement.
<PAGE>
SCHEDULE A
TERMS FOR GOLD, SILVER AND BRONZE MAINTENANCE PROGRAMS
Customer may select one or more of the following Maintenance Program in its
purchase order. Customer's purchase order must indicate which Maintenance
Program is being purchased. Working hours and working days are defined by the
Sun office delivering the Maintenance Program.
1. Gold Maintenance Program
1.1 Customer may use the telephone number and web site URL provided by Sun
to request support. Customer may submit Priority 1 problems only, 24
hours a day, 7 days a week. For Priority 1 problems, Customer agrees
to notify Sun via telephone.
1.2 Customer Contacts: Customer will identify 4 members of its customer
support staff, per 8 hour shift, to act as the primary technical
liaisons responsible for all communications with Sun's technical
support representatives.
1.3 Customer will designate, in writing and/or e-mail to Sun, its list of
liaisons within 1 week after Sun's receipt of Customer's purchase
order, and may substitute contacts at any time by providing 1 week's
prior written and/or electronic notice thereof to Sun.
1.4 Working hours in the U.S. and Canada are 5:00 a.m. to 5:00 p.m. (PST).
Priority 1 working hours are identified in subsection 1.1 above.
Working hours outside the U.S. and Canada vary with the location and
office.
1.5 The following target response times will apply:
<TABLE>
<CAPTION>
Priority Failure Description Initial Target
Response Time
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 Enterprise Critical (Production Server or application is not functioning) 1 business hours
2 Severe Impact (Software inconsistency causes significantly decreased 4 business hours
Customer productivity, such as periodic work stoppages or feature
crashes)
3 Degraded Operations (Software inconsistency causes slightly impaired Next business day
Customer productivity, but Customer can work around problem)
4 Minimal Impact (Requests for minor changes such as documentation Next business days
updates, cosmetic defects or feature enhancements)
</TABLE>
2. Silver Maintenance Program
2.1 Customer may use the telephone number and web site URL provided by Sun
to request technical support.
2.2 Customer Contacts: Customer will identify 2 members of its customer
support staff, per 8 hour shift, to act as the primary technical
liaisons responsible for all communications with Sun's technical
support representatives.
2.3 Customer will designate, in writing and/or e-mail to Sun, its list of
liaisons within 1 week after Sun's receipt of Customer's purchase
order, and may substitute contacts at any time by providing 1 week's
prior written and/or electronic notice thereof to Sun.
2.4 Working hours in the U.S. and Canada are 5:00 a.m. to 5:00 p.m. (PST).
Working hours outside the U.S. and Canada vary with location and
office.
2.5 The following target response times will apply:
<TABLE>
<CAPTION>
Priority Failure Description Initial Target
Response Time
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 Enterprise Critical (Production Server or application is not functioning) 4 business hours
2 Severe Impact (Software inconsistency causes significantly decreased 8 business hours
Customer productivity, such as periodic work stoppages or feature
crashes)
3 Degraded Operations (Software inconsistency causes slightly impaired Next business day
Customer productivity, but Customer can work around problem)
4 Minimal Impact (Requests for minor changes such as documentation 2 business days
updates, cosmetic defects or feature enhancements)
</TABLE>
3. Bronze Maintenance Program
3.1 Customer may use the telephone number and web site URL provided by Sun
to request technical support.
3.2 Customer Contacts: Customer will identify 2 members of its customer
support staff, per 8 hour shift, to act as the primary technical
liaisons responsible for all communications with Sun's technical
support representatives.
3.3 Customer will designate, in writing and/or e-mail to Sun, its list of
liaisons within 1 week after Sun's receipt of Customer's purchase
order, and may substitute contacts at any time by providing 1 week's
prior written and/or electronic notice thereof to Sun.
3.4 Working hours in the U.S. and Canada are 8:00 a.m. to 5:00 p.m. (PST).
Working hours outside of the U.S. and Canada vary with location and
office.
3.5 The following target response times will apply:
<TABLE>
<CAPTION>
Priority Failure Description Initial Target
Response Time
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 Enterprise Critical (Production Server or application is not functioning) 6 business hours
2 Severe Impact (Software inconsistency causes significantly decreased Next business day
Customer productivity, such as periodic work stoppages or feature
crashes)
3 Degraded Operations (Software inconsistency causes slightly impaired Next business day
Customer productivity, but Customer can work around problem)
4 Minimal Impact (Requests for minor changes such as documentation 2 business days
updates, cosmetic defects or feature enhancements)
</TABLE>
ORACLE Credit Corporation Payment Plan Agreement
Customer: WordCruncher Internet Executed by Customer
Technologies Inc. (authorized signature):
Address: 405 East, 12450 South, By: /s/
Suite B Name: Kenneth W. Bell
Draper, Utah 84020 Title: Senior VP & CFO
Executed by Oracle Credit Corporation:
Phone: (801) 816-9904 By:
PPA No.: Name:
Effective Date: Title:
This Payment Plan Agreement is entered into by Customer and Oracle Credit
Corporation ("OCC") to provide for the payment of the System Price specified in
a Payment Schedule on an installment basis. The System (as defined below) is
being acquired from Oracle Corporation, an alliance member/agent of Oracle
Corporation or any other party providing any portion of the System ("Supplier").
Each Payment Schedule shall specify the Software and other products and
services, which items together with any upgrade, transfer, substitution, or
replacement thereof, shall comprise the "System." Each Payment Schedule shall
incorporate the terms and conditions of the PPA to form a "Contract," and the
System specified therein shall be subject to the terms and conditions of such
Contract. The System shall be licensed or provided to Customer directly by
Supplier pursuant to the terms of the Order and Agreement specified in the
Contract. Except as provided under the Contract, Customer's rights and remedies
under the Order and Agreement, including Supplier's warranty and refund
provisions, shall not be affected.
1. PAYMENT SCHEDULE: Customer agrees to pay OCC the Payment Amounts in
accordance with the Contract, with each payment due and payable on the
applicable Due Date. If full payment of each Payment Amount and other amounts
payable is not received by OCC within 10 days of each Due Date, Customer agrees
to pay to OCC interest on the overdue amount at the rate equal to the lesser of
one and one-half percent (1.5%) per month, or the maximum amount allowed by law.
Unless stated otherwise, Payment Amounts exclude any applicable sales, use,
property or any other tax allocable to the System, Agreement or Contract
("Taxes"). Any amounts or any Taxes payable under the Agreement which are not
added to the Payment Amounts due under the Contract are due and payable by
Customer, and Customer shall remain liable for any filing obligations.
Customer's obligation to remit Payment Amounts to OCC or its assignee in
accordance with the Contract is absolute, unconditional, noncancellable,
independent, and shall not be subject to any abatement, set-off, claim,
counterclaim, adjustment, reduction, or defense for any reason, including but
not limited to, any termination of any Agreement, or performance of the System.
2. ASSIGNMENT: Customer hereby consents to OCC's assignment of all or a portion
of its rights and interests in and to the Contract to third-parties
("Assignee"). OCC shall provide Customer notice thereof. Customer and OCC agree
that Assignee shall not, because of such assignment, assume any of OCC's or
Supplier's obligations to Customer. Customer shall not assert against Assignee
any claim, defense, counterclaim or setoff that Customer may have against OCC or
Supplier. Customer waives all rights to make any claim against Assignee for any
loss or damage of the System or breach of any warranty, express or implied, as
to any matter whatsoever, including but not limited to the System and service
performance, functionality, features, merchantability or fitness for a
particular purpose, or any indirect, incidental or consequential damages or loss
of business. Customer shall pay Assignee all amounts due and payable under the
Contract, but shall pursue any claims under any Agreement solely against
Supplier. Except when a Default occurs, neither OCC nor Assignee will interfere
with Customer's quiet enjoyment or use of the System in accordance with the
Agreement's terms and conditions.
3. DEFAULT; REMEDIES: Any of the following shall constitute a Default under the
Contract (i) Customer fails to pay when due any sums due under any Contract;
(ii) Customer breaches any representation or fails to perform any obligation in
any Contract; (iii) Customer materially breaches or terminates the license
relating to the Software; (iv) Customer defaults under a material agreement with
Assignee; or (v) Customer becomes insolvent or makes an assignment for the
benefit of creditors, or a trustee or receiver is appointed for Customer or for
a substantial part of its assets, or bankruptcy, reorganization or insolvency
proceedings shall be instituted by or against Customer.
In the event of a Default that is not cured within thirty (30) days of its
occurrence, OCC may (i) require all outstanding Payment Amounts and other sums
due and scheduled to become due (discounted at the lesser of the rate in the
Contract or five percent (5%) per annum simple interest) to become immediately
due and payable by Customer; (ii) pursue any rights provided under the
Agreement, as well as terminate all of Customer's rights to use the System and
related services, and Customer agrees to cease all use of the System; and (iii)
pursue any other rights or remedies available at law or in equity. In the event
OCC institutes any action for the enforcement of the collection of Payment
Amounts, there shall be due from Customer, in addition to the amounts due above,
all costs and expenses of such action, including reasonable attorneys' fees. No
failure or delay on the part of OCC to exercise any right or remedy hereunder
shall operate as a waiver thereof, or as a waiver of any subsequent breach. All
remedies are cumulative and not exclusive. Customer acknowledges that upon a
default under the Contract, no party shall license, lease, transfer or use any
Software in mitigation of any damages resulting from Customer's default.
4. CUSTOMER'S REPRESENTATIONS AND COVENANTS: Customer represents that,
throughout the terms of the Contract, the Contract has been duly authorized and
constitutes a legal, valid, binding and enforceable agreement of Customer. Any
transfer or assignment of Customer's rights or obligations in the System, or
under the Agreement or the Contract shall require OCC's and Assignee's prior
written consent. A transfer shall include a change in majority ownership of
Customer. Customer agrees to promptly execute any ancillary documents and take
further actions as OCC or Assignee may reasonably request, including, but not
limited to, assignment notifications, acceptance certificates, certificates of
authorization, registrations, and filings. Customer agrees to provide copies of
Customer's balance sheet, income statement, and other financial reports as OCC
or Assignee may reasonably request.
5. MISCELLANEOUS: The Contract shall constitute the entire agreement between
Customer and OCC regarding the subject matter herein and shall supersede any
inconsistent terms set forth in the Order, Agreement or any related agreements,
Customer purchase orders and all prior oral and written understandings. If any
provision of the Contract is invalid, such invalidity shall not affect the
enforceability of the remaining terms of the Contract. Customer's obligations
under the Contract shall commence on the Effective Date specified therein.
Except for payment terms specified in the Contract, Customer remains responsible
for all the obligations under each Agreement. Each Payment Schedule, and any
changes to a Contract or any related document, shall take effect when executed
by OCC. The Contract shall be governed by the laws of the State of California
and shall be deemed executed in Redwood Shores, CA as of the Contract Effective
Date.
ORACLE Credit Corporation Payment Schedule
Page 1 of 1 (Oracle Product) No. 1
Customer: WordCruncher Internet Executed by Customer
Technologies Inc. (authorized signature):
Address: 405 East, 12450 South, By: /s/
Suite B Draper, Utah 84020 Name: Kenneth W. Bell
Title: Senior VP & CFO
Contact: Executed by Oracle Credit Corporation:
Phone: (801) 816-9904 By:
Order: dated Name:
Agreement: dated Title:
PPA No.: dated
Payment Schedule Effective Date:
System Payment Schedule:
- ------ Payment Amount Due Date:
Software: $136,512.00 1 @ $76,954 Due at signing
Support: $120,000.00 one year 4 @ $49,069 Due 01-Feb-00, 01-May-00,
Education: 01-Aug-00 and 01-Nov-00
Consulting:
Other: Five (5) payments due as set
forth above.
System Price: $265,512.00
Optional (if this box is checked):
- --------
[x] The Customer has ordered the System from an alliance member/agent of Oracle
Corporation whose name and address are specified below. Customer shall
provide OCC with a copy of such Order. The System shall be directly licensed
or provided by the Supplier specified in the applicable Order and Agreement,
each of which shall be considered a separate contract. Customer has entered
into the Order and Agreement based upon its own judgment, and expressly
disclaims any reliance upon statements made by OCC about the System, if any.
Customer's rights with respect to the System are as set forth in the
applicable Order and Agreement and Customer shall have no right to make any
claims under such Order and Agreement against OCC or its Assignee. Neither
Supplier nor any alliance member/agent is authorized to waive or alter any
term or condition of this Contract. If within ten days of the Payment
Schedule Effective Date, OCC is provided with Customer invoices for the
System specifying applicable Taxes, then OCC may add the applicable Taxes in
accordance with this Contract.
Alliance Member/Agent: Integrated Business Solutions
Address: 505 East 200 South Suite 401 Salt Lake City, UT 84102
Contact: Deborah Hoffler Phone: (801) 328-4567
This Payment Schedule is entered into by Customer and Oracle Credit Corporation
("OCC") for the acquisition of the System from Oracle Corporation, an alliance
member/agent of Oracle Corporation or any other party providing any portion of
the System ("Supplier"). This Payment Schedule incorporates by reference the
terms and conditions of the above-referenced Payment Plan Agreement ("PPA") to
create a separate Contract ("Contract").
A. PAYMENTS: This Contract shall replace Customer's payment obligation under the
Order and Agreement to Supplier, to the extent of the System Price listed above,
upon Customer's delivery of a fully executed Order Agreement, PPA, Payment
Schedule, and any other documentation required by OCC, and execution of the
Contract by OCC. Customer agrees that OCC may add the applicable Taxes due on
the System Price to each Payment Amount based on the applicable tax rate
invoiced by supplier at shipment. OCC may adjust subsequent Payment Amounts to
reflect any change or correction in Taxes due. If the System Price includes
support fees for a support period that begins after the first support period,
such future support fees and the then relevant Taxes will be paid to Supplier as
invoiced in the applicable support period from the Payment Amounts received in
that period. The balance of each Payment Amount, unless otherwise stated,
includes a proportional amount of the remaining components of the System Price
excluding such future support fees, if any.
B. SYSTEM: Software shall be acceptable, and the services shall be deemed
ordered pursuant to the terms of the Agreement. customer agrees that any
software acquired from Supplier to replace any part of the System shall be
subject to the terms of the Contract. Any claims related to the performance of
any component of the System shall be made pursuant to the Order and Agreement.
Neither OCC nor Assignee shall be responsible to Customer for any claim or
liability pertaining to any performance, actions, warranties or statements of
Supplier.
C. ADMINISTRATIVE: Customer agrees that OCC or its Assignee may treat executed
faxes or photocopies delivered to OCC as original documents; however, Customer
agrees to deliver original signed documents if requested. Customer agrees that
OCC may insert the appropriate administrative information to complete this form.
OCC will provide a copy of the final Contract upon request.
SUN MICROSYSTEMS FINANCE
MASTER LEASE AGREEMENT
Master Lease #SL7082094
------------
Lessor agrees to lease to Lessee and Lessee agrees to lease from
Lessor, subject to the following terms of this Master Lease Agreement ("Master
Lease") and any Lease Schedule ("Schedule"), collectively referred to as the
Lease ("Lease"), the personal property described in any Schedule together with
all attachments, replacements, parts, substitutions, additions, upgrades,
accessories, software licenses and operating manuals (the "Product"). Each
Schedule shall constitute a separate, distinct, and independent Lease and
contractual obligation of Lessee.
1. Commencement Date and Term
The initial lease term ("Initial Term") and Lessee's rental obligations shall
begin on the Commencement Date and continue for the number of Rental Periods
specified in the Lease as set forth in Section 2 below and shall renew
automatically thereafter until terminated by either party upon not less than
ninety (90) days written notice. The Commencement Date with respect to each item
of Product shall be the 16th day after date of shipment to Lessee.
2. Rent and Rental Period
All rental payments and any other amounts payable under a lease are collectively
referred to as "Rent." The Rental Period shall mean the rental payment period of
either calendar months, quarters, or as otherwise specified in each Schedule.
Rent for the specified Rental Period is due and payable in advance, to the
address specified in Lessor's invoice, on the first day of each Rental Period
during the Initial Term and any extension (collectively, the "Lease Term"),
provided, however, that Rent for the period of time (if any) from the
Commencement Date to the first day of the first Rental Period shall begin to
accrue on the Commencement Date. If any Rent is not paid when due, Lessee will
pay a service fee equal to five percent (5%) of the overdue amount plus interest
at the rate of one and one-half percent (1.5%) per month or the maximum legal
interest rate, whichever is less.
3. Net Lease, Taxes and Fees
Each Schedule shall constitute a net lease and payment of Rent shall be absolute
and unconditional, and shall not be subject to any abatement, reduction, set
off, defense, counterclaim, interruption, deferment or recoupment for any reason
whatsoever. Lessee agrees to pay Lessor when due shipping charges, fees,
assessments and all taxes (municipal, state and federal) imposed upon a Lease or
the Product or its ownership, leasing, renting, possession or use except for
taxes based on Lessor's income.
4. Title
Product shall always remain personal property. Lessee shall have no right or
interest in the Product except as provided in this Master Lease and the
applicable Schedule and shall hold the Product subject and subordinate to the
rights of Lessor. Lessee agrees to execute UCC financing statements as and when
requested by Lessor and hereby appoints Lessor as its attorney-in-fact to
execute such financing statements. Lessor may file a photocopy of any Lease as a
financing statement.
Lessee will, at its expense, keep the Product free and clear from any liens or
encumbrances of any kind (except any caused by Lessor) and will indemnify and
hold Lessor harmless from and against any loss or expense caused by Lessee's
failure to do so. Lessee shall give Lessor immediate written notice of any
attachment or judicial process affecting the Product or Lessor's ownership. If
requested, Lessee will label the Product as the property of Lessor and shall
allow, subject to Lessee's reasonable security requirements, the inspection of
the product during regular business hours.
5. Use, Maintenance and Repair
Lessee, at its own expense, shall keep the Product in good repair, appearance
and condition, other than normal wear and tear and shall obtain and keep in
effect throughout the term of the Schedule a hardware and software maintenance
agreement with the manufacturer or other party acceptable to Lessor. All parts
furnished in connection with such repair and maintenance shall be manufacturer
authorized parts and shall immediately become components of the Product and the
property of Lessor. Lessee shall use the Product in compliance with the
manufacturer's or supplier's suggested guidelines.
6. Delivery and Return of Product
Lessee assumes the full expense of transportation, insurance, and installation
to Lessee's site. Upon termination of each Schedule, Lessee will provide Lessor
a letter from the manufacturer certifying that the Product is in good operating
condition and is eligible for continued maintenance and that the operating
system is at the then current level, unless under a Sun service contract during
the Lease Term. Lessee, at its expense, shall deinstall, pack and ship the
Product to a U.S. location identified by Lessor. Lessee shall remain obligated
to pay rent on the Product until the Product and certification are received by
Lessor.
7. Assignment and Relocation
Lessee may sublease or assign its rights under this agreement with Lessor's
prior written consent, which consent shall not be unreasonably withheld,
subject, however, to any terms and conditions which Lessor may require. No
permitted assignment or sublease shall relieve Lessee or any of its obligations
hereunder.
Lessee acknowledges Lessor may sell and/or assign its interest or grant a
security interest in each Lease and/or the Product to an assignee ("Lessor's
Assignee"), so long as Lessee is not in default hereunder. Lessor or Lessor's
Assignee shall not interfere with Lessee's right of quiet enjoyment and use of
the Product. Upon the assignment of each Lease, Lessor's Assignee shall have any
and all discretions, rights and remedies of Lessor and all references to Lessor
shall mean Lessor's Assignee. In no event shall any assignee of Lessor be
obligated to perform any duty, covenant or condition under this Lease and Lessee
agrees it shall pay such assignee without any defense, rights of set-off or
counterclaims and shall not hold or attempt to hold such assignee liable for any
of Lessor's obligations hereunder.
Lessee, at its expense, may relocate Product (after packing it for shipment in
accordance with the manufacturer's instructions) to a different address with
thirty (30) days prior written notice to Lessor. The Product shall at all times
be used solely within the United States.
8. Upgrades and Additions
Lessee may affix or install any accessory, addition, upgrade, equipment or
device on the Product ("Additions") provided that such Additions (i) can be
removed without causing material damage tot he Product, (ii) do not reduce the
value of the Product and (iii) are obtained from or approved by Sun Microsystems
Computer Corporation and are not subject to the interest of any third party
other than Lessor. Any other Additions may not be installed without Lessor's
prior written consent. At the end of the Schedule Term, Lessee shall remove any
Additions which (i) were not leased by Lessor and (ii) are readily removable
without causing material damage or impairment of the intended function, use, or
value of the Product and restore the Product to its original configuration. Any
Additions which are not so removable will become the Lessor's property (lien
free).
9. Lease End Options
Upon written notice given at least ninety (90) days prior to expiration of the
Lease Term, and provided Lessee is not in default under any Schedule, Lessee may
(i) exercise any purchase option set forth on the Schedule, or (ii) renew the
Schedule for a minimum extension period of twelve (12) months, or (iii) return
the Product to Lessor at the expiration date of the Schedule pursuant to Section
6 above.
10. Insurance, Loss or Damage
Effective upon shipment of Product to Lessee and until Product is received by
Lessor, Lessee shall provide at its expense (i) insurance against the loss or
theft or damage to the Product for the full replacement value, and (ii)
insurance against public liability and property damage. Lessee shall provide a
certificate of insurance that such coverage is in effect, upon request by
Lessor, naming Lessor as loss payee and/or additional insured as may be
required.
Lessee shall bear the entire risk of loss, theft, destruction of or damage to
any item of product. No loss or damage shall relieve Lessee of the obligation to
pay Rent or any other obligation under the Schedule. In the event of loss or
damage, Lessee shall promptly notify Lessor and shall, at Lessor's option, (i)
place the Product in good condition and repair, or (ii) replace the Product with
lien free Product of the same model, type and configuration in which case the
relevant Schedule shall continue in full force and effect and clear title in
such Product shall automatically vest in Lessor, or (iii) pay Lessor the present
value of remaining Rent plus the buyout purchase option price provided for in
the applicable Schedule.
11. Selection, Warranties and Limitation of Liability
Lessee acknowledges that it has selected the Product and disclaims any reliance
upon statements made by Lessor. Lessee acknowledges and agrees that use and
possession of the Product by Lessee shall be subject to and controlled by the
terms of any manufacturer's or, if appropriate, supplier's warranty, and Lessee
agrees to look solely to the manufacturer or, if appropriate, supplier with
respect to all mechanical, service and other claims, and the right to enforce
all warranties made by said manufacturer are hereby assigned to Lessee for the
term of the Schedule.
EXCEPT AS SPECIFICALLY PROVIDED HEREIN, LESSOR HAS NOT MADE AND DOES NOT MAKE
ANY REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR IMPLIED, AS TO ANY MATTER
WHATSOEVER, INCLUDING, WITHOUT LIMITATION, NONINFRINGEMENT, THE DESIGN, QUALITY,
CAPACITY OR CONDITION OF THE PRODUCT, ITS MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE. IT BEING AGREED THAT AS THE LESSEE SELECTED BOTH THE PRODUCT
AND THE SUPPLIER, NO DEFECT, EITHER PATENT OR LATENT SHALL RELIEVE LESSEE OF ITS
OBLIGATION HEREUNDER, LESSEE AGREES THAT LESSOR SHALL NOT BE LIABLE FOR SPECIFIC
PERFORMANCE OR ANY LIABILITY, LOSS, DAMAGE OR EXPENSE OF ANY KIND INCLUDING,
WITHOUT LIMITATION, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES OF
ANY NATURE, DAMAGES ARISING FROM THE LOSS OF USE OF PRODUCT, LOST DATA, LOST
PROFITS, OR FOR ANY CLAIM OR DEMAND.
12. Indemnity
Lessee shall indemnify and hold harmless Lessor and Lessor's Assignee from and
against any and all claims, actions, suits, proceedings, liabilities, damages,
penalties, costs and expenses (including reasonable attorneys' fees), arising
out of the use, operation, possession, ownership (for strict liability in tort
only), selection, leasing, maintenance, delivery or return of any item of
Product.
13. Default and Remedies
Lessee shall be in default of any Lease if (i) Lessee fails to pay Rent within
ten (10) days of due date; (ii) Lessee fails to perform or observe or breaches
any covenant or condition or any representation or warranty in such Lease, and
such failure or breach continues unremitted for a period of ten (10) days after
written notice from Lessor; (iii) Lessee, except as expressly permitted in the
Lease, attempts to move, sell, transfer, encumber, or sublet without consent any
item of Product leased under such Lease; (iv) Lessee files or has filed against
it a petition in bankruptcy or becomes insolvent or makes an assignment for the
benefit of creditors or consents to the appointment of a trustee or receiver or
either shall be appointed for Lessee or for a substantial part of its property
without its consent, or (v) Lessee or any guarantor of Lessee is declared
legally deceased or if Lessee shall terminate its existence by merger,
consolidation, sale of substantially all of its assets or otherwise.
Upon default, Lessor may, at its option, take one or more of the following
actions, (i) declare all sums due and to become due under the Schedule
immediately due and payable, (ii) require Lessee to return immediately all
Product leased under such Schedule to Lessor in accordance with Paragraph 6
hereof, (iii) without breach of the peace take immediate possession of and
remove the Product; (iv) sell any or all of the Product at public or private
sale or otherwise dispose of, hold, use or lease to others, or, (v) exercise any
right or remedy which may be available to Lessor under applicable law, including
the right to recover damages for the breach of the Schedule. In addition, Lessee
shall be liable for reasonable attorney's fees, other costs and expenses
resulting from any default, or the exercise of Lessor's remedies, including
placing such Product in the condition require by Paragraph 6 hereof. Each remedy
shall be cumulative and in addition to any other remedy otherwise available to
Lessor at law or in equity. No express or implied waiver of any default shall
constitute a waiver of any of Lessor's other rights.
14. Lessee's Representations
Lessee represents and warrants for this Master Lease and each Schedule that the
execution, delivery and performance by Lessee have been duly authorized by all
necessary corporate action; the individual executing was duly authorized to do
so; the Master Lease and each Schedule constitute valid, binding agreements of
the Lessee enforceable in accordance with their terms; that all information
supplied by Lessee, including but not limited to the credit application and
other financial information concerning Lessee, is accurate in all material
respects as of the date provided; and if there is any material change in such
information prior to manufacturer's or, if appropriate, supplier's shipment of
Product under the Schedule, Lessee will advise Lessor of such change in writing.
15. Applicable Law
This Master Lease and each Schedule shall in all respects be governed by and
construed in accordance with the laws of the state of California without giving
effect to the principles of conflict of laws.
16. Miscellaneous
Lessee agrees to execute and deliver to Lessor such further documents,
including, but not limited to, financing statements, assignments, and financial
reports and take such further action as Lessor may reasonably request to protect
Lessor's interest in the Product.
The performance of any act or payment by Lessor shall not be deemed a waiver of
any obligation or default on the part of Lessee. Lessor's failure to require
strict performance by Lessee of any of the provisions of this Master Lease shall
not be a waiver thereof. No rights or remedies referred to in Article 2A of the
Uniform Commercial Code will be conferred on Lessee unless expressly granted in
this Master Lease.
This Master Lease together with any Schedule constitutes the entire
understanding between the parties and supersedes any previous representations or
agreements whether verbal or written with respect to the use, possession and
lease of the Product described in that Schedule. In the event of a conflict, the
terms of the Schedule shall prevail over the Master Lease.
No amendment or charge of any of the terms or conditions herein shall be binding
upon either party unless they are made in writing and are signed by an
authorized representative of each party. Each Schedule is non-cancellable for
the full term specified and each Schedule shall be binding upon, and shall inure
to the benefit of Lessor, Lessee, and their respective successors, legal
representatives and permitted assigns.
All agreements, representations and warranties contained herein shall be for the
benefit of Lessor and shall survive the execution, delivery and termination of
this Master Lease, any Schedule or related document.
Any provision of this Master Agreement and/or each Schedule which is
unenforceable shall not cause any other remaining provision to be ineffective or
invalid. The captions set forth herein are for convenience only and shall not
define or limit any of the terms thereof. Any notices or demands in connection
with any Schedule shall be given in writing by regular or certified mail at the
address indicated in the Schedule, or to any other address specified.
THIS MASTER LEASE SHALL BECOME EFFECTIVE ON THE DATE ACCEPTED BY LESSOR.
LESSOR: LESSEE:
SUN MICROSYSTEMS FINANCE WORDCRUNCHER INTERNET TECHNOLOGIES,
A Sun Microsystems, Inc. Business INC.
By: _______________________________
By: _______________________________ (Authorized Signature)
(Authorized Signature)
Name: _____________________________
Name: _____________________________
Title: ____________________________
Title: ____________________________
Date: _____________________________
Date: _____________________________
<PAGE>
Sun Microsystems Finance
5500 Wayzata Boulevard, Suite 725
Golden Valley, MN 55416
800 786-3366
Lease Schedule ("Schedule") No. 001
To Master Lease Agreement ("Master Lease") No. SL7082094
- --------------------------------------------------------------------------------
LESSEE LESSOR
- --------------------------------------------------------------------------------
NAME: WordCruncher Internet Technologies, SUN MICROSYSTEMS FINANCE
Inc. A SUN MICROSYSTEMS, INC.
ADDRESS: 405 East 12450 South BUSINESS
Suite B 901 SAN ANTONIO ROAD
Draper, UT 84020 PALO ALTO, CA 94303
ADMIN. CONTACT: Mr. Ken Bell PHONE NO.: 800-786-3366
PHONE NO.: 801-816-9904 FAX NO.: 612-513-3299
- --------------------------------------------------------------------------------
BILLING ADDRESS PAYMENT SCHEDULE
- --------------------------------------------------------------------------------
LEASE TERM: 24 MONTHS
Same as above RENTAL: $23,779.00* PER MONTH
* Payments to be made via Auto-
matic Bank Withdrawal
LESSEE PURCHASE ORDER NO.: SALES/USE TAX: Payment amount may
CONTACT: be increased to
PHONE NO.: include applicable sales/use tax.
- --------------------------------------------------------------------------------
LOCATION OF PRODUCT END OF LEASE OPTIONS
- --------------------------------------------------------------------------------
Same as above __X__ FMV PURCHASE OR RENEWAL
_____ $1 PURCHASE OPTION
CONTACT: _____ 10% PURCHASE OPTION
PHONE NO.: _____ OTHER:
- --------------------------------------------------------------------------------
PRODUCT DESCRIPTION AS DESCRIBED IN INTEGRATED BUSINESS SOLUTIONS QUOTATION NO.
Word 11-4-99 LESS INTEGRATED BUSINESS SOLUTIONS EXHIBIT "A" ADDING INTEGRATED
BUSINESS SOLUTIONS QUOTATION #'s Word 11-3-99(1), Word 11-30-99(2), Word
11-30-99(3) Modified, Word 11-30-99(4), Word 11-30-99(5), & Word 11-30-99(6), &
QWEST PRODUCTS & SERVICES PURCHASE ORDER FORMS DATED 11/23/99; TOTALING $97,688,
DATED 12/3/99; TOTALING $11,410, & DATED 12/3/99; TOTALING $2,886 ATTACHED
HERETO.
- --------------------------------------------------------------------------------
MASTER AGREEMENT: This Schedule is issued and effective this date set forth
below pursuant to the Master Lease identified above. All of the terms,
conditions, representations and warranties of the Master Lease are hereby
incorporated herein and made a part hereof as if they were expressly set forth
in this Schedule and this Schedule contains a separately enforceable, complete
and independent lease with respect to the Product described herein. By their
execution and delivery of this Schedule, the parties hereby affirm all of the
terms, conditions, representations and warranties of the Master Lease.
The additional terms set forth on the reverse side hereof are made a part of
this Schedule.
- --------------------------------------------------------------------------------
AGREED AND ACCEPTED BY: AGREED AND ACCEPTED BY:
SUN MICROSYSTEMS FINANCE LESSEE WordCruncher Internet
A Sun Microsystems, Inc. Business Technologies, Inc.
BY: _________________________________ BY: /s/ James W. Johnston
NAME: Vicki Kandl NAME: James W. Johnston
TITLE: Manager-Lease Originations TITLE: Chairman
DATE: _______________________________ DATE: 13 Dec. 99
<PAGE>
Sun Microsystems Finance
5500 Wayzata Boulevard, Suite 725
Golden Valley, MN 55416
800 786-3366
Lease Schedule ("Schedule") No. 002
To Master Lease Agreement ("Master Lease") No. SL7082094
- --------------------------------------------------------------------------------
LESSEE LESSOR
- --------------------------------------------------------------------------------
NAME: WordCruncher Internet Technologies, SUN MICROSYSTEMS FINANCE
Inc. A SUN MICROSYSTEMS, INC.
ADDRESS: 405 East 12450 South BUSINESS
Suite B 901 SAN ANTONIO ROAD
Draper, UT 84020 PALO ALTO, CA 94303
ADMIN. CONTACT: Mr. Ken Bell PHONE NO.: 800-786-3366
PHONE NO.: 801-816-9904 FAX NO.: 612-513-3299
- --------------------------------------------------------------------------------
BILLING ADDRESS PAYMENT SCHEDULE
- --------------------------------------------------------------------------------
Same as above LEASE TERM: 24 MONTHS
RENTAL: $452.05* PER MONTH
LESSEE PURCHASE ORDER NO.: * Payments to be made using Auto-
CONTACT: matic Bank Withdrawal
PHONE NO.: SALES/USE TAX: Payment amount may
be increased to
include applicable sales/use tax.
- --------------------------------------------------------------------------------
LOCATION OF PRODUCT END OF LEASE OPTIONS
- --------------------------------------------------------------------------------
Same as above __X__ FMV PURCHASE OR RENEWAL
_____ $1 PURCHASE OPTION
CONTACT: _____ 10% PURCHASE OPTION
PHONE NO.: _____ OTHER:
- --------------------------------------------------------------------------------
PRODUCT DESCRIPTION AS DESCRIBED IN QWEST COMMUNICATIONS QUOTATIONS DATED
12/19/99 TOTALING $2,591.00 & DATED 12/3/99 TOTALING $12,503.00 ATTACHED HERETO.
- --------------------------------------------------------------------------------
MASTER AGREEMENT: This Schedule is issued and effective this date set forth
below pursuant to the Master Lease identified above. All of the terms,
conditions, representations and warranties of the Master Lease are hereby
incorporated herein and made a part hereof as if they were expressly set forth
in this Schedule and this Schedule contains a separately enforceable, complete
and independent lease with respect to the Product described herein. By their
execution and delivery of this Schedule, the parties hereby affirm all of the
terms, conditions, representations and warranties of the Master Lease.
The additional terms set forth on the reverse side hereof are made a part of
this Schedule.
- --------------------------------------------------------------------------------
AGREED AND ACCCEPTED BY: AGREED AND ACCCEPTED BY:
SUN MICROSYSTEMS FINANCE LESSEE WordCruncher Internet
A Sun Microsystems, Inc. Business Technologies, Inc.
BY: _______________________________ BY: /s/ Kenneth W. Bell
NAME: Carrie A. Halvorson NAME: Kenneth W. Bell
TITLE: Sun Programs Manager TITLE: SRVP & CFO
DATE: _____________________________ DATE: 1/26/00
<PAGE>
ADDITIONAL TERMS FOR SMCC PRODUCTS
The following additional terms and conditions shall govern the use of SMCC
Products leased hereunder.
1.0 USE OF SOFTWARE
Lessee's use of any software Products ("Software") provided under this Schedule
shall be governed by the object code license accompanying such Software.
2.0 WARRANTY
Product warranties may vary depending on the specific SMCC Product leased.
Applicable terms and conditions are as set out in the then current U.S. End User
Price List. Software is warranted to conform to published specifications for a
period of ninety (90) days from the date of delivery. SMCC does not warrant
that: (i) operation of any Software will be uninterrupted or error free; or (ii)
functions contained in Software will operate in combinations which may be
selected for use by the licensee or meet the licensee's requirements. These
warranties extend only to Lessee as an original Lessee.
Lessee's exclusive remedy and SMCC's entire liability under these warranties
will be: (i) with respect to Product, repair or at SMCC's option, replacement;
and (ii) with respect to Software, use its best efforts to correct such Software
as soon as practical after licensee has notified SMCC of Software's
nonconformance. If such repair, replacement or correction is not reasonably
achievable, SMCC will refund the rental fee/license fee. Unless Lessee has
executed an on-site service agreement, repair or replacement will be undertaken
at a service location authorized by SMCC.
All Software customization is provided "AS IS", without a warranty of any kind.
No SMCC warranty shall apply to any Software that is modified without SMCC's
written consent or any Product or Software which has been misused, altered,
repaired or used with equipment or software not supplied or expressly approved
by SMCC.
SMCC reserves the right to change these warranties at any time upon Notice and
without liability to Lessee or third parties.
EXCEPT AS SPECIFIED IN THIS AGREEMENT, ALL EXPRESS OR IMPLIED REPRESENTATIONS
AND WARRANTIES, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR NON-INFRINGEMENT, ARE HEREBY DISCLAIMED.
3.0 TRADEMARKS AND OTHER PROPRIETARY RIGHTS
"Trademarks" means all company names, products' names, marks, logos, designs,
trade dress and other designations or brands used by Sun Microsystems, Inc., its
subsidiaries and affiliates ("Sun") in connection with Products, including, Sun,
Sun Microsystems, the Sun logo, SPARCstation, SPARCserver, and all Sun product
designs.
Lessee is granted no right, title, license or interest in the Trademarks. Lessee
acknowledges Sun's rights in the Trademarks and agrees that any and all use of
the Trademarks by Lessee shall inure to the sole benefit of Sun.
4.0 HIGH RISK ACTIVITIES
PRODUCTS ARE NOT FAULT-TOLERANT AND ARE NOT DESIGNED, MANUFACTURED OR INTENDED
FOR USE OR RESALE AS ON-LINE CONTROL EQUIPMENT IN HAZARDOUS ENVIRONMENTS
REQUIRING FAIL-SAFE PERFORMANCE, SUCH AS IN THE OPERATION OF NUCLEAR FACILITIES,
AIRCRAFT NAVIGATION OR COMMUNICATION SYSTEMS, AIR TRAFFIC CONTROL, DIRECT LIFE
SUPPORT, OR WEAPONS SYSTEMS IN WHICH THE FAILURE OF PRODUCTS COULD LEAD DIRECTLY
TO DEATH, PERSONAL INJURY, OR SEVERE PHYSICAL OR ENVIRONMENTAL DAMAGE ("HIGH
RISK ACTIVITIES"). SMCC SPECIFICALLY DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTY
OF FITNESS FOR HIGH RISK ACTIVITIES.
Lessee represents and warrants that it will not use, distribute or resell
Products (including Software) for High Risk Activities and that it will ensure
that its end-users or customers of Product are provided with a copy of the
notice in the previous paragraph.
QWEST INTERNET SOLUTIONS, INC.
Dedicated Internet Access Service Agreement
1. General. This Agreement is made by and between Qwest Internet Solutions,
Inc., a Delaware corporation with an address at 555 Seventeenth Street, Denver,
CO 80202 ("Qwest") and Customer ("Customer") as identified below. This Agreement
shall e effective on the date that it is executed by Qwest following Customer's
execution ("Effective Date"). This Agreement sets forth the terms and conditions
pursuant to which Qwest shall provide to Customer the Qwest Dedicated Internet
Access Service ("Service") described in Addendum A-2 hereto, which Addendum is
incorporated by reference herein.
2. Rates and Charges: Payment. Customer agrees to pay all applicable rates
and charges set forth on Addendum A-1 hereto, which Addendum is incorporated by
reference herein. In addition to such rates and charges, Customer shall be
responsible for all sales and use taxes, as well as any duties or levies,
arising in connection with the Service, including without limitation any and all
fees and taxes which may be imposed by any internet registration authority. IN
connection with the registration and maintenance of Customer's domain name(s)
and/or internet address(es), if any. Billing for the recurring component of the
Service shall be monthly in advance. Payment for the non-recurring component of
the Service, including initial set-up and installation fees shall be payable
upon execution of Addendum A-1. Charges shall be due upon Customer's receipt of
invoice and payable within thirty (30) days of such date. Any amount not paid
within such period shall bear interest at the lesser of (i) the rate of one and
one-half percent (1 1/2%) per month, or (ii) the highest rate permitted by
applicable law if Customer reasonably and in good fait disputes any portion of
an invoice, Customer shall timely pay the full invoiced amount and provide
Qwest, within thirty (30) days of payment a written statement adequately support
Customer's position regarding the dispute. Qwest shall determine in its good
faith business judgment whether such invoiced times were erroneous, and shall
issue a credit to Customer if it so determines. Qwest reserves the right to
change or modify the rates and charges for the Service or eliminate or modify
certain components of the Service, upon not less than forty-five (45) days
advance written notice to Customer. In the event of such modification or
elimination with respect to the Service, Customer may terminate this Agreement,
without penalty, upon not less than thirty (30) days advance written notice to
Qwest. Customer's execution of this Agreement signifies Customer's acceptance of
Qwest's initial and continuing credit review and approval. Qwest reserve the
right to withhold implementation of Service pending completion of Qwest's credit
review and Qwest may condition initiation of Service on its receipt of a deposit
or such other means to establish reasonable assurance of payment.
3. Term and Termination.
(a) This Agreement shall be effective upon the Effective Date and continue
until the expiration (or termination) of Addendum A-1 as issued pursuant hereto.
Unless otherwise set forth in Addendum A-1, the term with respect to such
Addendum A-1 (its "Term") shall commence on the date upon which, with respect to
the Service ordered, the Service is made available for use by Customer, and
continue for a period of twelve (12) months. Addendum A-1 may be terminated by
either party at the end of its Term by giving written notice at least sixty (60)
days prior thereto, but in the absence of such notice, such Addendum A-1 shall
automatically renew under the same terms and conditions for a term equal to that
of its original Term (such renewal term shall also be referred to herein as the
"Term"). In the event Customer terminates the Agreement prior to the conclusion
of the Term, Customer shall pay to Qwest all charges for Service provided
through the effective date of such cancellation plus a cancellation charge
determined as follows: (i) if the Term for the cancelled Service is one (1) year
or less, then the cancellation charge shall be an amount equal to the balance of
the monthly Service charges (then in effect at the time of cancellation) for
such cancelled Service that would otherwise have become due for the unexpired
balance of the Term; (ii) if the Term for the canceled Service is longer than
one(1) year and such cancellation becomes effective prior to the completion of
the first year of the Term, the cancellation charge shall be an amount equal to
the balance of the monthly Service charges (then in effect at the time of
cancellation) for such cancelled Service that otherwise would have become due
for the unexpired portion of the first year of the Term, plus fifty percent
(50%) of the balance of such monthly charges for the remainder of the Term
beyond the first year; and (iii) if the Term for the cancelled Service is longer
than one (1) year and such cancellation becomes effective after completion of
the first year of the Term, the cancellation charge shall be an amount equal to
fifty percent (50%) of the balance of the monthly Service charges (then in
effect at the time of cancellation) for such cancelled Service that otherwise
would have become due and payable for the unexpired portion of the Term. In
addition, if Customer was granted a discount or waiver with respect to any
non-recurring charges based on the duration of Customer's Term commitment (an
"NRC Discount"), then Customer shall also pay an amount equal to the NRC
Discount. It is agreed that Qwest's damages if Service is cancelled prior to the
completion of the Term shall be difficult or impossible to ascertain, thus the
amounts set forth herein are intended to establish liquidated damages in the
event of cancellation and are not intended as a penalty.
(b) Qwest may terminate this Agreement and/or cease or suspend the
provision of the Service upon default of Customer. Default includes: (i) the
failure to pay any amount when due hereunder (after five (5) days prior notice
of such failure to pay); (ii) the filing of a petition in bankruptcy by or
against Customer; and (iii) any material default of this Agreement including but
not limited to violation of the "AUP" (as hereinafter defined) or conduct that
Qwest, in its sole discretion, believes may subject Qwest to civil or criminal
litigation, charges and/or damages. If Qwest has suspended the Service pursuant
to this Section 3(b), Qwest shall require a reconnection fee in order to resume
Service. Termination shall not relieve Customer of its obligation to pay all
fees for Service accrued and owing u to and including the date of termination or
otherwise payable pursuant to Section 3(a) above, nor shall it preclude Qwest
from pursuing any other remedies available to it, at law or in equity.
(c) In the event a law or regulatory action prohibits, substantially
impairs or makes impracticable the provision of Service under this Agreement, as
determined by Qwest, Qwest may, at its option and without liability, terminate
this Agreement or modify the Service or the terms and conditions of this
Agreement in order to conform to such action ("Regulatory Modification");
provided, however, that Qwest shall provide thirty (30) days written notice
prior to Customer of any such Regulatory Modification, unless Qwest determines,
in its good faith business judgment, that it is necessary to reduce the
foregoing notice period. Use by Customer of the Service after implementation of
a Regulatory Modification shall constitute acceptance by Customer of such
changes.
4. Rights and Obligations of Customer. Customer represents that (a) it has
full right and authority to enter into this Agreement; (b) it will not use the
Service in any manner which is in violation of any law or governmental
regulation, or Qwest's Acceptable Use Policy ("AUP") as amended from time to
time by Qwest, which AUP is posted on Qwest's web site at (www.qwest.com) and
which is incorporated by reference herein; (c) the "Customer Data" (as
hereinafter defined) will not violate or infringe the rights of others,
including, without limitation, any patent, copyright, trademark, trade dress,
trade secret, privacy, publicity, or other personal or proprietary right; (d)
the Customer Data will not include indecent or obscene material or constitute a
defamation or libel of Qwest or any third party and will not result in the
obligation of Qwest to make payment of any third party licensing fees; and (e)
it will comply with all relevant export and encryption laws and regulations of
the United States. For purposes of this Section 4, "Customer Data" shall mean
the text, data, images, sounds, photographs, illustrations, graphics, programs,
code and other materials transmitted through the Service hereunder.
5. Equipment of Software Not Provided By Qwest. Customer shall be solely
responsible for the installation, operation, maintenance, use and compatibility
of equipment or software not provided by Qwest and Qwest shall have no
responsibility or liability in connection therewith. In the event that equipment
or software not provided by Qwest impairs Customer's use of any Service: (a)
Customer shall nonetheless be liable for payment for all Service provided by
Qwest; and (b) any service specifications or service levels (and corresponding
service credits) generally applicable to the Service shall not apply. Customer
shall cooperate with Qwest in setting the initial configuration for its
equipment's interface with the Service and comply with Qwest's instructions in
connection therewith.
6. Rights and Obligations of Qwest; Disclaimer of Warranties.
(a) Qwest, at its sole discretion, may secure domain names and assign
internet address space (subject to reasonable availability) for the benefit of
Customer during the Term, and Qwest will route those addressees on Qwest's
network, it being understood and agreed that neither Customer nor any of its
"Users" (as defined in the AUP) shall have the right to route these addresses.
Customer understands and agrees that it shall have no ownership interest in any
IP address which Qwest obtains on Customer's behalf and that Qwest shall retain
ownership of all such IP addresses, and upon termination of the Agreement,
Customer's access to and utilization of such IP addresses shall terminate.
(b) Customer agrees that it is solely responsible for assessing its own
computer and transmission network needs and the results to be obtained therefrom
and Qwest exercises no control whatsoever over the merchandise, information and
services offered or accessible on the Internet. Qwest shall use commercially
reasonable efforts to (i) monitor its network and its interconnection to other
networks and (ii) maintain its network, including interconnections, in an
operational state (except during scheduled maintenance) in order to provide
Service in accordance with any applicable service level agreement ("SLA").
CUSTOMER ASSUMES TOTAL RESPONSIBILITY FOR CUSTOMER'S USE AND USERS' USE OF THE
SERVICE, SOFTWARE OR EQUIPMENT PROVIDED BY QWEST, IF ANY, AND THE INTERNET.
CUSTOMER UNDERSTANDS AND AGREES FURTHER THAT THE INTERNET (1) CONTAINS MATERIALS
SOME OF WHICH ARE SEXUALLY EXPLICIT OR MAY BE OFFENSIVE AND (2) IS ACCESSIBLE BY
PERSONS WHO MAY ATTEMPT TO BREACH THE SECURITY OF QWEST'S AND/OR CUSTOMER'S
NETWORK(S). QWEST HAS NO CONTROL OVER AND EXPRESSLY DISCLAIMS ANY LIABILITY OR
RESPONSIBILITY WHATSOEVER FOR SUCH MATERIALS OR ACTIONS AND CUSTOMER AND
CUSTOMER'S USERS ACCESS THE SERVICE AT CUSTOMER'S OWN RISK. EXCEPT AS
SPECIFICALLY SET FORTH HEREIN OR IN THE ADDENDUM, THE SERVICE AND RELATED
SOFTWARE AND/OR EQUIPMENT PROVIDED BY QWEST, IF ANY, ARE PROVIDED ON AN "AS IS"
AND "AS AVAILABLE" BASIS WITHOUT WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF TITLE, NONINFRINGEMENT OR
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. NO
ADVICE OR INFORMATION GIVEN BY QWEST, ITS AFFILIATES OR ITS CONTRACTORS OR THEIR
RESPECTIVE EMPLOYEES SHALL CREATE A WARRANTY. Some states do not allow the
limitation of implied warranty, and therefore certain provisions may not apply
to customers located in those states.
7. Limitation of Liability. TO THE MAXIMUM EXTENT PERMITTED BY LAW, IN NO
EVENT SHALL QWEST, ITS AFFILIATES OR AGENTS BE LIABLE FOR ANY DIRECT, INDIRECT,
INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OR LOST OR IMPUTED
PROFITS OR ROYALTIES, LOST DATA OR COST OF PROCUREMENT OF SUBSTITUTE GOODS OR
SERVICES ARISING FROM OR RELATED TO THE SERVICE OR THIS AGREEMENT WHETHER FOR,
AMONG OTHER THINGS, BREACH OF WARRANTY OR ANY OBLIGATION ARISING THEREFROM, AND
WHETHER LIABILITY IS ASSERTED IN, AMONG OTHER THINGS, CONTRACT OR TORT
(INCLUDING BUT NOT LIMITED TO NEGLIGENCE AND STRICT PRODUCT LIABILITY) WHETHER
OR NOT QWEST HAS BEEN ADVISED OF THE POSSIBILITY OF ANY SUCH LOSS OR DAMAGE.
QWEST'S LIABILITY HEREUNDER SHALL IN NO EVENT EXCEED AN AMOUNT EQUAL TO THE
AVERAGE MONTHLY RECURRING CHARGE PAID BY CUSTOMER FOR THE SERVICE, SUCH AVERAGE
MONTHLY CHARGE TO BE CALCULATED BASED UPON THE PERIOD COMMENCING ON THE
EFFECTIVE DATE AND CONCLUDING ON THE DATE A CLAIM IS MADE. CUSTOMER HEREBY
WAIVES ANY CLAIM THAT THESE EXCLUSIONS DEPRIVE IT OF AN ADEQUATE REMEDY OR CAUSE
THIS AGREEMENT TO FAIL OF ITS ESSENTIAL PURPOSE. Except as specifically set
froth in the SLA, the foregoing sets forth Customer's exclusive remedy for
breach of this Agreement by Qwest. Some states do not allow the exclusion of
incidental or consequential damages, and therefore certain provisions hereof may
not apply to customers located in those states. The provisions of this Section 7
allocate the risks between Qwest and Customer and Qwest's pricing reflects the
allocation of risk and limitation of liability specified herein.
8. Indemnity. Customer agrees to defend, indemnify and hold Qwest and its
affiliates harmless from any and all liabilities, costs and expenses, including
reasonable attorneys' fees, related to or arising from: (a) any breach of this
Agreement by Customer or Users; (b) the use of the Service or the Internet or
the placement or transmission of any information, software or other materials on
the Internet by Customer or Users, including but not limited to any Customer
Data; (c) acts or omissions of Customer, Customer's agents or contractors in
connection with, among other things, the installation, maintenance, presence,
use or removal of equipment or software not provided by Qwest connected or to be
connected to the Service; and (d) claims for infringement of any third party
proprietary right, including copyright, patent, trade secrete and trademarks
rights, arising from the use of any services, equipment and software not
provided by Qwest.
9. Non-Solicitation of Employees. Customer shall not, during the Term of
this Agreement and for a period of one (1) year thereafter, directly or
indirectly solicit, employ, offer to employ, nor engage as a consultant, any
employee of Qwest with whom Customer had contact pursuant to this Agreement.
10. Non-Disclosure. Except with respect to information in the public domain
or which is legally required to be disclosed, Customer shall not disclose any of
the terms and conditions of this Agreement to any third party during the Term
and for a period of twelve (12) months thereafter.
11. Assignment. Customer shall not assign this Agreement or, unless set
forth in Addendum A-1, resell the right to use the Service, without the prior
written consent of Qwest.
12. Miscellaneous.
(a) Any dispute relating to this Agreement shall be submitted for binding
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association and judgment on any award entered therein may be entered in any
court of competent jurisdiction. The venue for any such arbitration shall be
Denver, Colorado.
(b) In the event that any portion of this Agreement is held to be
unenforceable, the unenforceable portion shall be construed as nearly as
possible to reflect the original intent of the parties and the remainder of the
provisions shall remain in full force and effect.
(c) Qwest's failure to insist upon strict performance of any provision of
this Agreement shall not be construed as a waiver of any of its rights
hereunder.
(d) The terms and conditions of this Agreement, including all Addenda,
shall prevail notwithstanding any different or additional terms and conditions
of any purchase order or other form for purchase or payment submitted by
Customer to Qwest.
(e) All terms and provisions of this Agreement which should by their nature
survive the termination of this Agreement shall so survive, including but not
limited sections 3, 4, 6, 7, 8, 9, 10 and 12.
(f) Qwest is acting as n independent contractor and shall have exclusive
control of the manner and means of performing its obligations.
(g) Qwest will not be responsible for performance of its obligations
hereunder where delayed or hindered by war, riots, embargoes, strikes or acts of
its vendors, suppliers, accidents, acts of God, or any other event beyond its
control.
(h) All notices shall be sent by registered or certified mail or by
overnight commercial delivery to the address set forth in this Agreement by each
party. Notices to Qwest shall be sent to the attention of its General Counsel.
(i) This Agreement shall be governed by the laws of the State of New York.
Any cause of action Customer may have with respect to the Service must be
commenced within one (1) year after the claim or cause of action arises or such
claim or cause of action is barred. In any proceeding to enforce the terms of
this Agreement, the party prevailing shall be entitled to recover all of its
expenses, including, without limitation, reasonable attorney's fees.
(j) This Agreement may be executed in separate counterparts using facsimile
copies, each of which shall be deemed an original, and all of which shall be
deemed one and the same instrument and legally binding upon the parties.
(k) This Agreement, including the AUP (as such AUP may be amended from time
to time), Addendum A-1 and Addendum A-2, constitutes the entire agreement
between Customer and Qwest with respect to the Service. This Agreement may only
be amended in a written agreement executed by authorized representatives of both
parties hereto.
CUSTOMER
WORD CRUNCHER INTERNET TECHNOLOGIES INC.
/s/
- ----------------------------------------------------------
Signature of Authorized Representative Date
Martin Cryer, VP Product Dev.
- ----------------------------------------------------------
Name and Title of Authorized Representative
Customer Address:
405 East 12450 South, Suite B
Draper, UT 84020
QWEST INTERNET SOLUTIONS, INC.
- ----------------------------------------------------------
Signature of Authorized Representative Date
- ----------------------------------------------------------
Name and Title of Authorized Representative
<PAGE>
Qwest
ADDENDUM A-2 TO QWEST SERVICE AGREEMENT
Dedicated Internet Access ("DIA") Service Description
This Addendum A-2 to the agreement by and between Customer and Qwest (the
"Agreement") sets forth the description of Qwest's Dedicated Internet Access
("DIA") Service, as provided pursuant to such Agreement. Except as otherwise set
forth herein, capitalized terms shall have the definitions assigned to them in
the Agreement.
Qwest DIA Service consists of: (i) a dedicated, high-speed network connection
between Customer's premises (as specified in Addendum A-1 of the Agreement) and
Qwest's domestic (continental United States) Internet protocol ("IP") network;
and (ii) routing services, based upon the Transmission Control Protocol/Internet
Protocol which will afford Customer Internet connectivity. The specific
bandwidth and, therefore, the speed or rate at which Customer may transmit and
receive data via its Internet connection, is specified in Addendum A-1 of the
Agreement. If specified in Addendum A-1, Qwest will, on Customer's behalf, use
commercially reasonable efforts to perform the following as part of the DIA
Service; (i) order local access facilities connecting Customer's premises to a
Qwest point-of presence; and/or (ii) secure IP address space for Customer in
accordance with Addendum A-1. Estimated dates of completion including Firm Order
Commitments (collectively, the "FOC Dates") are often dependent on parties other
than Qwest, including Local Exchange Carriers; therefore, FOC Dates are provided
on a "Best efforts" basis, but Qwest makes no guarantees regarding FOC Dates
except as may be specifically set forth in the Service Level Agreement ("SLA")
below.
For Customers purchasing "Burstable" DIA Services as set forth herein, the
methodology for Burstable Billing is as follows: Usage samples are taken every 5
minutes throughout the month. Only one sample is captured for each five-minute
period, even though there are actually two samples take; one for inbound
utilization and one for outbound utilization. The higher of these two figures is
retained. At the end of the billing period, the samples are ordered from highest
to lowest. The result is a database of over 8,000 samples (12 samples/hour *24
hours/day *30 days/month), with the highest sample listed first and the lowest
sample listed last. The top 5% of the samples (representing the top 5% of usage
levels) are discarded. The highest remaining sample is used to calculate the
usage level. This is the 95th percentile of peak usage.
The DIA Service purchased herein is subject to the following SLA which is
effective as of the first day of the second month after initial installation of
Services.
NETWORK AVAILABILITY GOAL
- -------------------------
NETWORK AVAILABILITY GOAL.
For domestic Qwest Internet Services, Qwest's goal is to maintain network
availability at the bandwidth specified in the Addendum of 100%.
COMPONENTS INCLUDED.
All components of the Qwest IP Network (e.g. POPs, Routers, Circuits) and
Qwest-provided local access facilities used to access the Qwest IP Network (e.g.
Local Loop) are included in the determination of Network Availability.
NETWORK AVAILABILITY MEASUREMENT AND REMEDIES.
Network Downtime is measured based on the total outage time of the affected
Services. Network Downtime shall exist when a particular Customer circuit (the
"Affected Service") is unable to transmit data and Qwest records such failure in
the Qwest trouble ticket system. Network Downtime is measured from the time the
trouble ticket is opened to the time the Affected Service is again able to
transmit and receive data. Upon Customer's written request to the Call
Management Center made within five (5) business days of the last day of the
month in which the Network Downtime occurred, Qwest shall provide a service
credit equal of the pro-rated charges for one day of Services for the Affected
Service for each cumulative hour of Network Downtime.
SERVICE CREDIT EXCEPTIONS.
Service credits will not be available to Customer in cases which the Services
are unavailable as a result of (i) the negligence, acts or omissions of
Customer, its employees, contractors or agents or its end users; (ii) the
failure or malfunction of equipment, applications or systems not owned or
controlled by Qwest, (iii) circumstances or causes beyond the control of Qwest,
including instances of Force Majeure (as defined in this Agreement), or (iv)
scheduled service maintenance, alteration, or implementation. Such credits will
be granted only if Customer affords Qwest full and free access to Customer's
premises and equipment to make necessary repairs, maintenance, testing. etc.
NETWORK DELAY GOAL
- -------------------
NETWORK DELAY GOAL.
Qwest's goal is to maintain an average roundtrip POP-to POP (e.g. IP Backbone)
on-network delay of 75 milliseconds.
CALCULATION.
The calculation for average roundtrip network delay (Average Network Delay) for
a given month is as follows based on the procedure criteria defined below:
[SIGMA] (Roundtrip Delay for POP-POP trunks) = Average Network
--------------------------------------------
Delay Total Number of POP-POP trunks
COMPONENTS INCLUDED.
All components of the Qwest IP Network shall be included in the determination of
Average Network Delay.
AVERAGE NETWORK DELAY MEASUREMENT AND REMEDIES.
Average Network Delay will be measured by software and hardware components
capable of measuring application traffic and responses at each POP to be
measured for roundtrip delay. Measurements shall be performed on an ongoing
basis to adequately determine a consistent average performance level for the
calculation, and posted to the Qwest web site provided to Customer. If the
Average Network Delay falls below the Network Delay Goal within the calendar
month, Qwest shall provide a service credit equal of 10% percent of the total
monthly charges relating to the affected Services.
SERVICE CREDIT EXCEPTIONS.
Service credits will not be available in cases where the Average Network Delay
exceeds the Network Delay Goal as a result of (i) the negligence, acts or
omissions of Customer, its employees, contractors or agents or its end users;
(ii) the failure or malfunction of equipment, applications or systems not owned
or controlled by Qwest, (iii) circumstances or causes beyond the control of
Qwest, including instances of Force Majeure, or (iv) scheduled service
maintenance, alteration, or implementation. Such credits will be granted only if
Customer affords Qwest full and free access to Customer's premises and equipment
to make necessary repairs, maintenance, testing, etc.
REPORTING LEVEL GOAL
- ---------------------
REPORTING LEVEL GOAL.
Qwest's goal is to report service interruptions within 10 minutes or less after
Qwest's determination that the Customer's Services are unavailable.
DEFINITION AND PROCESS.
If Qwest determines that the Services are unavailable (i.e. router is unable to
transmit and/or receive data), Qwest will contact Customer within 10 minutes,
via an agreed upon method. In connection with Qwest's obligations to contact
Customer, Customer must provide a valid pager number, fax number or email
address. Customer is solely responsible for providing accurate contact
information for customer's designated point of contact.
COMPONENTS INCLUDED.
All components of the Qwest IP Network shall be included in the determination of
whether Qwest has met the Reporting Level Goal.
REMEDIES.
Upon verification by Qwest that Qwest failed to meet the Reporting Level Goal,
Qwest shall provide a service credit equal to the prorated charges for one day
of network connectivity for the affected Services; provided, however, that a
maximum of one such credit may be accrued per day.
SERVICE CREDIT EXCEPTIONS.
Service credits will not be available in cases where the failure to meet the
Reporting Level Goal is a result of (i) Customer's failure to provide valid and
accurate contact information as set forth above; (ii) the failure or malfunction
of equipment, applications or systems not owned or controlled by Qwest, (iii)
circumstances or causes beyond the control of Qwest, including instances of
Force Majeure (as defined in this Agreement), or (iv) schedule service
maintenance, alteration, or implementation.
MAINTENANCE WINDOW DEFINITION
- -----------------------------
Maintenance performed by Qwest shall be classified as one of the following two
(2) types:
NORMAL MAINTENANCE.
Normal maintenance shall refer to: (i) upgrades of hardware or software; or (ii)
upgrades to increase capacity. Normal Maintenance while being conducted may
degrade the quality of the Services provided which may include an outage of the
Services; provided, however than an outage related to Normal Maintenance shall
not be deemed to be Network Downtime. Normal maintenance shall be undertaken by
Qwest only on Sunday morning between the hours of 12:00 AM and 6:00 AM Local
Time and on Wednesday morning between the hours of 12:00 AM and 6:00 AM Local
Time. For purposes of this SLA, "Local Time" shall refer to the local time in
the time zone in which an Affected Service is located; provided, however, that
if Affected Services are located in multiple time zones, Local Time shall refer
to Eastern Standard Time. Qwest shall provide two (2) days prior notice of
Normal Maintenance.
URGENT MAINTENANCE.
Urgent maintenance shall refer to efforts by Qwest to correct Qwest IP Network
conditions which are likely to cause a material Service outage and which require
immediate correction. Urgent Maintenance, while being conducted, may degrade the
quality of the Services provided to an Affected Service which may include an
outage of the Services. An outage related to Urgent Maintenance shall be deemed
an outage for purposes of calculating Network Downtime and Actual Network
Availability. Qwest may undertake Urgent Maintenance at any time Qwest deems
necessary. Qwest shall provide notice of Urgent Maintenance to Customer as soon
as is commercially practicable under the circumstances.
INSTALLATION GOAL.
Except as otherwise stated in the applicable Addendum, Qwest guarantees that
with respect to (a) frame relay, fractional T-1 and T-1 circuits, the local loop
and Qwest port shall be installed within 45 business days, (b) T-3 circuits, the
local loop and Qwest port shall be installed within 60 business days, and (c)
OC-3 circuits, the local loop and Qwest port shall be installed within the time
period specified in writing by a Qwest Sales Manager (the" Installation Goal").
These installation intervals shall commence at the close of business on the day
upon which Customer has provided Qwest with a signed Agreement, any applicable
Addenda, a completed Contact Form, and a completed and approved credit
application. Upon Customer's written request, if Qwest determines in its good
faith discretion that it has failed to meet this installation Goal, then it
shall credit Customer's account for one-half of the set-up fee with respect to
the affected Services. No such credit shall be available for any failure to meet
the Installation Goal which is the result of (i) the negligence, acts or
omissions of Customer, its employees, contractors or agents or its end users,
(ii) the failure or malfunction of equipment, applications or systems not owned
or controlled by Qwest, or (iii) circumstances or causes beyond the control of
Qwest, including instances of Force Majeure, and such credit shall be Customer's
sole and exclusive remedy in the event Qwest fails to meet the Installation
Goal.
MAXIMUM CREDITS AND TERMINATION OPTION.
In the event that Customer is entitled to multiple credits under this SLA
arising from the same event, such credits shall not be cumulative and Customer
shall be entitled to receive only the maximum single credit available for such
event. Under no circumstances will Qwest be required to credit Customer in any
one calendar month charges in excess of seven (7) days of service. A credit
shall be applied only to the month in which the event giving rise to the credit
occurred. Notwithstanding the foregoing, in the event that, in any single
calendar month, either (A) Customer would be able to receive credits totaling
fifteen (15) or more days (but for the limitation set forth in this section)
resulting from three (3) or more events during such calendar month, (B) any
single event entitling Customer to credits under the section entitled "Network
Availability Goal" above exists for a period of eight (8) consecutive hours, or
(C) any number of events entitling Customer to credits under "Network
Availability Goal" above exists for an aggregate of twenty-four (24) hours,
then, Customer may terminate this agreement for cause and without penalty by
written notice to the Call Management Center with a courtesy copy to the
attention of the General Counsel within five (5) business days following the end
of such calendar month. Such termination will be effective forty-five (45) days
after receipt of written notice by Qwest. The provisions of this Service Level
Agreement state Customer's sole and exclusive remedy for service interruptions
of service deficiencies of any kind whatsoever.
All terms and conditions of this Addendum A-2 and the Agreement (collectively,
the "Agreement") entered into between the parties shall prevail over any
conditions in customer purchase orders, payments or other forms, all of which
are hereby rejected. Please sign below to confirm your agreement with the terms
stated herein.
Customer Qwest Internet Solutions, Inc.
WORD CRUNCHER
INTERNET TECHNOLOGIES INC.
By: /s/ By:
--------------------------------- ---------------------------------
Martin Cryer Date Title Date
V.P. Product Development
CONSULTING AND SUPPORT AGREEMENT
This agreement (the "Agreement") is entered into as of the 22 day of
February, 2000 (the "Effective Date"), by and between Netdotworks, Corp., a Utah
corporation ("Provider"), and WordCruncher Internet Technologies, Inc. a Nevada
corporation ("WordCruncher").
Recitals
A. Whereas, WordCruncher has developed and will soon an Internet website at
www.logio.com wherein it will provide a searchable business portal dedicated to
news, data and services of importance to business professionals; and
B. Whereas, Provider is a full service network systems consulting firm with
experience in network architectural design, multi-platform database
administration, network security, network audits, Web site administration and
project management; and
C. Whereas, WordCruncher desires to engage Provider to perform certain
consulting and support services, and Provider desires to provide such services,
in accordance with the terms and conditions of this Agreement; and
D. Whereas, Provider and WordCruncher desire to set forth in writing their
mutual intent and understanding of the scope and terms of such engagement.
Agreement
Now, therefore, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Definitions.
As used in this Agreement, the following terms shall have the following
meanings, unless the context otherwise requires. Certain other terms are defined
elsewhere in this Agreement.
1.1 "Access Terminals" mean the computer terminals located at
_________ Draper, Utah (the "Access Terminals Site") and connected to the
System through the Frame relay.
1.2 "Agreement" means this Consulting and Support Agreement between
Provider and WordCruncher, as amended from time to time.
1.3 "Code" means all computer programming code (both object and
source, unless otherwise specified) and application program interfaces
associated with the System, as modified or enhanced from time to time by
WordCruncher, including, without limitation, all interfaces, navigational
devices, menu structures or arrangements, icons, help, operational
instructions, commands, syntax, hyper-text markup language, design,
templates the literal and non-literal expressions of ideas that operate,
cause, create, direct, manipulate, access or otherwise affect the Content
whether created or licensed from third parties by WordCruncher including,
without limitation, any copyrights, trade secrets and other intellectual or
industrial property rights therein.
1.4 "Content" means all text, graphics, animation, audio and/or
digital video components and other online materials and services included
on logio-com, but does not include the Code.
1.5 "End-User(s)" means any person or entity that accesses logio.com
or uses the services therein.
1.6 "Frame Relay" means the data-packet switching service used by
WordCruncher to transmit data between the System and the Access Terminals.
1.7 "Intellectual Property Right(s)" means any patent, copyright,
trademark, trade secret, trade dress, mask work, right of attribution or
integrity or other intellectual or industrial property rights or
proprietary rights arising under the laws of any jurisdiction (including,
without limitation, all claims and causes of action for infringement,
misappropriation or violation thereof and all rights in any registrations
and renewals).
1.8 "Launch Date" means the first day that logio.com provided services
become available on the Internet to End Users.
1.9 "Services" mean any and all services provided by Provider under
Section 2 of this Agreement.
1.10 "logio.com" means the WordCruncher owned Internet site, namely
www.logio.com.
1.11 "System" means all application server hardware devices and
software owned, rented or licensed by WordCruncher, used to operate
logio.com and located at the data center of Qwest Communications
International Inc. in ___________________, California (the "Data Center
Site"). The System does not include the Access Terminals and the Frame
Relay.
2. Scope of Services. On the terms and subject to the conditions set forth
in this Agreement, Provider shall provide to WordCruncher the following services
(collectively, the "Services"):
2.1 Obtaining Familiarity. Provider shall at least three weeks prior
to the Launch Date, provide two senior employees of Provider to be
available at the Access Terminals Site to develop a familiarity with the
System and the procedures WordCruncher has established relating to the
System. These two senior employees are billable at a rate of $10,000 per
month each. Any amount payable to Provider under this Section 2.1 shall be
prorated during any month in which this Agreement is not in effect for the
entire month.
2.2 Database and Web Server Support. From and after one week prior to
the Launch Date, Provider shall 9a) proactively monitor the System to
identify situations that could cause downtime of the System and to respond
to those issues to maintain the availability of the System for all End
Users, (b) seek ways to improve performance and reliability of the System
through optimization of the System, (c) monitor the backend connectivity
between the database, application, Web and search servers of the System to
verify that the entire process is functioning and providing the required
resources for the operation of the System, (d) monitor backups of the
content and verify the backups' integrity through regular testing, (e)
administer, and update as reasonably necessary, a disaster recovery plan
for the System and (f) assist WordCruncher managers, developers and
programmers with the implementation of modifications to the System and the
establishment of proper quality control requirements to be met before such
modifications are made.
2.2.1 Level of Support. From and after one week prior to the
Launch Date, Provider shall provide at all times of every day a
database server administrator and a Web site administrator at the
Access Terminals Site and a security consultant on an as-needed basis
to provide the Services set forth in Section 2.2.
2.2.2 Logs and Manuals. Provider shall keep detailed logs of
resolution steps taken by Provider to remedy any failure, or events
that could potentially create failure, of the System. Provider shall
maintain and update a manual relating to the Services set forth in
Section 2.2.
3. WordCruncher's Responsibilities. WordCruncher shall, to the extent
reasonably necessary for Provider to fulfill its responsibilities under this
Agreement and at no charge to Provider, (a) provide reasonable cooperation and
assistance to Provider, (b) be responsible for all costs associated with
maintaining and upgrading the System, Access Terminals and Frame Relay, (c)
provide and be responsible for all costs associated with the Access Terminals
Site, including, but not limited to, security for such site (d) furnish
information requested by Provider, including, but not limited to, the Code, (e)
provide reasonable access to WordCruncher personnel, and (f) keep Provider
reasonably informed of the date on which WordCruncher believes the Launch Date
will occur. Any delays attributable to WordCruncher's failure to respond to
reasonable requests by Provider shall extend any and all deadlines set forth in
this Agreement for an amount of time equal to WordCruncher's delay and/or
release Provider from its obligations hereunder to the extent that Provider is
affected by such delay or failure of WordCruncher.
4. Payments.
4.1 Payment for the Services and Reimbursements. The amount to be paid
to Provider for all of the Services during the Initial Term (as hereinafter
defined) shall be $90,000 per month (with first months payment due upon
execution of the Agreement) payable on the fifteenth (15) day of each month
during the Initial Term. In the event that WordCruncher elects to extend
the term of this Agreement for an additional two hundred forty days in
accordance with Section 5.1(a), the amount to be paid to Provider for all
of the Services during such extended period shall be $85,000 per month
during the first four months of the Extended Period (as hereinafter
defined) and $85,000 per month during the first four months of the Extended
Period (as hereinafter defined) and $80,000 per month during the fifth
month of the Extended Period through the end of the Extended Period. In the
event that WordCruncher elects to extend the term of this Agreement on a
month to month basis in accordance with Section 5.1(b), the amount to be
paid to Provider for all of the Services during such extended period shall
be $90,000 per month during the first two months of the Month to Month
Period (as hereinafter defined) and $80,000 per month during the third
month of the Month to Month Period through February 22, 2001. Any amount
payable to Provider under this Section 4.1 shall be prorated during any
month in which this Agreement is not in effect for the entire month.
WordCruncher shall reimburse Provider for actual, reasonable out-of-pocket
expenses, including travel expenses, incurred by Provider in furtherance of
its obligations under this Agreement. Without limiting the generality of
the foregoing, WordCruncher shall reimburse Provider for all expenses
Provider incurs to travel to the Data Center Site. WordCruncher shall pay
such reimbursements within thirty days after Provider has submitted to
WordCruncher an invoice therefor.
4.2 Payment Terms. All payments required to be made by WordCruncher
hereunder shall be in U.S. currency. In the event of a payment dispute
between the parties hereto, WordCruncher agrees to pay any and all sums due
to Provider not in dispute without prejudice to WordCruncher's legal
rights. The fees to be paid by WordCruncher hereunder are exclusive of any
and all sales, use or other taxes or charges levied or imposed on Provider,
resulting from this Agreement or any part thereof.
5. Term and Termination.
5.1 Initial Term. This Agreement shall remain in full force and effect
for a period of one hundred twenty days from the date Provider first
provides full time support in accordance with section 2.2 and 2.2.1 above
(the "Initial Term"). WordCruncher may terminate this Agreement with or
without cause at the end of the Initial Term upon thirty days written
notice to Provider prior to the end of the Initial Term.
5.2 Option to Extend. In the event WordCruncher does not elect to
terminate this Agreement at the end of the Initial Term in accordance with
Section 5.1, WordCruncher shall have the option to extend the term of this
Agreement in full force and effect (a) for a period of an additional two
hundred forty days from the end of the Initial Term (the "Extended Term");
provided that this Agreement may be terminated during the Extended Term in
accordance with Section 5.3 or (b) on a month to month basis until February
22, 2001 (the "Month to Month Period").
5.3 Termination. During the Extended Term, either party may deliver to
the other party a written "Notice of Default" in the event that the other
party has breached any material provision hereunder. Such Notice of Default
must prominently contain the following sentences in capital letters: "THIS
IS A FORMAL NOTICE OF A BREACH OF CONTRACT. FAILURE TO CURE SUCH BREACH
WILL HAVE SIGNIFICANT LEGAL CONSEQUENCES." A party that has received a
Notice of Default shall have twenty days to cure the alleged breach (and,
if the defaulting party shall have commenced actions in good faith to cure
such defaults which are not susceptible of being cured during such
twenty-day period, such period shall be extended (but not in excess of
twenty additional days) while such party continues such actions to cure
(the "Cure Period") If such party fails to cure the breach within the Cure
Period, as long as such default shall be continuing, the non-defaulting
party shall have the right to either (a) suspend its performance or payment
obligations under this Agreement, (b) seek an order of specific
performance, (c) seek an award of compensatory damages, and/or (d)
terminate the Agreement.
6. Confidential Information.
6.1 Nondisclosure. If either party acquires Confidential Information
of the other, such receiving party shall maintain the confidentiality of
the disclosing party's Confidential Information, shall use such
Confidential Information only for the purposes for which it is furnished
and shall not reproduce or copy it in whole or in part except for use as
authorized in this Agreement. Without limiting the generality of the
foregoing, neither party shall use the Confidential Information of the
other party to solicit the other party" customers or to otherwise compete
unfairly with the other party. Confidential Information shall mean all
information of the disclosing party which it treats as confidential or
proprietary. Confidential Information shall not include information which
is or hereafter becomes generally available to others without restriction
or which is obtained by the receiving party without violating the
disclosing party's rights under this Section 6 or any other obligation of
confidentiality. The terms and conditions of this Agreement and the Code
shall constitute Confidential Information. Provider and WordCruncher shall
cooperate to request confidential treatment as may be mutually agreed by
them with respect to certain terms of this Agreement and the transactions
contemplated hereby in any filing with the Securities and Exchange
Commission, any other government authority or any securities exchange or
stock market.
6.2 Duration. With respect to all Confidential Information, the
parties' rights and obligations under this Section 6 shall remain in full
force and effect following the termination of this Agreement.
6.3 Ownership. All materials and records which constitute Confidential
Information, other than copies of this Agreement, shall be and remain the
property of, and belong exclusively to, the disclosing party, and the
receiving party agrees either to surrender possession of and turn over or
to destroy and certify to the other party the destruction of all such
Confidential Information which it may possess or control upon request of
the disclosing party or upon the termination of this Agreement.
6.4 Injunctive Relief. The parties acknowledge and agree that, in the
event of a breach or threatened breach by any party of any provision of
this Section 6, the other party will have no adequate remedy in money or
damages and, accordingly, shall be entitled to an injunction against such
breach. However, no specification in this Section 6 of a specific legal or
equitable remedy shall be construed as a waiver or prohibition against any
other legal or equitable remedies in the event of a breach of this Section
6 of this Agreement.
6.5 Legal Obligation to Disclose. Each party shall be released from
its obligations under this Section 6 with respect to information which such
party is required to disclose to others pursuant to obligations imposed by
law, rule or regulation or securities exchange or stock market rule;
provided, however, that prior to any such required disclosure, such party
shall, to the extent practicable, provide written notice and consult with
the other party.
7. Representations and Warranties.
7.1 General. Each party represents and warrants to the other party
that (a) it has the right and power to perform its obligations and (b) its
performance under this Agreement will not violate any agreement or
obligation between it and a third party or any applicable law or
regulation, and does not now or will not in the future infringe upon or
violate any Intellectual Property Right or other proprietary or
non-proprietary right of any third party.
7.2 Quality; Conformity. Provider warrants that each of the Services
will (a) be completed in a good and workmanlike manner consistent with the
requirements of and in accordance with standards customary in the industry
and (b) be completed by duly qualified and skilled personnel of Provider
with qualifications no less favorable than those set forth in Exhibit A
hereto.
7.3 WordCruncher's Ownership Rights. WordCruncher warrants that it
owns all right, title and interest in and to the System and the Code and
any other programs, systems, data or materials provided to Provider
hereunder, unless expressly stated otherwise in Exhibit B hereto.
7.4 No Warranties. Provider makes no express or implied warranties,
including but not limited to, implied warranties of merchantability and
fitness for a particular purpose with respect to the services rendered by
its personnel or th results obtained from their work. Any of the services
provided by provider pursuant to this agreement are provided "As is"
without warranty of any kind. The entire risk as to such services is
assumed by WordCruncher. Provider disclaims all warranties either expressed
or implied with respect to the services including, but not limited to
implied warranties of merchantability, fitness for a particular purpose.
8. Limitation of Liability. In no event shall Provider be responsible for
any special, incidental, direct, indirect, punitive, reliance or consequential
damages, whether foreseeable or not, arising under this Agreement or from any
breach or partial breach of the provisions of this Agreement or occasioned by
any defect in the Services, delay in availability of the Services, failure of
the Services, interruptions or outages of the System, Frame Relay, Access
Terminals or any other cause whatsoever or arising out of any act or omission by
Provider, as applicable, its employees, servants and/or agents, including but
not limited to, damage or loss of data, property or equipment, loss or profits
or revenue, cost of capital, cost of replacement services, or claims of End
Users and other customers for service interruptions or transmission problems.
9. Force Majeure. Neither party shall be liable for any delay or failure to
perform its obligations under this Agreement, where such delay or failure
results from any cause beyond such party's reasonable control including, without
limitation, any (a) act of God (fire, storm, floods, earthquakes, etc.), (b)
civil disturbances, (c) mechanical, electronic or communications failure, or (d)
disruption of telecommunications, power or other essential services; provided
that it gives the other party written notice thereof promptly and, in any event
within fifteen days of discovery thereof and uses its best efforts to cure the
delay if such party is responsible to cure such delay. Notwithstanding the
foregoing, either party may terminate this Agreement upon written notice to the
other party in the event such failure to perform continues unremedied for a
period of thirty days in the aggregate.
10. General.
10.1 Amendments. Any term of this Agreement may be amended and the
observance of any term may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of the parties.
10.2 Waivers. The failure of a party hereto at any time or times to
require performance of any provision hereof shall in no manner affect its
right at a later time to enforce the same unless the same is waived in
writing. No waiver by a party of any condition or any breach of any term,
covenant, representation or warranty contained in this Agreement shall be
effective unless in writing, and no waiver of any one or more instances
shall be deemed to be a further or continuing waiver of any such condition
or breach in other instances or a waiver of any other condition or breach
of any other term, covenant, representation or warranty. A valid waiver is
limited to the specific situation for which it was given.
10.3 Assignment. This Agreement may not be assigned, or otherwise
transferred, in whole or in part, by either party without the prior written
consent of the other party. Any attempted assignment in violation of the
foregoing will be void.
10.4 Interpretation. This Agreement has been negotiated by the parties
and their respective counsel and will be interpreted fairly in accordance
with its terms and without any strict construction in favor of or against
either party.
10.4 Counterparts. This Agreement may be executed in two or more
counterparts, and each counterpart will be deemed an original, but all
counterparts together will constitute a single instrument.
10.6 Choice of Law; Venue. This Agreement will be governed by and
construed in accordance with the laws of the State of Utah, without regard
to principles of conflicts of law. Each party hereby irrevocably and
unconditionally submits to the exclusive jurisdiction of any state or
federal court sitting in Salt Lake City, Utah over any suit, action or
proceeding arising out of or relating to this Agreement.
10.7 Headings. The headings contained in this Agreement are for the
purposes of convenience only and are not intended to define or limit the
contents of this Agreement.
10.8 Independent Contractors. The parties are independent contractors
and neither party is an employee, agent, servant, representative, partner
or joint venturer of the other. Neither party has the right or ability to
bind the other to any agreement with a third party or to incur any
obligation or liability on behalf of the other party without the other
party's written consent. WordCruncher shall have no direction or control of
Provider, or any person employed by or contracted for by Provider, except
in the results to be obtained.
10.9 Notices. Any notice or other communication must be in writing,
and either actually delivered (including delivery by facsimile, telex,
courier or similar means) or deposited in the United States mail in
registered or certified form, return receipt requested, postage prepaid,
addressed to the receiving party at the address stated below or to another
address as such party may indicate by notice in accordance with this
Section 10.9. Notice will be effective on the date that it is delivered or,
if sent by mail in accordance with this Section 10.9, five days after the
date of mailing.
For Provider: Netdotworks, Corp.
215 South State, Suite 675
Salt Lake City, UT 84111
Facsimile: 801-505-6224
For WordCruncher: WordCruncher Internet Technologies Inc.
405 E. 12450 S Suite B
Draper, UT 84020
Facsimile: 801-816-9840
10.10 Severance. Whenever possible, each provision of this Agreement
will be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement is found to violate
a law, it will be severed from the rest of the Agreement and ignored.
10.11 Survival of Terms. Regardless of the circumstances of
termination or expiration of this Agreement or portion thereof, the
provisions of Sections 6 ("Confidential Information"), 7 ("Representations
and Warranties"), 8 ("Limitation of Liability"), 10 ("General") will
survive the termination or expiration and continue according to their
terms.
10.12 Time. Whenever reference is made in this Agreement to "days,"
the reference means calendar days, not business days, unless otherwise
specified.
10.13 Attorneys' Fees. If any party hereto brings an action or
proceeding for the declaration of the rights of the parties hereunder, for
injunctive relief, or for an alleged breach or default of, or any other
action arising out of this Agreement or the transactions contemplated
hereby, the prevailing party in any such action shall be entitled to an
award of reasonable attorneys' fees and any court costs incurred in such
action or proceeding, in addition to any other damages or relief awarded,
regardless of whether such action proceeds to final judgment.
10.14 Entire Agreement. This Agreement constitutes the entire
understanding of the parties with respect to the subject matter hereof and
merges all prior written or oral communications, understandings, and
agreements with respect to the subject matter of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized representatives, to be effective as of the Effective Date stated
above.
NETDOTWORKS, CORP.
By: /s/
-------------------------------------
Name: Clay Flory
Title: Principal Partner
WORDCRUNCHER INTERNET TECHNOLOGIES, INC.
By: /s/
-------------------------------------
Name: M. Daniel Lunt
Title: President and CEO
41 Madison Avenue, 22nd Floor
New York, NY 10010
212/693-0001
Click
DoubleClick
www.doubleclick.net
DART(TM) SERVICE AGREEMENT FOR PUBLISHERS
TERMS AND CONDITIONS
1. Agreement. DoubleClick, Inc. ("DoubleClick") and You hereby enter into the
agreement set forth in these Terms and Conditions and in the Cover Page
(collectively, this "DART Service Agreements" or "Agreement"), as of the
Effective Date set forth on the Cover Page. All capitalized items not otherwise
defined in these Terms and Conditions shall have the meanings as defined on the
Cover Page. "Advertiser shall mean any entity or person that desires to
advertise their own products or services. "Publisher" shall mean any entity or
person that desires to use the DART Service to target and measure advertisements
for Advertisers on their own Web site.
2. DART Service. The DART Service (the "Service") is a service provided by
DoubleClick to Publishers for targeted and measured delivery of ad banners from
DoubleClick's servers to the Web Sites set forth on the cover page of this
Agreement ("Target Sites"). The ad banners are displayed to visitors
("Visitors") to the Target Sites based on criteria selected by You and Your
Advertisers.
3. Ad Management Systems. You and DoubleClick understand that You are required
to use DoubleClick's proprietary Ad Management System software technology (the
"System") in order to receive the Service. Accordingly, DoubleClick grants to
You the non-exclusive and non-transferrable right to access and use the System,
which You can access and use only on DoubleClick's Web servers by means of a
unique password chosen by You, and only for the purposes of: (i) performing
projections of ad banner impression inventories that might be available through
the Service, (ii) uploading and storing ad banners for delivery by the Service,
(iii) selecting trafficking criteria for the delivery of ad banners to Target
Sites and Visitors, and (iv) receiving reports of ad banner impressions and
other data related to the delivery of ad banners by the Service.
4. Your Obligation. You shall be solely responsible for soliciting all
Advertisers, trafficking of ad banners (which shall include the input of ad
banners into the System) and handling all inquiries of any type or nature. You
shall obtain all necessary rights, licenses, consents, waivers and permissions
from Advertisers, Visitors and others, to allow DoubleClick to store and deliver
ad banners and otherwise operate the Service3 on Your behalf and on behalf of
You Advertisers, and to use any data provided in or collected by the System. You
further represent that You have read, and will conform to DoubleClick's
statements on privacy that can be found on the DoubleClick Web site. You further
agree that advertisements provided to DoubleClick and/or delivered on behalf of
You, and Your other promotional and marketing activities in connection with the
use of the Service, including the Target Sites, shall not be deceptive,
misleading, obscene, defamatory, illegal or unethical.
5. DoubleClick's Obligations. DoubleClick's sole obligations hereunder shall be
(i) to make the System available to You, (ii) to deliver ad banners through the
Service according to the trafficking criteria selected by You using the System,
(iii) to make customer service personnel available by telephone for support
twenty-four hours per day, seven days per week and (iv) to provide six training
days at DoubleClick's premises explaining the proper use of the Service and the
System. A "training day" is defined as a full day training session for one of
Your employees. You can divide the training days in any manner You deem
appropriate, such as having three employees attend two sessions each, six
employees attend one session each, or one employee attend all six sessions. The
cost for such training sessions is included in the Upfront Fee. If You require
additional training or training on Your site, DoubleClick shall provide such
training to You at DoubleClick's standard published rates for such training. For
training on Your Site, You agree to reimburse DoubleClick for its actual travel
and lodging expenses. You shall not permit any of Your employees to access and
use the Service or the System unless any such employee has successfully
completed the training session and has been so certified by DoubleClick.
6. Fees. You shall pay DoubleClick the fees set forth on the Cover Page to this
Agreement. The fees may include an Upfront Fee and Monthly Service Fees. The
Upfront Fee is a one-time, non-creditable, non-refundable fee for Your use of
the Service and the System, payable upon execution of this Agreement. The
Monthly Service Fees are recurring, non-refundable, non-creditable fees, payable
within thirty (30) days after receipt of an invoice from DoubleClick for such
fees. The Monthly Service Fee shall be based on the number of ad banner
impressions delivered through the Service on behalf of You each month, divided
by one thousand (1,000) and multiplied by the Monthly Service Fee CPM rate set
forth on the Cover Page to this Agreement. If Your Monthly Service Fee is less
than the Minimum Monthly Service Fee in any given month, You shall owe
DoubleClick the Minimum Monthly Service Fee for that month. To the extent that
the average file size of all ad banners delivered via the Service in a given
month ("Average Ad Size") exceeds the Ad Size Limit set forth on the Cover Page,
the Monthly Service Fee payable for that month shall be increased by an amount
that shall be calculated by subtracting the Ad Size Limit from the Average Ad
Size, diving that difference by the Ad Size Limit, and multiplying the quotient
by the Monthly Service Fee CPM rate set forth on the Cover Page of this
Agreement. All fees hereunder shall be denominated in U.S. dollars and paid by
wire transfer to an account to be designated by DoubleClick, or by other means
expressly agreed to in writing by DoubleClick, or by other means expressly
agreed to in writing by DoubleClick. You shall also be responsible for and shall
pay any applicable sales, use or other taxes or duties, tariffs or the like
applicable in provision of the Service (except for taxes on DoubleClick's
income). Late payments will be subject to late fees at the rate of one and one
half percent (1.5%) per month, or, if lower, the maximum rate allowed by law. If
You fail to pay fees invoiced by DoubleClick within thirty (30) days following
the payment due date. DoubleClick shall have the right to suspend performance of
the Services without notice to You; such Service not be reinstated until You pay
all such overdue amounts and an additional reinstatement fee of $1,000. In
addition, You also agree to pay any attorneys' fees and/or collection costs
incurred by DoubleClick in collecting any past due amounts from You.
7. Proprietary Rights and Restriction. DoubleClick is the exclusive supplier of
the Service and the exclusive owner of all right, title and interest in and to
the System, all software, databases and other aspects and technologies related
to the System and Service, including the System, any enhancements thereto and
any materials provided to You by DoubleClick through the System or otherwise.
You may not use the System except pursuant to the limited rights expressly
granted in this Agreement. You shall use the System only in accordance with
reference manuals to be supplied by DoubleClick and only in accordance with
DoubleClick's standard security procedures, as posted on the DoubleClick Web
sited or otherwise notified to You.
8. Data. You have the sole and exclusive right to use all data derived from Your
use of the Service, for any purpose related to Your business; provided that
DoubleClick may use and disclose the Visitors' data (other than personally
identifiable information) derived from Your use of the Service only (i) for
DoubleClick's reporting purposes, consisting of compilation of aggregated
statistics about the Service (e.g., the aggregate number of ads delivered) that
may be provided to customers, potential customers and the general public; and
(ii) if required by court order, law or governmental agency. As part of the DART
service, DoubleClick will supply You with unlimited Standard Reports available
on the Admanage Interface. DoubleClick can supply customized reports that are
not available on the Admanage Interface at an additional cost.
9. Term. Unless terminated earlier in accordance with the termination rights set
forth in this Agreement, the term of this Agreement shall commence on the
Effective Date and continue in effect until December 31, 2000 (the "Term").
10. Termination. At any time during the Term, this Agreement shall terminate (i)
thirty (30) days after DoubleClick's notice to You if the Service Fee for any
month following the third month of the Term is less than the Minimum Monthly
Service Fee set forth on the Cover Page to this Agreement, (ii) thirty (30) days
after a party's notice to the other party that such other party is in breach
hereunder, unless the other party cures such breach within said thirty (30) day
period or (iii) ten (10) days after DoubleClick's notice to You of DoubleClick's
reasonable determination that You are using the Service or the System in such a
manner that could damage or cause injury to the Service or the System or reflect
unfavorably on the reputation of DoubleClick (i.e. the Target Sites begin
serving pornographic content). If this Agreement is terminated by DoubleClick
due to a breach by You. You are required to promptly pay DoubleClick the Minimum
Monthly Service Fee for the balance of the Term.
10. Indemnification. You agree to indemnify and hold DoubleClick and its
officers, directors, employees and agents (each a "DoubleClick Indemnitee")
harmless from and against any and all third party claims, actions, losses,
damages, liability, costs and expenses (including, without limitation,
reasonable attorneys' fees and disbursements incurred by a DoubleClick
Indemnitee in any action between You and the DoubleClick Indemnitee, or between
the DoubleClick Indemnitee and any third party or otherwise) arising out of or
in connection with (i) the breach of any of Your representations, warranties or
obligations set forth in this Agreement, (ii) Your use of the Service or the
System other than as permitted herein, or (iii) any claim by any Advertiser
arising from Your arrangement to display Advertisers' Advertising on the Target
Sites.
DoubleClick agrees to indemnify and hold You and Your officers, directors,
employees and agents (each "Your Indemnitee") harmless from and against any and
all third-party claims, actions, losses, damages, liability, costs and expenses
including, without limitation, reasonable attorneys' fees and disbursements
incurred by Your Indemnitee in any action between DoubleClick and Your
Indemnitee, or between Your Indemnitee and any third party or otherwise) arising
out of or in connection with the breach of any of DoubleClick's representations,
warranties or obligations set forth in this Agreement.
12. WARRANTIES AND DISCLAIMER. DoubleClick represents and warrants that the
System was developed by DoubleClick and may be used by You without infringement
or misappropriation of any third party's copyrights, trademarks or trade secrets
or U.S. patents issued as of the Effective Date. You acknowledge that the
Service and the System can be used to target, measure and traffic advertisements
in many different ways and based on many different types of data. You represent
and warrant that You will not use the Service or the System in a way or for any
purpose that infringes or misappropriates any third party's intellectual
property or personal rights. EXCEPT AS SET FORTH IN THIS AGREEMENT, DOUBLECLICK
MAKES NO WARRANTIES OF ANY KIND TO ANY PERSON WITH RESPECT TO THE SERVICE, THE
SYSTEM OR ANY AD BANNER OR OTHER DATA SUPPLIED THEREBY, WHETHER EXPRESS OR
IMPLIED, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR NONINFRINGEMENT.
13. Limitation and Exclusion of Liability. Except as otherwise set forth in the
Agreement, DoubleClick shall not be liable to You or any other third party for
any loss, cost, damage or expense incurred in connection with the availability,
operation or use of the Service, the System or any ad banner or other data
supplied thereby, including, without limitation, for any unavailability or
inoperability of the System or the Internet, technical malfunction, computer
error or loss or corruption of data, or other injury, damage or disruption of
any kind related thereto, unless DoubleClick has directly caused such loss,
cost, damage or expense through its gross negligence or intentional misconduct.
In no event shall either party be liable for any indirect, incidental,
consequential, special or exemplary damages, including, but not limited to, loss
of profits, or loss of business opportunity, even if such damages are
foreseeable and whether or not such party has been advised of the possibility
thereof. Each party's maximum aggregate liability shall not exceed the total
amount paid by You to DoubleClick under this Agreement during the twelve (12)
month period prior to the first date the liability arose.
12. Confidentiality The terms of this Agreement, and information and data that
one party (the "Receiving Party") has received or will receive from the other
party (the "Disclosing Party") about the Service, the System and other matters
are proprietary and confidential information ("Confidential Information"),
including without limitation any information that is marked as "confidential" or
should be reasonably understood to be confidential or proprietary to the
disclosing Party and any reference manuals compiled or provided hereunder. The
Receiving Party agrees that for the Term and for two (2) years thereafter, the
Receiving Party will not disclose the Confidential Information to any third
party, nor use the Confidential Information for any purpose not permitted under
this Agreement. The nondisclosure obligations set forth in this Section shall
not apply to information that the Receiving Party can document is generally
available to the public (other than through breach of this Agreement) or was
already lawfully in the Receiving Party's possession at the time of receipt of
the information from the Disclosing Party.
15. Independent Contractor Status. Each party shall be and act as an independent
contractor and not as partner, joint venturer or agent of the other.
16. Modifications and Waivers. This Agreement represents the entire
understanding between DoubleClick and You and supersedes all prior agreements
relating to the subject matter of this Agreement. No failure or delay on the
part of either party in exercising any right, power or remedy under this
Agreement shall operate as a waiver, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise or the
exercise of any other right, power or remedy. Unless otherwise specified, any
amendment, supplement or modification of or to any provision of this Agreement,
any waiver of any provision of this Agreement and any consent to any departure
by the parties from the terms of this Agreement, shall be effective only if its
made or given in writing and signed by both parties.
17. Assignment. This Agreement and rights hereunder are not transferrable or
assignable without prior written consent of the non-assigning party; provided,
however, that this Agreement may be assigned by either party (a) to a person or
entity who acquires substantially all of such party's assets, stock or business
by sale, merger or otherwise and (b) to an affiliate of such party.
18. Applicable Law. This Agreement shall be governed by the law of New York,
without reference to its conflict of laws, rules or principles, and the United
States.
19. Audit of the System. On a monthly basis, the System is independently audited
by ABC Interactive, a third-party auditor. Upon request, DoubleClick agrees to
provide You with a copy of the reports prepared by ABC Interactive relating to
the System. DoubleClick agrees to provide You with the same rights to copies of
the reports if DoubleClick enters an agreement with a third-party auditor other
than ABC Interactive at some later date.
20. General. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the minimum extent necessary without invalidating the remaining
provisions of this Agreement or effecting the validity or enforceability of such
provisions in any other jurisdiction. No failure or omission by either party in
the performance of any obligation under this Agreement shall be deemed a breach
of this Agreement nor create any liability if the same shall arise from any
cause or causes beyond the reasonable control of such party, including but not
limited to the following: acts of God, acts or omissions of any government, or
any rules, regulations or orders of any governmental authority or any officer,
department, agency or instrument thereof: first, storm, flood, earthquake,
accident, acts of the public enemy, war, rebellion, Internet brown-out,
insurrection, riot, invasion, strikes, or lockouts. All notices, demands and
other communications provided for or permitted under this Agreement shall be
made in writing to the parties at the addresses on the Cover Page and shall be
sent by registered or certified first-class mail, return receipt requests,
telecopies, courier service or personal delivery and shall be deemed received
upon delivery.
<PAGE>
41 Madison Avenue, 22nd Floor
New York, NY 10010
212/693-0001
Click
DoubleClick
www.doubleclick.net
DART(TM) SERVICE AGREEMENT FOR PUBLISHERS
- --------------------------------------------------------------------------------
You agree to pay DoubleClick, Inc., all of the fees and other charges specified
below and DoubleClick, Inc. agrees to provide the DART Service to You, all in
accordance with the attached Terms and Conditions. Both You and DoubleClick,
Inc. agree that this Cover Page and the attached Terms and Conditions
(collectively, the "DART Service Agreement" or "Agreement"), may be updated from
time to time by replacing or adding further signed attachments to this
Agreement.
- --------------------------------------------------------------------------------
Your Company Wordcruncher Contact: Dan Lunt
Name So. W. Canyon Crest Rd. Phone: 801-816-9904
and Alpine, UT Fax: 801-756-8198
Address: 84004 E-Mail:
Your Billing Contact: Mike Schouten
Address, if Phone: 801-816-9904
Different: Fax:
E-Mail:
Web Site(s): www.wordcruncher.com
Fees Upfront Fee due on signing US$ 4500
Monthly Service Fee per 1000 ad banner impressions (CPM) (see chart below)
Ad Size Limit: 12 Kbytes Minimum Monthly Service Fee: US$ 500*
*Effective February 1, 2000 /s/ RC
-----------------------------------------------------------------
Custom MONTHLY SERVICE FEE
Arrangements -------------------
Number of Revenue Generating Ad Impressions
Delivered by DART Service Per Month Cost Per Thousand
----------------------------------- -----------------
From 1 to 1,000,000 $1.40
From 1,000,001 to 5,000,000 $1.25
From 5,000,001 to 10,000,000 $1.05
From 10,000,001 to 20,000,000 $0.90
From 20,000,001 to 30,000,000 $0.75
From 30,000,001 to 40,000,000 $0.65
From 40,000,001 to 50,000,000 $0.55
From 50,000,000+++ $0.45
Example of Monthly Service Fee Circulation
------------------------------------------
If the number of ad impressions delivered by the Service in the
month is 6,750,000
(i) Divide into Volume Tiers
Tier 1: 1,000,000
Tier 2: 4,000,000
Tier 3: 1,750,000
(ii) Divide each tier amount by 1,000 and then multiply by the
applicable Monthly Service Fee rate
Tier 1: (1,000,000 / 1,000) x $1.40 = $1400
Tier 2: (4,000,000 / 1,000) x $1.25 = $5000
Tier 3: (1,750,000 / 1,000) x $1.05 = $1837.50
----------
Monthly service Fee $8237.50
------------------------------------------------------------------
Fee for non-revenue generating house ads redirected to
Your servers for delivery on Your bandwidth
(on a CPM basis) US$ 0.20
- --------------------------------------------------------------------------------
The undersigned confirm their mutual agreement to these arrangements as of the
Effective Date.
- --------------------------------------------------------------------------------
DOUBLECLICK INC. YOUR COMPANY NAME: WCTI
(Please print)
Signature: /s/ Signature: /s/
----------------------------- ----------------------------
Printed Name: Aaron Mittman Printed Name: Dan Lunt
Title: Director, Direct Sales N. America Title: President/CEO
Effective Date: _______________________
- --------------------------------------------------------------------------------
DOUBLECLICK(R) and DART(TM) are trademarks of DoubleClick Inc.,
(c)1998 DoubleClick Inc.
All rights reserved.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999, FOR
WORDCRUNCHER INTERNET TECHNOLOGIES, INC. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0001085278
<NAME> WORDCRUNCHER INTERNET TECHNOLOGIES, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1.000
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0
63
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</TABLE>
