TANNING TECHNOLOGY CORP, S-1/A, 1999-07-22

TANNING TECHNOLOGY CORP
S-1/A, 1999-07-22
COMPUTER INTEGRATED SYSTEMS DESIGN

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<PAGE>

As filed with the Securities and Exchange Commission on July 22, 1999
Registration No. 333-78657
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

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AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

Tanning Technology Corporation
(Exact name of registrant as specified in its charter)

Delaware 7379 84-1381662
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)

----------------
4600 South Ulster Street, Suite 380
Denver, Colorado 80237
(303) 220-9944
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

----------------
Henry F. Skelsey
Chief Financial Officer
Tanning Technology Corporation
4600 South Ulster Street, Suite 380
Denver, Colorado 80237
(303) 220-9944
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

----------------
Copies to:
Joseph A. Stern, Esq. William J. Whelan, III, Esq.
Fried, Frank, Harris, Shriver & Cravath, Swaine & Moore
Jacobson 825 Eighth Avenue
One New York Plaza New York, New York 10019
New York, New York 10004 (212) 474-1000
(212) 859-8000

Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [_]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]

CALCULATION OF REGISTRATION FEE

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<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum
Title of Each Class of Securities Amount to be Offering Price Aggregate Offering Amount of
to be Registered Registered Per Share Price(1) Registration Fee
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value per
share.......................... 4,600,000 $14.00 $64,400,000 $17,903.20(2)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.

(2) A registration fee of $15,985.00 was paid in connection with the original
filing on May 17, 1999.

The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED JULY 22, 1999

4,000,000 Shares

[TANNING LOGO]

Tanning Technology Corporation

Common Stock

--------

Prior to this offering, there has been no public market for our common stock.
The initial public offering price of our common stock is expected to be between
$12.00 and $14.00 per share. Our common stock has been approved for listing on
The Nasdaq Stock Market's National Market under the symbol "TANN."

The underwriters have an option to purchase a maximum of 600,000 additional
shares to cover over-allotments of shares.

Investing in our common stock involves risks. See "Risk Factors" on page 4.

<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Tanning
-------- ------------- -----------
<S> <C> <C> <C>
Per Share ................................. $ $ $
Total...................................... $ $ $
</TABLE>

Delivery of the shares of common stock will be made on or about , 1999.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.

Credit Suisse First Boston

Salomon Smith Barney

CIBC World Markets

ING Barings

Adams, Harkness & Hill, Inc.

The date of the prospectus is , 1999.
<PAGE>

[Inside Front Cover]

OUTSIDE PORTION OF GATEFOLD:

TANNING TECHNOLOGY CORPORATION

TANNING IS AN INFORMATION TECHNOLOGY SERVICES PROVIDER

THAT SPECIALIZES IN LARGE, COMPLEX, INTEGRATED SOLUTIONS.

FOR MANY OF OUR CUSTOMERS, THE SYSTEMS WE BUILD ARE AT

THE CORE OF THEIR EFFORTS TO CAPITALIZE ON INFORMATION

TECHNOLOGY AND THE INTERNET.

[Graphic of pyramid superimposed over graphics of globe and finger on key of
computer]

e-xperience Architecting real solutions for the new economy
<PAGE>

LEFT-HAND PAGE OF GATEFOLD:

Tanning

Solutions

Tanning specializes in three solution areas central to success

in the new digital economy:

[_] Electronic commerce

[_] Enterprise customer relationship management

[_] Core operations

People

Customer-focused, Tanning's information technology professionals have an
average of more than ten years of industry experience.

Culture

Tanning consistently attracts and retains leading information technology talent
interested in solving the industry's toughest challenges.

Based on constant innovation, learning and knowledge sharing, Tanning
encourages the free flow of ideas, where expertise within and across the
organization is channeled into strategic projects that deliver results to
Global 1000 clients.

Assessment

Architecture

Development & Integration

Deployment

Operational Support

[Three photos of Tanning employees]

Tanning staffs projects based on its philosophy that there is no substitute for
experience.

Highly-skilled professional staff, with industry-specific expertise.

[Graphic of a pyramid]

e-xperience Architecting real solutions for the new economy
<PAGE>

RIGHT-HAND PAGE OF GATEFOLD:

CUSTOMERS

Federal Express

A global overnight delivery service provider

The Challenge

Enable Federal Express to more efficiently manage the flow of millions of
packages globally.

The Tanning Solution

We worked with Federal Express to develop a comprehensive intranet system for
reporting measures of package volume and flow efficiency for its global package
delivery operations in a timely manner. We created an online transaction
processing system capable of handling 1,000 transactions per second on a one-
plus terabyte database. As a result, Federal Express is able to obtain
information about the performance of its package delivery system in
significantly shorter timeframes (hours vs. days).

Maersk Line

A leading worldwide ocean container transportation corporation

The Challenge

Help Maersk Line improve customer service across over 400 offices in nearly
every country around the world.

The Tanning Solution

We were engaged by Maersk Line to develop an application architecture for their
customer service applications as well as to establish an architecture for
future applications within Maersk Line. We were subsequently engaged to use
that architecture to design, develop and deploy new customer service
applications in five phases over two and one-half years. The solution
facilitates adoption of common customer service procedures in Maersk Line
offices worldwide while enabling regional and country specific variations where
necessary. The solution was deployed to function with their then-existing
global infrastructure.

Blockbuster

The world's leading retail chain of video rental stores

The Challenge

Help Blockbuster understand its customer demographics and purchase patterns in
order to stock movies according to regional tastes and to more accurately
target customer promotions.

The Tanning Solution

We redesigned Blockbuster's existing enterprise architecture and created a new
system that allows Blockbuster to assemble customer data and account activity
information for over 40 million customers and more than 6,000 stores. The
system enables Blockbuster to measure demand for specific products at the
single store level and therefore to predict minimum stock requirements. As a
result, the system supports the ability of Blockbuster to advertise "In Stock
or It's Free."
<PAGE>

E*Trade

A leading online brokerage firm

The Challenge

Assist E*Trade in building a global brand by creating a standardized platform
for its international expansion.

The Tanning Solution

We designed international extensions to E*Trade's domestic trading system,
enabling support for multiple languages and the ability to handle diverse
character sets and content types. We deployed this system in Sweden as the
first stage of E*Trade's international expansion. The new system can
accommodate rapid business growth because the system architecture was designed
to handle significantly greater numbers of transactions than currently
experienced by E*Trade. The "look and feel" of the user interface and the set
of features and functions offered to the user are standardized to facilitate
global brand recognition.

Electronic Commerce is rapidly advancing from simple Web-based front-end
solutions to large, complex systems that must integrate core business
operations. These are the systems that Tanning builds.

[Tanning logo]
<PAGE>

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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 4
Cautionary Notice Regarding Forward-Looking Statements................... 14
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 14
Capitalization........................................................... 15
Dilution................................................................. 16
Selected Financial Data.................................................. 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 18
Business................................................................. 26
Management............................................................... 38
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Certain Relationships and Transactions With Related Parties................ 53
Principal Stockholders..................................................... 56
Description of Capital Stock............................................... 58
Shares Eligible for Future Sale............................................ 61
United States Tax Consequences to Non-United States Holders................ 63
Underwriting............................................................... 66
Notice to Canadian Residents............................................... 69
Legal Matters.............................................................. 70
Experts.................................................................... 70
Where You Can Find More Information........................................ 70
Index to Consolidated Financial Statements................................. F-1
</TABLE>

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You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this prospectus.

Tanning Technology Corporation and the Tanning logo are our trademark. We
have filed for registration of this trademark.

Dealer Prospectus Delivery Obligation

Until , 1999, 25 days after the commencement of the offering, all dealers
that effect transactions in these securities, whether or not participating in
this offering, may be required to deliver a prospectus. This is in addition to
the dealer's obligation to deliver a prospectus when acting as an underwriter
and with respect to their unsold allotments or subscriptions.
<PAGE>

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information you
should consider before investing in our common stock. You should read this
entire prospectus carefully.

Unless otherwise indicated, all references in this prospectus to the number
of outstanding shares of our common stock:

. give effect to an amendment of our certificate of incorporation to
increase the number of our authorized shares of common stock to 70
million and to convert our existing Class A, Class B and Class C common
stock into one class of common stock on the basis of a 1 for 3.05
reverse stock split in the case of the Class A and Class C common stock,
and a 1 for 2.67 reverse stock split in the case of the Class B common
stock, immediately prior to this offering; and

. do not include the number of shares that we will issue if the
underwriters exercise their over-allotment option.

In addition, the information in this prospectus assumes that the initial public
offering price will be $13.00 per share, the midpoint of the range disclosed on
the cover of this prospectus.

Tanning

We are an information technology services provider that architects, builds
and deploys enterprise solutions for companies in the United States and
internationally. We specialize in large, complex, integrated solutions that
incorporate online transaction processing and very large databases. Internet
technologies are central to many of our solutions, enabling direct interaction
among customers and business partners on the World Wide Web, and among
employees within organizations on their private intranets. Our clients include
Ameritech, Blockbuster, BSkyB, E*Trade, Federal Express, Maersk Line, MCI
WorldCom, R.R. Donnelley Financial and U S WEST.

We focus on the most challenging and critical assignments in the information
technology industry. Our solutions typically involve:

. ultra-high transaction rates (up to millions per hour);

. very large databases (terabytes of information); and

. business-critical operational requirements for reliability, scalability,
flexibility and availability.

Our key solutions are:

. Electronic commerce solutions, which enable businesses to interact with
customers, suppliers and other business partners directly and sell
products and services through the Internet. For example, we designed
international extensions to E*Trade's domestic trading system to enable
it to expand its trading services into foreign countries.

. Enterprise customer relationship management solutions, which enhance a
business' ability to identify, attract, retain and support customers
using emerging and established channels such as the World Wide Web,
direct sales, telemarketing and call centers, direct mail and retail
facilities. For example, we redesigned Blockbuster's existing enterprise
architecture to effectively manage customer data and account activity
information for over 40 million customers and more than 6,000 stores.

. Core operations solutions, which improve business processes such as
billing system integration and order, claim, trade, credit card
transaction and operation transaction processing. For example, we
created an online transaction processing system for Federal Express
capable of handling 1,000

1
<PAGE>

transactions per second on a one-plus terabyte database, enabling
Federal Express to obtain information about the performance of its
package delivery system in significantly shorter time frames (hours vs.
days).

With advances in the Internet and technology, new business models and
innovative information technology solutions are emerging that can transform the
way companies run their businesses. As part of this evolution of business
models, companies are seeking value from electronic commerce, customer
relationship management and core operations solutions. We believe that we are
differentiated by our focus on, and expertise in, the architecture, complex
integration, high volume online transaction processing capabilities and very
large databases required to successfully deploy these advanced solutions. For
many clients, the systems we build are at the core of their efforts to
capitalize on information technology and the Internet.

Our company traces its history back to 1993 and is currently incorporated in
Delaware. Our principal executive office is located at 4600 South Ulster
Street, Suite 380, Denver, Colorado 80237, and our telephone number is (303)
220-9944. We maintain a site on the World Wide Web at http://www.tanning.com;
however, the information found on our website is not part of this prospectus.

2
<PAGE>

The Offering

Common stock offered by Tanning..... 4,000,000 shares.

Common stock to be outstanding
after this offering.................
19,863,166 shares or 20,463,166 shares if
the underwriters exercise their over-
allotment option in full. These shares do
not include 4,121,779 shares reserved for
issuance pursuant to options we may issue
in the future or 8,399,821 shares subject
to outstanding options, in each case
pursuant to our stock option plans, as of
the completion of this offering. In
addition, these shares do not include
1,000,000 shares available for awards
under our employee stock purchase plan.

Use of proceeds..................... For general corporate purposes, including
capital expenditures and working capital.

Proposed Nasdaq symbol.............. TANN

Summary Financial Information

The following table presents our summary condensed consolidated financial
information and has been derived from our audited financial statements for the
three-year period ended December 31, 1998 and from our unaudited interim
financial statements for the three months ended March 31, 1998 and 1999, all of
which are included in another section of this prospectus, and from our
unaudited financial statements for the year ended December 31, 1995. As
adjusted balance sheet data give effect to the sale of 4,000,000 shares of
common stock in this offering. The information below should be read in
conjunction with "Selected Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our consolidated
financial statements and the notes to our consolidated financial statements,
each of which is included in another section of this prospectus.

<TABLE>
<CAPTION>
Three months ended
Year ended December 31, March 31,
---------------------------------------------- ----------------------
1995 1996 1997 1998 1998 1999
----------- ----------- ---------- ---------- ---------- ----------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues............ $4,815 $12,809 $26,107 $33,289 $5,183 $11,305
Gross profit............ 2,798 6,240 11,385 18,348 2,295 5,813
Income (loss) from
operations............. 954 2,852 (269) 3,384 (846) 1,134
Net income (loss)....... 954 2,823 73 2,303 (471) 819
Basic and diluted
earnings (loss) per
share.................. $ 0.01 $ 0.15 $ (0.03) $ 0.05
Diluted weighted average
shares outstanding..... 13,718,710 15,232,236 14,647,552 16,323,342
</TABLE>

<TABLE>
<CAPTION>
March 31, 1999
-------------------
Actual As adjusted
------- -----------
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................................... $ 7,183 $53,793
Working capital............................................. 15,587 62,197
Total assets................................................ 25,117 71,727
Long-term debt, net of current portion...................... 429 429
Total stockholders' equity.................................. 18,596 65,206
</TABLE>

3
<PAGE>

RISK FACTORS

This offering involves a high degree of risk. You should carefully consider
the risks described below and the other information in this prospectus,
including our consolidated financial statements and the related notes, before
you purchase any shares of our common stock.

Risks Related to Our Business

Inability to manage our growth could have a material adverse effect on the
quality of our services, our ability to retain key personnel, and our business

Our growth has placed significant demands on our management and other
resources. Our revenues increased approximately 28% from 1997 to 1998. Our
staff increased from 120 full-time employees at December 31, 1997 to 148 at
December 31, 1998, and to 228 at June 30, 1999. Our future success will depend
on our ability to manage our growth effectively, including:

. continuing to train, motivate, manage and retain our existing employees
and attract and integrate new employees;

. improving our business development capabilities;

. maintaining high rates of employee utilization;

. accurately estimating time and resources for engagements;

. developing and improving our operational, financial, accounting and
other internal systems and controls; and

. maintaining project quality.

Our management has limited experience managing a business of Tanning's size.
If we are unable to manage our growth and projects effectively, it could have a
material adverse effect on the quality of our services, our ability to retain
key personnel, and our business and results of operations.

If our revenues do not increase proportionately with our planned increases in
costs and capital expenditures, then our results of operations and liquidity
will suffer

In anticipation of business growth, we expect to incur costs and expend
capital. We can give no assurances that we will continue to grow, or that we
will grow at a pace that will support these costs and expenditures. To the
extent revenues do not increase at a rate commensurate with these additional
costs and expenditures, our results of operations and liquidity could be
materially and adversely affected. In particular, we expect that our plans for
increases in expenses and capital expenditures over the next year to support
our growth will negatively impact profitability.

The loss of our professionals, or the inability to recruit additional
professionals, would make it difficult to complete existing projects and bid
for new projects, which could cause our business to suffer

Our business is labor intensive, and our success depends on identifying,
hiring, training and retaining experienced, knowledgeable professionals. If a
significant number of our current employees or any of our project managers or
senior technical personnel leave, we may be unable to complete or retain
existing projects or bid for new projects of similar scope and revenue. In
addition, former employees may compete with us in the future.

Even if we retain our current employees, our management must continually
recruit talented professionals in order for our business to grow. There is
currently a shortage of qualified project managers and senior technical
personnel in the information technology services field, and this shortage is
likely to continue.

4
<PAGE>

Furthermore, there is significant competition for employees with the skills
required to perform the services we offer. We cannot give any assurances that
we will be able to attract a sufficient number of qualified employees in the
future, or that we will be successful in motivating and retaining the employees
we are able to attract. If we cannot attract, motivate and retain qualified
professionals, our business, financial condition and results of operations will
suffer.

We depend on our key personnel, and the loss of any key personnel may harm our
ability to obtain and retain client engagements, maintain a cohesive culture
and compete effectively

We believe that our success will depend on the continued employment of our
key management personnel. This dependence is particularly important to our
business because personal relationships are critical to obtaining and
maintaining client engagements and maintaining a cohesive culture. If one or
more members of our key management personnel were unable or unwilling to
continue in their present positions, such persons would be very difficult to
replace and our business could be seriously harmed. In addition, if any of
these key employees joins a competitor or forms a competing company, some of
our clients might choose to use the services of that competitor or new company
instead of our own. Furthermore, clients or other companies seeking to develop
in-house information technology services capabilities may hire away some of our
key employees. This would not only result in the loss of key employees but
could also result in the loss of a client relationship or a new business
opportunity. Any of the foregoing could seriously harm our business.

We depend heavily on our principal clients; a significant reduction in the work
we perform for any of them could harm our revenues and earnings

We derive a large portion of our services revenue from a limited number of
clients. Services revenue constitutes substantially all of our revenues. In
1997, our five largest clients accounted for approximately 81% of our services
revenue, with Ameritech accounting for approximately 41% of our services
revenue and Oxford Health Plans accounting for approximately 23% of our
services revenue. In 1998, our five largest clients accounted for approximately
70% of our services revenue, with Maersk Line accounting for approximately 31%
of our services revenue, U S WEST accounting for approximately 12% of our
services revenue and E*Trade and CSX Technology each accounting for
approximately 10% of our services revenue. In the first three months of 1999,
our five largest clients accounted for approximately 74% of our services
revenue, with Maersk Line accounting for approximately 31% of our services
revenue and U S WEST, E*Trade, and Ameritech each accounting for approximately
12% of our services revenue. The volume of work performed for our principal
clients may not be sustained from year to year, and there is a risk that these
principal clients may not retain us in the future. Any cancellation, deferral
or significant reduction in work performed for these principal clients or a
significant number of smaller clients could have a material adverse effect on
our financial condition and results of operations. See "Business--Clients" for
more information relating to our clients.

Our clients may terminate projects before completion; this could adversely
affect our revenues and earnings

In general, our clients may terminate project engagements upon limited
notice and without significant penalty. This makes our results of operations
difficult to predict. Our clients' termination of our project engagements would
result in lower revenues and underutilized employees and, as a result, would
negatively affect our earnings. For example, a client's termination of a
significant project in the fourth quarter of 1997 adversely affected revenues,
employee utilization and earnings in the first half of 1998. For a further
discussion of the impact of this project termination, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Our international operations and expansion involve risks relating to
difficulties in complying with foreign laws and regulations, staffing
difficulties, currency related risks, difficulties in collecting accounts
receivable, and seasonal reductions in business activity; these risks could
result in increased costs, unanticipated liabilities, operational difficulties
and decreases in revenues and earnings

We currently have significant operations in Europe and intend to expand our
business to other regions, as attractive opportunities arise. Revenues from our
existing international operations represented 35% of services

5
<PAGE>

revenue in 1998 and in the first three months of 1999 and 86% of our income
before income taxes in 1998 and 55% of our income before income taxes in the
first three months of 1999. We may incur significant costs in connection with
our international expansion.

We also encounter risks in doing business in foreign countries, including:

. increased costs due to the need to comply with visa or other work permit
requirements, which may impair our ability to move personnel between
countries and properly staff our projects;

. to the extent we bill for our services in the functional currency of our
foreign subsidiaries, any depreciation of such currencies against the
dollar would negatively impact our results of operations;

. expenses incurred to modify our accounting systems as we do more
business in the countries that are converting their currencies to the
euro;

. difficulties in staffing and managing foreign offices, such as our
office in Chertsey, England, as a result of, among other things,
distance and time zone differences;

. seasonal reductions in business activity, such as the August slowdown in
Europe, which may adversely impact our business and results of
operations;

. longer payment cycles and problems in collecting accounts receivable,
which may adversely impact our results of operations due to required
allowances for doubtful accounts and increased cost of collection
efforts; and

. lack of ability to determine the taxation to which we may be subject in
foreign countries, including the failure to evaluate complex payroll tax
regulations of foreign countries, which could cause us to underestimate
our tax liabilities.

Any of these factors could result in increased costs, unanticipated
liabilities, operational difficulties and decreases in revenues and earnings.

We may fail to accurately estimate the time and resources necessary for the
performance of our services, which could reduce the profitability of, or
result in a loss on, our projects and damage our customer relationships

To date, we have generally provided services to our clients on a time and
materials basis, although we sometimes work on a fixed-fee or capped fee
basis. In the future, we anticipate that an increasing percentage of our
client engagements will be subject to fixed-fee or other arrangements that are
not solely based on time and materials. Because we work with complex
technologies in compressed timeframes and because we have limited experience
in pricing engagements on these terms, it can be difficult to judge the time
and resources necessary to complete a project. Our failure to accurately
estimate the time and resources required for a project, or our failure to
complete our obligations in a manner consistent with the project plan upon
which our fixed-fee or other arrangements are based, could reduce the
profitability of, or result in a loss on, our projects if we are required to
devote additional resources to project engagements for which we will not
receive additional compensation, and could damage our customer relationships
and our reputation.

Quarter to quarter fluctuations in our revenues and earnings could affect the
market price of our common stock

Our revenues and earnings may vary from quarter to quarter as a result of a
number of factors, including:

. number, size and scope of client engagements commenced or completed
during a quarter;

. employee utilization rates;

. unanticipated project terminations, delays or deferrals;

. the accuracy of estimates of resources required to complete ongoing
projects; and

. the contractual terms and degree of completion of projects in which we
are engaged.

6
<PAGE>

Because a high percentage of our expenses, particularly compensation and
rent, are fixed in advance of any particular quarter, any of the factors listed
above could cause significant variations in our revenues and earnings in any
given quarter. Any decline in revenues or earnings or a greater than expected
loss for any quarter could materially adversely affect the market price of our
common stock, even if not reflective of any long-term problems with our
business.

Competition from bigger, more established competitors who have greater
financial and technical resources, and from new entrants, could cause us to
lose current or future business opportunities and harm our business, results of
operations and ability to grow

The business areas in which we compete are intensely competitive and subject
to rapid technological change. We expect competition to continue and intensify.
Our competitors fall into four major categories:

. large information technology consulting services providers, such as
Andersen Consulting, KPMG, PricewaterhouseCoopers, IBM, EDS and CSC;

. mid-tier information technology services providers, such as Cambridge
Technology Partners and Sapient;

. Internet professional service providers, such as Modem Media . Poppe
Tyson, US Interactive, Proxicom, Viant and Scient; and

. internal information technology departments of current and potential
clients.

Many of our competitors have longer operating histories and client
relationships, greater financial, technical, marketing and public relations
resources, larger client bases and greater brand or name recognition than we
have. Our competitors may be able to respond more quickly to technological
developments and changes in clients' needs.

Further, there are low barriers to entry into our business. We do not own
any technologies that preclude or inhibit competitors from entering our
industry. Existing or future competitors may independently develop and patent
or copyright technologies that are superior or substantially similar to our
technologies. The costs to develop and provide information technology
consulting services are relatively low. Therefore, we expect to continue to
face additional competition from new entrants into our industry. See
"Business--Competition" for a further discussion of competition within our
industry.

Year 2000 issues could seriously harm our business as a result of reduced
demand for our services, internal and external operations difficulties, and
potential disputes with, or liabilities to, clients

The Year 2000 problem is the potential for system and processing failures of
date-related data arising from the use of two digits by computer-controlled
systems, rather than four digits, to define the applicable year. Clients' and
potential clients' purchasing patterns may be affected by Year 2000 issues as
companies expend significant resources to correct or replace their current
systems for Year 2000 compliance. These clients and potential clients may have
fewer funds available to purchase our services, which could adversely affect
our business, financial condition and results of operations. We may experience
operations difficulties because of undetected errors or defects in the
technology we use in our internal systems. We also rely, directly and
indirectly, on the systems of business enterprises such as clients, suppliers,
utilities, creditors and financial institutions, both domestic and
international, which could be subject to operational difficulties arising out
of Year 2000 issues. In addition, we have made representations to clients
regarding Year 2000 compliance and may become involved in disputes regarding
Year 2000 problems involving solutions that we have developed or implemented.
Any failure on the part of our principal internal systems, other business'
systems or the systems that we create for our clients as a result of the Year
2000 problem could seriously harm our business, reputation, financial condition
and results of operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Year 2000."

7
<PAGE>

Expansion of our solutions and service offerings may not be successful and we
may lose opportunities to expand our business

In addition to growing our business within the disciplines on which we
currently focus, an element of our strategy is to expand our solutions in the
area of supply chain management and our service offerings in areas such as
business consulting, process innovation and creative design. Successful
expansion in these areas will require:

. attracting, integrating and retaining talented personnel;

. successfully marketing and delivering these services; and

. successfully establishing relationships with vendors and technology
providers.

Failure to develop additional solutions and service offerings on a timely
basis could cause us to lose opportunities for business with both existing and
potential clients. We cannot assure you that this expansion will be successful.

We may have difficulty responding to changing technology, industry standards
and client preferences, which could cause us to lose business

Our success will depend in part on our ability to develop information
technology solutions that keep pace with continuing changes in technology,
evolving industry standards and changing client preferences. We cannot give any
assurances that we will be successful in addressing these developments on a
timely basis or at all. Our failure to respond quickly and cost-effectively to
new developments could cause us to lose current and potential business
opportunities and have a material adverse effect on our business and results of
operations.

In particular, we have derived a significant portion of our revenues from
projects based primarily on:

. open system technologies, which are standards-based, non-proprietary
technologies;

. multi-tier software architecture, in which the key layers of an
application system are separated and optimized independently to improve
performance, scalability and reliability;

. web-based architectures; and

. electronic commerce, generally.

These areas are continuing to develop and are subject to rapid change. Any
factors negatively affecting the acceptance of information processing systems
using client/server and web-based architectures could have a material adverse
effect on our business, especially if we are unable to develop skills and
replacement technologies for these types of information processing systems.

Our business may suffer if growth in the use of the Internet declines

Because Internet technologies are central to many of our solutions, our
business depends upon continued growth in the use of the Internet by our
clients, prospective clients and their customers and suppliers. Capacity
constraints caused by growth in Internet usage may, unless resolved, impede
further growth in Internet use. If the number of users on the Internet does not
increase and commerce over the Internet does not become more accepted and
widespread, demand for our services may decrease and our business and results
of operations could suffer. Factors which may affect Internet usage or
electronic commerce adoption include:

. actual or perceived lack of security of information;

. lack of access and ease of use;

. congestion of Internet traffic or other usage delays;

. inconsistent quality of service;

8
<PAGE>

. increases in access costs to the Internet;

. excessive government regulation;

. uncertainty regarding intellectual property ownership;

. reluctance to adopt new business methods;

. costs associated with the obsolescence of existing infrastructure; and

. economic viability of the Internet commerce model.

Misappropriation of our intellectual property could harm our reputation, affect
our competitive position and cost us money

We believe our intellectual property, including our proprietary
methodologies, is important to our success and competitive position. If we are
unable to protect our intellectual property against unauthorized use by others,
our reputation among existing and potential clients could be damaged and our
competitive position adversely affected.

Our strategies to deter misappropriation could be inadequate in light of the
following risks:

. non-recognition of the proprietary nature of or inadequate protection of
our methodologies in the United States or foreign countries;

. undetected misappropriation of our proprietary methodologies;

. development of similar software or applications by our competitors; and

. unenforceability of the non-competition and confidentiality agreements
entered into by our key employees.

If any of these risks materialize, we could be required to spend significant
amounts to defend our rights and our managerial resources could be diverted. In
addition, our proprietary methodologies may decline in value or our rights to
them may not be enforceable. See "Business--Intellectual property rights" for
more information concerning our intellectual property.

Others could claim that we infringe on their intellectual property rights,
which may result in substantial costs, diversion of resources and management
attention and harm to our reputation

Although we believe that our services do not infringe on the intellectual
property rights of others, we cannot give any assurances that an infringement
claim will be successfully defended. A successful infringement claim against us
could materially and adversely affect us in the following ways:

. we may be liable for damages and litigation costs, including attorneys'
fees;

. we may be enjoined from further use of the intellectual property;

. we may have to license the intellectual property, incurring licensing
fees;

. we may have to develop a non-infringing alternative, which could be
costly and delay projects; and

. we may have to indemnify clients with respect to losses incurred as a
result of our infringement of the intellectual property.

Regardless of the outcome, an infringement claim could result in substantial
costs, diversion of resources and management attention, clients' termination of
project engagements and harm to our reputation.

Our business and our client relationships may suffer if we have disputes over
our right to resell or reuse intellectual property developed for specific
clients

9
<PAGE>

to some of the applications, processes and other intellectual property
developed in connection with client engagements. Issues relating to the rights
to intellectual property can be complicated. We cannot give any assurances that
disputes will not arise that affect our ability to resell or reuse such
applications, processes and other intellectual property, damage our
relationships with our clients, divert our management's attention or have a
material adverse effect on our business, financial condition and results of
operations.

Potential acquisitions may result in, among other things, increased expenses,
difficulties in integrating target companies and diversion of management's
attention

. expenses and difficulties in identifying potential targets and the costs
associated with acquisitions that are abandoned before completion;

. expenses, delays and difficulties of integrating the acquired company
into our existing organization and our company's culture;

. diversion of management's attention during the acquisition process;

. diversion of management's attention following the acquisition process
where management has options or other equity incentive rights in the
acquired company;

. expenses of amortizing the acquired company's intangible assets, which
could be significant in light of the high valuations of many companies
in the information technology industry;

. impact on our financial condition due to the timing of the acquisition;
and

. expenses of any undisclosed or potential legal liabilities of the
acquired company, including intellectual property, employment, and
warranty and product liability-related problems.

If realized, any of these risks could have a material adverse effect on our
business, financial condition and results of operations.

If we are unable to maintain our reputation and expand our name recognition, we
may have difficulty attracting new business and retaining current clients, and
our business may suffer

We believe that establishing and maintaining a good reputation and name
recognition are critical for attracting and expanding our client base. We also
believe that the importance of reputation and name recognition will increase
due to the growing number of information technology services providers. If our
reputation is damaged or if potential clients are not familiar with us or the
services we provide, we may become less competitive or lose our market
position. Promotion and enhancement of our name will depend largely on our
success in continuing to provide large, complex, integrated information
technology solutions. If clients do not perceive our solutions to be effective
or of high quality, our brand name and reputation will suffer. In addition, if
solutions we provide have defects, critical business functions of our clients
may fail, and we would likely suffer adverse publicity as well as economic
liability.

Lack of detailed written contracts could impair our ability to collect fees,
protect our intellectual property and protect ourselves from liability to
others

We try to protect ourselves by entering into detailed written contracts with
our clients covering the terms and contingencies of the project engagement. In
some cases, however, consistent with what we believe to be industry practice,
work is performed for clients on the basis of a limited statement of work or
verbal agreements before a detailed written contract can be finalized. To the
extent that we fail to have detailed written contracts in place, our ability to
collect fees, protect our intellectual property and protect ourselves from
liability to others may be impaired.

10
<PAGE>

Concentration of ownership of our common stock may limit your ability to
influence corporate matters

Immediately following this offering, our executive officers and directors,
or entities controlled by them, together with Stephen Brobst and entities
controlled by AEA Tanning Investors Inc. will own approximately 78% of the
outstanding shares of our common stock.

Holders of approximately 64% of the outstanding shares of our common stock
immediately following this offering are parties to an agreement under which
they have agreed to vote in favor of their nominees to our board of directors.
As a result of their voting power, they will have the ability to cause their
nominees to be elected. If our significant stockholders choose to act or vote
together on other matters, they will have the power to control the approval of
any other action requiring the approval of our stockholders, including any
amendments to our certificate of incorporation and mergers, acquisitions or
sales of all of our assets. In addition, without the consent of these
stockholders, we could be prevented from entering into transactions that could
be beneficial to us. Also, third parties could be discouraged from making a
tender offer or bid to acquire our company at a price per share that is above
the then-prevailing market price. See "Certain Relationships and Transactions
with Related Parties--Stock Purchase Agreement, Shareholder Agreement and
Registration Rights Agreement" and "Principal Stockholders" for more
information regarding the stock ownership of our officers, directors and
significant stockholders.

Government regulation and legal uncertainties relating to the Internet could
result in decreased demand for our services, increased costs, or otherwise harm
our business

Increased regulation of the Internet might slow the growth in use of the
Internet, which could decrease demand for our services, increase our cost of
doing business or otherwise harm our business. Congress, federal regulatory
agencies and the states have recently passed legislation or taken other actions
regulating certain aspects of the Internet, including:

. on-line content;

. interaction with children;

. copyright infringement;

. user privacy;

. taxation;

. access charges;

. liability for third-party activities;

. transmission of sexually explicit material;

. defamation;

. consumer protection; and

. jurisdiction.

Foreign governments have also taken actions to regulate aspects of the
Internet, including user privacy and on-line content. In addition, federal,
state and local governmental organizations as well as foreign governments are
considering other legislative and regulatory proposals that would regulate
these and other aspects of the Internet. We do not know how courts will
interpret laws governing the Internet or the extent to which they will apply
existing laws to the Internet. Therefore, we are not certain how existing or
future laws governing the Internet or applied to the Internet will affect our
business.

11
<PAGE>

Risks Related to this Offering

Our common stock has not traded publicly; the initial public offering price may
not be indicative of the market price of our common stock after this offering,
and the market price of our common stock, like the market prices of the stocks
of other technology companies, may fluctuate widely and rapidly

There is currently no public market for our common stock, and we cannot
assure you that an active trading market will develop or be sustained after
this offering. The initial public offering price will be determined through
negotiation between us and representatives of the underwriters and may not be
indicative of the market price for our common stock after this offering.

The market price of our common stock could fluctuate significantly as a
result of:

. our susceptibility to quarter to quarter variations in our operating
results, which may cause us to fail to meet analysts' or investors'
expectations;

. economic and stock market conditions specific to information technology
services providers;

. changes in financial estimates by securities analysts following our
stock;

. earnings and other announcements by, and changes in market evaluations
of, providers of information technology services;

. changes in business or regulatory conditions affecting information
technology services;

. announcements or implementation by us or our competitors of
technological innovations or new products or services; and

. trading volume of our common stock.

The securities of many companies have experienced extreme price and volume
fluctuations in recent years, often unrelated to the companies' operating
performance. Specifically, market prices for securities of Internet-related and
technology companies have frequently reached elevated levels, often following
their initial public offerings. These levels may not be sustainable and may not
bear any relationship to these companies' operating performances. If the market
price of our common stock reaches an elevated level following this offering, it
may materially and rapidly decline. In the past, following periods of
volatility in the market price of a company's securities, stockholders have
often instituted securities class action litigation against the company. If we
were involved in a class action suit, it could divert the attention of senior
management, and, if adversely determined, have material adverse effect on our
business and financial condition.

The sale or availability for sale of substantial amounts of our common stock
could adversely affect its market price

Sales of substantial amounts of our common stock in the public market after
the completion of this offering, or the perception that these sales could
occur, could adversely affect the market price of our common stock and could
materially impair our future ability to raise capital through offerings of our
common stock. There will be 19,863,166 shares of common stock outstanding
immediately after this offering, or 20,463,166 shares if the underwriters
exercise their over-allotment option in full. The 4,000,000 shares sold in this
offering will be freely tradeable without restriction or further registration
under the Securities Act, unless held by our "affiliates" as that term is
defined in Rule 144 under the Securities Act. The 15,863,166 shares of common
stock outstanding prior to this offering are "restricted securities" as defined
in Rule 144 and may not be sold in absence of registration other than in
accordance with Rule 144 or Rule 701 under the Securities Act or another
exemption from registration.

In connection with this offering, we, our executive officers and directors
and a number of our stockholders have agreed, except in limited circumstances,
not to sell any shares of common stock for 180 days after completion of this
offering without the underwriters' consent; however, the underwriters may
release these

12
<PAGE>

shares from these restrictions at any time. We cannot predict what effect, if
any, market sales of shares held by principal stockholders or any other
stockholder or the availability of these shares for future sale will have on
the market price of our common stock. See "Shares Eligible for Future Sale" for
a more detailed description of the restrictions on selling shares of our common
stock after this offering.

A number of our stockholders are parties to an agreement with us that
provides these stockholders with the right to require us to register the sale
of shares owned by them. These rights cover approximately 80% of our issued and
outstanding common stock and will also cover any shares obtained by these
stockholders from time to time. Registration of these shares of our common
stock would permit the sale of these shares without regard to the restrictions
of Rule 144. For a further discussion of these registration rights, see
"Certain Relationships and Transactions with Related Parties--Stock Purchase
Agreement, Shareholder Agreement and Registration Rights Agreement."

The net proceeds of this offering may be allocated in ways with which you and
other stockholders may not agree

Our management has significant flexibility in applying the proceeds we
receive in this offering. Because the proceeds are not required to be allocated
to any specific investment or transaction, you cannot determine at this time
the value or propriety of our management's application of the proceeds on our
behalf and you and other stockholders may not agree with our management's
decisions. See "Use of Proceeds" for a more detailed description of how
management intends to apply the proceeds of this offering.

Investors in this offering will experience immediate and substantial dilution

If you purchase common stock in this offering, you will pay more for your
shares than the amounts paid by existing stockholders for their shares. As a
result, you will experience immediate and substantial dilution of approximately
$9.66 per share, representing the difference between our net tangible book
value per share as of March 31, 1999, after giving effect to this offering and
the assumed public offering price of $13.00 per share. In addition, you may
experience further dilution to the extent that shares of our common stock are
issued upon the exercise of stock options or under our employee stock purchase
plan. Substantially all of the shares issuable upon the exercise of currently
outstanding stock options, and shares that may be sold in the initial offering
period under our employee stock purchase plan, will be issued at a purchase
price less than the public offering price per share in this offering. See
"Dilution" for a more complete description of how the value of your investment
in our common stock will be diluted upon the completion of this offering.

Anti-takeover provisions of Delaware's General Corporation Law and our
certificate of incorporation could delay or deter a change in control

Amendments we intend to make to our certificate of incorporation and our
bylaws, as well as various provisions of the Delaware General Corporation Law,
may make it more difficult to effect a change in control of our company. The
existence of these provisions may adversely affect the price of our common
stock, discourage third parties from making a bid for our company or reduce any
premiums paid to our stockholders for their common stock. For example, we
intend to amend our certificate of incorporation to authorize our board of
directors to issue up to 5 million shares of "blank check" preferred stock and
to attach special rights and preferences to this preferred stock. The issuance
of this preferred stock may make it more difficult for a third party to acquire
control of us. We also intend to amend our certificate of incorporation to
provide for the division of the board of directors into three classes as nearly
equal in size as possible with staggered three-year terms. This classification
of the board of directors could have the effect of making it more difficult for
a third party to acquire our company, or of discouraging a third party from
acquiring control of our company. See "Description of Capital Stock--Preferred
stock," and "Description of Capital Stock--Anti-takeover effects of our
certificate of incorporation and bylaws and provisions of Delaware law" for a
more complete description of our capital stock, our certificate of
incorporation and the effects of the Delaware General Corporation Law that
could hinder a third party's attempts to acquire control of us.

13
<PAGE>

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes "forward-looking statements" for purposes of the
Securities Act of 1933 and the Securities Exchange Act of 1934. All statements
other than statements of historical fact in this prospectus, including
statements regarding our competitive strengths, business strategy, future
financial position, budgets, projected costs and plans and objectives of
management are forward-looking statements. In addition, forward-looking
statements generally can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "should," "intend," "estimate,"
"anticipate," "believe," "continue" or similar terminology. We can give no
assurance that the expectations reflected in forward-looking statements will
prove to have been correct. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of factors
including those set forth under the "Risk Factors," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business"
sections, and elsewhere in this prospectus. All written and oral forward-
looking statements attributable to us are expressly qualified in their entirety
by the factors we disclose that could cause our actual results to differ
materially from our expectations. We undertake no obligation to update publicly
or revise any forward-looking statements.

USE OF PROCEEDS

We estimate that we will receive net proceeds of approximately $46.6
million, or approximately $53.9 million if the underwriters' over-allotment
option is exercised in full, from the sale of the shares of common stock
offered by us, at an assumed initial public offering price of $13.00 per share,
after deducting the estimated underwriting discounts and commissions and
offering expenses payable by us.

We expect to use the net proceeds of the offering for general corporate
purposes, including:

. working capital;

. additional personnel;

. increased facilities; and

. computers and network equipment.

An element of our strategy includes expanding our solutions and service
offerings and gaining access to new technologies through strategic acquisitions
and investments when attractive opportunities arise. At the present time, we
have no understanding, commitment or agreement with respect to any acquisition
or investment. Pending these uses, we intend to invest the net proceeds from
this offering in U.S. government securities and other investment-grade,
interest-bearing instruments.

The foregoing represents our present intentions with respect to the
allocation of the net proceeds of this offering based upon our present plans
and business conditions. The occurrence of unforeseen events or changed
business conditions could result in the application of the proceeds of this
offering in a manner other than as described in this prospectus. See "Risk
Factors--The net proceeds of this offering may be allocated in ways with which
you and other stockholders may not agree" for a discussion of this risk.

DIVIDEND POLICY

Our board of directors has never declared or paid any cash dividends on our
common stock and does not expect to do so in the foreseeable future. We
currently intend to retain any earnings to finance the expansion and
development of our business. Our board of directors will make any future
determination of the payment of dividends based on conditions then existing,
including our earnings, financial condition and capital requirements, as well
as such economic and other conditions as the board of directors may deem
relevant. In addition, the payment of dividends may be limited by financing
agreements that we may enter into in the future.

14
<PAGE>

CAPITALIZATION

The following table sets forth our capitalization (1) on an actual basis as
of March 31, 1999 and (2) as adjusted to give effect to an amendment of our
certificate of incorporation to increase the number of our authorized shares of
common stock to 70 million and preferred stock to 5 million, and to the sale of
4 million shares of common stock offered hereby.

This table should be read in conjunction with "Selected Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and the notes to our
consolidated financial statements, each of which is included in this
prospectus.

<TABLE>
<CAPTION>
As of March 31, 1999
------------------------
Actual As adjusted
---------- ------------
(in thousands)
<S> <C> <C>
Cash and cash equivalents............................ $ 7,183 $ 53,793
========== ==========
Long-term debt, net of current portion............... $ 429 $ 429
Stockholders' equity:
Preferred stock, $0.01 par value: no shares
authorized, no shares issued and outstanding,
actual (5,000,000 shares authorized, no shares
issued and outstanding, as adjusted).............. -- --
Common stock, $0.01 par value: 23,753,631 shares
authorized, 15,498,618 shares issued and
outstanding, actual (70,000,000 shares authorized,
19,498,618 shares issued and outstanding, as
adjusted)(1)(2)................................... 451 195
Additional paid-in capital(2)...................... 15,226 62,092
Retained earnings.................................. 2,979 2,979
Accumulated comprehensive income (loss)............ (60) (60)
---------- ----------
Total stockholders' equity....................... 18,596 65,206
---------- ----------
Total capitalization........................... $ 19,025 $ 65,635
========== ==========
</TABLE>
- --------
(1) Excludes, as of the completion of this offering, 4,121,779 shares reserved
for issuance pursuant to options we may issue in the future and 8,399,821
shares subject to outstanding options, in each case pursuant to our stock
option plans. In addition, these shares do not include 1,000,000 shares
available for awards under our employee stock purchase plan.

(2) Actual par value and actual additional paid-in capital amounts do not give
effect to the reverse stock split of all existing classes of our common
stock; as adjusted amounts do give effect to the reverse stock split.

15
<PAGE>

DILUTION

Our net tangible book value as of March 31, 1999 was approximately $18.6
million, or $1.20 per share. Net tangible book value per share is equal to our
total tangible assets minus our total liabilities divided by the number of
shares of our common stock outstanding. Assuming we had sold the 4 million
shares of common stock offered hereby at an initial public offering price of
$13.00, and after deducting underwriting discounts and commissions and
estimated offering expenses payable by us, our net tangible book value at March
31, 1999 would have been approximately $65.2 million, or $3.34 per share. This
represents an immediate increase in net tangible book value of $2.14 per share
to existing stockholders and an immediate dilution of $9.66 per share to new
investors. Dilution is determined by subtracting net tangible book value per
share after this offering from the amount of cash paid by a new investor for a
share of common stock. The following table illustrates the substantial and
immediate per share dilution to new investors:

<TABLE>
<CAPTION>
Per share
------------
<S> <C> <C>
Assumed initial public offering price.......................... $13.00
Net tangible book value as of March 31, 1999................. $1.20
Increase attributable to new investors....................... 2.14
-----
Net tangible book value after this offering.................... 3.34
------
Dilution to new investors...................................... $ 9.66
======
</TABLE>

The following table summarizes as of March 31, 1999 the number of shares of
common stock purchased from us, the total consideration paid to us and the
average price per share paid by existing stockholders and by new investors at
an assumed offering price of $13.00 per share and without giving effect to the
underwriting discount and assumed offering expenses:

<TABLE>
<CAPTION>
Shares purchased Total consideration
------------------ ------------------- Average price
Number Percent Amount Percent per share
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 15,498,618 79% $15,677,374 23% $ 1.01
New investors.............. 4,000,000 21 52,000,000 77 13.00
---------- --- ----------- ---
Total.................... 19,498,618 100% $67,677,374 100%
========== === =========== ===
</TABLE>

If the underwriters exercise their over-allotment option in full, the pro
forma net tangible book value per share of common stock as of March 31, 1999
would have been $3.61 share, which would result in dilution to the new
investors of $9.39 share, and the number of shares held by the new investors
will increase to 4,600,000, or 23% of the total number of shares to be
outstanding after this offering.

The foregoing tables assume no exercise of any outstanding stock options to
purchase common stock. As of March 31, 1999, there were outstanding options to
purchase an aggregate of 5,402,410 shares of common stock at a weighted average
exercise price of $3.60 per share under our stock option plans. If all of these
options had been exercised on March 31, 1999 before the issuance of common
stock from this offering, our net tangible book value would have been
approximately $38.0 million or $1.82 per share. On issuance of common stock
from this offering, our pro forma net tangible book value on March 31, 1999
would have been approximately $84.7 million, or $3.40 per share, the increase
in net tangible book value attributable to new investors would have been $1.58
per share and the dilution in net tangible book value to new investors would
have been $9.60 per share.

16
<PAGE>

SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with,
and are qualified by reference to, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our consolidated financial
statements and the notes to our consolidated financial statements, each of
which is included in this prospectus. The selected financial data presented are
for the four years from our formation in February 1995 through year end 1998
and for the three months ended March 31, 1998 and March 31, 1999. The statement
of operations data for the three-year period ended December 31, 1998 and the
balance sheet information as of December 31, 1997 and 1998 are derived from our
financial statements, which have been audited by Ernst & Young LLP, independent
auditors, and are included elsewhere in this prospectus. The balance sheet data
as of December 31, 1996 are derived from our audited financial statements,
which are not included in this prospectus. The statement of operations data for
the year ended December 31, 1995 and the balance sheet data as of December 31,
1995 are derived from our unaudited financial statements, which are not
included in this prospectus. The statement of operations data for each of the
three-month periods ended March 31, 1998 and 1999, and the balance sheet
information at March 31, 1999 are derived from our unaudited financial
statements, which are included in this prospectus. In the opinion of
management, the unaudited interim financial information includes all
adjustments, consisting of only normal recurring adjustments, considered
necessary for a fair presentation of such information. The results of
operations for interim periods are not necessarily indicative of the results
that may be expected for the entire year.

<TABLE>
<CAPTION>
Three months ended
Year ended December 31, March 31,
-------------------------------------- ----------------------
1995 1996 1997 1998 1998 1999
------ ------- ---------- ---------- ---------- ----------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Services revenue........ $4,815 $12,763 $25,235 $30,313 $4,613 $11,305
Product sales........... -- 46 872 2,976 570 --
------ ------- ---------- ---------- ---------- ----------
Net revenues.......... 4,815 12,809 26,107 33,289 5,183 11,305
Project personnel
costs.................. 2,017 6,569 14,722 14,941 2,888 5,492
------ ------- ---------- ---------- ---------- ----------
Gross profit.......... 2,798 6,240 11,385 18,348 2,295 5,813
Selling, marketing and
administrative......... 574 2,055 7,856 12,178 2,321 4,679
Product development
costs.................. -- 431 1,608 2,786 820 --
Sign-on bonus related to
stock purchase
agreement.............. -- -- 2,117 -- -- --
Management fees--related
parties................ 1,270 902 73 -- -- --
------ ------- ---------- ---------- ---------- ----------
Income (loss) from
operations............. 954 2,852 (269) 3,384 (846) 1,134
Interest income
(expense) and other,
net.................... -- (29) 130 285 96 163
------ ------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes........... 954 2,823 (139) 3,669 (750) 1,297
Income tax provision
(benefit).............. -- -- (212) 1,366 (279) 478
------ ------- ---------- ---------- ---------- ----------
Net income (loss)....... $ 954 $ 2,823 $ 73 $ 2,303 $ (471) $ 819
====== ======= ========== ========== ========== ==========
Basic and diluted
earnings (loss) per
share.................. $ 0.01 $ 0.15 $ (0.03) $ 0.05
========== ========== ========== ==========
Basic weighted average
shares outstanding..... 13,718,710 14,968,974 14,647,552 15,345,327
========== ========== ========== ==========
Diluted weighted average
shares outstanding..... 13,718,710 15,232,236 14,647,552 16,323,342
========== ========== ========== ==========
Gross profit from
services............... $2,798 $ 6,194 $10,513 $15,372 $1,725 $ 5,813
Income (loss) from
operations from
services............... $ 954 $ 3,238 $ 467 $ 3,194 $ (596) $ 1,134
</TABLE>

<TABLE>
<CAPTION>
December 31, March 31,
------------------------------ ---------------
1995 1996 1997 1998 1998 1999
------ ------ ------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents...... $ 47 $1,612 $ 7,769 $10,446 $ 6,361 $ 7,183
Working capital................ 840 (82) 10,204 14,005 10,002 15,587
Total assets................... 2,118 3,233 16,846 23,923 16,464 25,117
Long-term debt, net of current
portion....................... 203 1,000 -- 460 544 429
Total stockholders' equity..... 1,100 83 12,737 16,772 12,265 18,596
</TABLE>

17
<PAGE>

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

The following discussion and analysis should be read in conjunction with our
consolidated financial statements and the notes to our consolidated financial
statements, each of which is included in this prospectus. This prospectus
contains forward-looking statements relating to future events and our future
financial performance. Actual results could be significantly different from
those discussed in this prospectus. Factors that could cause or contribute to
such differences include those summarized in the section entitled "Risk
Factors," as well as those discussed in other sections of this prospectus.

Overview

Our revenue is comprised primarily of fees generated for professional
services. To date, we have generally provided services to our clients on a time
and materials basis, although we sometimes work on a fixed-fee basis. Under
time and materials contracts, we recognize revenue as services are provided.
Under fixed-fee contracts, we recognize revenue on a percentage of completion
basis. In the future, we anticipate that an increasing percentage of our client
engagements will be subject to fixed-fee or other arrangements that are not
solely based on time and materials. We are generally reimbursed for reasonable
expenses under our contracts.

Our revenue from foreign operations represents revenue for professional
services performed for clients outside the United States. Revenue from foreign
operations has made an increasing contribution to our total services revenue
and we anticipate continued growth in revenue from foreign operations. Foreign
operations represented approximately 35% of services revenues in 1998 and the
first three months of 1999 and 86% of income before income taxes in 1998 and
55% of income before income taxes in the first three months of 1999. The higher
relative profitability from foreign operations principally arises because of
better employee utilization due to longer term projects of greater dollar
value. Additionally, our foreign operations incurred lower overhead costs as
compared to our domestic operations due to a lesser number of clients.

Sales by Tanning Technology Europe Limited, a United Kingdom subsidiary, are
currently made in U.S. dollars or its functional currency of pounds sterling.
Historically, we have not experienced material fluctuations in our results of
operations due to foreign currency exchange rate changes.

Revenue from a limited number of clients has comprised a very substantial
portion of our revenues and is expected to represent a very substantial portion
of our revenues in the foreseeable future. In 1997, our five largest clients
accounted for approximately 81% of our services revenue. In 1998, our five
largest clients accounted for approximately 70% of our services revenue. In the
first three months of 1999, our five largest clients accounted for
approximately 74% of our services revenue. Any cancellation, deferral or
significant reduction in work performed for these principal clients or a
significant number of smaller clients could have a material adverse effect on
our business, financial condition and results of operations. Historically, we
have been able to collect the applicable accounts receivable for work performed
up to the termination date from clients that have terminated projects. See
"Business--Clients."

In 1998, we had revenue from both services and, to a lesser extent, product
sales. We completed the sale of the rights to one of our software products in
the third quarter of 1998. We have shifted our business focus to concentrate
solely on generating revenues from services.

Project personnel costs represent our most significant expense and consist
primarily of salaries, bonuses and employee benefits for company personnel
dedicated to client assignments, and fees paid to subcontractors for work
performed on our projects. Subcontractors generally cost us more than our own
project personnel; consequently, we usually generate lower gross profit margins
by using subcontractors. Non-billable time incurred by our project personnel
resulting from start-up time for new hires and training time incurred to
upgrade the skills of existing staff may cause gross profit margins to
decrease. We plan to increase the number of our project personnel in order to
support our planned revenue growth.

18
<PAGE>

Selling, marketing and administrative expenses consist primarily of
salaries, bonuses and employee benefits for non-project personnel, occupancy
costs, staff recruiting costs, travel expenses, depreciation expenses and
promotional costs. Our sales and marketing costs are expected to increase as a
percentage of revenue in the future as we enhance our selling effort. We also
expect to expand geographically by opening new offices in 1999 and 2000. This
will require us to purchase office equipment and computer and networking
equipment, both of which will increase our depreciation expenses.

Our predecessor is Tanning Technology Group, LLC, which was formed on
February 8, 1995 as a result of the combination of four entities affiliated
with our co-founders, Larry G. Tanning, Bipin Agarwal, Toni S. Hippeli and
Stephen Brobst. Pursuant to a stock purchase agreement entered into with AEA
Tanning Investors Inc., the managing member of TTC Investors I LLC, TTC
Investors IA LLC, TTC Investors II LLC and TTC Investors IIA LLC (together with
AEA Tanning Investors Inc., the "TTC Investors Group"), our predecessor was
converted into a Delaware corporation and the TTC Investors Group purchased,
between January 1997 and June 1998, a total of 5,696,770 shares of our common
stock for an aggregate purchase price of $14.6 million.

Results of operations

The following table presents the relative composition of revenue and
selected statements of operations data as a percentage of revenue, as well as
certain other revenue and profitability statistics.

<TABLE>
<CAPTION>
Three months
ended
Year ended December 31, March 31,
---------------------------- ----------------
1996 1997 1998 1998 1999
------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Services revenue............. 100% 97 % 91% 89 % 100%
Product sales................ 0 3 9 11 0
------- ------- ------- ------ ------
Net revenues................ 100 100 100 100 100
Project personnel costs...... 51 56 45 56 49
------- ------- ------- ------ ------
Gross profit margin......... 49 44 55 44 51
Selling, marketing and
administrative.............. 16 30 37 45 41
Product development costs.... 3 6 8 16 0
Sign-on bonus related to
stock purchase agreement.... 0 8 0 0 0
Management fees--related
parties..................... 7 0 0 0 0
------- ------- ------- ------ ------
Income (loss) from
operations.................. 22 (1) 10 (16) 10
Interest income (expense) and
other, net.................. 0 0 1 2 1
------- ------- ------- ------ ------
Income (loss) before income
taxes....................... 22 (1) 11 (14) 11
Income tax provision
(benefit)................... 0 (1) 4 (5) 4
------- ------- ------- ------ ------
Net income (loss)............ 22% 0 % 7% (9)% 7%
======= ======= ======= ====== ======
Growth in net revenues....... 104 % 28% 118%
Growth in services revenue... 98 20 145
Gross profit margin from
services.................... 49% 42 51 37 % 51
Income (loss) from operations
from services............... 25 2 11 (13) 10
</TABLE>

19
<PAGE>

Comparison of three months ended March 31, 1998 and 1999

Net revenues

Our net revenues increased $6.1 million, or 118%, to $11.3 million for the
first quarter of 1999 from $5.2 million for the first quarter of 1998. Included
in the first quarter of 1998 net revenue is $0.6 million of revenue from
product sales; there was no revenue from product sales in the first quarter of
1999. The increase in services revenue of 145% reflects increases in both the
size and number of client projects as well as higher average billing rates.
During the first quarter of 1999, as compared to the first quarter of 1998, the
number of clients we provided services for increased by 27%, and our average
revenue per customer increased by 93%. The increase in services revenue from
our foreign operations also significantly contributed to this increase in
revenue. The revenue from foreign operations increased $2.9 million, or 264%,
to $4.0 million for the first quarter of 1999 from $1.1 million for the first
quarter of 1998. Revenues from our five largest clients as a percentage of
total net revenues were 74% for the first quarter of 1999 and 77% for the same
period in 1998.

Project personnel costs

Our project personnel costs increased $2.6 million, or 90%, to $5.5 million
for the first quarter of 1999 from $2.9 million for the first quarter of 1998.
The increase in project personnel costs for the first three months of 1999 was
primarily due to an increase in project personnel from 79 at March 31, 1998 to
127 at March 31, 1999, as well as higher salaries. Our gross profit margin from
services has increased from 37% for the first quarter of 1998 to 51% for the
same period in 1999, principally as a result of higher average billing rates
and an increased utilization of project personnel.

Selling, marketing and administrative

Our selling, marketing and administrative expenses increased $2.4 million,
or 102%, to $4.7 million for the first quarter of 1999 from $2.3 million for
the first quarter of 1998. The increase in selling, marketing and
administrative expenses was primarily the result of our decision to expand our
marketing effort to support revenue growth. Our sales, marketing and
administrative staff grew from 31 employees at March 31, 1998 to 50 employees
at March 31, 1999, and staffing expenses increased to $1.5 million. Selling,
marketing and administrative expenses decreased as a percentage of net revenues
from 45% in the first quarter of 1998 to 41% for the same period in 1999 due to
increases in revenues without a proportional increase in these expenses.

Product development costs

We incurred costs associated with software product sales during the first
quarter of 1998 of $0.8 million, or 16% of net revenues. No such costs were
incurred in 1999.

Provision for (benefit from) income taxes

Income tax expense represents combined federal, state, and foreign taxes.
Our income tax provision increased to $0.5 million on pre-tax profits of $1.3
million at the end of the first quarter of 1999 compared to a tax benefit of
$0.3 million on pre-tax losses of $0.8 million at the end of the first quarter
of 1998. The tax benefit was recorded in the first quarter of 1998 on the pre-
tax losses in anticipation of applying the tax benefit to future tax provisions
as we generate future profits. Our effective tax rate was 37% for the first
quarter of 1999 and for the same period in 1998.

Comparison of years ended December 31, 1997 and 1998

Net revenues

Our net revenues increased $7.2 million, or 28%, to $33.3 million in 1998
from $26.1 million in 1997. The increase in services revenue of 20% in 1998
reflects increases in both the size and number of client

20
<PAGE>

projects. During 1998, as compared to 1997, the number of clients we provided
services for increased by 3%, and our average revenue per customer increased by
16%. Utilization and revenues were adversely affected for the first half of
1998, principally as a result of a significant project termination in the
fourth quarter of 1997 following a change in the client's strategic plans due
in part to regulatory changes. As a result of this termination, we generated
$5.7 million less revenues from this client in the first half of 1998 than we
did in the second half of 1997, without a proportionate decrease in project
personnel costs. Utilization and revenues improved in the second half of 1998
as new projects commenced, including additional work for the same client. Our
net revenues from foreign operations increased $7.5 million, or 253%, from $3.0
million in 1997 to $10.5 million in 1998. In 1997, we earned revenues of $0.9
million from the sale of software products compared to $3.0 million earned in
1998. The software sales in 1998 included the sale of the rights to certain
software products. Revenues derived from our five largest clients as a
percentage of total net revenues were 65% in 1998 and 78% in 1997.

Project personnel costs

Project personnel costs increased $0.2 million, or 1%, to $14.9 million in
1998 from $14.7 million in 1997. The increase in project personnel costs in
1998 was due to an increase in project personnel from 81 at the end of 1997 to
107 at the end of 1998, which was nearly offset by a decrease in fees paid to
subcontractors. The gross profit margin from services increased from 42% in
1997 to 51% in 1998 as a result of improved utilization and a shift in staffing
mix to using fewer subcontractors and more internal project personnel.

Selling, marketing and administrative

Selling, marketing and administrative expenses increased $4.3 million, or
55%, to $12.2 million in 1998 from $7.9 million in 1997. Selling, marketing and
administrative expenses increased as a percentage of revenues from 30% in 1997
to 37% in 1998. These increases were primarily a result of our decision to
expand our selling and marketing group and the administrative staff to support
revenue growth. Also contributing to the increase in staffing expenses of $2.2
million were increases in occupancy costs of $0.6 million and increases in
depreciation expense of $0.8 million associated with fixed asset additions
during 1998. Our sales, marketing and administrative staff grew from 28
employees at the end of 1997 to 37 employees at the end of 1998.

Product development costs

We incurred costs associated with software product sales of $1.6 million in
1997 and $2.8 million in 1998, representing 6% of 1997 net revenues and 8% of
1998 net revenues. We have no plans to continue the development of software for
resale purposes.

Sign-on bonus related to stock purchase agreement

In conjunction with the stock purchase agreement entered into with the TTC
Investors Group, we paid sign-on bonuses aggregating $2.1 million in order to
retain the members and certain employees of our predecessor. This expense was a
single occurrence in 1997 and was not incurred in any other periods reported.

Management fees--related parties

We incurred management fees of $73,000 to members of our predecessor in
January 1997. No management fees were incurred after the formation of our
company in January 1997. These fees represent payment for services performed on
behalf of our predecessor. Subsequent to the formation of our company, the
payments made to members of our predecessor are reflected in salary expenses in
selling, marketing and administrative expenses, or as project personnel cost
for billable time incurred by these employees.

Provision for (benefit from) income taxes

Our provision for income taxes increased to approximately $1.4 million on
pre-tax profits of $3.7 million for 1998 compared to a tax benefit of
approximately $0.2 million on pre-tax losses of $0.1 million in 1997. Our

21
<PAGE>

effective tax rate in 1998 was 37%. The 1997 tax benefit is the result of 11
months of net (loss) from operations before taxes of $0.4 million and the
implications of a change in that status after the merger of Tanning Technology
Group, LLC into Tanning Technology Corporation on January 31, 1997. No income
taxes were paid by Tanning Technology Group since members included their
distributive shares of revenue and deductions of the limited liability company
in their personal capacities, pursuant to Subchapter K of the Internal Revenue
Code.

Comparison of years ended December 31, 1996 and 1997

Net revenues

Our net revenues in 1997 increased $13.3 million, or 104%, to $26.1 million
from $12.8 million in 1996. The increase in services revenue of 98% in 1997
reflects increases in both the size and number of client projects. During 1997,
as compared to 1996, the number of clients we provided services for increased
by 3%, and our average revenue per customer increased by 92%. Our revenues from
foreign operations increased $2.5 million, or 549%, from $0.5 million in 1996
to $3.0 million in 1997. In 1997, we earned revenues of $0.9 million from the
sale of software products compared to $46,000 earned in 1996. Revenues derived
from our five largest clients as a percentage of total net revenues were 78% in
1997 and 80% in 1996.

Project personnel costs

Project personnel costs in 1997 increased $8.2 million, or 124%, to $14.7
million from $6.5 million in 1996. The increase in project personnel costs in
1997 was primarily due to an increase in project personnel from 40 at the end
of 1996 to 81 at the end of 1997. In addition, more fees were paid to
subcontractors during 1997. The gross profit margin from services revenue
decreased from 49% in 1996 to 42% in 1997 as a result of the shift in staffing
mix to using more subcontractors.

Selling, marketing and administrative

Selling, marketing and administrative expenses in 1997 increased $5.8
million, or 282%, to $7.9 million from $2.1 million in 1996. Selling, marketing
and administrative expenses increased as a percentage of net revenues from 16%
in 1996 to 30% in 1997. These increases were primarily a result of our decision
to expand our selling and marketing group and the administrative staff to
support revenue growth. Our sales, marketing and administrative staff grew from
9 employees at the end of 1996 to 28 employees at the end of 1997. In addition
to the increase in staff expense of $3.3 million, our facilities expense
increased $0.5 million and depreciation expense increased $0.2 million.

Product development costs

We incurred costs associated with software product sales of $0.4 million in
1996 and $1.6 million in 1997, representing 3% of 1996 net revenues and 6% of
1997 net revenues.

Sign-on bonus related to stock purchase agreement

Management fees--related parties

We incurred management fees of approximately $902,000 in 1996 and $73,000 in
1997 to members of our predecessor, representing 7% of 1996 net revenues. These
fees represent payment for services performed on behalf of our predecessor. No
management fees were incurred after the formation of our company in January
1997, but payments to former members of our predecessor are reflected in salary
expenses in selling, marketing and administrative expenses, or as project
personnel cost for billable time incurred by these employees.

22
<PAGE>

Provision for (benefit from) income taxes

Our income taxes benefit realized in 1997 was $0.2 million on pre-tax losses
of $0.1 million in 1997. No income taxes were paid by our predecessor, Tanning
Technology Group, LLC, in 1996.

Quarterly results

The following table presents our unaudited quarterly results of operations
for 1998 and the first quarter of 1999. We derived these data from unaudited
consolidated financial statements, and, in the opinion of management, they
include all necessary adjustments, which consist only of normal recurring
adjustments necessary to present fairly the financial results for the periods.
Results of operations for any fiscal quarter do not necessarily indicate what
results may be for any future period.

<TABLE>
<CAPTION>
Three months ended
-------------------------------------------------------
March 31, June 30, September 30, December 31, March 31,
1998 1998 1998 1998 1999
--------- -------- ------------- ------------ ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Services revenue........ $4,613 $5,574 $9,185 $10,941 $11,305
Product sales........... 570 58 2,309 39 --
------ ------ ------ ------- -------
Net revenues.......... 5,183 5,632 11,494 10,980 11,305
Project personnel
costs.................. 2,888 2,873 4,004 5,176 5,492
------ ------ ------ ------- -------
Gross profit.......... 2,295 2,759 7,490 5,804 5,813
Selling, marketing and
administrative......... 2,321 2,649 3,212 3,996 4,679
Product development
costs.................. 820 703 1,181 82 --
------ ------ ------ ------- -------
Income (loss) from
operations............. (846) (593) 3,097 1,726 1,134
Interest income and
other, net............. 96 31 105 53 163
------ ------ ------ ------- -------
Income (loss) before
income taxes........... (750) (562) 3,202 1,779 1,297
Income tax provision
(benefit).............. (279) (209) 1,192 662 478
------ ------ ------ ------- -------
Net income (loss)....... $ (471) $ (353) $2,010 $ 1,117 $ 819
====== ====== ====== ======= =======
Gross profit from
services............... $1,725 $2,701 $5,181 $ 5,765 $ 5,813
Income (loss) from
operations from
services............... (596) 52 1,969 1,769 1,134
</TABLE>

Stock-based compensation

We have elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations in
accounting for our employee stock options. Under Accounting Principles Board
Opinion No. 25, because the exercise price of our employee stock options equals
the market price of the underlying stock on the date of grant, no compensation
expense is recorded. We have adopted the disclosure-only provisions of the
Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 123.

Liquidity and capital resources

Prior to January 1997, we financed our operations and investments in
property and equipment primarily through cash generated from operations,
unsecured and secured borrowings and capital lease financing. During 1997, we
issued common stock resulting in net proceeds to us of approximately $12.7
million. The proceeds were used to fund operations, purchase property and
equipment as well as to pay down $700,000 of outstanding debt during 1997.

During 1998, we financed our operations and investments in property and
equipment primarily through cash generated from operations, the sale of common
stock and, to a lesser extent, borrowings. Outstanding debt of $1.1 million was
paid off in 1998 with the net proceeds from the sale of common stock of $1.9
million. At

23
<PAGE>

March 31, 1999, we had a bank note outstanding of approximately $550,000, the
proceeds of which were used to acquire office furniture and fixtures. The note
bears interest at 8.71% and principal and interest payments are payable over a
60-month term.

Cash and cash equivalents increased to $7.2 million at March 31, 1999 from
$1.6 million at December 31, 1996. The increase was primarily due to cash
provided as a result of the completion of our stock transactions and cash
provided by operations. We invest available cash in short-term liquid
investments.

We anticipate that we will expend capital to develop the infrastructure
needed to support our future growth. As a result, we expect to use cash from
operations and the net proceeds from this offering to meet capital expenditures
and working capital necessary to support our growth. We currently have no
material commitments for capital expenditures. Based on our current business
plan, we believe that the cash provided from operations, cash on hand and our
net proceeds from this offering will be sufficient to meet our cash
requirements, including for working capital and capital expenditures, at least
through the end of 2000.

Qualitative and quantitative disclosures about market risk

We provide our services to customers primarily in the United States, the
United Kingdom and Denmark. As a result, our financial results could be
affected by factors such as changes in foreign currency exchange rates or weak
economic conditions in those foreign markets. Sales by Tanning Technology
Europe Limited, a United Kingdom subsidiary, are currently made in U.S. dollars
or its functional currency of pounds sterling. To the extent Tanning Technology
Europe has monetary assets and liabilities denominated in any currency other
than pounds sterling, any significant variation in exchange rate between the
pound sterling and these other currencies could have a material effect on our
operating results. To the extent that we bill clients in a currency other than
their local currency, exchange rate fluctuations that strengthen the currency
in which we bill relative to their local currency could make our services less
competitive to such clients. Historically, we have not experienced material
fluctuations in our results of operations due to foreign currency exchange rate
changes.

Year 2000

Until recently, computer programs were written to store only two digits of
date-related information in order to more efficiently handle and store data.
These programs were unable to distinguish properly between the year 1900 and
the year 2000, and as such, risk failure with the changing of the century. This
circumstance is frequently referred to as the "Year 2000 issue."

We rely on information technology systems, applications and devices in
several aspects of our business, including service delivery, time reporting,
and financial accounting. In this regard, we have conducted an assessment of
our information technology systems and believe that significant changes will
not be necessary in order to achieve a Year 2000 date conversion with no effect
on customers or disruption of business operations. We have obtained written
and/or verbal confirmation, either directly or through published materials,
from our major third-party software providers that those applications currently
being used are Year 2000 compliant or that revised versions that are compliant
will become available. Internally generated applications have been largely
tested and deemed compliant as well. Our computer hardware platforms,
principally servers, have been confirmed as Year 2000 compliant by the server
manufacturers, or have been appropriately upgraded in order to achieve
compliance. Based on currently available information, we believe that the total
expense related to these efforts will not have a material impact on our results
of operations.

In addition to our internal systems, we also rely, directly and indirectly,
on the systems of business enterprises such as clients, suppliers, utilities,
creditors and financial institutions, both domestic and international. We plan
to obtain assurances from those material third-party vendors with which we
transact business that there will be no interruption of service as a result of
the Year 2000 issue. To the extent that

24
<PAGE>

assurances are not given, we intend to devise contingency plans to mitigate the
negative effects on our company in the event the Year 2000 issue results in the
unavailability of services. In addition, the failure of the accounting systems
of our clients due to the Year 2000 issue could result in a delay in the
payment of invoices we have issued for services rendered. A delay in payment of
invoices could have a material negative effect on us. Although we have not yet
done so, we intend to inquire of, and obtain assurances from, our major
customers regarding the compliance of their accounting systems. We also plan to
assess risks related to the potential failure of our non-information technology
systems, which include, among other things, our climate control systems and
elevators. We expect to complete our comprehensive risk assessment and related
contingency plan in the third quarter of 1999.

Although our principal service offerings generally do not include Year 2000
remediation services, former, present and future clients could assert claims
against us related to the Year 2000 issue. There can be no assurance that all
information technology systems we have designed, developed, recommended or
deployed will be Year 2000 compliant. Any Year 2000-related failure of critical
client systems in which we were involved could result in claims being asserted
against us, regardless whether the failure is related to the services provided
by us. If asserted, liability that may result, and the time and resources used
in resolving these claims, could have a material adverse effect on us.

25
<PAGE>

BUSINESS

Overview

Our key solutions are:

. electronic commerce solutions;

. enterprise customer relationship management solutions; and

. core operations solutions.

Industry background

The explosive growth in demand for information technology services providers
in the 1990s has been driven by corporate recognition that information
technology can be used to achieve competitive advantage. GartnerGroup's
Dataquest, an information technology market research firm, estimates that the
worldwide information technology services market will grow from approximately
$361 billion in 1998 to approximately $722 billion by 2003.

Within the overall information technology services market, some segments are
experiencing particularly rapid growth. For example, according to International
Data Corporation, an information technology market research firm, the market
for Internet services will grow from $7.8 billion in 1998 to $78.6 billion in
2003, representing a compound annual growth rate of 59%. In addition, AMR
Research, Inc., an information technology market research firm, predicts that
the market for customer relationship management services will grow from $404
million in 1997 to $4.0 billion in 2002, representing a compound annual growth
rate of 58%.

With advances in the Internet and information technology, companies are
transforming the way they run their businesses and manage information. New
business models and innovative information technology solutions are emerging
that create business value by:

. compiling and coordinating customer information and contacts across the
enterprise and all customer channels;

. profiling and scoring customers and performing predictive selling in
real-time, which involves understanding each customer's needs and
preferences so that the most appropriate products and services can be
offered during a particular online interaction;

. integrating the business operations and content of business partners;

. coordinating the complex business transactions of the supply chain;

. providing dynamic personalized content to web page users; and

. enabling complex transaction processing systems that support core
business operations.

As part of this evolution of business models, today's electronic commerce,
customer relationship management and core operations solutions must be
architected and deployed to function reliably in an environment of rapidly
growing website traffic, numbers of customers, order volumes, customer service
inquiries and other business transactions. Advanced information technology
solutions must also be built with

26
<PAGE>

the flexibility required to rapidly add features and functions, accommodate new
content and business partners and support modified business processes as the
business environment becomes more competitive. These advanced business
solutions must address the following technology challenges:

. dramatic increases in the volume of data and transactions processed;

. the emergence of rich data types, including text, images, video and
sound;

. the evolution of batch to online processing to support real-time
customer interactions;

. improved performance and response times to support real-time customer
access from a variety of technology environments;

. improved reliability, accuracy and security of transactions;

. integration of legacy systems and databases across the enterprise; and

. high degrees of integration among applications, networks and platforms
within a company as well as among diverse business enterprises.

Many information technology services providers focus on the less technically
demanding areas of creative web design and simple transaction systems.
Moreover, they do not have the skills to design a solution with the required
scalability, flexibility and performance characteristics, or to deploy it in an
environment that may combine many generations of computing platforms and
technologies, all while facing the demands of real-time business operations.
Their solutions are often cobbled together from software packages, custom
software components and legacy systems, and fail to provide for the enormous
growth in transaction and data volumes that are experienced after going to
market. Forrester Research, an information technology research firm, cites
recent high-visibility web site outages at a number of electronic commerce
leaders in support of its conclusion that many of today's electronic commerce
solutions are unreliable, unscalable and deliver service levels that are not
adequate for online commerce.

We believe that we are differentiated by our focus on, and expertise in, the
architecture, complex integration, high volume online transaction processing
capabilities and very large databases required to successfully deploy advanced
electronic commerce, customer relationship management and core operations
solutions. As a result, we believe that we are particularly well positioned to
benefit from the growing demand for these skills.

The Tanning Difference

We believe that the following capabilities and characteristics differentiate
us from other information technology services providers.

Large, complex solutions

We specialize in architecting, developing and deploying large and complex
business-critical solutions that require high degrees of integration across
diverse portfolios of applications and technologies. Clients that seek to
transform their businesses with advanced electronic commerce, customer
relationship management and core operations solutions rely on the systems we
build to run their businesses without failure. Our solutions typically involve
ultra-high transaction rates (up to millions per hour) in online transaction
processing environments and very large databases (terabytes of information). We
believe that we are able to address our clients' greatest information
technology challenges because we are able to extend the accepted performance
and feasibility limits of leading-edge technologies. For many clients, the
systems we build are at the core of their efforts to capitalize on information
technology and the Internet.

Business-value driven

We focus on delivering solutions to our clients' business challenges, not
simply on technology. These solutions provide value to our clients by enhancing
their ability to communicate with their customers and

27
<PAGE>

business partners, allowing our clients to offer new or enhanced products and
services, and providing them opportunities for revenue enhancement and cost
reductions. We align technology deployment with business objectives and
processes and plan deployments in phases to deliver business benefits rapidly.
Through extensive business analysis and work with clients to define and
articulate their business goals and constraints, we are able to discern a
project's critical business requirements before proceeding to technology
considerations.

Architecture-based solutions

Our architecture-based approach enables us to provide large and complex
integrated solutions that accommodate our clients' goals in a rapidly changing
business environment. Our overall architecture identifies the component and
technology frameworks required for the successful construction and deployment
of our solutions. Through rigorous systems analysis, we design solutions that
address requirements for:

. reliability, to ensure accurate processing and robust backup and
recovery;

. scalability, to accommodate the rapid growth associated with electronic
commerce, customer relationship management and core operations solutions
under changing business conditions;

. full time availability (24 hours a day and 7 days a week);

. performance, to deliver the required end-user response times and
transaction rates;

. flexibility, to accommodate new functions and interfaces;

. complex interfaces to, and coexistence with, legacy systems, software
packages and departmental solutions in a heterogeneous technology
environment;

. transaction and data integration, both within a company's business and
among the company and its trading partners; and

. the ability to dynamically change features, services or product
offerings based on real-time Internet customer interaction.

Deployment-focused

We deliver high-value business solutions that are deployment-focused, rather
than development-focused. Our deployment focus allows us to architect and
design solutions for successful roll-out to, and use by, the hundreds,
thousands and potentially millions of users of that system. We focus on
deployment to ensure that our solution is constructed for scalable performance,
reliable and consistent service levels, and high levels of flexibility and
longevity. We identify performance and service level requirements in the early
stages of the solution process, architect and design the system so that it will
meet these requirements and benchmark and develop proofs of concept to ensure
that our solution will work before construction of the application begins.
Benchmarking is a process of evaluating the performance of alternative system
configurations and components in order to determine which approach would best
meet the client's goals. We develop proofs of concept in order to demonstrate
the feasibility of our innovative architectures and combinations of components
as well as emerging technologies.

The project lifecycles of many information technology service providers and
companies do not adequately address the constraints of interfaces or the
challenges of operating the system in the intended environment. Consequently,
clients often engage us to "rescue" systems that were unsuccessfully developed
or deployed. We believe our focus on deployment allows us to deliver successful
projects and business value for our clients and constitutes a significant
competitive advantage. As a result, since 1993, we have established a strong
track record of repeat business from large corporations throughout the world,
including Ameritech, Maersk Line, R.R. Donnelley Financial and BSkyB.

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<PAGE>

Experienced and talented staff

Today's complex, data-intensive business solutions require broad, as well as
deep, technology skills to successfully tackle the technological challenges and
integration complexities typically encountered. We staff our projects based on
our philosophy that there is no substitute for experience, in contrast to the
common approach of relying on primarily inexperienced staff and building a
heavily "leveraged" staffing model that depends on methodology rather than
experience to guide the judgments and activities of project teams. Our
information technology professionals have an average of more than ten years of
industry experience. Our breadth of skills comes from the experience our staff
has with four generations of technology--mainframe and parallel processing
environments, minicomputers, client/server architectures and web technology
architectures. Our depth of skills began with our early work in benchmarking
large applications and databases that required multi-tier software
architecture, in which the key layers of an application system are separated
and optimized independently to improve performance, scalability and
reliability.

Our employees have expertise in a broad range of competencies, including
project management, business analysis, object modeling, architecture, software
development, database modeling and administration, quality assurance,
integration and testing, architecture and performance tuning, and system and
network management. We believe our staff is recognized in the industry for its
rich capabilities in building applications that deal with high transaction
volumes and very large database requirements.

Flexible pricing

We offer clients a choice of the most appropriate pricing model for a
particular engagement. Many of our engagements are based on time and materials
pricing, particularly in situations where the parameters of a project or
particular phase of a project cannot yet be specified. In other situations, a
client may prefer a fixed price/fixed time contract in order to cap its costs
while retaining guaranteed delivery of a solution. We offer flexible pricing
options to accommodate our clients' goals as well as to provide the most
appropriate pricing model for the project.

Strategy

Our strategy for growth centers around scaling our capabilities in
architecting, developing and deploying large, complex, business-critical
enterprise solutions. We will continue to identify areas of growing demand for
these types of solutions and differentiate ourselves based upon our experience,
capabilities and references. These areas may take the form of geographic
regions, industries or solution areas.

To achieve our objectives, we plan to:

. Maintain our leading edge capabilities

We believe that our clients choose to work with us because of our
reputation for successfully handling information technology's most
challenging assignments. A key source for new and advanced capabilities
is our experience in developing solutions that are innovative, and of
industry-leading scale and complexity. For example, we deployed a
solution for Blockbuster that assembled customer data and account
activity information for over 40 million customers and 6,000 stores.
The solution involved terabytes of information and difficult
integration issues, including hardware design and configuration,
database architecture, fault tolerance and operations support. We plan
to continue to actively manage our portfolio of client engagements to
ensure that we work on complex assignments that will allow us to refine
and advance our capabilities on an ongoing basis. We also believe that
our reputation for working on the industry's most difficult assignments
will assist us in continuing to recruit professionals who further add
to our skills and knowledge base. In addition, we intend to continue
and expand our practice of coordinating with our business and
technology partners to share expertise and innovations.

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<PAGE>

. Expand our solutions and service offerings

We intend to increase our focus on rapidly growing solution areas in
which we believe our expertise is relevant. For example, building off
of our successful engagements with Federal Express and Blockbuster, we
intend to develop an enhanced presence in the area of supply chain
management. We also intend to expand our service offerings in areas
such as business consulting, process innovation and creative design. In
addition, our strategy includes expanding our solutions and service
offerings and gaining access to new technologies through strategic
acquisitions and investments when attractive opportunities arise. In
some cases we may also invest in ventures that may not be directly
related to our business. Our investments may be structured to provide
our management with equity interests in the form of stock options,
carried interests, co-investment rights or other equity arrangements.
Although we believe that the areas in which we currently specialize are
among the fastest growing and critical in the information technology
industry, we believe that our ability to provide expanded integrated
service offerings will allow us to establish relationships with a
greater range of clients who have a need for our expertise and to
engage them earlier in the determination of their business needs.

. Expand our vertical industry focus

We intend to organize our sales and marketing efforts in the
industries in which there is significant potential demand for our
services and expertise. We intend to organize industry practice groups
in sales and marketing because we believe that businesses seek out
service providers who are familiar with the types of issues faced by
their industry and who are conversant with the language of the
industry. Currently, we are formally organized in telecommunications,
an industry in which we have a significant amount of experience. We
plan to organize industry practice groups in other high growth
industries such as media and entertainment, financial services,
healthcare, and logistics and transportation as our business in these
industries grows.

. Expand our relationships with existing clients and develop new clients

We intend to base our growth on long-term client relationships,
rather than on a project-by-project approach. Our client relationship
philosophy is that clients will choose to do business with us based on
the quality of our work, the value of our advice and solutions, and the
level of trust and respect that develops over time. Expanding our
existing client relationships will allow us to jointly plan future
projects and, in particular, develop large, multiyear engagements. This
will improve our ability to forecast projects, thereby helping us to
manage growth. We will continue to assign each of our clients a
relationship manager who will be responsible for ensuring that the
client is satisfied with the services we are providing. Relationship
managers work with their clients in an advisory capacity to clarify and
prioritize their business needs and secure additional high value
projects, based upon their in-depth knowledge of each client's business
and information technology needs.

We also intend to develop new clients through multiple channels
including our sales force, industry analysts, marketing events and
public relations, as well as through relationships with hardware and
software suppliers. Our dedicated sales and marketing team will allow
us to focus on solutions common across industries and will seek out
opportunities for entry-level service offerings such as assessments and
"rescue missions." We will also expand our relationships with hardware
and software suppliers such as IBM, Sun Microsystems, Hewlett Packard
and others to identify project opportunities consistent with our
capabilities and to provide us with client leads.

. Continue to attract and retain experienced, knowledgeable professionals

We have consistently attracted and retained leading information
technology talent interested in solving our industry's toughest
challenges. We plan to continue to recruit experienced staff from
consulting companies, corporate information technology organizations
and the benchmarking and product development centers of the industry's
leading hardware and software product companies. We expect that our
talented staff will also continue to provide us with employee
referrals, which have accounted for over 50% of our new recruits in the
last two years.

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<PAGE>

. Serve clients globally

We plan to expand our services and solution capabilities to client
locations around the world. Our expansion will be revenue-based--we
intend to open additional offices primarily where we have existing
clients in the geographic region. We believe this will enable us to
develop closer relationships with and provide more convenience to our
clients who are increasingly seeking service providers with global
presence and experience deploying solutions that address issues of
multiple currencies and languages, infrastructure diversity and around-
the-clock operations. We also expect that global expansion will allow
us to capitalize on high growth geographic regions and diversify our
revenue base.

. Expand our infrastructure for growth

We plan to continue our commitment to growth by making investments
in recruitment and retention, staff development, sales and marketing,
management information systems and other areas of infrastructure. We
have created a "Knowledge Net" on our internal computer network in
order to accumulate and make readily available to our employees (1)
expertise we have derived from our engagements, (2) best practices and
(3) a repository of information that can be used in sales, marketing
and service delivery. We intend to expand our formal employee
orientation program and to assist our technical staff in managing their
career paths. We also intend to improve our scalable global information
systems, in order to more effectively manage client lead generation and
tracking, sales forecasting, project profitability and employee
utilization. We believe that these investments will provide a
foundation for the continued expansion of our client and revenue base.

The Tanning Approach

The Tanning Approach flows directly from the Tanning Difference--we are
business-value driven, architecture-based and deployment-focused. We emphasize
rigorous business alignment during our assessment and architecture phases, and
address critical performance and operational requirements during our
architecture and development phases to ensure successful system deployment and
operation.

The Tanning Approach is composed of distinct phases, and each phase can be
adapted to the unique needs and requirements of an individual project. Each
phase also builds upon the deliverables of the previous phase. Our approach is
designed to deliver business value rapidly, by delivering the results in
several successive installments, rather than committing to extended projects
where business deliverables are produced only at the end of a protracted period
of time. This approach is also flexible, because not all phases are required by
every project. The following diagram illustrates the Tanning Approach.

[GRAPHIC]

System
Development
Enterprise /
Assessment System Deployment Operational
Architecture Package Support
Component
Integration

Our clients typically engage us in one of two alternative project scenarios.
The first is a strategic initiative in which we are engaged to help architect,
develop and deploy a new high-value business solution. Strategic

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<PAGE>

initiatives begin with an assessment and continue sequentially through the
phases of the Tanning Approach. The second is a "rescue mission," where the
client engages us to turn around a troubled or failed project. Typically, in
this type of situation, the system has been or is being constructed but is not
meeting the client's expectations. Rescue missions begin with an assessment,
but proceed through a modified version of the Tanning Approach that builds on
the useful work completed by the prior project effort, and proceeds to
emphasize those elements of the Tanning Approach that will successfully deploy
an improved solution. In a rescue mission, we will leverage the existing
information about the system, perform design reviews, and provide deployment
and operational support services to get the system into production.

Assessment

Every project begins with an assessment. Each assessment results in a clear
definition of the client's business problem, a set of recommendations and an
outline of the next steps as well as a statement of the project's contemplated
business benefits. The assessment and the presentation of its results to our
client are key entry level service offerings that enable us to demonstrate our
capabilities and serve as a platform for establishing a more extensive project
engagement and a continuing client relationship.

Assessments typically address one or more of the following:

. business case and business requirements;

. enterprise architecture;

. systems architecture;

. application design;

. development processes;

. integration testing processes;

. application migration considerations;

. deployment considerations; and

. operational readiness considerations.

Enterprise/system architecture

A well-defined architecture provides a critical foundation for the
successful definition, development, deployment and operation of information
technology systems. Enterprise architectures address the entire portfolio of
applications and technologies across the enterprise, while system architectures
address the more focused scope of a specific application or system. The
architecture is particularly critical when an iterative, phased approach for
development and deployment is used because it provides a rational framework for
each of the components and subsystems, as they are developed and deployed. A
well-defined architecture and technical framework greatly reduces the effort
and risk associated with the integration of components and subsystems because
each of the subsystems is integrated using proven interfaces and methods. We
deliver the architecture phase of the Tanning Approach to our clients either as
part of a specific application or solution project, or alternatively, as a
stand-alone engagement that addresses the entire enterprise architecture or
specific components of it.

An architecture is also more than just an inventory of vendors and
standards. It specifies all of the subsystems and components required to deploy
an effective information technology system. Further, this architecture defines
the dependencies and interfaces between the components and the functional,
operational and performance requirements of each subsystem and component.

The architecture phase of the Tanning Approach also focuses on identifying
and mitigating the major risks involved in the project. It can include building
proofs of concept for high-risk system components and new technologies.
Benchmarking may be performed to identify and resolve major system bottlenecks
for

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<PAGE>

performance. Prototypes may also be developed to visualize key user scenarios,
functions or processes to make sure that there is consensus in their definition
and that the project is resolving the key business issues and delivering the
expected business value. Prototypes are also used to validate and test critical
components of the architecture. This phase also involves detailing aspects of
the architecture that need further definition before beginning component
development.

Phased development and product integration

This stage of the Tanning Approach is characterized by phased design,
development and testing of various individual components (including user and
system interfaces) of the final business solution. If software packages or
technology components will be integrated into the solution, then this phase
also includes their integration. The phased system components are typically
organized into releases that deliver meaningful business value in rapid time
frames. We use standard methodologies and tools to conduct and document the
design and development of system releases. Each system release goes through
integration testing, as part of our quality assurance, to ensure that the
components function properly as a complete system.

Deployment services

The deployment phase of the Tanning Approach is designed to ensure the
successful deployment of the completed software into the client's computing
environment where it will support real-world business activities. Deployment
addresses issues related to systems management, data center operations and
performance testing to ensure that the system will provide the performance
demanded by business users and defined in the system service level agreements.
Our deployment phase typically includes a period where any systems or
components being replaced are run in parallel with the new system to ensure
proper operation before converting to the exclusive use of the new system.

Operational support services

The operational support phase of the Tanning Approach gives clients the
opportunity to engage us for ongoing maintenance and support of applications
and systems. We can also provide both remote and local system administration to
ensure proper operation, maintenance and enhancement of systems.

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<PAGE>

Client solutions

The following chart illustrates some of the solutions that we have created
for our clients.

Federal Express--a global overnight delivery service provider

<TABLE>
<S> <C> <C> <C>
Challenge: Enable Federal Express to more Solution: We worked with Federal Express to
efficiently manage the flow of develop a comprehensive intranet
millions of packages globally system for reporting measures of
package volume and flow
efficiency for its global package
delivery operations in a timely
manner. We created an online
transaction processing system
capable of handling 1,000
transactions per second on a one-
plus terabyte database. As a
result, Federal Express is able
to obtain information about the
performance of its package
delivery system in significantly
shorter timeframes (hours vs.
days).
</TABLE>

Blockbuster--the world's leading retail chain of video rental stores

<TABLE>
<S> <C> <C> <C>
Challenge: Help Blockbuster understand its Solution: We redesigned Blockbuster's
customer demographics and existing enterprise architecture
purchase patterns in order to and created a new system that
stock movies according to allows Blockbuster to assemble
regional tastes and to customer data and account
more accurately target customer activity information for over 40
promotions million customers and more than
6,000 stores. The system enables
Blockbuster to measure demand for
specific products at the single
store level and therefore to
predict minimum stock
requirements. As a result, the
system supports the ability of
Blockbuster to advertise "In
Stock Or It's Free."
</TABLE>

E*Trade--a leading online brokerage firm

<TABLE>
<S> <C> <C> <C>
Challenge: Assist E*Trade in building a Solution: We designed international
global brand by creating a extensions to E*Trade's domestic
standardized platform for its trading system, enabling support
international expansion for multiple languages and the
ability to handle diverse
character sets and content types.
We deployed this system in Sweden
as the first stage of E*Trade's
international expansion. The new
system can accommodate rapid
business growth because the
system architecture was designed
to handle significantly greater
numbers of transactions than
currently experienced by E*Trade.
The "look and feel" of the user
interface of the new system and
the set of features and functions
offered to the user are
standardized across different
countries to facilitate global
brand recognition.
</TABLE>

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<PAGE>

Maersk Line--a leading worldwide ocean container transportation corporation

<TABLE>
<S> <C> <C> <C>
Challenge: Help Maersk Line improve customer Solution: We were engaged by Maersk Line to
service across over 400 offices develop an application
in architecture for their customer
nearly every country around the service applications as well as
world to establish an architecture for
future applications within Maersk
Line. We were subsequently
engaged to use that architecture
to design, develop and deploy new
customer service applications in
five phases over two and one-half
years. The solution facilitates
adoption of common customer
service procedures in Maersk Line
offices worldwide while enabling
regional and country specific
variations where necessary. The
solution was deployed to function
with their then-existing global
infrastructure. The first version
of this system was developed and
deployed within six months in
Asia, Africa, Europe and North
and South America. The second
phase of the system is under
development.
</TABLE>

Clients

The following is a representative list of our clients for 1998 and the
current year.

<TABLE>
<S> <C>
Ameritech Maersk Line
Ameritrade MCI WorldCom
Blockbuster MelDisco Footstar
BSkyB Oxford Health Plans
CableTel The Polk Company
CSX Technology Qwest
E*Trade R.R. Donnelley Financial
Energis TeleDanmark
Federal Express U S WEST
The Hartford
</TABLE>

In 1997, our five largest clients accounted for approximately 81% of our
services revenue, with Ameritech accounting for approximately 41% of our
services revenue and Oxford Health Plans accounting for approximately 23% of
our services revenue. In 1998, our five largest clients accounted for
approximately 70% of our services revenue, with Maersk Line accounting for
approximately 31% of our services revenue, U S WEST accounting for
approximately 12% of our services revenue and E*Trade and CSX Technology each
accounting for approximately 10% of our services revenue. In the first three
months of 1999, our five largest clients accounted for approximately 74% of our
services revenue, with Maersk Line accounting for approximately 31% of our
services revenue and U S WEST, E*Trade, and Ameritech each accounting for
approximately 12% of our services revenue. We believe that we will continue to
derive a significant portion of our revenue from a limited number of clients.
Any cancellation, deferral or significant reduction in work performed for these
principal clients or a significant number of smaller clients could have a
material adverse effect on our business, financial condition and results of
operations.

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<PAGE>

Marketing and sales

We market and sell our services through multiple channels including our
sales force, long-term client relationships, relationships with industry
analysts, marketing events and public relations. We also cultivate
relationships with hardware and software suppliers such as IBM, Sun
Microsystems, Hewlett Packard and others to identify project opportunities
consistent with our capabilities and to provide us with client leads. For
example, some of these suppliers maintain sales forces in the hundreds and
thousands with a significant presence at large companies around the world.
These suppliers also introduce us to clients and assist in our efforts to
secure business opportunities. In return, we provide them with solution
capabilities, which are of high importance to their clients.

While our marketing channels and relationships with hardware and software
suppliers are used to generate business with new accounts, we also have an
organization of relationship managers who are responsible for managing
relationships with existing clients. Relationship managers seek to ensure
client satisfaction, the successful delivery of projects and are able to
identify additional opportunities for our services at a client site.

Competition

The information technology services business is intensely competitive and
subject to rapid technological change. We expect the competition to continue
and intensify. Our competitors fall into four major categories:

. large information technology consulting services providers, such as
Andersen Consulting, KPMG, PricewaterhouseCoopers, IBM, EDS and CSC;

. mid-tier information technology services providers, such as Cambridge
Technology Partners and Sapient;

. Internet professional service providers, such as Modem Media . Poppe
Tyson, US Interactive, Proxicom, Viant and Scient; and

. internal information technology departments of current and potential
clients.

In addition, there are low barriers to entry into our business. We do not
own any technologies that preclude or inhibit competitors from entering our
industry. Existing or future competitors may independently develop and patent
or copyright technologies that are superior or substantially similar to our
technologies. The costs to develop and to provide information technology
services are relatively low. Therefore, we expect to continue to face
additional competition from new entrants into our industry.

We believe that the principal competitive factors in our business are:

. client value and service;

. the reputation and experience of professionals delivering solutions;

. the success and reliability of the delivered solution;

. technical knowledge and creative skills; and

. the ability to attract and retain professionals.

We believe that we presently compete favorably with respect to each of these
factors. The market for our services is evolving, however, and we cannot be
certain that we will compete successfully in the future.

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<PAGE>

Employees

As of June 30, 1999, we had 228 employees. We believe our relationship with
our employees is satisfactory. None of our employees is represented by a union.
Generally, our employees are retained on an at-will basis.

Intellectual property rights

Our success is dependent, in part, upon our proprietary processes,
components, and other intellectual property rights. We do not have any patents
or patent applications pending. We rely on a combination of trade secret,
nondisclosure and other contractual agreements, and copyright and trademark
laws, to protect our proprietary rights. Existing trade secret and copyright
laws afford us only limited protection. We enter into confidentiality
agreements with our employees, generally require that our consultants and
clients enter into similar agreements, and limit access to and distribution of
our proprietary information. In addition, we have entered into non-competition
agreements with certain of our key employees. There can be no assurance that
the steps we have taken in this regard will be adequate to deter
misappropriation of our proprietary information or that we will be able to
detect unauthorized use and take appropriate steps to enforce our intellectual
property rights.

A portion of our business involves the development of software applications
for specific client engagements. Ownership of client-specific software is
generally retained by the client, although we retain some rights to the
applications, processes and intellectual property developed in connection with
client engagements.

Facilities

Our principal headquarters is located in Denver, Colorado and comprises
23,598 square feet. The lease for our headquarters expires in April 2000 and we
have the option to extend the term to April 2005. We are opening an
approximately 50,000 square-foot new headquarters in Denver, Colorado in the
third quarter of 1999. We also have offices in Phoenix, Arizona; Stamford,
Connecticut; Tampa, Florida; Atlanta, Georgia; Boston, Massachusetts; Portland,
Oregon; Chertsey, England; and Hyderabad, India. We do not own any real estate.
We do not consider any specific leased location to be material to our
operations, and we believe that equally suitable alternative locations are
available in all areas where we currently do business.

Legal proceedings

We are not a party to any pending material legal proceedings.

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<PAGE>

MANAGEMENT

Directors and executive officers

The following table contains information regarding our executive officers
and directors.

<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Larry G. Tanning........ 52 Chairman of the Board, President and Chief Executive Officer
Bipin Agarwal........... 38 Director and Executive Vice President of Strategy, Planning and
New Ventures
Henry F. Skelsey........ 41 Director, Executive Vice President and Chief Financial Officer
John N. Piccone......... 39 Executive Vice President and Chief Operating Officer
P. Tracy Currie......... 37 Senior Vice President of International Operations
Louis A. D'Alessandro... 44 Vice President of Technical Services
Mark W. Tanning......... 46 Vice President of Human Resources and Administration
Philip A. Purver........ 40 Vice President of European Operations
Frederick H. Fogel...... 39 Vice President of Business Affairs and General Counsel*
Katherine L. Scherping.. 39 Treasurer and Director of Finance
Mark S. Whitfield....... 40 Corporate Controller
Toni S. Hippeli......... 51 Director
Christopher P. Mahan.... 32 Director
Joseph P. Roebuck....... 63 Director
Michael E. Shanahan..... 46 Director designee
</TABLE>
- --------
* Will take office upon completion of this offering.

Larry G. Tanning, a co-founder of Tanning, has been our Chairman of the
Board, President and Chief Executive Officer since January 1997 and served as
the President of our predecessor entities from July 1993. Mr. Tanning has a
B.S. degree in marketing from the University of Minnesota and a M.S. equivalent
degree in business management with the American Management Association in New
York, New York. Larry Tanning and Mark Tanning are brothers.

Bipin Agarwal, a co-founder of Tanning, has been our Executive Vice
President of Strategy, Planning and New Ventures since July 1999 and served as
our Senior Vice President of North American Consulting Operations since July
1998. He has been a director since our incorporation in January 1997. From
August 1997 until June 1998 he was our Senior Vice President of Business
Development and Architecture Practice. Mr. Agarwal was responsible for our
consulting services and those of our predecessors from July 1994 until August
1997. Mr. Agarwal has a M.S. degree in computer science from Roorkee
University, India.

Henry F. Skelsey has been our Executive Vice President and Chief Financial
Officer since September 1998. He has been a director since our incorporation in
January 1997. From March 1988 until August 1998, Mr. Skelsey was a Managing
Director of AEA Investors Inc., the parent of AEA Tanning Investors Inc., which
is a beneficial owner of our common stock. Since August 1998, Mr. Skelsey has
acted as a consultant to AEA Investors Inc. Mr. Skelsey is also a director of
Dal-Tile International Inc. and Rand McNally & Company. Mr. Skelsey has a
M.B.A. from the Darden School at the University of Virginia and a B.S. degree
in economics and finance from George Mason University.

John N. Piccone joined Tanning as our Vice President of Strategy and
Marketing in April 1999 and is now serving as our Executive Vice President and
Chief Operating Officer. From November 1993 until January 1999, Mr. Piccone
served as a Senior Vice President at Cambridge Technology Partners, an
information technology consulting services company. He was a member of
Cambridge Technology Partners's executive committee from October 1997 until
January 1999. Mr. Piccone has a B.S. degree in chemical engineering from the
Massachusetts Institute of Technology.

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<PAGE>

P. Tracy Currie has been our Senior Vice President of International
Operations since July 1999 and served as our Vice President of International
since October 1998. Mr. Currie was our Vice President--Service Delivery from
May 1996 until October 1998. Mr. Currie was the Director of UNIX Computing at
McKesson Corporation, a healthcare company, from March 1995 until April 1996
and he was McKesson's Manager of Client Network Computing from August 1993
until March 1995. Mr. Currie has a B.S. degree in computer science engineering
from Montana State University.

Louis A. D'Alessandro has been our Vice President of Technical Services
since October 1997. Mr. D'Alessandro served as Vice President of Technology
Implementation at Fidelity Investments, a mutual fund company, from September
1996 until October 1997. He was the Eastern Region Consulting Manager at
Informix Software, a relational database manufacturing service company, from
February 1996 until September 1996. He was the National Director of Systems
Engineering at Pyramid Technology Corporation, a computer hardware
manufacturer, from October 1988 until January 1996. Mr. D'Alessandro has a B.S.
degree and a M.S. degree in computer science from the City University of New
York.

Mark W. Tanning has been our Vice President of Human Resources and
Administration since January 1997. He was the Director of Human Resources at HB
Fuller Company, a multinational specialty chemicals company, from July 1988
until December 1996 and the Director of International Human Resources at HB
Fuller from June 1986 until July 1988. Mr. Tanning has B.A. and M.A. degrees in
economics and business administration from the University of Minnesota. Mr.
Tanning also has a professional certification degree from the Wharton School
and has done post-graduate studies in industrial relations. Mark Tanning and
Larry Tanning are brothers.

Philip A. Purver has been our Vice President of European Operations since
March 1999. Mr. Purver served as Commercial Vice President--Europe at Cambridge
Technology Partners from December 1998 until March 1999 and Director of Sales--
Europe from December 1997 until December 1998. He was Cambridge Technology
Partners' Western European Director of Sales from October 1995 until December
1997. Mr. Purver was the Sales Director for Easel UK Limited, a software
development company, from August 1994 until October 1995. From 1993 until
August 1994, he was in charge of international business development at Legent
P.L.C., a software development company. Mr. Purver has a BSc. in mathematics
and geography from Exeter University, England.

Frederick H. Fogel will be joining us as Vice President of Business Affairs
and General Counsel upon completion of this offering. Mr. Fogel has been a
partner at the law firm of Fried, Frank, Harris, Shriver & Jacobson since 1992,
and was an associate at the firm from 1986 to 1992. Mr. Fogel will continue as
a partner at this law firm following this offering. Mr. Fogel has a J.D. and an
A.B. degree in philosophy from Harvard University.

Katherine L. Scherping has been our Treasurer and Director of Finance since
April 1999. Prior to that, she served as Director of Internal Reporting and
Technical Accounting at AT&T Broadband & Internet Services (formerly Tele-
Communications, Inc.), a television cable services provider, from April 1998
until April 1999. Ms. Scherping was the Corporate Controller at ADT Security
Services, Inc. (formerly Alert Centre Inc.), a security alarm monitoring
company, from January 1996 until September 1997. She was ADT's Treasurer from
July 1993 until January 1996. Ms. Scherping has a B.S. degree in accounting
from Northern Illinois University.

Mark S. Whitfield has been our Corporate Controller since May 1997. Mr.
Whitfield served as Director, Corporate Controller at St. Ives Laboratories
Inc., a manufacturer and distributor of personal care products, from June 1988
until November 1996. Mr. Whitfield has a B.A. degree in economics and public
relations from Syracuse University and a M.B.A. from California State
University.

Toni S. Hippeli, a co-founder of Tanning, has been with us since November
1994. She has been a Director since our incorporation in January 1997 and had
been a managing partner of our predecessor since

39
<PAGE>

January 1995. Ms. Hippeli has been the owner of Hippeli Enterprises, a business
and financial consulting firm and a beneficial owner of our common stock, since
December 1991. From October 1982 until selling the company to BMC Software in
July 1991, Ms. Hippeli was the co-founder and President of Integrity Solutions,
a mainframe computer software company. Ms. Hippeli has a B.A. degree in
psychology from the University of Colorado.

Christopher P. Mahan has been a Director since our incorporation in January
1997. Mr. Mahan has been a Principal at AEA Investors Inc. since December 1997
and has been associated with AEA Investors Inc. since August 1991. AEA
Investors Inc. is the parent of AEA Tanning Investors Inc., which is a
beneficial owner of our common stock. From August 1989 to August 1991, Mr.
Mahan was a consultant with Bain & Company, a management consulting company.
Mr. Mahan is also a Director of Rand McNally & Company. Mr. Mahan has a B.A.
degree in economics and history from Amherst College.

Joseph P. Roebuck has been a Director since April 1999. Mr. Roebuck has been
Vice President--Strategic Sales of Sun Microsystems Inc., a computer hardware
company, since November 1998. He was Vice President of Worldwide Sales at Sun
Microsystems from June 1990 until November 1998. Mr. Roebuck joined Sun
Microsystems in 1983 as the Vice President of Sales. Mr. Roebuck has a B.A. in
business administration from Cornell University.

Michael E. Shanahan will be joining our board of directors upon the
completion of this offering, and currently serves as a consultant to us.
Mr. Shanahan has been the Vice President of Football Operations for the Denver
Broncos, a National Football League franchise, since April 1999. He has been
the coach and general manager of the Broncos since January 1995. Mr. Shanahan
has a B.A. degree and a M.A. degree from Eastern Illinois University.

Stephen Brobst, a co-founder of Tanning, is a Tanning Fellow. Mr. Brobst
works with our clients on the development of technology strategies and systems
architectures. Mr. Brobst has taught graduate courses at Boston University and
the Massachusetts Institute of Technology in database design and parallel
computer architecture. He performed his Masters and Ph.D research at the
Massachusetts Institute of Technology in the area of load-balancing and
resource allocation for parallel computing architectures. He also holds a
M.B.A. with joint course and thesis work at the Harvard Business School and the
M.I.T. Sloan School of Management. He received a B.S. in electrical engineering
and computer science from the University of California at Berkeley and was
bestowed the Bechtel Engineering Award for academic excellence upon graduation.
Mr. Brobst is not currently an employee or an officer of our company.

Board of directors

Our board of directors is currently composed of six directors. We intend to
expand the board of directors to seven directors upon completion of this
offering. The new director will be Michael E. Shanahan.

We intend to amend our certificate of incorporation to divide the board of
directors into three classes: Class I, whose terms will expire at the annual
meeting of stockholders to be held in 2000, Class II, whose terms will expire
at the annual meeting of stockholders to be held in 2001, and Class III, whose
terms will expire at the annual meeting of stockholders to be held in 2002. The
initial Class I directors will be Toni S. Hippeli and Michael E. Shanahan. The
initial Class II directors will be Christopher P. Mahan and Joseph P. Roebuck.
The initial Class III directors will be Larry G. Tanning, Bipin Agarwal and
Henry F. Skelsey. At each annual meeting of stockholders beginning in 2000, the
successors to directors whose terms will then expire will be elected to serve
from the time of election and qualification until the third annual meeting
following election.

In addition, our certificate of incorporation will provide that the
authorized number of directors may be changed only by resolution of the board
of directors. Any additional directorships resulting from an increase in the
number of directors will be distributed among the three classes so that, as
nearly as possible, each class will consist of one-third of the total number of
directors.

40
<PAGE>

Committees of the board of directors

Our committees consist of an audit committee and a compensation committee.
The audit committee recommends the annual appointment of our auditors with whom
the audit committee reviews the scope of audit and non-audit assignments and
related fees, accounting principles we use in financial reporting, internal
auditing procedures and the adequacy of our internal control procedures. During
1998, the audit committee was composed of Bipin Agarwal, Toni S. Hippeli and
Christopher P. Mahan. The compensation committee reviews and approves the
compensation and benefits for our employees, directors and consultants,
administers our employee benefit plans, authorizes and ratifies stock option
grants and other incentive arrangements and authorizes employment and related
agreements. During 1998, our compensation committee was composed of Larry G.
Tanning, Bipin Agarwal and Henry F. Skelsey, all of whom are employees of
Tanning.

Compensation of directors

Directors who are also our employees receive no additional compensation for
their services as directors. Directors who are not our employees will not
receive a fee for attendance in person at meetings of our board of directors or
committees of our board of directors, but they will be reimbursed for travel
expenses and other out-of-pocket costs incurred in connection with the
attendance of meetings. Directors who are not our employees or employees of AEA
Investors Inc. will be eligible to receive options to purchase our common stock
in connection with their appointment to our board of directors.

In connection with his election to the board of directors, we granted Mr.
Roebuck options to purchase 49,108 shares of our common stock at an exercise
price of $5.35 per share. Options to purchase 16,369 shares were immediately
exercisable and were exercised; the remaining options will vest over the next
four years.

In connection with his engagement as a consultant and his agreement to
become a director upon completion of this offering, we granted Mr. Shanahan
options to purchase 49,108 shares of our common stock at an exercise price of
$5.35 per share. Options to purchase 16,369 shares were immediately exercisable
and were exercised; the remaining options will vest over the next four years.

Executive officers

Our board of directors appoints our executive officers. Our executive
officers serve at the discretion of our board of directors.

Employment and non-competition agreements

We have entered into an employment agreement with Larry G. Tanning,
effective upon completion of this offering, providing for his employment as our
President and Chief Executive Officer. Pursuant to the agreement, Mr. Tanning
is entitled to an annual salary of $295,000, and is eligible to receive an
annual performance-based bonus determined by the compensation committee of the
board of directors, which for fiscal 1999 is based upon attainment of
performance targets involving the following: (1) global revenue, (2) global
earnings (before deductions for interest and taxes), (3) common stock price
appreciation, and (4) management and organizational objectives. For fiscal
1999, if we attain our target performance goals, Mr. Tanning's bonus will equal
approximately 55% of his base salary.

41
<PAGE>

If we terminate Mr. Tanning's employment without cause (as defined in the
employment agreement) or we constructively terminate (as defined in the
employment agreement) Mr. Tanning's employment, we are required to pay
Mr. Tanning (1) any unpaid portion of his annual salary earned through the date
of termination, (2) the annual bonus for the fiscal year immediately preceding
the fiscal year of termination to the extent not already paid and a pro rata
portion of the annual bonus for the fiscal year of termination, and (3) during
a period of twelve months following termination, an amount equal to his annual
salary at the time of termination. In addition, Mr. Tanning (and each other
currently employed Named Executive Officer, as defined below in "--Executive
compensation," and certain other employees) is entitled to a gross-up payment
in the event he is subject to a federal excise tax resulting from payments or
benefits received in connection with a change in control of our company. Mr.
Tanning is also subject to customary non-competition, non-solicitation and non-
disclosure covenants.

We have entered into an employment agreement with Bipin Agarwal effective
upon completion of this offering. Pursuant to the agreement, Mr. Agarwal is
entitled to an annual salary of $275,000, and is eligible to receive an annual
performance-based bonus determined by the compensation committee of the board
of directors, which for fiscal 1999 is based upon attainment of performance
targets involving the following: (1) global revenue, (2) global earnings
(before deductions for interest and taxes), (3) common stock price
appreciation, and (4) management and organizational objectives. For fiscal
1999, if we attain our target performance goals, Mr. Agarwal's bonus will equal
approximately 55% of his base salary.

If we terminate Mr. Agarwal's employment without cause (as defined in the
employment agreement) or we constructively terminate (as defined in the
employment agreement) Mr. Agarwal's employment, we are required to pay to Mr.
Agarwal (1) any unpaid portion of his annual salary earned through the date of
termination, (2) the annual bonus for the fiscal year immediately preceding the
fiscal year of termination to the extent not already paid and a pro rata
portion of the annual bonus for the fiscal year of termination, and (3) during
a period of twelve months following termination, an amount equal to his annual
salary at the time of termination. Mr. Agarwal is also subject to customary
non-competition, non-solicitation and non-disclosure covenants.

We have entered into an employment agreement with P. Tracy Currie dated June
1, 1997. Pursuant to the agreement, Mr. Currie is entitled to an annual salary
of $250,000, and is eligible to receive an annual bonus of between 13% and 80%
of his annual salary upon attainment of performance goals, which is based upon
attainment of performance targets involving the following: (1) revenue, and (2)
earnings (before deductions for interest, taxes, depreciation and
amortization). If we attain 100% of our target performance goals for a fiscal
year, Mr. Currie's bonus for that fiscal year will equal approximately 55% of
his base salary. Pursuant to the agreement, Mr. Currie was granted an option to
acquire 70,389 shares of common stock at a purchase price of $2.90 per share.
One-fourth of the shares subject to the option vested on each of June 1, 1997,
February 1, 1998, and February 1, 1999. The remaining one-fourth is scheduled
to vest on February 1, 2000.

If we terminate Mr. Currie's employment without cause (as defined in the
employment agreement) or we constructively terminate (as defined in the
employment agreement) Mr. Currie's employment after he completes one year of
continuous service, we are required to provide to Mr. Currie nine months of
annual base salary and benefits coverage continuation and the post-termination
period during which Mr. Currie will be subject to non-competition and non-
disclosure provisions will be reduced from one year to nine months. If we
terminate Mr. Currie's employment without cause or we constructively terminate
Mr. Currie's employment after three years of continuous service or after a
change in control of our company, we are required to provide to Mr. Currie one
year of base salary and benefits coverage continuation. The employment
agreement also contains customary non-competition, non-solicitation and non-
disclosure covenants.

We have also entered into an employment and expatriate assignment agreement
with Mr. Currie dated November 15, 1998, specifying the terms and conditions of
his employment while on an expatriate assignment in London, England. Pursuant
to the expatriate agreement, Mr. Currie is entitled to the same base salary and
bonus schedule as under his employment agreement, and he is entitled to
additional compensation primarily to make up for cost of living differentials
while working in London.

42
<PAGE>

We have entered into an employment agreement with Louis A. D'Alessandro
dated February 1, 1999. Pursuant to the agreement, Mr. D'Alessandro is entitled
to an annual salary of $175,000, and for fiscal 1999 is eligible to receive an
annual bonus of between 16% and 87% of his annual salary upon attainment of
performance goals, which for fiscal 1999 is based upon attainment of
performance targets involving the following: (1) domestic revenue, (2) domestic
technical services cost as a percentage of revenue, (3) domestic earnings
(before deductions for interest and taxes), and (4) management and
organizational objectives. Mr. D'Alessandro is guaranteed a minimum bonus of
$48,125 for 1999.

Under the agreement, Mr. D'Alessandro was granted an option to acquire
16,369 shares of our common stock at a per share purchase price of $3.82, which
vest over four years based on continuous employment. Mr. D'Alessandro was also
granted an option to acquire 91,669 shares of common stock at a per share
purchase price of $3.82, which vest (up to a maximum of 19,643 shares in each
of 1999 and 2000 and 52,382 shares in 2001, subject to further vesting over
time) based upon Mr. D'Alessandro's attainment of the performance goals on
which his cash bonus is based. Whether or not vested based on the attainment of
performance goals, all of the performance-based options will become exercisable
based on continued employment on December 1, 2003. The employment agreement
also contains customary non-competition, non-solicitation, and non-disclosure
covenants.

We have entered into a separation agreement and release with Tom Stack dated
May 14, 1999, providing for his resignation from our company. Pursuant to the
agreement, Mr. Stack will continue to receive his 1999 base salary and
commission draw, and will receive benefits continuation, in each case, through
January 31, 2000, and a one-time lump-sum payment of $10,000. Mr. Stack will
continue through November 17, 2001 to vest in options to purchase shares of our
common stock that he presently holds (at which time he is scheduled to have
completed the vesting requirements for 57,293 shares), on the condition that he
complies with various non-competition, non-solicitation and related covenants.
If the options so vest, Mr. Stack will be eligible to exercise his vested stock
options through November 17, 2002.

43
<PAGE>

Executive compensation

The table below summarizes information concerning the compensation paid by
Tanning during 1998 to Tanning's Chief Executive Officer and Tanning's four
other most highly paid executive officers, who are collectively defined as the
"Named Executive Officers":

Summary compensation table

<TABLE>
<CAPTION>
Annual compensation
-----------------------
Other Annual Securities LTIP All other
Name and principal position Salary Bonus Compensation underlying options payouts compensation(1)
- --------------------------- ---------- --------- ------------ ------------------ ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Larry G. Tanning......... $ 480,000(2) $ 28,720 -- -- -- $2,467
Chairman of the Board,
President and Chief
Executive Officer
Bipin Agarwal ........... $ 450,000(2) -- -- -- -- $ 955
Director and Senior Vice
President of Consulting
Operations--North
America
P. Tracy Currie.......... $ 250,000 $ 24,000 $60,606(3) 384,682 $30,000(4) $2,130
Vice President--
International
Louis A. D'Alessandro.... $ 160,000 $ 69,452 $25,235(5) 157,147 -- $ 480
Vice President--
Technical Services
Thomas J. Stack(6)....... $ 268,239(7) $ 35,000 -- 91,669(8) -- $ 300
Vice President--Western
Regional Sales
</TABLE>
- --------
(1) Represents group term life insurance premiums paid by us.
(2) Mr. Tanning and Mr. Agarwal have agreed to reduce their annual salary to
$295,000 and $275,000, respectively, effective upon completion of this
offering. See "--Employment and non-competition agreements."
(3) Includes a $21,975 housing allowance for local housing while on expatriate
assignment in London, England. See "--Employment and non-competition
agreements."
(4) Represents an amount paid in connection with meeting time deadlines for a
project engagement covering performance over fiscal years 1997 and 1998.
(5) Includes $23,000 paid to Mr. D'Alessandro by us as reimbursement for
closing costs and other expenses incurred by Mr. D'Alessandro, in
connection with the sale of a home in Boston, Massachusetts and the
purchase of a home in Denver, Colorado.
(6) Mr. Stack is no longer employed by us. See "--Employment and non-
competition agreements."
(7) Includes $108,239 in sales commissions.
(8) In connection with Mr. Stack's resignation, 58,930 of these options were
canceled.

44
<PAGE>

Option grants in fiscal 1998

The following table sets forth information regarding stock options granted
during 1998 to each of the Named Executive Officers.
<TABLE>
<CAPTION>
Individual grants
---------------------------------------------------
Potential realized value
at assumed annual
Number of Percent of rates of stock
securities total options price appreciation
underlying granted to Exercise or for option term
options employees base price Expiration -------------------------
Name granted in fiscal 1998 (per share)* date 5% 10%
- ---- ---------- -------------- ------------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Larry G. Tanning........ -- -- -- -- -- --
Bipin Agarwal........... -- -- -- -- -- --
P. Tracy Currie......... 57,293(1) 1.5% $3.82 06/08/08 $ 137,639 $ 348,805
327,389(2) 8.5 3.82 07/23/08 786,512 1,993,176
Louis A. D'Alessandro... 49,108(3) 1.3 3.82 06/08/08 117,976 298,974
108,038(4) 2.8 3.82 12/01/08 259,548 657,746
Thomas J. Stack......... 32,739(5) 0.9 3.82 06/08/08 78,651 199,318
58,930(6) 1.5 3.82 N/A -- --
</TABLE>
- --------
* The stock option exercise price was established based on the fair market
value of the underlying common stock, as determined by our board of
directors, taking into account the price per share we received in sales of
our common stock to the TTC Investors Group made in proximity to the time of
these option grants.
(1) One-fourth of the shares subject to the option vested on the date of grant
and on June 9, 1999. One-fourth of the shares subject to the option are
scheduled to vest on June 9, 2000 and 2001, respectively.
(2) One-fourth of the shares subject to the option vested on the date of grant.
One-fourth of the shares subject to the option are scheduled to vest on
July 24, 1999, 2000 and 2001, respectively.
(3) One-fourth of the shares subject to the option vested on the date of grant
and on June 9, 1999. One-fourth of the shares subject to the option are
scheduled to vest on June 9, 2000 and 2001, respectively.
(4) Sixteen thousand three hundred sixty-nine of the shares subject to the
option vest solely on the basis of employment with our company (4,092 on
December 1, 1999, 2000, 2001 and 2002, respectively). Up to 19,643 of the
shares subject to the option vest based upon the attainment of performance
goals in 1999. Of those shares that become performance-vested, one-fourth
become time-vested on December 1, 1999, 2000, 2001 and 2002, respectively.
Up to 19,643 of the shares subject to the option vest based upon the
attainment of performance goals in 2000. Of those shares that become
performance vested, one-fourth become time-vested on December 1, 2000,
2001, 2002 and 2003, respectively. Up to 52,382 of the shares subject to
the option vest based upon the attainment of performance goals in 2001. Of
those shares that become performance-vested, one-fourth become time-vested
on December 1, 2001, 2002, 2003 and 2004, respectively. Whether or not
vested based on the attainment of performance goals, all of the
performance-based options will become exercisable based on continued
employment on December 1, 2003.
(5) In connection with Mr. Stack's resignation, Mr. Stack will continue to vest
in these options through November 17, 2001, on the condition that he
complies with various non-competition, non-solicitation and related
covenants during the vesting period.
(6) In connection with Mr. Stack's resignation, these options were canceled.

45
<PAGE>

Aggregate option exercises in fiscal 1998 and fiscal year-end option values

The following table sets forth information concerning the value of
unexercised in-the-money options held by the Named Executive Officers as of
December 31, 1998.

There was no public trading market for our common stock at December 31,
1998. Accordingly, these values of exercisable and unexercisable in-the-money
options have been calculated on the basis of the fair market value of our
common stock at December 31, 1998 ($3.82 per share) as determined by our board
of directors, less the applicable exercise price per share multiplied by the
number of shares underlying the options.

<TABLE>
<CAPTION>
Value of unexercised
Number of securities in-the-money
underlying unexercised options at
Shares options at fiscal year-end fiscal year-end
acquired on Value --------------------------------- -------------------------
Name exercise realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ------------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Larry G. Tanning........ -- -- -- -- -- --
Bipin Agarwal........... -- -- -- -- -- --
P. Tracy Currie......... -- -- 131,365(1) 323,706(2) $32,378 $32,378
Louis A. D'Alessandro... -- -- 40,923(3) 165,331(4) 22,590 22,590
Thomas J. Stack......... -- -- 14,323(5) 101,900(6) 5,647 16,943
</TABLE>
- --------
(1) The per share exercise price of these options was $2.90 for options to
acquire 35,194 shares of common stock, and $3.82 for options to acquire
96,171 shares of common stock.
(2) The per share exercise price of these options was $2.90 for options to
acquire 35,194 shares of common stock, and $3.82 for options to acquire
288,512 shares of common stock.
(3) The per share exercise price of these options was $2.90 for options to
acquire 24,554 shares of common stock, and $3.82 for options to acquire
16,369 shares of common stock.
(4) The per share exercise price of these options was $2.90 for options to
acquire 24,554 shares of common stock, and $3.82 for options to acquire
140,777 shares of common stock.
(5) The per share exercise price of these options was $2.90 for options to
acquire 6,138 shares of common stock, and $3.82 for options to acquire
8,185 shares of common stock.
(6) The per share exercise price of these options was $2.90 for options to
acquire 18,416 shares of common stock, and $3.82 for options to acquire
83,484 shares of common stock. In connection with Mr. Stack's resignation,
58,930 of these options with an exercise price of $3.82 per share were
canceled.

Tanning Technology Corporation 1997 and 1998 Stock Option Plans

We have previously adopted the Tanning Technology Corporation 1997 Stock
Option Plan and the Tanning Technology Corporation 1998 Stock Option Plan. The
1997 and 1998 Stock Option Plans provide for the granting of nonqualified stock
options to our key employees, officers, independent contractors and directors.
As of the completion of this offering, 7,521,600 shares of common stock will be
subject to options outstanding under the 1997 and 1998 Stock Option Plans.
After this offering, we will not make any further grants under these plans.

The following is a summary description of these plans.

Overview

The 1997 and 1998 Stock Option plans provide our key employees, officers,
independent contractors and directors with an opportunity to purchase our
shares of common stock. The purpose of the 1997 and 1998 Stock Option Plans is
to retain the services of the optionees and to incentivize them to devote
maximum efforts to our success and to align their interests with those of our
stockholders.

46
<PAGE>

Administration

The 1997 and 1998 Stock Option Plans are administered by a committee of the
board of directors that consists of at least two directors. Generally, the
committee (1) selects those persons to whom options will be granted, and (2)
determines the terms and conditions of options, including the purchase price
per share, the vesting provisions, and the term of the option. The committee
interprets the plan and its determinations are final.

Eligible individuals

Our current and future key employees, officers, independent contractors and
directors are eligible to participate in the 1997 and 1998 Stock Option Plans.
There are 254 individuals who hold options granted under the 1997 and 1998
Stock Option Plans.

Option terms generally

Each option is evidenced by an agreement between us and an optionee. Unless
the applicable agreement permits otherwise, 25% of the shares subject to the
option vest on each of the first four anniversaries of the grant date. The
purchase price for shares acquired pursuant to the exercise of an option must
be paid in full concurrently with the exercise of the option. The purchase
price may be paid in cash, or the equivalent thereof as determined by the
committee.

Except as otherwise permitted by the committee in respect of transfers to
certain family members, options are not transferable except by will or the laws
of descent and distribution.

In the event of certain change in control transactions, each outstanding
option vests and becomes fully exercisable immediately prior thereto. In
connection with any such transaction, we have the right to cancel options which
have not been exercised or convert options into the right to receive the
consideration paid per share in such transaction less the per share exercise
price of the option.

Termination of employment

Unless the committee determines otherwise, unvested options are forfeited on
the date of termination of employment, of service on the board of directors, or
of service as an independent contractor, and, generally, vested options expire
90 days from the date of such termination. If the optionee is terminated with
cause, the committee may determine, within a period of 60 days from the date of
such termination, to terminate any or all options granted to the optionee.

No additional rights

An optionee does not have any rights to the underlying shares until the
option is properly exercised. The 1997 and 1998 Stock Option Plans do not limit
in any way our right to terminate anyone's employment. It is also not evidence
of any agreement or understanding that we will employ any person at any
particular rate of compensation or for any particular period of time.

Income tax withholding

When an optionee recognizes taxable income in connection with the receipt of
shares under the 1997 and 1998 Stock Option Plans, the optionee must pay us an
amount equal to the federal, state and local income taxes and other amounts as
may be required by law to be withheld by us prior to the issuance. We may
deduct from any payment an amount equal to the withholding taxes in
satisfaction of an optionee's obligation to pay withholding taxes.

47
<PAGE>

Adjustments upon change in capitalization

In the event of certain changes in capitalization, the committee, in its
sole discretion, may adjust the maximum number of shares with respect to which
options may be granted under the 1997 and 1998 Stock Option Plans, the number
of shares which are subject to outstanding options and the purchase price
therefor.

Amendment and termination

Each plan terminates on the tenth anniversary of the date of its adoption.
The board of directors or the committee may at any time and from time to time
suspend, discontinue, revise or modify the 1997 or 1998 Stock Option Plan.
However, no such action may adversely alter any outstanding options without the
consent of the optionee.

Tanning Technology Corporation 1999 Employee Stock Purchase Plan

Prior to the completion of this offering, we will adopt the Tanning
Technology Corporation 1999 Employee Stock Purchase Plan. We intend to
administer the plan so that it qualifies as an employee stock purchase plan
under Section 423 of the Internal Revenue Code. The maximum number of shares of
common stock available for awards under the 1999 Employee Stock Purchase Plan
is 1 million.

The purpose of the plan is to strengthen our company by providing our
employees and our subsidiaries' employees the opportunity to acquire a
proprietary interest in our company through the purchase of shares of our
common stock at a discount. These purchases will be funded primarily through
regular payroll deductions of up to 15% of a participant's gross cash wages for
each pay period during an offering period. Each full-time employee may
participate in the plan. An offering period to purchase shares of our common
stock will begin on the date on which Tanning and the underwriters agree on the
price per share in this offering and end on December 31, 1999. The maximum
number of shares of common stock that a participant may purchase during this
offering period is 1,000. Thereafter, offering periods generally will commence
on each January 1 and July 1.

On the first day of each offering period, each participant is deemed to have
been granted an option to purchase a number of shares of common stock. The
funds used to purchase the shares will equal a percentage designated by the
participant (between 1 and 15 percent) of his gross cash wages during such
offering period plus additional employee contributions as may be permitted by
Tanning. The purchase price for such shares will be the lower of 85% of the
fair market value of the shares on the first day and the last day of the
offering period. Each participant will automatically purchase shares on the
last day of the offering period.

A participant may reduce the percentage of payroll deductions once during an
offering period. A participant may discontinue payroll deductions at any time
during an offering period. If a participant discontinues payroll deductions, he
may request that amounts previously withheld be returned without interest.

The plan will be administered by the compensation committee of the board of
directors. Its determinations will be conclusive and binding. The board of
directors may amend or terminate the plan at any time; however, no such
amendment or termination may adversely effect outstanding options. Termination
of the plan will cause the termination of the then current offering period.

Tanning Technology Corporation 1999 Stock Option Plan

Prior to completion of this offering, we will adopt the Tanning Technology
Corporation 1999 Stock Option Plan.

The 1999 Stock Option Plan provides for the granting of incentive stock
options to our employees and nonqualified stock options to our employees,
consultants and directors. The maximum number of shares of common stock
available for awards under the 1999 Stock Option Plan is 5 million. As of the
completion of this offering, 878,221 shares of common stock will be subject to
options outstanding under the 1999 Stock Option Plan.

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<PAGE>

The following is a summary description of the 1999 Stock Option Plan.

Overview

The 1999 Stock Option Plan provides our employees, consultants and directors
with an opportunity to purchase our shares. The purpose of the plan is to
retain the services of the optionees and to incentivize them to devote maximum
efforts to our success and to align their interests with those of our
stockholders.

Administration

The 1999 Stock Option Plan will be administered by a committee of the board
of directors that consists of at least two non-employee members. The
compensation committee of the board of directors is expected to serve as the
committee.

Generally, the committee (1) will select those persons to whom options will
be granted, and (2) will determine the terms and conditions of options,
including the purchase price per share and the vesting provisions. The
committee will interpret the plan and its determinations will be final. The
committee will have the authority to make amendments or modifications to
outstanding options consistent with the plan's terms.

Eligible individuals

Any of our current or future employees, consultants or directors will be
eligible to participate in the 1999 Stock Option Plan. Substantially all of our
employees are currently eligible to participate in the plan.

Shares subject to the 1999 Stock Option Plan

The maximum number of shares available for the granting of options under the
1999 Stock Option Plan is 5 million. The maximum number of shares that an
eligible individual may receive in respect of options granted in any calendar
year is 1 million. If any option is exercised by tendering shares, either
actually or by attestation as full or partial payment of the exercise price,
the maximum number of shares available under the plan will be increased by the
number of shares so tendered. Whenever any outstanding option expires, is
canceled, is settled in cash or is otherwise terminated without having been
exercised, the shares allocable to the expired, canceled, settled or otherwise
terminated portion of the option may again be the subject of an option grant.

Options will be designated as either incentive stock options, or ISOs, which
are intended to qualify for special tax treatment, or nonqualified stock
options. No employee may receive ISOs in respect of more than 1 million shares
of common stock. The per share exercise price of any option will be fixed by
the committee at the time the option is granted. The per share exercise price
of any ISO may not be less than 100% of the fair market value on the date the
option is granted or 110% in the case of an ISO granted to a 10% stockholder.
Each option is exercisable at such dates and in such installments as determined
by the committee. Each option will be for a term will be determined by the
committee.

Except as otherwise determined by the committee, options will not be
transferable except by will or the laws of descent and distribution.

The purchase price for shares acquired pursuant to the exercise of an option
must be paid in full concurrently with the exercise of the option. The purchase
price may be paid in cash, or as otherwise determined by the committee.

In the event of a merger of Tanning with or into another corporation, or the
sale of substantially all of our assets, each outstanding option shall be
assumed or an equivalent option substituted by the successor corporation or a
parent or subsidiary of the successor corporation; provided, however, that,
unless otherwise determined by the committee, the options shall remain subject
to all of the conditions, restrictions and performance criteria which were
applicable to such options prior to such assumption or substitution. In the
event that the successor corporation refuses to or otherwise does not assume
the option or substitute an

49
<PAGE>

equivalent option, the optionee shall have the right to exercise the option as
to all of the shares subject to the option, including shares as to which it
would not otherwise be exercisable. In the event the option becomes so
exercisable or the committee otherwise determines to accelerate the
exercisability of an option in connection with any transaction involving our
company, the committee may, in its sole discretion, authorize the redemption of
the option for consideration payable per share subject to the option equal to
the excess of the consideration payable per share in connection with the
transaction over the exercise price per share of the option. If an option is
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, our company's secretary shall notify the optionee that the
option shall be fully exercisable for a period of fifteen (15) days (or such
other period as shall be determined by the committee) from the date of such
notice, and the option shall terminate upon the expiration of such period. For
the purposes of this paragraph, the option shall be considered assumed if,
following the merger or sale of assets, the option confers the right to
purchase or receive, for each share subject to the option immediately prior to
the merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets for each share
held on the effective date of the transaction (and if holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares).

Termination of employment

Each option agreement will set forth the terms and conditions applicable to
the option upon a termination of employment of the optionee.

No additional rights

An optionee will not have any rights to the underlying shares until the
option is properly exercised. The 1999 Stock Option Plan does not give any
person any rights with respect to shares except as provided in the plan. The
plan does not limit in any way our right to terminate anyone's employment. It
is also not evidence of any agreement or understanding that we will employ any
person at any particular rate of compensation or for any particular period of
time.

Income tax withholding

When an optionee recognizes taxable income in connection with the receipt of
shares under the 1999 Stock Option Plan, the optionee must pay us an amount
equal to the federal, state and local income taxes and other amounts as may be
required by law to be withheld by us prior to the issuance of such shares. We
may deduct from any payment an amount equal to the withholding taxes in
satisfaction of an optionee's obligation to pay withholding taxes. If permitted
by the committee, in satisfaction of the obligation to pay withholding taxes,
the optionee may elect to have withheld a portion of the shares then issuable
to him or her having an aggregate fair market value equal to the withholding
taxes.

Adjustments upon change in capitalization

In the event of a change in capitalization, the committee will adjust the
maximum number and class of shares or other stock or securities with respect to
which options may be granted under the 1999 Stock Option Plan or to any
eligible individual in any calendar year and the number and class of shares or
other stock or securities which are subject to outstanding options and the
purchase price therefor.

Effect of liquidation

In the event of our liquidation, the 1999 Stock Option Plan and the related
options issued will continue in effect in accordance with their respective
terms. Following such a liquidation, each optionee will be entitled to receive
in respect of each share subject to any outstanding option, upon the exercise
of the option, the same number and kind of stock, securities or other
consideration that each holder of a share was entitled to receive in the
liquidation in respect of a share; provided that such stock, securities or
other consideration will remain subject to all of the provisions which were
applicable to the option prior to such liquidation.

50
<PAGE>

Pooling transactions

In the event of a transaction which is intended to constitute a pooling
transaction, we may take such actions as are specifically recommended by an
independent accounting firm to the extent reasonably necessary to assure that
the transaction will qualify as a pooling transaction. These actions may affect
the terms and conditions of awards under the 1999 Stock Option Plan.

Multiple agreements

The terms of any option under the 1999 Stock Option Plan will be set forth
in an agreement between us and the optionee.

Amendment and termination

The 1999 Stock Option Plan terminates on the day preceding the tenth
anniversary of its adoption. The board of directors or the committee may at any
time and from time to time amend, modify, suspend or terminate the 1999 Stock
Option Plan. However, no such amendment, modification, suspension or
termination may adversely alter any outstanding options without the consent of
the optionee. In addition, amendments may require stockholder approval.

Federal income tax consequences applicable to 1997, 1998 and 1999 Stock Option
Plans

In general, an optionee will not recognize taxable income upon the grant or
exercise of an ISO and we will not be entitled to any business expense
deduction. However, upon the exercise of an ISO, the excess of the fair market
value on the date of exercise of the shares received over the exercise price of
the option will be treated as an adjustment to alternative minimum taxable
income (unless the shares are sold in the same taxable year as exercise). In
order for the exercise of an ISO to qualify as an ISO, an optionee generally
must be an employee of Tanning or a subsidiary from the date the ISO is granted
through the date three months before the date of exercise or one year preceding
the date of exercise in the case of an optionee whose employment is terminated
due to disability. The employment requirement does not apply where an
optionee's employment is terminated upon death.

If an optionee held the shares acquired upon exercise of an ISO for more
than two years after the date of grant and for more than one year after the
date of exercise, when the optionee disposes of the shares, the difference, if
any, between the sales price of the shares and the exercise price of the option
will be treated as long-term capital gain. If an optionee disposes of the
shares prior to satisfying these holding period requirements, the optionee will
recognize ordinary income at the time of the sale, generally in an amount equal
to the excess of the fair market value of the shares at the time of exercise
over the exercise price of the option. The balance of any gain realized will be
short-term or long-term capital gain. If the optionee sells the shares prior to
satisfying the holding period requirements at a price below fair market value
at the time the option was exercised, the amount of ordinary income will be
limited to the amount realized on the sale over the exercise price of the
option. In general, if we comply with applicable income reporting requirements,
we will be allowed a business expense deduction to the extent an optionee
recognizes ordinary income.

In general, an optionee who receives a nonqualified stock option will not
recognize income at the time of the grant of the option. Upon exercise of a
nonqualified stock option, an optionee will recognize ordinary income in an
amount equal to the excess of the fair market value of the shares on the date
of exercise over the exercise price of the option. The basis in the shares
acquired upon exercise of a nonqualified stock option will equal fair market
value of such shares at the time of exercise. The holding period of the shares
for capital gain purposes will begin on the date of exercise. In general, if we
comply with applicable income reporting requirements, we will be entitled to a
business expense deduction in the same amount as the optionee recognizes
ordinary income. In the event of a sale of the shares received upon the
exercise of a nonqualified stock option, any appreciation or depreciation after
the exercise date generally is taxed as capital gain or loss. However, any gain
will be subject to reduced tax rates if the shares were held for more than
twelve months.

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<PAGE>

This discussion assumes that at the time of exercise, the sale of the shares
would not subject an optionee to liability under Section 16(b) of the Exchange
Act. Special rules may apply with respect to persons who may be subject to
Section 16(b). Optionees who are or may become subject to Section 16(b) should
consult with their own advisors.

Excise taxes

Under certain circumstances, the accelerated vesting or exercise of options
in connection with a change in control of Tanning may be deemed an "excess
parachute payment" for purposes of the golden parachute tax provisions of
Section 280G of the Internal Revenue Code. To the extent it is so considered,
an optionee may be subject to a 20% excise tax and we may be denied a tax
deduction. The currently employed Named Executive Officers and certain other
employees are entitled to a gross-up payment in the event that they are subject
to a federal excise tax resulting from payments or benefits received in
connection with a change in control of our company.

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<PAGE>

CERTAIN RELATIONSHIPS AND TRANSACTIONS WITH RELATED PARTIES

Stock Purchase Agreement, Shareholder Agreement and Registration Rights
Agreement

Tanning, Tanning's founders, and the TTC Investors Group are parties to a
stock purchase agreement dated as of December 24, 1996, as amended. Under this
agreement, the TTC Investors Group purchased an aggregate of 5,696,770 shares
of our common stock for an aggregate consideration of $14.6 million.

Larry G. Tanning, Bipin Agarwal, Toni Hippeli and entities controlled by
them, together with the TTC Investors Group, have entered into an amended and
restated shareholder agreement dated as of July 20, 1999, which provides, among
other things:

. the TTC Investors Group may nominate one director to Class II of our
board of directors;

. Tanning Family Partnership, L.L.L.P., which is indirectly controlled by
Larry G. Tanning, and WinSoft Corporation, which is controlled by Bipin
Agarwal, each may nominate one director to any class of our board of
directors;

. the TTC Investors Group may appoint one member to each of the audit and
compensation committees; and

. all of the parties to the shareholder agreement have agreed to vote the
shares of common stock owned by them in favor of each other's nominees.

If there are insufficient vacancies in a particular class of directors, the
available positions shall be allocated first to the nominee of the TTC
Investors Group (as to Class II only), second to the nominee of Tanning Family
Partnership, L.L.L.P., and third to the nominee of WinSoft Corporation. The
rights of each person mentioned above will terminate when such person no longer
owns at least ten percent of our common stock.

The parties to the stock purchase agreement and affiliated entities,
together with Mr. Skelsey, have entered into an amended and restated
registration rights agreement dated as of July 20, 1999, which provides, among
other things:

. the TTC Investors Group has the right to require the filing of a total
of two registration statements with the SEC to register for sale shares
of our common stock owned by it;

. holders of a majority of the shares of our common stock held by
Tanning's founders and Mr. Skelsey have the right to require the filing
of one registration statement with the SEC during any twelve month
period to register for sale shares of our common stock owned by them;

. Tanning has the right to participate in any of the registrations
described above and sell shares of its common stock under such
registration to the extent of 25% of the shares to be sold in the
offering; and

. all parties to the registration rights agreement have rights to
participate in registration statements filed by Tanning for the sale of
common stock in an underwritten offering for its own account, subject to
the ability of the underwriters to limit the number of shares included
in the registration and giving priority to issuances by Tanning.

The existence and exercise of these registration rights may make it more
difficult for us to arrange future financing and may have an adverse effect on
the market price of our common stock.

Loans to our directors and officers

Upon completion of this offering, we will lend on a recourse basis to each
of Larry G. Tanning and Bipin Agarwal $250,000. These loans were entered into
in connection with a significant reduction in the compensation of Messrs.
Tanning and Agarwal pursuant to their revised employment agreements. The loans
will bear interest at the lowest rate permitted by the IRS to avoid the
imputation of interest income. The principal and all accrued interest on the
loans will be repayable after two years.

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<PAGE>

Financing arrangements with one of our directors

In 1996 and 1997, we repaid approximately $490,000 of remaining principal on
notes evidencing financing arrangements entered into in 1995 with Hippeli
Enterprises, Inc., Toni S. Hippeli Unitrust and V. Jerome Nickerson Unitrust.
Toni S. Hippeli, one of our directors and the managing member of our
predecessor, owns 50% of the capital stock of Hippeli Enterprises, Inc., and V.
Jerome Nickerson, Ms. Hippeli's husband, owns the remaining 50%. Hippeli
Enterprises, Inc., is a significant stockholder of Tanning. Ms. Hippeli and Mr.
Nickerson are co-trustees of both Toni S. Hippeli Unitrust and V. Jerome
Nickerson Unitrust.

Agreements with family members of our directors and officers

In connection with an agreement entered into between our company and Mr.
Nickerson as of January 1997, Mr. Nickerson received a commission on the sale
of a software product by one of our subsidiaries in the amount of approximately
$100,000, of which approximately $85,000 has been paid, and $15,000 of which
will be paid between now and September 1, 2000. In addition, Mr. Nickerson also
received approximately $18,000 in wage compensation in 1998.

We have employed Adesh Gupta, a brother-in-law of Bipin Agarwal, as a
Practice Leader since January, 1997 and as a Consultant from October 1994 until
January 1997. Mr. Agarwal is one of our directors and our Senior Vice President
of Consulting Operations--North America, and also controls WinSoft Corporation,
which is a significant stockholder of Tanning. In 1998, Mr. Gupta received
approximately $245,000 in compensation.

On April 7, 1997, we granted Mr. Gupta an option to acquire 327,389 shares
of our common stock at a per share purchase price of $2.90 per share. Of these
options, 245,542 vested upon the grant, 16,369 vested on April 7, 1998, 32,739
vested on April 7, 1999 and the remaining 32,739 will vest on April 7, 2000. On
June 9, 1998, we granted Mr. Gupta an additional option to acquire 65,478
shares of our common stock at a per share purchase price of $3.82 per share.
One-fourth of the shares subject to this option vested on June 9, 1999, and the
remaining three-fourths will vest in equal installments on each of June 9,
2000, 2001 and 2002.

Mark W. Tanning, brother of Larry G. Tanning, has served as our Vice
President--Human Resources and Administration since January 1997. Larry Tanning
is our Chairman of the Board, President and Chief Executive Officer, and also
indirectly controls Tanning Family Partnership, L.L.L.P., which is a
significant holder of our stock. In 1998, Mark Tanning received $212,280 in
compensation. In addition, we have entered into an employment agreement with
Mark Tanning dated February 1, 1999. Pursuant to the agreement, Mr. Tanning
receives an annual salary of $180,000, and for fiscal 1999 is eligible to
receive a bonus of between 16% to 87% of his annual salary upon attainment of
performance goals, which is based upon the attainment of performance targets
involving the following: (1) global revenue, (2) global earnings (before
deductions for interest and taxes), and (3) management and organizational
objectives.

Under the employment agreement, Mr. Tanning was granted an option to acquire
91,667 shares of our common stock at a per share purchase price of $3.82, which
vests (up to a maximum of 19,643 shares in 1999, 32,738 shares in 2000, and
39,286 shares in 2001, subject to further vesting over time) based upon Mr.
Tanning's attainment of the performance goals on which his cash bonus is based.
Whether or not vested based on the attainment of performance goals, all of the
performance-based options will become exercisable based on continued employment
on December 1, 2003. The employment agreement also contains customary non-
competition, non-solicitation, and non-disclosure covenants. Mr. Tanning was
also granted two options to purchase an aggregate of 65,478 shares of our
common stock at a purchase price of $3.82 per share. One-fourth of the shares
subject to the options vested in 1998 and the remainder vest equally over 1999,
2000 and 2001. Mr. Tanning has also been granted an option to purchase 49,107
shares of our common stock at a purchase price of $2.90 per share. Three-
fourths of this option vested in equal installments in 1997, 1998 and 1999 and
the remaining one-fourth will vest in 2000.

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<PAGE>

Fees paid to related parties

Stephen Brobst, a significant stockholder, has served, and will continue to
serve, as a consultant on project engagements. We paid Mr. Brobst $240,000 for
consulting services in 1996, $790,535 for consulting services in 1997 and
$293,502 for consulting services in 1998. In addition, in connection with the
stock purchase agreement, we paid Mr. Brobst a sign-on bonus of $413,422 in
1997.

We will pay a fee of $250,000 to AEA Investors Inc., the parent of AEA
Tanning Investors Inc., which is a beneficial owner of our common stock, for
strategic advisory services in connection with this offering.

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<PAGE>

PRINCIPAL STOCKHOLDERS

The following table presents information regarding the beneficial ownership
of our common stock as of July 20, 1999 and as adjusted to reflect the sale of
our common stock offered hereby by (1) each person (or group within the meaning
of Section 13(d)(3) of the Exchange Act) known by us to own beneficially 5% or
more of our common stock, (2) our directors and Named Executive Officers and
(3) all of our directors and executive officers as a group.

As used in this table, "beneficial ownership" means the sole or shared power
to vote or direct the voting or to dispose or direct the disposition of any
security. A person is deemed to be the beneficial owner of securities that can
be acquired within 60 days from the date of this prospectus through the
exercise of any option, warrant or right. Shares of common stock subject to
options, warrants or rights that are currently exercisable or exercisable
within 60 days are deemed outstanding for computing the ownership percentage of
the person holding such options, warrants or rights, but are not deemed
outstanding for computing the ownership percentage of any other person. The
amounts and percentages are based upon 15,863,166 shares of common stock
outstanding as of July 20, 1999, and 19,863,166 shares of common stock
outstanding as of the completion of this offering, respectively.

In the table below, unless otherwise noted, the address of our significant
stockholders is c/o our company.

<TABLE>
<CAPTION>
Number of shares
of common stock
beneficially owned Percentage owned Number of Number of
prior to and -------------------------------- exercisable excluded
Name after offering Prior to offering After offering options(1) options(2)
- ---- ------------------ ----------------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
TTC Investors I LLC(3).. 984,237 6.2% 5.0% -- --
TTC Investors II
LLC(3)................. 4,143,022 26.1 20.8 -- --
AEA Tanning Investors
Inc.(3)................ 5,696,770 35.9 28.7 -- --
Tanning Family
Partnership,
L.L.L.P. .............. 3,261,351 20.6 16.5 -- --
Larry G. Tanning(4)..... 3,461,713 21.8 17.4 -- --
WinSoft Corporation..... 2,313,291 14.6 11.6 -- --
Bipin Agarwal(5)........ 2,313,291 14.6 11.6 -- --
Stephen Brobst.......... 2,322,021 14.6 11.7 -- --
Hippeli Enterprises,
Inc.................... 1,161,010 7.3 5.8 -- --
Toni S. Hippeli(6)...... 1,161,010 7.3 5.8 -- --
Henry F. Skelsey(7)(8).. 814,380 5.0 4.0 407,190 814,380
P. Tracy Currie(9)...... 236,533 1.5 1.2 236,533 234,492
Louis A. D'Alessandro... 54,183 * * 53,201 153,054
Thomas J. Stack(10)..... 22,508 * * 22,508 34,785
Christopher P.
Mahan(7)(11)........... -- * * -- --
Joseph P. Roebuck....... 16,369 * * -- 32,739
Michael E.
Shanahan(12)........... 16,369 * * -- 32,739
All directors and
executive officers as a
group (16
persons)(13)........... 8,208,904 49.2 39.7 823,787 2,179,183
</TABLE>
- --------
*Represents beneficial ownership of less than one percent.
(1) Shows shares of our common stock issuable upon exercise of options that
are currently exercisable or are exercisable within 60 days of July 20,
1999 and that are included in the total number of shares beneficially
owned.
(2) Shows shares of our common stock issuable upon exercise of options that
will not be exercisable within 60 days of July 20, 1999 and that are not
included in the total number of shares beneficially owned.

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<PAGE>

(3) AEA Tanning Investors Inc. is the managing member of TTC Investors I LLC,
TTC Investors II LLC, TTC Investors IA LLC, which holds 108,986 shares of
our common stock, and TTC Investors IIA LLC, which holds 460,525 shares of
our common stock, and accordingly may be deemed to beneficially own the
shares held by these entities. AEA Tanning Investors Inc. is a wholly
owned subsidiary of AEA Investors Inc. The address for each member of the
TTC Investors Group is c/o AEA Investors Inc., Park Avenue Tower, 65 East
55th Street, New York, New York 10022.
(4) Includes 3,261,351 shares of our common stock that Mr. Tanning is deemed
to beneficially own because he indirectly controls Tanning Family
Partnership, L.L.L.P., as to which Mr. Tanning disclaims beneficial
ownership. Excludes 94,288 shares of our common stock held by immediate
family members, and 32,738 shares of our common stock held by trusts for
the benefit of immediate family members, as to which Mr. Tanning disclaims
beneficial ownership.
(5) Includes 2,322,021 shares that Mr. Agarwal is deemed to beneficially own
as the controlling investor of WinSoft Corporation. Excludes 2,182 shares
of our common stock held by Mr. Agarwal's wife, Shashi Agarwal, as to
which Mr. Agarwal disclaims beneficial ownership.
(6) Includes 1,161,010 shares that Ms. Hippeli is deemed to beneficially own
as a controlling investor of Hippeli Enterprises, Inc. Ms. Hippeli and her
husband, Jerome Nickerson, each own 50% of the outstanding shares of
common stock of Hippeli Enterprises, Inc. Mr. Nickerson disclaims
beneficial ownership of the shares of our common stock owned by Hippeli
Enterprises, Inc.
(7) Mr. Skelsey and Mr. Mahan are each members of two of the limited liability
companies constituting the TTC Investors Group. Neither Mr. Skelsey nor
Mr. Mahan has voting or investment power over the shares of common stock
owned by the TTC Investors Group as a result of the memberships and
therefore neither is deemed to have beneficial ownership of the shares as
a result of the memberships. Each of Mr. Skelsey's and Mr. Mahan's
indirect ownership interest in our company through his memberships in the
limited liability companies constituting the TTC Investors Group is less
than one percent.
(8) Includes 100,000 shares of our common stock held by trusts for the benefit
of immediate family members, as to which Mr. Skelsey is the trustee and
disclaims beneficial ownership.
(9) Includes options to purchase 154,686 shares of our common stock held by
Connor Patrick, Ltd., a partnership controlled by Mr. Currie. Excludes
options to purchase 8,600 shares of our common stock which are held by a
trust for Mr. Currie's children, as to which Mr. Currie disclaims
beneficial ownership.
(10) Mr. Stack is no longer employed by us. See "Management--Employment and
non-competition agreements."
(11) Mr. Mahan's total excludes 5,696,770 shares of our common stock owned by
the TTC Investors Group. Mr. Mahan is a director of AEA Tanning Investors
Inc. Mr. Mahan disclaims beneficial ownership of the shares beneficially
owned by the TTC Investors Group.
(12) Mr. Shanahan has agreed to serve on our board of directors upon completion
of this offering.
(13) See footnotes 4 through 6 above.

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<PAGE>

DESCRIPTION OF CAPITAL STOCK

We intend to amend our certificate of incorporation and bylaws prior to the
completion of this offering. The forms of our certificate of incorporation and
bylaws will be filed as exhibits to the registration statement of which this
prospectus is a part. The following summarizes the terms and provisions of our
capital stock upon the closing of this offering. The summary is not complete,
and you should read the forms of our certificate of incorporation and bylaws.

Upon the closing of this offering, our authorized capital stock will consist
of 70 million shares, $0.01 par value per share, of common stock and 5 million
shares, par value $0.01 per share, of preferred stock.

Common stock

Each share of our common stock will be identical in all respects and will
entitle its holder to the same rights and privileges enjoyed by all other
holders of shares of common stock and will subject them to the same
qualifications, limitations and restrictions to which all other holders of
common stock will be subject.

Voting rights

Holders of our common stock will be entitled to one vote per share on all
matters to be voted on by our stockholders. Holders of common stock will not
have cumulative rights, so that holders of a plurality of the shares of common
stock present at a meeting at which a quorum is present will be able to elect
all of our directors eligible for election in a given year. The holders of a
majority of the voting power of the issued and outstanding common stock will
constitute a quorum.

Dividends

Holders of our common stock will be entitled to receive ratably such
dividends, if any, as are declared by our board of directors out of funds
legally available for the declaration of dividends, subject to the preferential
rights of any holder of preferred stock that may from time to time be
outstanding.

Liquidation

Upon our liquidation, dissolution or winding up, the holders of our common
stock will be entitled to share pro rata in the distribution of all of our
assets available for distribution after satisfaction of all of our liabilities
and the payment of the liquidation preference of any preferred stock that may
be outstanding.

Other provisions

The holders of our common stock will have no preemptive or other
subscription rights to purchase common stock, and there will be no redemptive
rights or sinking fund provisions.

Preferred stock

Our board of directors will be authorized to issue preferred stock in one or
more series and to establish the number of shares to be included in each series
and to fix the designations, powers, preferences and rights of the shares of
each series and any qualifications, limitations or restrictions of each series.
Because the board of directors will have the power to establish the preferences
and rights of the shares of any series of preferred stock, it may afford the
holders of any series of preferred stock preferences, powers and rights,
including voting rights, senior to the rights of the holders of common stock.
The issuance of preferred stock may have the effect of delaying, deferring or
preventing a change in control of Tanning.

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<PAGE>

Limitation on directors' liabilities

Our certificate of incorporation will limit the liability of our directors
to us and our stockholders to the fullest extent permitted by Delaware law.
Specifically, our directors will not be personally liable for money damages for
breach of fiduciary duty as a director, except for liability

. for any breach of the director's duty of loyalty to us or our
stockholders;

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

. under Section 174 of the Delaware General Corporation Law, which
concerns unlawful payments of dividends, stock purchases or redemptions;
and

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

Anti-takeover effects of our certificate of incorporation and bylaws and
provisions of Delaware law

Our certificate of incorporation, bylaws and Section 203 of the Delaware
General Corporation Law contain provisions that may make the acquisition of
control of Tanning by means of a tender offer, open market purchase, proxy
fight or otherwise, more difficult.

Section 203 of the Delaware General Corporation Law

We must comply with the provisions of Section 203 of the Delaware General
Corporation Law. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner.

A "business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder. An "interested
stockholder" is a person who, together with affiliates and associates, owns,
or, in some cases, within three years prior, did own, 15% or more of the
corporation's voting stock. Under Section 203, a business combination between
Tanning and an interested stockholder is prohibited unless it satisfies one of
the following three conditions:

. our board of directors must have previously approved either the business
combination or the transaction that resulted in the stockholder becoming
an interested stockholder;

. upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of our voting stock outstanding at the time the transaction
commenced, excluding, for purposes of determining the number of shares
outstanding, shares owned by (1) persons who are directors and also
officers and (2) employee stock plans, in some instances; and

. the business combination is approved by our board of directors and
authorized at an annual or special meeting of the stockholders by the
affirmative vote of the holders of at least 66 2/3% of the outstanding
voting stock that is not owned by the interested stockholder.

Staggered board

Our certificate of incorporation will provide that the number of directors
shall be fixed from time to time by a resolution of our board of directors. Our
certificate of incorporation will also provide that the board of directors
shall be divided into three classes. The members of each class of directors
will serve for staggered three-year terms. As permitted by the Delaware General
Corporation Law, the members of our classified board of directors will only be
removable from office by our stockholders for cause, subject to the terms of
our shareholder agreement. Vacancies on the board of directors shall be filled
by a majority of the remaining directors, or by a sole remaining director, or
by our stockholders if the vacancy was caused by the action of our
stockholders.

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<PAGE>

Advance notice provision

Our certificate of incorporation and bylaws will provide that stockholders
must follow an advance notification procedure to nominate candidates for the
board of directors and to propose business to be conducted at an annual
meeting.

Special meetings of stockholders; written consent provision

Our certificate of incorporation will provide that special meetings of our
stockholders may be called only by the board of directors, the chairman of the
board or the president. Our certificate of incorporation will also remove our
stockholders' ability to act by written consent. These provisions may render it
more difficult for stockholders to take action opposed by the board of
directors.

Adoption, amendment or repeal of bylaws

Our certificate of incorporation will limit the ability of our stockholders
to adopt, amend or repeal our bylaws. Specifically, any adoption, amendment or
repeal of a bylaw by our stockholders will require passage by a supermajority
vote.

Supermajority approvals

The provisions of our certificate of incorporation referred to above will
not be able to be altered without supermajority approval by our stockholders.

Transfer agent and registrar

The Transfer Agent and Registrar for our common stock is ChaseMellon
Shareholder Services.

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<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, 19,863,166 shares of common stock will be
outstanding, or 20,463,166 shares if the underwriters exercise their over-
allotment option in full. Of these shares, the 4,600,000 shares of common
stock, assuming the underwriters exercise their over-allotment option in full,
sold in this offering will be freely tradable without restriction or further
registration under the Securities Act, unless held by an "affiliate" of Tanning
as that term is defined in Rule 144 under the Securities Act. All of the shares
of common stock outstanding prior to this offering are "restricted securities,"
as such term is defined under Rule 144. These shares are restricted securities
because they were issued in private transactions not involving a public
offering and may not be sold in the absence of registration other than in
accordance with Rule 144 or Rule 701 under the Securities Act or another
exemption from registration. This prospectus may not be used in connection with
any resale of shares of common stock acquired in this offering by Tanning
affiliates.

We, our executive officers and directors and a number of our existing
stockholders have agreed not to offer, sell, contract to sell, announce their
intention to sell, pledge or otherwise dispose of, directly or indirectly, or
file with the SEC a registration statement under the Securities Act relating
to, any additional shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock without the
prior written consent of Credit Suisse First Boston Corporation for a period of
180 days after the date of this prospectus, except in our case for grants of
employee stock options pursuant to the terms of any stock option plans in
effect on the date of this prospectus, issuances of securities pursuant to the
exercise of employee stock options outstanding on the date of this prospectus,
employee stock purchases pursuant to the terms of a plan in effect on the date
of this prospectus or the issuance of shares pursuant to the exercise of any
other stock options outstanding on the date of this prospectus.

In general, under Rule 144 as currently in effect, if a minimum of one year
has elapsed since the later of the date of acquisition of the restricted
securities from the issuer or from an affiliate of the issuer, a person (or
persons whose shares of common stock are aggregated), including persons who may
be deemed Tanning affiliates, would be entitled to sell within any three-month
period a number of shares of common stock that does not exceed the greater of

(1) one percent of the then-outstanding shares of common stock, which
equals approximately 198,632 shares immediately after this offering,
and

(2) the average weekly trading volume during the four calendar weeks
preceding the date on which notice of the sale is filed with the SEC.

Sales under Rule 144 are also subject to certain restrictions as to the
manner of sale, notice requirements and the availability of current public
information about us. In addition, under Rule 144(k), if a period of at least
two years has elapsed since the later of the date restricted securities were
acquired from us or the date they were acquired from a Tanning affiliate, a
stockholder who is not a Tanning affiliate at the time of sale and who has not
been a Tanning affiliate for at least three months prior to the sale would be
entitled to sell shares of common stock in the public market immediately
without compliance with the foregoing requirements under Rule 144. Rule 144
does not require the same person to have held the securities for the applicable
periods. The foregoing summary of Rule 144 is not intended to be a complete
description.

In addition, any employee, director or officer of, or consultant to Tanning
who acquired shares pursuant to a written compensatory plan or contract may be
entitled to rely on the resale provisions of Rule 701, which permits non-
affiliates to sell their Rule 701 shares without having to comply with the
public information, holding period, volume limitation or notice provisions of
Rule 144, and permits Tanning affiliates to sell their Rule 701 shares without
having to comply with the holding period restrictions of Rule 144, in each
case, commencing 90 days after the date of this prospectus.

Immediately following this offering, none of the 15,863,166 "restricted
securities" will be available for immediate sale in the public market pursuant
to Rule 144(k). Beginning 90 days after the date of this prospectus, and
without consideration of the contractual restrictions described above, 646,103
shares acquired

61
<PAGE>

upon exercise of options issued under our stock option plans and purchases
under our employee stock purchase plans will be outstanding and eligible for
sale in reliance upon Rule 701. Additional shares may be available if options
are exercised in the 180-day period following the date of this prospectus.
Shares of our common stock issued in reliance on Rule 701 may be resold by
holders who are not Tanning affiliates under Rule 144 without compliance with
the holding period, amount and notice limitations and by holders who are
Tanning affiliates under Rule 144 without compliance with the holding period
limitation. Simultaneously with the effectiveness of this offering, we intend
to file a registration statement on Form S-8 under the Securities Act to
register 1 million shares of common stock reserved for issuance under our
employee stock purchase plan and to register 5 million shares of common stock
reserved or to be available for issuance pursuant to our stock option plans.
Shares of our common stock issued under our employee stock purchase plan
generally will be available for sale in the open market by holders who are not
Tanning affiliates and, subject to the volume and other applicable limitations
of Rule 144, by holders who are Tanning affiliates, unless such shares are
subject to the contractual restrictions described above. Shares of common stock
acquired upon exercise of options issued under our stock option plans generally
will be available for sale in the open market by holders who are not Tanning
affiliates and, subject to the volume and other applicable limitations of Rule
144, by holders who are Tanning affiliates, unless such shares are subject to
the contractual restrictions described above.

Prior to this offering, there has been no public market for our common
stock. No information is currently available and we cannot predict the timing
or amount of future sales of shares, or the effect, if any, that future sales
of shares, or the availability of shares for future sale, will have on the
market price of our common stock prevailing from time to time. Sales of
substantial amounts of our common stock (including shares issuable upon the
exercise of stock options) in the public market after the lapse of the
restrictions described above, or the perception that such sales may occur,
could materially adversely affect the prevailing market prices for our common
stock and our ability to raise equity capital in the future. See "Risk
Factors--Risks Related to this Offering--The sale or availability for sale of
substantial amounts of our common stock could adversely affect its market
price."

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<PAGE>

UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS

The following is a general discussion of the principal U.S. federal income
and estate tax consequences of the ownership and disposition of our common
stock by a Non-U.S. Holder. As used in this prospectus, the term "Non-U.S.
Holder" is a person other than:

. a citizen or individual resident of the United States,

. a corporation or partnership created or organized in or under the laws
of the United States or of any political subdivision of the United
States, other than a partnership treated as foreign under U.S. Treasury
regulations,

. an estate whose income is includible in gross income for U.S. federal
income tax purposes regardless of its source, or

. a trust, in general, if it is subject to the primary supervision of a
court within the United States and the control of one or more U.S.
persons.

An individual may, subject to certain exceptions, be treated as a resident
of the United States for U.S. federal income tax purposes, instead of a
nonresident, by, among other things, being present in the United States for at
least 31 days in the calendar year and for an aggregate of at least 183 days
during a three-year period ending in the current calendar year--counting for
these purposes all of the days present in the current year, one-third of the
days present in the immediately preceding year and one-sixth of the days
present in the second preceding year. Residents are subject to U.S. federal tax
as if they were U.S. citizens.

This discussion does not consider:

. U.S. state and local or non-U.S. tax consequences,

. specific facts and circumstances that may be relevant to a particular
Non-U.S. Holder's tax position, including, if the Non-U.S. Holder is a
partnership, that the U.S. tax consequences of holding and disposing of
our common stock may be affected by certain determinations made at the
partner level,

. the tax consequences for the shareholders, partners or beneficiaries of
a Non-U.S. Holder,

. special tax rules that may apply to certain Non-U.S. Holders, including
without limitation, banks, insurance companies, dealers in securities
and traders in securities, or

. special tax rules that may apply to a Non-U.S. Holder that holds our
common stock as part of a "straddle," "hedge" or "conversion
transaction."

The following discussion is based on provisions of the U.S. Internal Revenue
Code of 1986, applicable Treasury regulations, and administrative and judicial
interpretations, all as of the date of this prospectus, and all of which may
change, retroactively or prospectively. The following summary is for general
information. Accordingly, each Non-U.S. Holder should consult a tax advisor
regarding the U.S. federal, state, local and non-U.S. income and other tax
consequences of acquiring, holding and disposing of shares of our common stock.

Dividends

We do not anticipate paying cash dividends on our common stock in the
foreseeable future. See "Dividend Policy." In the event, however, that
dividends are paid on shares of common stock, dividends paid to a Non-U.S.
Holder of common stock generally will be subject to withholding of U.S. federal
income tax at a 30% rate, or such lower rate as may be provided by an
applicable income tax treaty. Non-U.S. Holders should consult their tax
advisors regarding their entitlement to benefits under a relevant income tax
treaty.

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<PAGE>

Dividends that are effectively connected with a Non-U.S. Holder's conduct of
a trade or business in the United States or, if an income tax treaty applies,
attributable to a permanent establishment, or in the case of an individual, a
"fixed base," in the United States, as provided in that treaty ("U.S. trade or
business income"), are generally subject to U.S. federal income tax on a net
income basis at regular graduated rates, but are not generally subject to the
30% withholding tax if the Non-U.S. Holder files the appropriate U.S. Internal
Revenue Service form with the payor. Any U.S. trade or business income received
by a Non-U.S. Holder that is a corporation may also, under certain
circumstances, be subject to an additional "branch profits tax" at a 30% rate
or such lower rate as specified by an applicable income tax treaty.

Dividends paid prior to 2001 to an address in a foreign country are
presumed, absent actual knowledge to the contrary, to be paid to a resident of
such country for purposes of the withholding discussed above and for purposes
of determining the applicability of a tax treaty rate. For dividends paid after
2000:

. a Non-U.S. Holder of common stock who claims the benefit of an
applicable income tax treaty rate generally will be required to satisfy
applicable certification and other requirements;

. in the case of common stock held by a foreign partnership, the
certification requirement will generally be applied to the partners of
the partnership and the partnership will be required to provide certain
information, including a U.S. taxpayer identification number; and

. look-through rules will apply for tiered partnerships.

A Non-U.S. Holder of common stock that is eligible for a reduced rate of
U.S. withholding tax under an income tax treaty may obtain a refund or credit
of any excess amounts withheld by filing an appropriate claim for a refund with
the IRS.

Gain on disposition of common stock

A Non-U.S. Holder generally will not be subject to U.S. federal income tax
in respect of gain recognized on a disposition of common stock unless:

. the gain is U.S. trade or business income, in which case, the branch
profits tax described above may also apply to a corporate Non-U.S.
Holder;

. the Non-U.S. Holder is an individual who holds the common stock as a
capital asset within the meaning of Section 1221 of the Internal Revenue
Code, is present in the United States for more than 182 days in the
taxable year of the disposition and meets certain other requirements;

. the Non-U.S. Holder is subject to tax pursuant to the provisions of the
U.S. tax law applicable to certain U.S. expatriates; or

. we are or have been a "U.S. real property holding corporation" for
federal income tax purposes at any time during the shorter of the five-
year period ending on the date of disposition or the period that the
Non-U.S. Holder held our common stock.

Generally, a corporation is a "U.S. real property holding corporation" if
the fair market value of its "U.S. real property interests" equals or exceeds
50% of the sum of the fair market value of its worldwide real property
interests plus its other assets used or held for use in a trade or business.
Tanning believes that it has not been, is not currently, and does not
anticipate becoming, a "U.S. real property holding corporation" for U.S.
federal income tax purposes. The tax relating to stock in a "U.S. real property
holding corporation" will not apply to a Non-U.S. Holder whose holdings, direct
and indirect, at all times during the applicable period, constituted 5% or less
of the common stock, provided that the common stock was regularly traded on an
established securities market.

Federal estate tax

Common stock owned or treated as owned by an individual who is a Non-U.S.
Holder at the time of death will be included in the individual's gross estate
for U.S. federal estate tax purposes, unless an applicable estate tax or other
treaty provides otherwise and, therefore, may be subject to U.S. federal estate
tax.

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<PAGE>

Information reporting and backup withholding tax

We must report annually to the IRS and to each Non-U.S. Holder the amount of
dividends paid to that holder and the tax withheld with respect to those
dividends. Copies of the information returns reporting those dividends and
withholding may also be made available to the tax authorities in the country in
which the Non-U.S. Holder is a resident under the provisions of an applicable
income tax treaty or agreement.

Under certain circumstances, U.S. Treasury Regulations require information
reporting and backup withholding at a rate of 31% on certain payments on common
stock. Under currently applicable law, Non-U.S. Holders of common stock
generally will be exempt from these information reporting requirements and from
backup withholding on dividends paid prior to 2001 to an address outside the
United States. For dividends paid after 2000, however, a Non-U.S. Holder of
common stock that fails to certify its Non-U.S. Holder status in accordance
with applicable U.S. Treasury Regulations may be subject to backup withholding
at a rate of 31% on payments of dividends.

The payment of the proceeds of the disposition of common stock by a holder
to or through the U.S. office of a broker or through a non-U.S. branch of a
U.S. broker generally will be subject to information reporting and backup
withholding at a rate of 31% unless the holder either certifies its status as a
Non-U.S. Holder under penalties of perjury or otherwise establishes an
exemption. The payment of the proceeds of the disposition by a Non-U.S. Holder
of common stock to or through a non-U.S. office of a non-U.S. broker will not
be subject to backup withholding or information reporting unless the non-U.S.
broker is a "U.S. related person." In the case of the payment of proceeds from
the disposition of common stock by or through a non-U.S. office of a broker
that is a U.S. person or a "U.S. related person," information reporting, but
currently not backup withholding, on the payment applies unless the broker
receives a statement from the owner, signed under penalty of perjury,
certifying its non-U.S. status or the broker has documentary evidence in its
files that the holder is a Non-U.S. Holder and the broker has no actual
knowledge to the contrary. For this purpose, a "U.S. related person" is:

. a "controlled foreign corporation" for U.S. federal income tax purposes;

. a foreign person 50% or more of whose gross income from all sources for
the three-year period ending with the close of its taxable year
preceding the payment, or for such part of the period that the broker
has been in existence, is derived from activities that are effectively
connected with the conduct of a U.S. trade or business; or

. effective after 2000, a foreign partnership if, at any time during the
taxable year, (A) at least 50% of the capital or profits interest in the
partnership is owned by U.S. persons, or (B) the partnership is engaged
in a U.S. trade or business.

Effective after 2000, backup withholding may apply to the payment of
disposition proceeds by or through a non-U.S. office of a broker that is a U.S.
person or a "U.S. related person" unless certain certification requirements are
satisfied or an exemption is otherwise established and the broker has no actual
knowledge that the holder is a U.S. person. Non-U.S. Holders should consult
their own tax advisors regarding the application of the information reporting
and backup withholding rules to them, including changes to these rules that
will become effective after 2000.

Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be refunded, or credited against the holder's U.S. federal
income tax liability, if any, provided that the required information is
furnished to the IRS.

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<PAGE>

UNDERWRITING

Under an underwriting agreement, dated July , 1999, we have agreed to
sell to the underwriters named below, for whom Credit Suisse First Boston
Corporation, Salomon Smith Barney Inc., CIBC World Markets Corp., ING Barings
LLC and Adams, Harkness & Hill, Inc., are acting as representatives, the
following respective numbers of shares of our common stock:
<TABLE>
<CAPTION>
Number
of
Underwriters shares
------------ ------
<S> <C>
Credit Suisse First Boston Corporation................................
Salomon Smith Barney Inc. ............................................
CIBC World Markets Corp. .............................................
ING Barings LLC.......................................................
Adams, Harkness & Hill, Inc. .........................................
Total...............................................................
---------
4,000,000
=========
</TABLE>

The underwriting agreement provides that the underwriters are obligated to
purchase all of the shares of our common stock offered in this offering if any
are purchased, other than those shares covered by the over-allotment option
described below. The underwriting agreement also provides that if an
underwriter defaults, the purchase commitments of non-defaulting underwriters
may be increased or this offering of our common stock may be terminated.

We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 600,000 additional shares of our common stock at the initial
public offering price less the underwriting discounts and commissions. This
option may be exercised only to cover over-allotments of our common stock.

The underwriters propose to offer the shares of our common stock initially
at the public offering price on the cover page of this prospectus and to the
selling group members at that price less a selling concession of $ per
share. The underwriters and the selling group members may allow a discount of
$ per share on sales to other broker/dealers. After the initial public
offering, the public offering price and selling concession and discount to
dealers may be changed by the representatives.

The following table summarizes the discounts and commissions and estimated
expenses that we will pay.

<TABLE>
<CAPTION>
Per Share Total
----------------------------- -----------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts
and commissions paid by
us..................... $ $ $ $
Expenses payable by us.. $ $ $ $
</TABLE>

In addition, we will pay a fee of $250,000 to AEA Investors Inc., the
parent of AEA Tanning Investors Inc., which is a beneficial owner of our
common stock, for strategic advisory services in connection with this
offering. Although no affiliate of AEA Investors Inc. is participating in the
offering of the shares as underwriter or selling group member, such fee is
considered under the rules of the National Association of Securities Dealers
Inc. to be underwriting compensation received in connection with this
offering.

The underwriters have informed us that they do not expect sales to accounts
over which they exercise discretionary authority to exceed 5% of our common
stock being offered.

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<PAGE>

We, our executive officers and directors and a number of our existing
stockholders have agreed not to offer, sell, contract to sell, announce their
intention to sell, pledge or otherwise dispose of, directly or indirectly, or
file with the SEC a registration statement under the Securities Act relating
to, any additional shares of our common stock or securities convertible into to
exchangeable or exercisable for any shares of our common stock without the
prior written consent of Credit Suisse First Boston Corporation for a period of
180 days after the date of this prospectus, except in our case for grants of
employee stock options pursuant to the terms of any plan in effect on the date
of this prospectus, issuances of securities pursuant to the exercise of
employee stock options outstanding on the date of this prospectus, employee
stock purchases pursuant to the terms of a plan in effect on the date of this
prospectus or the issuance of shares pursuant to the exercise of any other
stock options outstanding on the date of this prospectus.

The underwriters have reserved for sale, at the initial public offering
price, up to 200,000 shares of common stock for our employees and certain other
persons associated with Tanning who have expressed an interest in purchasing
our common stock in this offering. The number of shares of common stock
available for sale to the general public in this offering will be reduced to
the extent these persons in fact purchase these shares. Any reserved shares not
so purchased will be offered by the underwriters to the general public on the
same terms as the other shares.

We have agreed to indemnify the underwriters against liabilities under the
Securities Act or contribute to payments which the underwriters may be required
to make in that respect.

Our common stock has been approved for listing on The Nasdaq National Market
under the symbol "TANN."

Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiation
between us and the representatives, and does not reflect the market price for
our common stock following this offering. Among the principal factors
considered in determining the initial public offering price will be:

. the information in this prospectus and otherwise available to the
representatives;

. market conditions for initial public offerings;

. the history of and prospects for the industry in which we will compete;

. our past and present operations;

. our past and present earnings and current financial position;

. the ability of our management;

. our prospects for future earnings;

. the present state of our development and our current financial
condition;

. the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies;

. the general condition of the securities markets at the time of this
offering; and

. other relevant factors.

We can offer no assurance that the initial public offering price will
correspond to the price at which the common stock will trade in the public
market subsequent to this offering or that an active trading market for the
common stock will develop and continue after this offering.

The representatives may engage in over-allotment, stabilizing
transactions, syndicate covering transactions and penalty bids in accordance
with Regulation M under the Exchange Act.

. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position. Stabilizing transactions
permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum.

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<PAGE>

. Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.

. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by that
syndicate member is purchased in a syndicate covering transaction to
cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of our common stock to be higher than it would
otherwise be in the absence of such transactions. These transactions may be
effected on The Nasdaq Stock Market's National Market or otherwise and, if
commenced, may be discontinued at any time.

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NOTICE TO CANADIAN RESIDENTS

Resale restrictions

The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the common stock.

Representations of purchasers

Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to Tanning and the dealer from whom
such purchase confirmation is received that: (1) such purchaser is entitled
under applicable provincial securities laws to purchase such common stock
without the benefit of a prospectus qualified under such securities laws, (2)
where required by law, that such purchaser is purchasing as principal and not
as agent, and (3) such purchaser has reviewed the text above under "Resale
restrictions."

Rights of action (Ontario purchasers)

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.

Enforcement of legal rights

All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such persons
in Canada or to enforce a judgment obtained in Canadian courts against such
issuer or persons outside of Canada.

Notice to British Columbia residents

A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such report
must be filed in respect of common stock acquired on the same date and under
the same prospectus exemption.

Taxation and eligibility for investment

Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.

69
<PAGE>

LEGAL MATTERS

Fried, Frank, Harris, Shriver & Jacobson (a partnership including
professional corporations), New York, New York will pass upon the validity of
the issuance of the shares of common stock offered hereby. Frederick H. Fogel
will be joining us as Vice President--Business Affairs and General Counsel upon
completion of this offering. Mr. Fogel is and will continue as a partner at
Fried, Frank, Harris, Shriver & Jacobson. Mr. Fogel has been granted options to
purchase 278,281 shares of our common stock, 61,386 of which will vest upon
this commencement of his employment with us. The underwriters have been
represented by Cravath, Swaine & Moore, New York, New York.

EXPERTS

The consolidated financial statements of Tanning Technology Corporation at
December 31, 1998 and 1997, and for each of the three years in the period ended
December 31, 1998, appearing in this prospectus and registration statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report appearing elsewhere herein, and are included in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 with respect
to the common stock being offered by this prospectus. This prospectus does not
contain all of the information set forth in the registration statement and the
exhibits and schedules to the registration statement. For further information
with respect to Tanning and the shares of common stock offered by this
prospectus, reference is made to the registration statement, including its
exhibits and schedules. Statements made in this prospectus to any contract or
other document are not necessarily complete and you should refer to the
exhibits attached to the registration statement for copies of the actual
contract or document. You may review a copy of the registration statement,
including its exhibits and schedules, at the SEC's public reference room,
located at 450 Fifth Street, N.W., Washington, D.C. 20549, or at the SEC's
regional offices located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and Seven World Trade Center, 13th Floor, New York, New York
10048 or on the Internet at http://www.sec.gov. You may obtain a copy of this
registration statement from the SEC's public reference room upon payment of
prescribed fees. Please call the SEC at (800) SEC-0330 for further information
on the operation of the public reference room.

As a result of this offering, we will become subject to the information and
reporting requirements of the Exchange Act and, in accordance with the Exchange
Act, we will file periodic reports, proxy statements and other information with
the SEC.

70
<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Auditors............................................ F-2
Consolidated Balance Sheets at December 31, 1998 and 1997 and at March 31,
1999 (unaudited)......................................................... F-3
Consolidated Statements of Income for the years ended December 31, 1998,
1997 and 1996 and for the periods ended March 31, 1999 and 1998
(unaudited).............................................................. F-5
Consolidated Statements of Stockholders'/Members' Equity for the years
ended December 31, 1998, 1997 and 1996 and for the period ended March 31,
1999 (unaudited)......................................................... F-6
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996 and for the periods ended March 31, 1999 and 1998
(unaudited).............................................................. F-7
Notes to Consolidated Financial Statements................................ F-8
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Tanning Technology Corporation

We have audited the accompanying consolidated balance sheets of Tanning
Technology Corporation as of December 31, 1998 and 1997, and the related
consolidated statements of income, stockholders'/members' equity, and cash
flows for each of the three years in the period ended 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 audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

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

Ernst & Young LLP

Denver, Colorado
February 26,
1999, except
for Note 4, as
to which the
date is May
17, 1999

F-2
<PAGE>

TANNING TECHNOLOGY CORPORATION

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
------------------------ March 31,
1997 1998 1999
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents............. $ 7,768,636 $10,446,111 $ 7,183,218
Accounts receivable--trade, net of
allowance for doubtful accounts of
$300,464, $956,656 and $685,714 at
December 31, 1997, December 31, 1998
and March 31, 1999, respectively..... 5,357,057 9,225,153 13,181,568
Accounts receivable--other............ 106,306 152,743 253,228
Income taxes receivable............... 603,500 -- --
Deferred income taxes................. 314,152 417,315 558,209
Prepaid expenses and other assets..... 77,206 344,867 362,956
----------- ----------- -----------
Total current assets.................... 14,226,857 20,586,189 21,539,179
Property and equipment, at cost:
Computer equipment.................... 1,733,839 2,081,553 2,276,574
Office furniture and equipment........ 1,117,970 1,342,097 1,452,385
Computer software..................... 211,477 917,757 1,045,597
Leasehold improvements................ 179,215 258,484 379,074
----------- ----------- -----------
3,242,501 4,599,891 5,153,630
Less accumulated depreciation and
amortization......................... (636,184) (1,384,859) (1,668,807)
----------- ----------- -----------
2,606,317 3,215,032 3,484,823
Deposits and other long-term assets..... 12,948 121,854 93,437
----------- ----------- -----------
Total assets............................ $16,846,122 $23,923,075 $25,117,439
=========== =========== ===========
</TABLE>

F-3
<PAGE>

TANNING TECHNOLOGY CORPORATION

CONSOLIDATED BALANCE SHEETS--(Continued)

<TABLE>
<CAPTION>
December 31,
------------------------ March 31,
1997 1998 1999
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
Liabilities and stockholders'/members'
equity
Current liabilities:
Accounts payable...................... $ 1,094,373 $ 1,554,871 $ 1,861,699
Accrued compensation.................. 1,410,116 2,280,842 1,599,651
Accrued distribution to former
members.............................. -- 165,257 165,257
Other accrued liabilities............. 457,863 629,190 317,856
Deferred revenue...................... 45,000 400,146 375,000
Income taxes payable.................. 15,223 1,432,518 1,511,205
Current portion of long-term debt..... 1,000,000 118,670 121,014
----------- ----------- -----------
Total current liabilities............... 4,022,575 6,581,494 5,951,682
Deferred income taxes................... 86,867 87,291 98,205
Long-term debt, net of current portion.. -- 460,183 428,766
Minority interest....................... -- 22,062 43,235
Commitments and contingencies...........
Stockholders'/members' equity:
Common stock:
Class A shares, $0.01 par value:
Authorized shares--9,520,293
Issued and outstanding shares--
9,520,293 at December 31, 1997,
December 31, 1998 and March 31,
1999............................... 58,159 290,795 290,795
Class B shares, $0.01 par value:
Authorized shares--5,696,770
Issued and outstanding shares--
5,127,259 at December 31, 1997;
5,696,770 at December 31, 1998 and
March 31, 1999..................... 26,700 151,376 151,376
Class C shares, $0.01 par value:
Authorized shares--8,536,568
Issued and outstanding shares--none
at December 31, 1997 and 1998;
281,555 at March 31, 1999.......... -- -- 8,600
Additional paid-in capital............ 12,800,772 14,178,203 15,226,603
Retained earnings (deficit)........... (143,543) 2,159,428 2,978,635
Accumulated comprehensive income
(loss)............................... (5,408) (7,757) (60,458)
----------- ----------- -----------
Total stockholders'/members' equity..... 12,736,680 16,772,045 18,595,551
----------- ----------- -----------
Total liabilities and
stockholders'/members' equity.......... $16,846,122 $23,923,075 $25,117,439
=========== =========== ===========
</TABLE>

See accompanying notes.

F-4
<PAGE>

TANNING TECHNOLOGY CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
Three months ended
Years ended December 31, March 31,
------------------------------------- ------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Services revenue........ $12,762,915 $25,235,268 $30,313,139 $4,613,213 $11,305,049
Product sales........... 46,150 872,038 2,975,417 569,800 --
----------- ----------- ----------- ---------- -----------
Net revenues............ 12,809,065 26,107,306 33,288,556 5,183,013 11,305,049
Operating expenses:
Project personnel
costs................ 6,569,108 14,722,065 14,941,164 2,888,509 5,492,295
Selling, marketing and
administrative
expenses............. 2,054,581 7,855,759 12,177,973 2,320,677 4,678,763
Product development
costs................ 431,000 1,608,178 2,785,723 819,858 --
Management fees--
related parties...... 901,932 73,000 -- -- --
Sign-on bonus related
to stock purchase
agreement............ -- 2,117,664 -- -- --
----------- ----------- ----------- ---------- -----------
Total operating
expenses........... 9,956,621 26,376,666 29,904,860 6,029,044 10,171,058
----------- ----------- ----------- ---------- -----------
Income (loss) from
operations............. 2,852,444 (269,360) 3,383,696 (846,031) 1,133,991
Other income (expense):
Interest income....... 10,648 291,292 333,195 89,894 120,003
Interest expense...... (89,397) (69,765) (81,576) (16,387) (12,039)
Other................. 49,260 (90,589) 33,979 23,008 54,850
----------- ----------- ----------- ---------- -----------
Income (loss) before
provision for (benefit
from) income taxes..... 2,822,955 (138,422) 3,669,294 (749,516) 1,296,805
Provision for (benefit
from) income taxes..... -- (211,829) 1,366,323 (278,820) 477,598
----------- ----------- ----------- ---------- -----------
Net income (loss)....... $ 2,822,955 $ 73,407 $ 2,302,971 $ (470,696) $ 819,207
=========== =========== =========== ========== ===========
Basic earnings (loss)
per share.............. $ 0.01 $ 0.15 $ (0.03) $ 0.05
=========== =========== ========== ===========
Basic weighted average
shares outstanding..... 13,718,710 14,968,974 14,647,552 15,345,327
=========== =========== ========== ===========
Diluted earnings (loss)
per share.............. $ 0.01 $ 0.15 $ (0.03) $ 0.05
=========== =========== ========== ===========
Diluted weighted average
shares outstanding..... 13,718,710 15,232,236 14,647,552 16,323,342
=========== =========== ========== ===========
</TABLE>

See accompanying notes.

F-5
<PAGE>

TANNING TECHNOLOGY CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS'/MEMBERS' EQUITY

<TABLE>
<CAPTION>
Class A Class B Class C
Member common stock common stock common stock Additional Retained
contributions Accumulated ------------------ ------------------ -------------- paid-in earnings
(distributions) earnings Shares Amount Shares Amount Shares Amount capital (deficit)
--------------- ----------- --------- -------- --------- -------- ------- ------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31,
1995............ $ 145,424 $ 954,176 -- $ -- -- $ -- -- $ -- $ -- $ --
Member
distributions... (3,852,063) -- -- -- -- -- -- -- -- --
Net income...... -- 2,822,955 -- -- -- -- -- -- -- --
Foreign currency
translation..... -- -- -- -- -- -- -- -- -- --
Comprehensive
income..........
----------- ---------- --------- -------- --------- -------- ------- ------ ----------- ----------
Balance,
December 31,
1996............ (3,706,639) 3,777,131 -- -- -- -- -- -- -- --
Member
distributions... (977,455) -- -- -- -- -- -- -- -- --
Member
contributions,
net............. 838,565 -- -- -- -- -- -- -- -- --
Net income and
comprehensive
income for month
ended January
31, 1997........ -- 216,950 -- -- -- -- -- -- -- --
Conversion to C
corporation and
sale of common
stock........... 3,845,529 (3,994,081) 9,520,293 2,763 3,657,342 927 -- -- 9,233,851 --
----------- ---------- --------- -------- --------- -------- ------- ------ ----------- ----------
Balance, January
31, 1997........ -- -- 9,520,293 2,763 3,657,342 927 -- -- 9,233,851 --
Stock split,
March 17, 1997.. -- -- -- 55,396 -- 17,927 -- -- (73,323) --
Sale of common
stock........... -- -- -- -- 1,469,917 7,846 -- -- 3,640,244 --
Net loss for the
11 months ended
December 31,
1997............ -- -- -- -- -- -- -- -- -- (143,543)
Foreign currency
translation..... -- -- -- -- -- -- -- -- -- --
Comprehensive
income (loss)...
----------- ---------- --------- -------- --------- -------- ------- ------ ----------- ----------
Balance,
December 31,
1997............ -- -- 9,520,293 58,159 5,127,259 26,700 -- -- 12,800,772 (143,543)
Stock split,
April 30, 1998.. -- -- -- 232,636 -- 109,476 -- -- (342,112) --
Sale of common
stock........... -- -- -- -- 569,511 15,200 -- -- 1,884,800 --
Distribution to
former members
of Tanning
Technology
Group, LLC...... -- -- -- -- -- -- -- -- (165,257) --
Net income...... -- -- -- -- -- -- -- -- -- 2,302,971
Foreign currency
translation..... -- -- -- -- -- -- -- -- -- --
Comprehensive
income..........
----------- ---------- --------- -------- --------- -------- ------- ------ ----------- ----------
Balance,
December 31,
1998............ -- -- 9,520,293 290,795 5,696,770 151,376 -- -- 14,178,203 2,159,428
Exercised stock
options
(unaudited)..... -- -- -- -- -- -- 281,555 8,600 1,048,400 --
Net income for
three months
ended March 31,
1999
(unaudited)..... -- -- -- -- -- -- -- -- -- 819,207
Foreign currency
translation
(unaudited)..... -- -- -- -- -- -- -- -- -- --
Comprehensive
income
(unaudited).....
----------- ---------- --------- -------- --------- -------- ------- ------ ----------- ----------
Balance, March
31, 1999
(unaudited)..... $ -- $ -- 9,520,293 $290,795 5,696,770 $151,376 281,555 $8,600 $15,226,603 $2,978,635
=========== ========== ========= ======== ========= ======== ======= ====== =========== ==========
<CAPTION>
Total
Accumulated stockholders'/
comprehensive members'
income (loss) equity
------------- --------------
<S> <C> <C>
Balance,
December 31,
1995............ $ -- $ 1,099,600
Member
distributions... -- (3,852,063)
Net income...... -- 2,822,955
Foreign currency
translation..... 12,079 12,079
--------------
Comprehensive
income.......... 2,835,034
------------- --------------
Balance,
December 31,
1996............ 12,079 82,571
Member
distributions... -- (977,455)
Member
contributions,
net............. -- 838,565
Net income and
comprehensive
income for month
ended January
31, 1997........ -- 216,950
Conversion to C
corporation and
sale of common
stock........... (12,079) 9,076,910
------------- --------------
Balance, January
31, 1997........ -- 9,237,541
Stock split,
March 17, 1997.. -- --
Sale of common
stock........... -- 3,648,090
Net loss for the
11 months ended
December 31,
1997............ -- (143,543)
Foreign currency
translation..... (5,408) (5,408)
--------------
Comprehensive
income (loss)... (148,951)
------------- --------------
Balance,
December 31,
1997............ (5,408) 12,736,680
Stock split,
April 30, 1998.. -- --
Sale of common
stock........... -- 1,900,000
Distribution to
former members
of Tanning
Technology
Group, LLC...... -- (165,257)
Net income...... -- 2,302,971
Foreign currency
translation..... (2,349) (2,349)
--------------
Comprehensive
income.......... 2,300,622
------------- --------------
Balance,
December 31,
1998............ (7,757) 16,772,045
Exercised stock
options
(unaudited)..... -- 1,057,000
Net income for
three months
ended March 31,
1999
(unaudited)..... -- 819,207
Foreign currency
translation
(unaudited)..... (52,701) (52,701)
--------------
Comprehensive
income
(unaudited)..... 766,506
------------- --------------
Balance, March
31, 1999
(unaudited)..... $(60,458) $18,595,551
============= ==============
</TABLE>

See accompanying notes.

F-6
<PAGE>

TANNING TECHNOLOGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Three months ended
Year ended December 31, March 31,
------------------------------------- ------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities
Net income (loss)....... $ 2,822,955 $ 73,407 $ 2,302,971 $ (470,696) $ 819,207
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Loss on disposal of
equipment............. -- -- 128,609 -- --
Depreciation and
amortization.......... 150,055 443,977 916,699 179,286 283,948
Deferred income
taxes................. -- (227,285) (102,739) (43,656) --
Minority interest...... -- -- 22,062 -- 21,173
Changes in operating
assets and
liabilities:
Accounts receivable--
trade............... (2,575,031) (5,036,989) (3,868,096) (321,469) (3,956,415)
Accounts receivable--
other............... -- (54,442) (46,437) 44,148 (100,485)
Income taxes
receivable.......... -- (603,500) 603,500 (433,770) --
Prepaid expenses and
other assets........ (124,649) 6,634 (267,661) (19,287) (18,089)
Deposits and other
long-term assets.... 6,901 744 (108,906) (516) 28,417
Accounts payable..... 265,540 746,104 460,498 (266,362) 306,828
Accrued
compensation........ 257,783 1,072,000 870,726 (539,592) (681,191)
Deferred revenue..... -- 45,000 355,146 63,750 (25,146)
Other accrued
liabilities......... 461,331 (265,892) 171,327 (8,578) (311,334)
Income taxes
payable............. -- 15,223 1,417,295 199,560 (51,293)
----------- ----------- ----------- ----------- -----------
Net cash provided by
(used in) operating
activities............. 1,264,885 (3,785,019) 2,854,994 (1,617,182) (3,684,380)
Investing activities
Purchase of property and
equipment, net......... (858,702) (1,899,060) (1,654,023) (441,292) (553,739)
----------- ----------- ----------- ----------- -----------
Net cash used in
investing activities... (858,702) (1,899,060) (1,654,023) (441,292) (553,739)
Financing activities
Principal payments under
capital lease
obligations............ (189,364) (40,471) -- -- --
Principal payments on
long-term debt......... -- (700,000) (1,073,478) -- (29,073)
Principal payments on
notes payable--related
parties................ (363,455) -- -- -- --
Borrowings on long-term
debt................... 1,700,000 -- 652,331 652,331 --
Exercise of stock
options................ -- -- -- -- 1,057,000
Proceeds from issuance
of common stock........ -- 12,725,000 1,900,000 -- --
Distributions to
members, net........... -- (138,890) -- -- --
----------- ----------- ----------- ----------- -----------
Net cash provided by
financing activities... 1,147,181 11,845,639 1,478,853 652,331 1,027,927
Effect of exchange rate
on cash................ 12,079 (5,408) (2,349) (1,110) (52,701)
----------- ----------- ----------- ----------- -----------
Net increase (decrease)
in cash and cash
equivalents............ 1,565,443 6,156,152 2,677,475 (1,407,253) (3,262,893)
Cash and cash
equivalents at
beginning of period.... 47,041 1,612,484 7,768,636 7,768,636 10,446,111
----------- ----------- ----------- ----------- -----------
Cash and cash
equivalents at end of
period................. $ 1,612,484 $ 7,768,636 $10,446,111 $ 6,361,383 $ 7,183,218
=========== =========== =========== =========== ===========
Supplemental disclosures
of cash flow
information
Cash paid for interest.. $ 35,866 $ 40,026 $ 163,897 $ 16,387 $ 12,039
Cash paid for income
taxes.................. -- 603,723 30,686 -- 478,324
</TABLE>

Supplemental disclosures of noncash investing and financing transactions

During 1997 and 1996, the Company distributed $977,455 and $3,852,063,
respectively, of its accounts receivable to its members.

See accompanying notes.

F-7
<PAGE>

TANNING TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for the three months ended March 31, 1998 and 1999 is unaudited)

1.BUSINESS AND ORGANIZATION

Tanning Technology Corporation (the "Company") is an information technology
services provider that architects, builds and deploys enterprise solutions for
corporations throughout the world. The Company specializes in large, complex,
integrated solutions that incorporate online transaction processing and very
large databases. Internet technologies are a central part of the Company's
solutions, enabling direct interaction among customers and business partners on
the World Wide Web and among employees within organizations on their private
intranets.

Tanning Technology Group, LLC ("TTG") was formed under the laws of the state
of Colorado on February 8, 1995, as a result of the combination of Courtney
Rose Corporation, WinSoft Corporation, Strategic Technologies and Systems, and
Hippeli Enterprises. The assets and liabilities contributed by the members were
recorded at historical cost as reflected on the accounts of the respective
entities prior to the formation of TTG.

On December 24, 1996, TTG entered into a Stock Purchase Agreement with AEA
Tanning Investors Inc. (AEA Tanning Investors Inc., together with certain
limited liability companies of which it is the managing member, the "TTC
Investors Group"). As a result of this agreement, on January 31, 1997 TTG
effected a series of transactions whereby TTG was merged into Tanning
Technology Corporation, a Delaware corporation newly formed in conjunction with
this transaction. The membership interests of the members of TTG were converted
into shares of Class A common stock of the Company. On the same date, the TTC
Investors Group purchased 3,657,342 shares of Class B common stock from the
Company for $9,076,910 and purchased directly from the former members of TTG
$3,648,090 of accounts receivable that had been distributed to the members of
TTG (see Note 7). On June 6, 1997, the TTC Investors Group purchased an
additional 1,469,917 shares of Class B common stock from the Company for
$3,648,090, which was comprised of $3,126,636 cash and accounts receivable with
a value of $521,454. On June 9, 1998, the TTC Investors Group purchased an
additional 569,511 shares of Class B common stock from the Company for
$1,900,000.

The Company's wholly-owned direct subsidiaries include Nextek Software Corp.
and a United Kingdom subsidiary, Tanning Technology Europe Limited ("TTEL").
During 1998, the Company established a 51% owned Indian subsidiary, Tanning
Technology India Pvt Ltd ("TTI"). The operating results of TTI are not material
to the consolidated results of operations. Nextek Software Corporation sold the
rights to certain developed software during 1998 and has no current plans for
future product sales.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation

The accompanying financial statements include the accounts of the Company
and all majority-owned subsidiaries. All significant intercompany transactions
have been eliminated.

Limited Liability Company ("LLC")

An LLC is an unincorporated association of two or more persons, whose
members have limited personal liability for the obligations or debts of the
entity. For federal income tax purposes, the Company was classified as an LLC
through January 31, 1997, at which time the Company converted from an LLC to a
C Corporation.

F-8
<PAGE>

TANNING TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Revenue Recognition

Substantially all of the Company's contracts are billed on a time and
materials basis. Under time and materials contracts, the Company recognizes
revenue as services are provided. In addition, the Company is generally
reimbursed for reasonable expenses incurred under its contracts. The Company
recognizes revenue for fixed price contracts on a percentage of completion
basis. The Company recognizes revenue from its software sales in accordance
with the provisions of the American Institute of Certified Public Accountants'
Statement of Financial Position 97-2, Software Revenue Recognition, which
provides guidance on applying generally accepted accounting principles in
recognizing revenue on software transactions.

Cash and Cash Equivalents

The Company considers all highly liquid investments (including money market
accounts) with a maturity of three months or less when purchased to be cash
equivalents.

Property and Equipment

Property and equipment is stated at cost. Depreciation and amortization,
which includes amortization of assets under capital leases, is based on the
straight-line method over the following estimated useful lives:

<TABLE>
<S> <C>
Computer equipment.................................... 5 years
Office furniture and equipment........................ 7 years
Computer software..................................... 3 years
Leasehold improvements................................ Lesser of the life
of the improvement
or the related asset
</TABLE>

Long-lived assets

The Company recognizes impairment losses on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. In such circumstances, those assets are written down to
estimated fair value. Long-lived assets consist principally of computer
equipment and office furniture and equipment. During the year ended December
31, 1998, the Company determined that computer and other equipment having an
original cost of approximately $296,633 was no longer being used. Accordingly,
the Company disposed of those assets and wrote off the remaining net book value
of $128,609.

Income Taxes

The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standard ("SFAS") No. 109, Accounting for Income Taxes,
which requires that the Company account for income taxes using the liability
method. Under SFAS No. 109, deferred income taxes are provided for temporary
differences in recognizing certain income and expense items for financial
reporting and tax reporting purposes. Upon completion of the merger of TTG with
the Company (see Note 1), the LLC status was terminated and the Company began
providing for current and deferred income taxes as a C corporation.
Accordingly, the consolidated statement of income for the year ended December
31, 1997 includes a one-time credit (included in benefit from income taxes) of
approximately $70,000 to record the related deferred tax asset. Prior to the
conversion to a C corporation, no provision for income taxes was provided since
members included their distributive shares of revenue and deductions of the
limited liability company in their personal capacities, pursuant to election
under Subchapter K of the Internal Revenue Code.

F-9
<PAGE>

TANNING TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Foreign Currency Translation

The financial statements of TTEL are prepared in pound sterling and
translated into U.S. dollars based on the current exchange rate at the end of
the period for the balance sheet and a weighted-average rate for the period on
the statement of income. Translation adjustments are reflected as foreign
currency translation adjustments within comprehensive income in
stockholders'/members' equity and accordingly have no effect on net income.
Transaction adjustments for TTEL are included in income. Foreign currency
transaction adjustments are not material to income.

Fair Value of Financial Instruments

The carrying amounts of the Company's cash and cash equivalents,
receivables, payables and accrued expenses approximate fair value due to the
short maturity of these instruments. The fair value of the Company's long-term
debt approximates carrying value and was estimated by discounting future cash
flows using rates currently available for debt with similar terms and remaining
maturities.

Sales to Significant Customers

The Company provides services to a small number of customers. Two customers
accounted for 31% each of total revenues in 1996. Two customers accounted for
40% and 22%, respectively, of total revenues in 1997. Two customers accounted
for 28% and 11%, respectively, of total revenues in 1998. Four customers
accounted for 31%, 12%, 12% and 12%, respectively, of total revenues for the
first three months of 1999. The Company performs periodic credit evaluations of
its customers' financial condition and collateral generally is not required.
Overall credit losses are within management's expectations.

Accounting Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company's management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent 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 from those estimates.

Stock-Based Compensation

The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees ("APB 25"), and related
interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recorded. The Company has adopted the disclosure-only provisions of
SFAS No. 123.

Earnings Per Share

The Company has adopted the provisions of SFAS No. 128, Earnings Per Share.
SFAS 128 requires entities to present both basic earnings per share ("EPS") and
diluted EPS. Basic EPS excludes dilution and is computed by dividing income
(loss) available to common stockholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock or resulted in the issuance
of common stock that then shared in the earnings of the entity. Potential
dilution of securities exercisable into common stock was computed using the
treasury stock method based on the average fair market

F-10
<PAGE>

TANNING TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

value of the stock. EPS for 1996 is not presented since there were no shares
outstanding due to the Company's status as an LLC. The following table reflects
the basic and diluted weighted average shares.

<TABLE>
<CAPTION>
Years ended December 31 Three months ended March 31
----------------------- ---------------------------
1997 1998 1998 1999
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Weighted-average shares
outstanding.............. 13,718,710 14,968,974 14,647,552 15,345,327
Dilutive impact of options
outstanding.............. -- 263,262 -- 978,015
----------- ----------- ------------- -------------
Weighted-average shares
and potential dilutive
shares outstanding....... 13,718,710 15,232,236 14,647,552 16,323,342
=========== =========== ============= =============
</TABLE>

Reclassifications

Certain of the prior year amounts have been reclassified to conform with the
1998 presentation.

Interim Financial Information

The financial statements as of and for the three months ended March 31, 1998
and 1999, are unaudited; however, they include all adjustments (consisting of
normal recurring adjustments) considered necessary by management for a fair
presentation of the financial position and results of operations for these
periods. The results of operations for interim periods are not necessarily
indicative of the results that may be expected for the entire year.

3.LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
December 31,
-------------------- March 31,
1997 1998 1999
---------- -------- -----------
(unaudited)
<S> <C> <C> <C>
Note and security agreements with bank,
interest at 8.71%, principal and
interest payable over sixty equal
monthly installments.................... $ -- $578,853 $549,780
Unsecured loan, interest at 6%, principal
and accrued interest paid in full in
1998.................................... 1,000,000 -- --
Less current portion..................... (1,000,000) (118,670) (121,014)
---------- -------- --------
Long-term debt........................... $ -- $460,183 $428,766
========== ======== ========
</TABLE>

The proceeds from the note and security agreements (the "Notes") totaling
$652,331 were used by the Company to purchase office furniture and fixtures.
The Notes are collateralized by the purchased assets.

4.STOCKHOLDERS'/MEMBERS' EQUITY

On May 17, 1999, the Company filed a registration statement with the
Securities and Exchange Commission for an initial public offering of shares of
its common stock. In connection with the planned initial public offering, the
Company intends to effect a 1 for 3.05 reverse stock split of its Class A and
Class C common shares; and a 1 for 2.67 reverse stock split of its Class B
common shares, and each share of Class A, Class B and Class C common stock will
be converted into one class of voting common stock. All references to common
shares in the accompanying financial statements reflect the Company's
anticipated reverse stock splits, but not the conversion to one class of common
stock, retroactively applied to all periods presented.

F-11
<PAGE>

TANNING TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

On March 17, 1997, the Board of Directors declared a 21.053:1 stock split of
the Company's Class A and B common stock, effected in the form of a stock
dividend of 20.053 shares of Class A and B common stock for each one share
issued and outstanding. Class A and B common stock issued and additional paid-
in capital as of December 31, 1997 have been restated to reflect this split.
The number of shares issued at December 31, 1997, after giving effect to both
the purchases by the TTC Investors Group and the stock splits, was 9,520,293,
5,127,259 and 0 of Class A, B and C common stock, respectively.

Effective April 30, 1998, the Board of Directors declared a 5:1 stock split
of the Company's Class A and B common stock, effected in the form of a stock
dividend of 4 shares of Class A and B common stock for each one share issued
and outstanding. The split was effected so that no change was made to the par
value of all outstanding shares. In conjunction with the stock split, each
outstanding stock option granted under the Stock Option Plan was also increased
while the exercise price of each stock option was decreased by the
corresponding 5:1 ratio.

In July 1998, the number of authorized shares of Class C nonvoting common
stock was increased to 8,536,568. The number of shares issued at December 31,
1998, after giving effect to both the stock splits and the purchases by the TTC
Investors Group, was 9,520,293, 5,696,770 and 0 of Class A, B and C common
stock, respectively. As of March 31, 1999 there were 9,520,293, 5,696,770 and
281,555 shares issued and outstanding of Class A, B and C common stock,
respectively.

5.INCOME TAXES

The components of income tax expense (benefit) are as follows:

<TABLE>
<CAPTION>
December 31,
---------------------
1997 1998
--------- ----------
<S> <C> <C>
Provision for (benefit from) income taxes:
Current:
Federal........................................... $ -- $ 268,823
State............................................. 2,903 68,352
Foreign........................................... 12,553 1,131,887
--------- ----------
Total current....................................... 15,456 1,469,062
Deferred:
Federal........................................... (194,058) (86,379)
State............................................. (33,227) (16,360)
--------- ----------
Total deferred...................................... (227,285) (102,739)
--------- ----------
Provision (benefit) from income taxes................. $(211,829) $1,366,323
========= ==========
</TABLE>

F-12
<PAGE>

TANNING TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The components of the deferred tax benefit, which arise from timing
differences between financial and tax reporting, are presented below:

<TABLE>
<CAPTION>
December 31,
----------------------
1997 1998
---------- ----------
<S> <C> <C>
Allowance for uncollectible accounts............... $ (121,328) $ (237,109)
Accrued bonuses.................................... (141,330) 141,330
Accrued vacation................................... (20,770) (10,462)
Deferred revenue................................... (18,171) 8,364
Foreign tax credit................................. (12,553) --
Net operating loss carryforward.................... (41,215) 41,215
Accelerated depreciation........................... 130,752 (43,461)
Deferred state income taxes........................ (2,670) 17,139
Organization costs................................. -- (19,755)
---------- ----------
$(227,285) $ (102,739)
========== ==========

Variation from the federal statutory rate is as follows:

<CAPTION>
December 31,
----------------------
1997 1998
---------- ----------
<S> <C> <C>
Expected provision for (benefit from) federal
income taxes at statutory rate of 34%............. $ (47,063) $1,247,561
Election of C corporation status................... (69,681) --
Tanning Technology Group, LLC income nontaxable due
to LLC status..................................... (86,780) --
Permanent differences.............................. -- 25,892
State tax benefit, net of federal benefit.......... (8,305) 34,315
Other.............................................. -- 58,555
---------- ----------
$(211,829) $1,366,323
========== ==========
</TABLE>

The components of the net deferred income tax asset are as follows:

<TABLE>
<CAPTION>
December 31,
-----------------
1997 1998
-------- --------
<S> <C> <C>
Deferred tax assets:
Allowance for uncollectible accounts.................... $121,328 $358,436
Accrued bonuses......................................... 141,330 --
Accrued vacation........................................ 20,770 31,232
Deferred revenue........................................ 18,171 9,807
Foreign tax credit...................................... 12,553 12,553
Net operating loss carryforward......................... 41,215 --
Other................................................... 2,670 19,756
-------- --------
358,037 431,784
Deferred tax liabilities:
Deferred state income taxes............................. -- 14,469
Accelerated depreciation................................ 130,752 87,291
-------- --------
Deferred tax asset, net................................... $227,285 $330,024
======== ========
</TABLE>

For the year ended December 31, 1998, income before income taxes for
domestic and foreign operations was $521,137 and $3,148,157, respectively. For
the year ended December 31, 1997, income (loss) before income taxes for
domestic and foreign operations was $164,074 and $(302,496), respectively.

F-13
<PAGE>

TANNING TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

6.LEASES
The Company leases equipment and office space. Rental expense under
operating leases included in selling, marketing and administrative expenses was
$1,153,562, $601,341 and $250,593 for the years ended December 31, 1998, 1997,
and 1996, respectively.

The following represents the future minimum lease payments for all
noncancelable operating leases at December 31, 1998:

<TABLE>
<S> <C>
1999........................................................... $1,654,502
2000........................................................... 1,731,424
2001........................................................... 1,390,055
2002........................................................... 1,407,827
2003........................................................... 1,437,480
----------
Total minimum lease payments................................... $7,621,288
==========
</TABLE>

During 1997, all capital leases, which were substantially with members of
the Company, were paid in full.

7.RELATED PARTY TRANSACTIONS

In conjunction with the Stock Purchase Agreement with the TTC Investors
Group (see Note 1), the Company entered into employment agreements with certain
stockholders of the Company on January 31, 1997. These employment agreements
are for three years and consist of annual minimum salary payments of $950,000
(in the aggregate for the employees who are party to these agreements) plus
annual bonuses, as defined. In connection with the initial public offering, the
Company intends to amend these agreements to change the annual salary payments
to $570,000 (in the aggregate for the employees who are party to these
agreements) plus annual bonuses. In addition, in February 1997 the Company paid
sign-on bonuses totaling $1,573,212 to certain stockholders of the Company and
$544,452 to certain employees of the Company.

On January 24, 1997, TTG distributed $977,455 of accounts receivable
balances which were generated from January 1997 sales in the United States, to
its members. The amount distributed of $977,455 is included in member
distributions in the accompanying consolidated statement of
stockholders'/members' equity.

Effective December 31, 1998, the Company agreed to distribute $165,257 to
the former members of TTG. This distribution was for reimbursement of taxes
paid by the members resulting from the conversion of an LLC to a C Corporation
on January 31, 1997.

The Company incurred management fees of $0, $73,000, and $901,932 to certain
of its members for the years ended December 31, 1998, 1997, and 1996,
respectively.

Receivable balances, owed to the Company by employees, totaled $66,024,
$60,753 and $68,566 at December 31, 1998 and 1997, and March 31, 1999,
respectively.

8.COMMITMENTS AND CONTINGENCIES

During 1997, the Company entered into an agreement with two individuals
whereby these individuals would receive commissions and royalties earned on
sales made by Nextek Software Corporation as defined in the agreement. The
Company incurred royalty and commission expenses of $104,569 and $28,210
related to this agreement for the years ended December 31, 1998 and 1997,
respectively.

F-14
<PAGE>

TANNING TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

9.EMPLOYEE BENEFIT PLAN

The Company has a defined contribution plan under Section 401(k) of the
Internal Revenue Code. Employees age twenty-one or older are eligible to
participate in the plan upon employment with the Company and may elect to defer
up to 15 percent of their annual compensation up to the maximum amount as
determined by the Internal Revenue Service. Under the retirement plan
agreement, the Company, at its discretion, may make voluntary contributions to
the plan. Each employee must complete one year of service, as defined, in order
to receive any voluntary contributions made by the Company. Total employer
contributions to the plan for the two-month period ended March 31, 1999 were
$38,626. No employer contributions were made to the plan in either 1998 or
1997.

10.STOCK OPTIONS

Effective February 1, 1997, the Company adopted the Tanning Technology
Corporation Stock Option Plan (the "1997 Plan"). Under the provisions of the
1997 Plan, nonqualified stock options may be granted by a committee of the
Board of Directors at its discretion to key employees, officers or independent
contractors of the Company. The Company's 1997 Plan authorized the grant of
options for up to 3,289,094 shares of Class C nonvoting common stock. All
awards are for the right to purchase one share of Class C nonvoting common
stock at a price to be determined by the committee. Generally, all options vest
over a period of 3-4 years. All options, once vested, are exercisable until
February 1, 2007, at which time the 1997 Plan shall terminate.

Effective July 24, 1998, the Company adopted the Tanning Technology
Corporation 1998 Stock Option Plan (the "1998 Plan"). The 1998 plan, which
carries similar terms and conditions as the 1997 plan, authorizes the grant of
options for up to 5,247,474 shares of Class C nonvoting common stock. All
options granted under the 1998 Plan, once vested, are exercisable until July
24, 2008, at which time the 1998 Plan shall terminate.

Pro forma information regarding net income is required by SFAS No. 123, and
has been determined as if the Company had accounted for its employee stock
options under the fair value method of that Statement. The fair value of these
options was estimated at the date of grant using a Black-Scholes option-pricing
model with the following weighted average assumptions for 1998 and 1997,
respectively: risk-free interest rates of 4.64%-5.36% and 5.77%; dividend
yields of 0; volatility factors of 0 and a weighted-average expected life of
the option of 5 years.

The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods. The
Company's pro forma net income (loss) and earnings per share was as follows:

<TABLE>
<CAPTION>
Year ended December
31,
---------------------
1997 1998
--------- ----------
<S> <C> <C>
Net income (loss)................................... $(149,000) $2,047,000
========= ==========
Basic earnings (loss) per share..................... $ (0.01) $ 0.14
========= ==========
Diluted earnings (loss) per share................... $ (0.01) $ 0.13
========= ==========
</TABLE>

F-15
<PAGE>

TANNING TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

A summary of the Company's stock option activity, and related information,
for the year ended December 31, 1998, follows:

<TABLE>
<CAPTION>
Weighted-average
Options exercise price
--------- ----------------
<S> <C> <C>
Outstanding January 1, 1997...................... -- $ --
Granted.......................................... 1,934,869 2.90
Exercised........................................ -- --
Forfeited........................................ (130,956) 2.90
---------
Outstanding December 31, 1997.................... 1,803,913 2.90
Granted.......................................... 3,846,330 3.79
Exercised........................................ -- --
Forfeited........................................ (318,386) 2.90
---------
Outstanding December 31, 1998.................... 5,331,857 3.57
Granted.......................................... 352,108 4.25
Exercised........................................ (281,555) 3.76
Forfeited........................................ -- --
---------
Outstanding March 31, 1999....................... 5,402,410 3.60
=========
Exercisable at December 31, 1997................. 356,445 2.90
=========
Exercisable at December 31, 1998................. 1,106,780 3.36
=========
</TABLE>

The weighted-average fair value of options granted during the years ended
December 31, 1998 and 1997, was $0.86 and $0.73, respectively. The range of
exercise prices for options outstanding as of December 31, 1998, is $2.90-
$3.82. The weighted-average remaining contractual lives of outstanding options
is 9.3 years.

11.SEGMENT REPORTING

During 1998, the Company adopted Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). SFAS 131 requires a business enterprise, based upon a management
approach, to disclose financial and descriptive information about its operating
segments. Operating segments are components of an enterprise about which
separate financial information is available and regularly evaluated by the
chief operating decision maker(s) of an enterprise. Under this definition, the
Company operated as a single segment for all years and periods presented.

SFAS 131 also requires the disclosure of certain financial information
pertaining to geographic areas. Long-lived assets located outside of the United
States are not material. Information about the Company's revenues by geographic
area is as follows (in thousands):

<TABLE>
<CAPTION>
December 31, March 31,
----------------------- --------------
1996 1997 1998 1998 1999
------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Revenues from external customers:
United States....................... $12,352 $23,139 $22,811 $4,089 $ 7,319
Denmark............................. -- 1,532 9,595 845 3,476
UK and other Europe................. 457 1,436 883 249 510
------- ------- ------- ------ -------
Total............................... $12,809 $26,107 $33,289 $5,183 $11,305
======= ======= ======= ====== =======
</TABLE>

F-16
<PAGE>

TANNING TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

12.EMPLOYEE STOCK PURCHASE PLAN

In March 1999, the Company established the Tanning Technology Corporation
1999 Qualified Stock Purchase Plan (the "Plan"). The Company intends that the
Plan qualify as an employee stock purchase plan under Section 423 of the
Internal Revenue Code. Employees scheduled to work at least 20 hours per week
and who have completed at least three months of continuous full-time employment
in the service of the Company are eligible to participate in the Plan. Under
the Plan, eligible employees can purchase shares, subject to limitations, of
the Company's Class C nonvoting common stock at a discount not to exceed 15% of
the market price as defined. No purchases were made as of March 31, 1999. On
April 15, 1999, the Company issued 59,094 shares of Class C nonvoting common
stock in conjunction with this plan.

F-17
<PAGE>

[TANNING LOGO]
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth expenses and costs payable by Tanning (other
than underwriting discounts and commissions) expected to be incurred in
connection with the issuance and distribution of the securities described in
this registration statement. All amounts are estimated except for the
Securities and Exchange Commission's registration fee and the National
Association of Securities Dealers' filing fee.

<TABLE>
<CAPTION>
Amount
----------
<S> <C>
Registration fee under Securities Act........................ $ 15,985
NASD filing fee.............................................. 6,250
The Nasdaq National Market fees.............................. 95,000
Legal fees and expenses...................................... 750,000
Accounting fees and expenses................................. 200,000
Advisory fee................................................. 250,000
Printing and engraving expenses.............................. 200,000
Registrar and transfer agent fees............................ 10,000
Miscellaneous expenses....................................... 222,765
----------
Total...................................................... $1,750,000
==========
</TABLE>

Item 14. Indemnification of Directors and Officers.

Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers as well as other
employees and individuals against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement in connection with specified
actions, suits and proceedings, whether civil, criminal, administrative, or
investigative (other than action by or in the right of the corporation--a
"derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such action, and the statute requires court approval
before there can be any indemnification where the person seeking
indemnification has been found liable to the corporation. The statute provides
that it is not exclusive of other indemnification that may be granted by a
corporation's certificate of incorporation, bylaws, disinterested director
vote, stockholder vote, agreement, or otherwise.

Tanning's bylaws currently, and Tanning's certificate of incorporation and
bylaws, as they will be amended and restated immediately prior to this
offering, require Tanning to indemnify to the fullest extent authorized by the
DGCL any person made or threatened to be made a party to an action, suit or
proceeding, whether criminal, civil, administrative or investigative, by reason
of the fact that he or she or a person of whom he or she is the legal
representative is or was a director of the officer of Tanning or is or was
serving at the request of Tanning as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans maintained
or sponsored by Tanning. Tanning will also be able to grant indemnification to
its other employees or agents. The amended and restated certificate of
incorporation and bylaws will also require Tanning to advance expenses, as
incurred, to its directors, officers and other agents and employees in
connection with a legal proceeding, to the fullest extent permitted by the
DGCL, subject to certain limited exceptions. The amended and restated
certificate of incorporation and bylaws will also permit Tanning to enter into
indemnification agreements with its directors and officers and to obtain
director and officer liability insurance.

II-1
<PAGE>

As permitted by Section 102(b)(7) of the DGCL, Tanning's certificate of
incorporation eliminates the liability of a director to the corporation or its
stockholders for monetary damages for such breach of fiduciary duty as a
director, except for liabilities arising (a) from any breach of the director's
duty of loyalty to the corporation or its stockholders; (b) from acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (c) under Section 174 of the DGCL; or (d) from any
transaction from which the director derived an improper personal benefit.

Tanning has obtained primary and excess insurance policies insuring its
directors and officers and those of its subsidiaries against certain
liabilities they may incur in their capacity as directors and officers. Under
these policies, the insurer, on behalf of Tanning, may also pay amounts for
which Tanning has granted indemnification to the directors or officers.
Additionally, Mr. Mahan, as an employee of AEA Investors Inc., and Mr. Skelsey,
as a consultant to AEA Investors Inc., are covered by an excess coverage
insurance policy maintained by AEA Investors Inc. against certain liabilities
they may incur in their capacity as directors of Tanning in excess of the
coverage provided by Tanning's director and officer insurance policies.

Additionally, reference is made to the Underwriting Agreement that will be
filed as Exhibit 1.1 to this registration statement, which provides for
indemnification by the Underwriters of Tanning, its directors and officers who
sign the registration statement and persons who control Tanning, under certain
circumstances.

Item 15. Recent Sales of Unregistered Securities.

Since January 31, 1997, we have issued and sold the securities listed below.
All sales were made in reliance on Section 4(2) of the Securities Act and/or
Regulation D or Rule 701 promulgated under the Securities Act and were made
without general solicitation or advertising. All share numbers set forth below
reflect the stock splits described in Note 1 to the Financial Statements, which
are included in the prospectus.

1. On January 31, 1997, we issued and sold 3,657,342 shares of common
stock to the "TTC Investors Group," which consists of TTC Investors I
LLC, TTC Investors IA LLC, TTC Investors II LLC and TTC Investors IIA
LLC, for aggregate consideration of $9,076,910.

2. On June 6, 1997, we issued and sold 1,469,917 shares of common stock to
the TTC Investors Group for aggregate consideration of $3,648,090.

3. On June 9, 1998, we issued and sold 569,511 shares of common stock to
the TTC Investors Group for aggregate consideration of $1,900,000.

4. We have granted stock options to employees, consultants, directors and
other service providers pursuant to our 1997 stock option plan and our
1998 stock option plan and we have sold common stock pursuant to
options exercised under this plan.

5. We have issued and sold common stock to our employees pursuant to our
1999 stock purchase plan.

Item 16. Exhibits and Financial Statement Schedules.

(a) Exhibits

II-2
<PAGE>

The following documents are filed as exhibits to this registration
statement:

<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement*
3.1 Form of Certificate of Incorporation of Tanning, as amended and
restated (to be effective upon consummation of the offering)*
3.2 Form of Bylaws of Tanning, as amended and restated (to be effective
upon consummation of the offering)*
4.1 Form of certificate of common stock*
4.2 Form of Amended and Restated Registration Rights Agreement by and
among Tanning and the parties listed as signatories thereto
5.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson*
10.1 Stock Purchase Agreement, dated as of December 24, 1996, by and among
Tanning Technology Group, L.L.C., Courtney Rose Corporation, WinSoft
Corporation, Hippeli Enterprises, Inc., Stephen Brobst, Larry Tanning,
Bipin Agarwal, Toni Hippeli and AEA Tanning Investors Inc.*
10.2 Supplement to Stock Purchase Agreement, dated as of January 31, 1997*
10.3 Amendment No. 1 to Stock Purchase Agreement, dated as of June 9, 1998,
by and among Tanning, Courtney Rose Corporation, WinSoft Corporation,
Hippeli Enterprises, Inc., Stephen Brobst, Larry Tanning, Bipin
Agarwal, Toni Hippeli, AEA Tanning Investors Inc., TTC Investors I
LLC, TTC Investors II LLC, TTC Investors IA LLC and TTC Investors IIA
LLC*
10.4 Form of Employment, Confidentiality and Non-Competition Agreement
(including Employee-Specific Terms) between Tanning and Larry Tanning*
10.5 Form of Promissory Note in the amount of $250,000, made by Larry
Tanning in favor of Tanning*
10.6 Form of Employment, Confidentiality and Non-Competition Agreement
(including Employee-Specific Terms) between Tanning and Bipin Agarwal*
10.7 Form of Promissory Note in the amount of $250,000, made by Bipin
Agarwal in favor of Tanning*
10.8 Form of Employment, Confidentiality and Non-Competition Agreement
between Tanning and each of P. Tracy Currie, Louis A. D'Alessandro,
Henry F. Skelsey, John Piccone, Mark Tanning and Frederick H. Fogel*
10.9 Employee-Specific Terms of Employment, Confidentiality and Non-
Competition Agreement between Tanning and P. Tracy Currie, dated as of
January 30, 1999*
10.10 Employee-Specific Terms of Employment, Confidentiality and Non-
Competition Agreement between Tanning and P. Tracy Currie, dated as of
June 1, 1997*
10.11 Employment and Expatriate Assignment Agreement between Tanning and P.
Tracy Currie, dated November 15, 1998*
10.12 Employee-Specific Terms of Employment, Confidentiality and Non-
Competition Agreement between Tanning and Louis A. D'Alessandro, dated
as of February 1, 1999*
10.13 Employee-Specific Terms of Employment, Confidentiality and Non-
Competition Agreement between Tanning and Louis A. D'Alessandro, dated
as of October 1, 1997*
10.14 Employee-Specific Terms of Employment, Confidentiality and Non-
Competition Agreement between Tanning and Henry F. Skelsey, dated as
of June 1, 1999*
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
10.15 Employee-Specific Terms of Employment, Confidentiality and Non-
Competition Agreement between Tanning and Henry F. Skelsey, dated as
of July 16, 1998*
10.16 Employee-Specific Terms of Employment, Confidentiality and Non-
Competition Agreement between Tanning and John Piccone, dated as of
June 30, 1999*
10.17 Employee-Specific Terms of Employment, Confidentiality and Non-
Competition Agreement between Tanning and Mark Tanning, dated as of
February 1, 1999*
10.18 Employee-Specific Terms of Employment, Confidentiality and Non-
Competition Agreement between Tanning and Mark Tanning, dated as of
June 1, 1997*
10.19 Employee-Specific Terms of Employment, Confidentiality and Non-
Competition Agreement between Tanning and Frederick H. Fogel, dated as
of June 30, 1999*
10.20 Form of Amended and Restated Shareholder Agreement by and among
Tanning and the parties listed as signatories thereto
10.21 Lease Agreement, dated as of January 31, 1995, between HD Delaware
Properties, Inc. and Tanning for premises at 4600 South Ulster Street*
10.22 Amendment No. 1 to Lease, dated as of September 15, 1995, by and
between HMS Office, Limited Partnership and Tanning for premises at
4600 South Ulster Street*
10.23 Amendment No. 2 to Lease, dated as of March 6, 1996, by and between
HMS Office, L.P. and Tanning for premises at 4600 South Ulster Street*
10.24 Amendment No. 3 to Lease, dated as of November 27, 1996, by and
between HMS Office, L.P. and Tanning for premises at 4600 South Ulster
Street*
10.25 Amendment No. 4 to Lease, dated as of July 11, 1997, by and between
HMS Office, L.P. and Tanning for premises at 4600 South Ulster Street*
10.26 Lease, dated as of June 3, 1998, by and between Denver Hines
Development, LLC and Tanning for premises at 4600 South Syracuse
Street*
10.27 Amendment No. 1 to Lease, dated as of March 11, 1999, by and between
Denver Hines Development, LLC and Tanning for premises at 4600 South
Syracuse Street*
10.28 Amendment No. 2 to Lease, dated as of May 28, 1999, by and between
Denver Hines Development, LLC and Tanning for premises at 4600 South
Syracuse Street*
10.29 Form of Excise Tax Agreement*
10.30 1997 Stock Option Plan
10.31 1998 Stock Option Plan*
10.32 1999 Employee Stock Purchase Plan*
10.33 1999 Stock Option Plan*
10.34 Separation Agreement and Release between Tanning and Thomas J. Stack,
dated as of May 14, 1999*
21.1 Subsidiaries of Tanning*
23.1 Consent of Ernst & Young LLP*
23.2 Consent of Fried, Frank, Harris, Shriver & Jacobson (included in
Exhibit 5.1 above)*
23.3 Consent of Michael E. Shanahan*
24.1 Power of Attorney*
27.1 Financial data schedule*
</TABLE>
- --------

* Previously filed.

(b) Financial Statement Schedule

II-4
<PAGE>

Schedule II -- Valuation and Qualifying Accounts

Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.

Item 17. Undertakings.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) To provide to the underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to each
purchaser.

(2) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

(3) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

II-5
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 4 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Denver, State of Colorado, on July 22, 1999.

TANNING TECHNOLOGY CORPORATION

/s/ Henry F. Skelsey
By: __________________________________
Henry F. Skelsey
Chief Financial Officer

Pursuant to the requirements of the Securities Act, this Amendment No. 4 to
the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<S> <C>
Signature Title
Date

* President, Chief Executive
- ------------------------------ Officer and Director
Larry G. Tanning (Principal Executive
Officer)

/s/ Henry F. Skelsey Executive Vice President, July 22,
- ------------------------------ Chief Financial Officer and 1999
Henry F. Skelsey Director (Principal
Financial and Accounting
Officer)

* Director
- ------------------------------
Bipin Agarwal

* Director
- ------------------------------
Toni S. Hippeli

* Director
- ------------------------------
Christopher P. Mahan

* Director
- ------------------------------
Joseph P. Roebuck

/s/ Henry F. Skelsey July 22,
*By: _________________________ 1999
Henry F. Skelsey
Attorney-in-fact
</TABLE>

II-6
<PAGE>

Report of Independent Auditors on Schedule

Board of Directors and Stockholders
Tanning Technology Corporation

We have audited the consolidated financial statements of Tanning Technology
Corporation as of December 31, 1998 and 1997, and for each of the three years
in the period ended December 31, 1998, and have issued our report thereon dated
February 26, 1999 (included elsewhere in this Registration Statement). Our
audits also included the financial statement schedule listed in Item 16(b) of
this Registration Statement. These schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

Ernst & Young LLP

Denver, Colorado
February 26, 1999

S-1
<PAGE>

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
Additions
--------------
Charged
Beginning to Ending
Balance Deductions Expense Other Balance
--------- ---------- -------- ----- --------
<S> <C> <C> <C> <C> <C>
Period Ending December 31, 1996
Allowance for Doubtful Accounts... $ -- $ -- $ -- -- $ --
Period Ending December 31, 1997
Allowance for Doubtful Accounts... $ -- $234,323 $534,787 -- $300,464
Period Ending December 31, 1998
Allowance for Doubtful Accounts... $300,464 $111,395 $767,587 -- $956,656
</TABLE>

S-2

<PAGE>

EXHIBIT 4.2

================================================================================

AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT

by and among

TANNING TECHNOLOGY CORPORATION

and

the parties listed as signatories hereto

Dated as of July 20, 1999

================================================================================

- i -
<PAGE>

TABLE OF CONTENTS

ARTICLE I DEFINITIONS................................................. 2

Section 1.1. Definitions............................................ 2

ARTICLE II REPRESENTATIONS AND WARRANTIES............................. 4

Section 2.1. Representations and Warranties......................... 4

ARTICLE III REGISTRATION RIGHTS........................................ 4

Section 3.1. Demand Registrations................................... 4
Section 3.2. Piggyback Registration................................. 5
Section 3.3. Holdback Agreements.................................... 7
Section 3.4. Registration Procedures................................ 8
Section 3.5. Registration Expenses..................................10
Section 3.6. Indemnification........................................11
Section 3.7. Participation in Underwritten Registrations............13
Section 3.8. Current Public Information.............................14
Section 3.9. Cooperation............................................14

ARTICLE IV TERMINATION.................................................14

ARTICLE V GENERAL PROVISIONS...........................................15

Section 5.1. Effective Date.........................................15
Section 5.2. Exclusive Agreement; No Third-Party Beneficiaries......15
Section 5.3. Governing Law, Etc.....................................15
Section 5.4. Successors and Assigns.................................16
Section 5.5. Severability...........................................16
Section 5.6. Notices................................................16
Section 5.7. Counterparts; Facsimile Signatures.....................17
Section 5.8. Interpretation.........................................17
Section 5.9. Amendment..............................................17
Section 5.10. Extension; Waiver.....................................18
Section 5.11. Enforcement of Agreement..............................18
Section 5.12. Further Assurances....................................18

- i -
<PAGE>

AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
-----------------------------

THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT, is made as of
July __, 1999 (this "Agreement"), by and among Tanning Technology Corporation, a
---------
Delaware corporation (the "Company"), Courtney Rose Corporation, a Colorado
-------
corporation ("Courtney"), WinSoft Corporation, a Colorado corporation
--------
("WinSoft"), Hippeli Enterprises, Inc., a Colorado corporation ("Hippeli"),
------- -------
Stephen Brobst, (Courtney, WinSoft, Hippeli and Stephen Brobst are collectively
referred to herein as the "Original Members"), Tanning Family Partnership,
----------------
L.L.L.P. ("TFP"), Larry G. Tanning, Christine A. Tanning, Larry G. Tanning
Irrevocable Trust for the Benefit of His Lineal Descendants ("LGT Trust"),
---------
Christine A. Tanning Irrevocable Trust for the Benefit of Her Lineal Descendants
("CAT Trust"), Bipin Agarwal, Toni Hippeli and Henry Skelsey (the Original
---------
Members and TFP, Larry G. Tanning, Christine A. Tanning, LGT Trust, CAT Trust,
Bipin Agarwal, Toni Hippeli and Henry Skelsey are referred to herein as the
"Tanning Parties"), AEA Tanning Investors Inc., a Delaware corporation ("AEA"),
--------------- ---
TTC Investors I LLC, a Delaware limited liability company ("TTC I"), TTC
-----
Investors II LLC, a Delaware limited liability company ("TTC II"), TTC Investors
------
IA LLC, a Delaware limited liability company ("TTC IA") and TTC Investors IIA
------
LLC, a Delaware limited liability company ("TTC IIA"), (AEA, TTC I, TTC II, TTC
IA and TTC IIA are collectively referred to herein as "TTC").
---

WHEREAS, the Company, the Tanning Parties (with the exception of Henry
Skelsey) and TTC are party to a Registration Rights Agreement dated as of
January 31, 1997, as amended prior to the date hereof, (the "Original
--------
Registration Rights Agreement");
- -----------------------------

WHEREAS, the parties to the Original Registration Rights Agreement
desire to make certain changes to such Original Registration Rights Agreement,
including adding Henry Skelsey as a party thereto, and to amend and restate such
Original Registration Rights Agreement to read in its entirety as set forth
below;

NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:
<PAGE>

ARTICLE I
DEFINITIONS

Section 1.1. Definitions.
-----------

"Agreement": as defined in the preamble to this Agreement.
---------

"Board of Directors": the board of directors of the Company.
------------------

"CAT Trust": as defined in the preamble to this Agreement.
---------

"Commission": the Securities and Exchange Commission or any other
----------
Federal agency at the time administering the Securities Act.

"Common Stock": the common stock of the Company (all classes) now or
------------
hereafter authorized to be issued.

"Company": as defined in the preamble to this Agreement.
-------

"Courtney": as defined in the preamble to this Agreement.
--------

"Demand Registrations": as defined in Section 3.1(a).
--------------------

"Director": a member of the Board of Directors.
--------

"Effective Date": as defined in Section 5.1.
--------------

"Exchange Act": the Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the Commission thereunder, all as the same shall be
in effect at the time.

"Hippeli": as defined in the preamble to this Agreement.
-------

"LGT Trust": as defined in the preamble to this Agreement.
---------

"Original Registration Rights Agreement": as defined in the preamble
--------------------------------------
to this Agreement.

"Person": any natural person, corporation, partnership, firm,
------
association, trust, government, governmental agency or other entity, whether
acting in an individual, fiduciary or other capacity.

"Piggyback Registration": as defined in Section 3.2(a).
----------------------

-2-
<PAGE>

"Registrable Securities": (i) any shares of Common Stock owned by, or
----------------------
otherwise hereafter acquired by, TTC or the Tanning Parties and (ii) any
securities issued as a dividend on or other distribution with respect to or in
exchange, replacement or in subdivision of, any such Common Stock. As to any
particular Registrable Securities, such securities shall cease to be Registrable
Securities when (i) a registration statement with respect to the sale of such
securities shall have been declared effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement, or (ii) such securities shall have been sold pursuant to Rule 144 (or
any successor provision) under the Securities Act.

"Registration Expenses": as defined in Section 3.5(a).
---------------------

"Securities Act": the Securities Act of 1933, as amended, and the
--------------
rules and regulations of the Commission thereunder, as the same shall be in
effect at the time.

"Shareholders": TTC and the Tanning Parties.
------------

"Shares": shares of Common Stock.
------

"Short-Form Registrations": as defined in Section 3.1(a).
------------------------

"Stock Purchase Agreement": the Stock Purchase Agreement, dated as of
------------------------
December 24, 1996, as amended and supplemented, among the Company, the Tanning
Parties, Stephen Brobst and TTC.

"Subsidiary": of any Person shall mean any corporation or other legal
----------
entity of which such Person (either alone or through or together with any other
Subsidiary) owns, directly or indirectly, 50% or more of the stock or other
equity interests, the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.

"Tanning Parties": as defined in the preamble to this Agreement.
---------------

"TFP": as defined in the preamble to this Agreement.
---

"TTC": as defined in the preamble to this Agreement.
---

"Voting Common Stock": Common Stock the holders of which are
-------------------
generally entitled to vote for the election of the board of directors of the
Company.

"WinSoft": as defined in the preamble to this Agreement.
-------

-3-
<PAGE>

ARTICLE II
REPRESENTATIONS AND WARRANTIES

Section 2.1. Representations and Warranties. (a) Each of the
------------------------------
parties hereto hereby represents and warrants to each other party hereto as
follows: It has all requisite power (corporate or otherwise) and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery by it of this Agreement, and the consummation
by it of the transactions contemplated hereby, have been duly authorized by all
necessary action (corporate or otherwise) on its part. This Agreement has been
duly executed and delivered by it and constitutes a valid and binding obligation
enforceable against it in accordance with its terms except to the extent such
enforceability may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws relating to creditors'
rights generally and to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law). No consent,
approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, is required by, or with
respect to, it in connection with the execution and delivery of this Agreement
by it or the consummation by it of the transactions contemplated hereby. The
execution and delivery of this Agreement by it and the consummation of the
transactions contemplated hereby by it does not conflict with, or result in a
breach of, any law or regulation of any governmental authority applicable to it
or any material agreement to which it is a party.

(b) Each of the Shareholders hereby represents and warrants to each
other Shareholder and the Company, that he or it is the record and beneficial
owner of the Shares as set forth on Schedule 2.1, free and clear of all liens
and encumbrances.

ARTICLE III
REGISTRATION RIGHTS

Section 3.1. Demand Registrations.
--------------------

(a) Requests for Registration. Subject to Sections 3.1(c) and 3.3,
-------------------------
(x) TTC shall have the right to make a total of two requests for registration
under the Securities Act of all or part of the Registrable Securities held by
TTC on Form S-1 or any similar long-form registration or, if available, on Form
S-2 or S-3 or any similar short-form registration ("Short-Form Registrations")
------------------------
and (y) during any twelve month period following the date hereof, the
Shareholders owning a majority of the Shares held by the Tanning Parties shall
have the right to request one registration of all or part of the Registrable
Securities held by them; provided that any request for a Demand Registration (as
defined below) shall not be otherwise deemed to be effective unless such request
includes Registrable Securities which have an estimated value of no less than
$25 million

-4-
<PAGE>

in the case of Demand Registrations other than Short-Form Registrations, and $15
million, in the case of Short-Form Registrations. Each request for a Demand
Registration shall specify the approximate number of Registrable Securities
requested to be registered and the anticipated per share price range for such
offering. All registrations requested pursuant to this Section 3.1(a) are
referred to herein as "Demand Registrations."
--------------------

(b) Short-Form Registrations. Demand Registrations will be Short-Form
------------------------
Registrations whenever the Company is permitted to use a Short-Form
Registration.

(c) Restrictions on Demand Registrations. The Company will not be
------------------------------------
obligated to effect any Demand Registration within six months after the
effective date of a previous Demand Registration. Not more than once in any
twelve month period following the date hereof, the Company may postpone for up
to six months the filing or the effectiveness of a registration statement for a
Demand Registration if the Board of Directors determines, in its good faith
judgment, that there exists material nonpublic information about the Company
which the Board of Directors does not wish to disclose in a registration
statement and which information would otherwise be required by the Securities
Act to be disclosed in a registration statement to be filed pursuant to this
Article III, provided that, in such event, the holders of Registrable Securities
initially requesting such Demand Registration will be entitled to withdraw such
request and, if such request is withdrawn, such Demand Registration will not
count as a Demand Registration hereunder and the Company will pay all
Registration Expenses in connection with such registration.

(d) Selection of Underwriters. TTC shall have the right to select the
-------------------------
managing underwriters for any Demand Registration requested by it. Such
managing underwriter shall be of national prominence and shall have nationally
recognized research coverage in the information technology sector. If the
Tanning Parties make a request for a Demand Registration, the Shareholders
owning a majority of the Shares held by the Tanning Parties will have the right
to select the managing underwriters to administer the offering, who shall be of
national prominence and reasonably acceptable to the Company.

(e) Other Registration Rights. Except as provided in this Agreement,
-------------------------
the Company will not grant to any Person the right to request or require the
Company to register any equity securities of the Company, or any securities
convertible or exchangeable into or exercisable for such securities without the
prior written consent of TTC.

Section 3.2. Piggyback Registration.
----------------------

-5-
<PAGE>

(a) Right to Piggyback. Whenever the Company proposes to register any
------------------
of its equity securities under the Securities Act (other than its initial public
offering and other than a registration on Form S-4 or Form S-8 or any successor
or similar forms) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), whether or
----------------------
not for sale for its own account, the Company will give prompt written notice to
TTC and each Tanning Party, of its intention to effect such a registration and
will (subject to subparagraphs (b) and (c), below) include in such registration
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 15 days after the receipt of the
Company's notice.

(b) Priority on Primary Registrations. If a Piggyback Registration is
---------------------------------
an underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering within a price range reasonably acceptable to
the Company, the Company will include in such registration (i) first, the
securities the Company proposes to sell and (ii) second, the Registrable
Securities requested to be included in such registration, pro rata among the
respective holders thereof on the basis of the number of Shares of Registrable
Securities held (or subject to stock options held) by each such holder and (iii)
third, other securities requested to be included in such registration pro rata
among the respective holders thereof on the basis of the number of Shares of
securities held by each such holder.

(c) Priority on Secondary Registrations. If a Piggyback Registration
-----------------------------------
is an underwritten secondary registration on behalf of holders of the Company's
securities and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering within a
price range reasonably acceptable to such holders, the Company will include in
such registration, subject to Section 3.2.(e), (i) first, the Registrable
Securities requested to be included in such registration, pro rata among the
respective holders thereof on the basis of the number of Shares of Registrable
Securities held (or subject to stock options held) by each such holder and (ii)
second, other securities requested to be included in such registration, pro rata
among the respective holders thereof on the basis of the number of Shares of
securities held by each such holder.

(d) Unlimited Piggyback Registrations. There is no limitation on the
---------------------------------
number of Piggyback Registrations which the Company is obligated to effect. No
Piggyback Registration shall relieve the Company of its obligations to effect
Demand Registrations.

-6-
<PAGE>

(e) The Company's Right to Participate in a Demand Registration. The
-----------------------------------------------------------
Company may participate in any Demand Registration effected pursuant to Section
3.1 in an amount up to 25% of the shares of Common Stock to be registered for
sale in such offering.

Section 3.3. Holdback Agreements. (a) (i) If requested in writing
-------------------
by the Company or the managing underwriters, if any, of any registration
effected pursuant to Section 3.1 or 3.2, the parties hereto agree not to effect
any public sale or distribution (including sales pursuant to Rule 144) of equity
securities of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, during the time period reasonably requested by
the Company or the managing underwriters, not to exceed seven days prior to and
the 180-day period beginning on the effective date of such underwritten
registration (except as part of such underwritten registration).

(ii) In connection with the termination, liquidation or dissolution of
any of the limited liability companies comprising TTC, AEA agrees (A) that
Common Stock of the Company owned by such limited liability companies shall be
distributed subject to such customary transfer restrictions (not to exceed 180
days in duration) as shall be reasonably requested (in connection with the
execution of such offering) by the managing underwriters of any registration
effected or to be effected pursuant to Section 3.1 or 3.2 (or, if no such
registration is then contemplated to be effected, transfer restrictions (not to
exceed 180 days in duration) of the same nature and extent as those agreed to by
holders of 80% of the registrable securities held by the Tanning Parties), and
(B) to arrange for extensions of such restrictions at the termination thereof to
the extent, on the terms (not to exceed 180 days in duration), and with respect
to those shareholders ("Covered Shareholders") reasonably requested (in
connection with the execution of such offering) by the managing underwriter of
any registration effected or to be effected pursuant to Section 3.1 or 3.2. In
no event shall the transfer restrictions referred to in the preceding sentence
exceed a total duration of 18 months, and in no event shall AEA be obligated to
obtain transfer restriction arrangements with respect to any holder of Common
Stock who was previously determined by the relevant underwriter not to be a
Covered Shareholder.

(b) If requested in writing by the managing underwriters of any
registration effected pursuant to Section 3.1 or 3.2, the Company agrees (i) not
to effect any public sale or distribution of its equity securities, or any
securities convertible into or exchangeable or exercisable for such securities,
during the time period reasonably requested by the managing underwriters, not to
exceed seven days prior to and during the 180-day period beginning on the
effective date of any such underwritten registration (except as part of such
underwritten registration or pursuant to registrations on Form S-4 or Form S-8
or any successor forms), and (ii) to cause each holder of its Common Stock, or
any securities convertible into or exchangeable or exercisable for Common Stock,
purchased from the Company at any time after the date of this Agreement (other
than in a

-7-
<PAGE>

registered public offering), to so agree (except as part of such underwritten
registration, if otherwise permitted).

Section 3.4. Registration Procedures. Whenever the parties hereto
-----------------------
have requested that any Registrable Securities be registered pursuant to this
Agreement, the Company will use its best efforts to effect the registration and
the sale of such Registrable Securities in accordance with the intended method
of disposition thereof, and pursuant thereto the Company will as expeditiously
as possible:

(a) prepare and file with the Commission a registration statement with
respect to such Registrable Securities and thereafter use its best efforts to
cause such registration statement to become effective (provided that, before
filing a registration statement or prospectus or any amendments or supplements
thereto, the Company will furnish to the counsel selected by the holders of a
majority of the Registrable Securities covered by such registration statement
copies of all such documents proposed to be filed, which documents will be
subject to review of such counsel);

(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period of either (i) not less than six months (subject to extension pursuant
to Section 3.7(b)) or, if such registration statement relates to an underwritten
offering, such longer period as, in the opinion of counsel for the underwriters,
a prospectus is required by law to be delivered in connection with sales of
Registrable Securities by an underwriter or dealer or (ii) such shorter period
as will terminate when all of the securities covered by such registration
statement have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement (but in any event not before the expiration of any longer period
required under the Securities Act), and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement until such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such registration statement;

(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;

(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or

-8-
<PAGE>

advisable to enable such seller to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such seller (provided that
the Company will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subparagraph, (ii) subject itself to taxation in any such jurisdiction or (iii)
consent to general service of process in any such jurisdiction);

(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the discovery of the happening of
any event as a result of which, the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and, at the request of any such
seller, the Company will prepare and furnish to such seller a reasonable number
of copies of a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus will
not contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made;

(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the Nasdaq National Market;

(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;

(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including, without limitation, effecting a stock split
or a combination of shares);

(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;

-9-
<PAGE>

(j) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its security holders,
as soon as reasonably practicable, an earnings statement covering the period of
at least twelve months beginning with the first day of the Company's first full
calendar quarter after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;

(k) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any securities included in such registration statement for sale in any
jurisdiction, the Company will use its reasonable best efforts promptly to
obtain the withdrawal of such order;

(l) obtain a cold "comfort letter", dated the effective date of such
registration statement (and, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement), signed by the Company's independent public accountants in customary
form and covering such matters of the type customarily covered by cold comfort
letters as the holders of a majority of the Registrable Securities being sold
reasonably request; and

(m) provide a legal opinion of the Company's outside counsel, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of the closing under
the underwriting agreement), with respect to the registration statement, each
amendment and supplement thereto, the prospectus included herein (including the
preliminary prospectus) and such other documents relating thereto in customary
form and covering such matters of the type customarily covered by legal opinions
of such nature.

The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing.

Section 3.5. Registration Expenses. (a) The Company shall pay all
---------------------
Registration Expenses relating to any registration of Registrable Securities
hereunder. "Registration Expenses" shall mean any and all fees and expenses
---------------------
incident to the Company's performance of or compliance with this Article III,
including, without limitation: (i) Commission, stock exchange or National
Association of Securities Dealers, Inc. registration and filing fees and all
listing fees and fees with respect to the inclusion of securities on the Nasdaq
National Market, (ii) fees and expenses of compliance with state securities or
"blue sky" laws and in connection with the preparation of a "blue sky" survey,
including, without limitation, reasonable fees and expenses of blue

-10-
<PAGE>

sky counsel, (iii) printing expenses, (iv) messenger and delivery expenses, (v)
fees and disbursements of counsel for the Company, (vi) with respect to each
registration, reasonable fees and disbursements of one counsel for all of the
selling holders of Shares (selected by the holders making the Demand
Registration request, in the case of a registration pursuant to Section 3.1, and
selected by the holders of a majority of the Registrable Securities included in
such registration, in the case of a registration pursuant to Section 3.2), (vii)
fees and disbursements of all independent public accountants (including the
expenses of any audit and/or "cold comfort" letter) and fees and expenses of
other persons, including special experts, retained by the Company, and (viii)
any other fees and disbursements of underwriters, if any, customarily paid by
issuers or sellers of securities.

(b) Notwithstanding the foregoing, (i) the provisions of this Section
3.5 shall be deemed amended to the extent necessary to cause these expense
provisions to comply with "blue sky" laws of each state in which the offering is
made and (ii) in connection with any registration hereunder, each holder of
Registrable Securities being registered shall pay all underwriting discounts and
commissions and transfer taxes, if any, attributable to the Registrable
Securities included in the offering by such holder.

Section 3.6. Indemnification. (a) The Company agrees to indemnify
---------------
and hold harmless, to the extent permitted by law, each holder of Registrable
Securities, its officers and directors and each Person who controls such holder
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities, joint or several, to which such holder or any such director or
officer or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon (i) any untrue or alleged untrue statement of a material fact
contained (A) in any registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or (B) in any
application or other document or communication (in this Section 3.6 collectively
called an "application") executed by or on behalf of the Company or based upon
written information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify any securities covered by such registration
statement under the "blue sky" or securities laws thereof, or (ii) any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company will
reimburse such holder and each such director, officer and controlling person for
any legal or any other expenses incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or

-11-
<PAGE>

alleged omission, made in such registration statement, any such prospectus or
preliminary prospectus or any amendment or supplement thereto, or in any
application, in reliance upon and in conformity with written information
prepared and furnished to the Company by such holder expressly for use therein
or by such holder's failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto after the Company has
furnished such holder with a sufficient number of copies of the same. In
connection with an underwritten offering, the Company will indemnify such
underwriters, their officers and directors and each Person who controls such
underwriters (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of the holders of Registrable
Securities.

(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder will furnish to the
Company in writing such information and documents as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, will indemnify and hold harmless
the Company, its directors and officers and each other Person who controls the
Company (within the meaning of the Securities Act) and its attorneys and
accountants against any losses, claims, damages, liabilities, joint or several,
to which the Company or any such director or officer, controlling person,
attorney or accountant may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon (i) any untrue or alleged untrue statement of a material fact
contained in the registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or in any application or (ii) any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or omission is made in such registration statement,
any such prospectus or preliminary prospectus or any amendment or supplement
thereto, or in any application, in reliance upon and in conformity with written
information prepared and furnished to the Company by such holder expressly for
use therein, and such holder will reimburse the Company and each such director,
officer and controlling person for any legal or any other expenses incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that the obligation to indemnify will
be individual to each holder and will be limited to the net amount of proceeds
received by such holder from the sale of Registrable Securities pursuant to such
registration statement.

(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with

-12-
<PAGE>

respect to such claim, permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified party. If
such defense is assumed, the indemnifying party will not be subject to any
liability for any settlement made by the indemnified party without its consent
(but such consent will not be unreasonably withheld). An indemnifying party who
is not entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest exists
between such indemnified party and any other of such indemnified parties with
respect to such claim.

(d) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and will survive (for the benefit of the transferor) the
transfer of securities by any holder thereof. The Company also agrees to make
such provisions, as are reasonably requested by any indemnified party, for
contribution to such party in the event the Company's indemnification is
unavailable for any reason.

Section 3.7. Participation in Underwritten Registrations. (a) If
-------------------------------------------
requested by the underwriters for any underwritten offering pursuant to a Demand
Registration requested under Section 3.1, the Company shall enter into a
customary underwriting agreement with the underwriters. Such underwriting
agreement shall be satisfactory in form and substance to the party making such
Demand Registration and shall contain such representations and warranties by,
and such other agreements on the part of, the Company and such other terms as
are generally prevailing in agreements of that type, including, without
limitation, indemnities and contribution agreements. Such underwriting agreement
shall also contain such representations, warranties, indemnities and
contributions by the participating holders as are customary in agreements of
that type. In the case of a registration pursuant to Section 3.2 hereof, if the
Company shall have determined to enter into any underwriting agreements in
connection therewith, all of the holders' Registrable Securities to be included
in such registration shall be subject to such underwriting agreement. Such
underwriting agreement shall also contain such representations, warranties,
indemnities and contributions by the participating holders as are customary in
agreements of that type. Any holder participating in such Piggyback Registration
may, at its option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
such holder and that any or all of the conditions precedent to the obligations
of such underwriters under such underwriting agreement be conditions precedent
to the obligations of such holder.

-13-
<PAGE>

(b) Each Person that is participating in any registration hereunder
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 3.4(e) above, such Person will forthwith
discontinue the disposition of its Registrable Securities pursuant to the
registration statement until such Person's receipt of the copies of a
supplemented or amended prospectus as contemplated by such Section 3.4(e). In
the event the Company shall give any such notice, the applicable time period
mentioned in Section 3.4(b) during which a registration statement is to remain
effective shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to this paragraph to
and including the date when each seller of a Registrable Security covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by Section 3.4(e).

Section 3.8. Current Public Information. At all times after the
--------------------------
Company has filed a registration statement with the Commission pursuant to the
requirements of either the Securities Act or the Exchange Act, the Company will
file all reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the Commission thereunder,
and will take such further action as any holder or holders of Registrable
Securities may reasonably request, all to the extent required to enable such
holders to sell Registrable Securities pursuant to Rule 144.

Section 3.9. Cooperation. Each of the parties hereto agrees to
-----------
cooperate with the Company and to take all action necessary to assist the
Company in the registration of any debt or equity securities, subject to the
terms and conditions of this Agreement.

ARTICLE IV
TERMINATION

The rights and obligations of any Shareholder contained in this
Agreement, including the rights to Demand Registrations and Piggyback
Registration shall terminate, at any time from and after the date hereof, upon
the earlier of (a) the first date on which such Shareholder (including TTC,
prior to the termination, liquidation or dissolution of the limited liability
companies comprising TTC) owns less than 200,000 shares of Common Stock or, (b)
with respect to the persons who were members of the limited liability companies
comprising TTC (following the termination, liquidation or dissolution thereof),
the date that the transfer restrictions to which such persons are subject
pursuant to Section 3.3(a)(ii) lapse, are terminated, or otherwise cease to be
effective, but, with respect to this clause (b), in no event later than 18
months following the date of termination, liquidation, or dissolution of any of
the limited liability companies comprising TTC.

-14-
<PAGE>

ARTICLE V
GENERAL PROVISIONS

Section 5.1. Effective Date. The effective date of this Agreement
--------------
shall be the closing date of the Company's initial public offering (the
"Effective Date"). If the Effective Date does not occur on or prior to October
--------------
31, 1999, or the transactions contemplated thereby are abandoned, this Agreement
shall be of no further force and effect and the Original Registration Rights
Agreement shall continue to be in full force and effect. Notwithstanding the
foregoing, by their execution hereof, the parties hereto confirm their waiver of
any rights to participate in the initial public offering contemplated by the
Company's Registration Statement on S-1 initially filed with the Securities and
Exchange Commission on May 17, 1999.

Section 5.2. Exclusive Agreement; No Third-Party Beneficiaries. This
-------------------------------------------------
Agreement, the Stock Purchase Agreement and the Related Agreements (as defined
in the Stock Purchase Agreement) constitute the sole understanding of the
parties with respect to the subject matter hereof and any verbal or written
communication between the parties prior to the adoption of this Agreement shall
be deemed merged herein and of no further force and effect. Notwithstanding
anything contained in this Agreement to the contrary, nothing in this Agreement,
express or implied, is intended to confer on any Person other than the parties
hereto or their respective heirs, successors, executors, administrators and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.

Section 5.3. Governing Law, Etc. This Agreement shall be construed
------------------
in accordance with and governed by the laws of the State of Delaware applicable
to agreements made and to be performed wholly within such jurisdiction. Each of
the parties hereto hereby irrevocably and unconditionally consents to submit to
the exclusive jurisdiction of the courts of the State of Delaware and of the
United States of America in each case located in the County of New Castle for
any Litigation arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any Litigation relating thereto
except in such courts), and further agrees that service of any process, summons,
notice or document by U.S. registered mail to its respective address set forth
in Section 5.6 shall be effective service of process for any Litigation brought
against it in any such court. Each of the parties hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any Litigation
arising out of this Agreement or the transactions contemplated hereby in the
courts of the State of Delaware or the United States of America in each case
located in the County of New Castle and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such Litigation brought in any such court has been brought in an
inconvenient forum.

-15-
<PAGE>

Section 5.4. Successors and Assigns. Except as otherwise provided
----------------------
herein, neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the holders of 80% of
the issued and outstanding Voting Common Stock held by the parties hereto.
Subject to the preceding sentence, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. Notwithstanding anything contained in this Agreement to the
contrary, but subject to Article IV hereof, following the termination,
liquidation or dissolution of any of the limited liability companies comprising
TTC, the rights herein to request and participate in registrations, and all
other rights with respect to TTC, shall continue in full force and effect for
the benefit of the members of such limited liability companies, such rights to
be exercised on their behalf by AEA.

Section 5.5. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any adverse
manner to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner so that the
transactions contemplated hereby are fulfilled to the greatest extent possible.

Section 5.6. Notices. Any notice, request, instruction or other
-------
document to be given hereunder by any party hereto to any other party shall be
in writing and shall be given (and will be deemed to have been duly given upon
receipt) by delivery in person, by electronic facsimile transmission, cable,
telegram, telex or other standard forms of written telecommunications, by
overnight courier or by registered or certified mail, postage prepaid:

(a) If to any of the Tanning Parties, to:

Tanning Technology Corporation
4600 South Ulster Street, Suite 380
Denver, Colorado 80237
Attention: Mark W. Reinhardt
Telecopy: 303 220-9958

-16-
<PAGE>

(b) If to TTC, to:

AEA Tanning Investors Inc.
c/o AEA Investors Inc.
Park Avenue Tower
65 East 55th Street
New York, New York 10022
Attention: Christine J. Smith, Esq.
Telecopy: 212 702-0518

with a copy to:

Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Sanford Krieger, Esq.
Telecopy: 212 859-4000

or at such other address for a party as shall be specified by like notice.

Section 5.7. Counterparts; Facsimile Signatures. This Agreement may
----------------------------------
be executed in any number of counterparts, each of which shall be deemed to be
an original, but all of which together shall constitute but one and the same
agreement. Delivery of a photocopy or transmission by telecopy of a signed
signature page of this Agreement shall constitute delivery of such signed
signature page; provided, however, that each party shall provide each other
party an originally executed copy of such signature page as promptly as
practicable.

Section 5.8. Interpretation. When a reference is made in this
--------------
Agreement to Articles, Sections, Schedule or Exhibits, such reference is to an
Article or a Section of, Schedule to, or an Exhibit to, this Agreement, unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be understood
to be followed by the words "without limitation."

Section 5.9. Amendment. This Agreement may not be amended except
---------
by an instrument in writing signed on behalf of the holders of 80% of the issued
and outstanding Voting Common Stock held by the parties hereto; provided
however, that no amendment may be made which adversely affects any rights of a
party hereto without the written agreement of such party (except to the extent
affecting all Shareholders equally with respect to rights granted to all
Shareholders equally).

-17-
<PAGE>

Section 5.10. Extension; Waiver. At any time the parties may
-----------------
extend the time for the performance of any of the obligations or other acts of
the other parties, waive any inaccuracies in the representations and warranties
contained in this Agreement and waive compliance with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
signed on behalf of such party. The waiver by any party hereto of a breach of
any provision hereunder shall not operate to be construed as a waiver of any
prior or subsequent breach of the same or any other provision hereunder.

Section 5.11. Enforcement of Agreement. The parties hereto agree
------------------------
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to any injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any Delaware court, this
being in addition to any other remedy to which they may be entitled at law or in
equity.

Section 5.12. Further Assurances. At any time, or from time to time,
------------------
after the date hereof, the parties agree to cooperate with each other , and at
the request of any other party, to execute and deliver any further instruments
or documents and to take all such further actions as any party may reasonably
request in order to evidence or effectuate the consummation of the transactions
contemplated hereby and to otherwise carry out the intent of the parties
hereunder.

-18-
<PAGE>

IN WITNESS WHEREOF, this Agreement has been signed on behalf of each
of the parties hereto as of the date first above written.

TANNING TECHNOLOGY CORPORATION

By: ___________________________________
Name:
Title:

COURTNEY ROSE CORPORATION

By: ___________________________________
Name:
Title:

WINSOFT CORPORATION

By: ___________________________________
Name:
Title:

HIPPELI ENTERPRISES, INC.

By: ___________________________________
Name:
Title:

-19-
<PAGE>

___________________________________
Stephen Brobst

TANNING FAMILY PARTNERSHIP, L.L.L.P.

By Courtney Rose Corporation,
its general partner

By: ___________________________________
Name:
Title:

___________________________________
Larry G. Tanning

___________________________________
Christine A. Tanning

LARRY G. TANNING GRANTOR
RETAINED ANNUITY TRUST

By Larry G. Tanning,
its trustee

By: ___________________________________
Name: Larry G. Tanning
Title: Trustee

-20-
<PAGE>

CHRISTINE A. TANNING GRANTOR
RETAINED ANNUITY TRUST

By Christine A. Tanning,
its trustee

By: ___________________________________
Name: Christine A. Tanning
Title: Trustee

___________________________________
Bipin Agarwal

___________________________________
Toni Hippeli

___________________________________
Henry Skelsey

AEA TANNING INVESTORS INC.

By: ___________________________________
Name: Christopher Mahan
Title: Vice President

-21-
<PAGE>

TTC INVESTORS I LLC

By AEA Tanning Investors Inc.,
its managing member

By: ___________________________________
Name: Christopher Mahan
Title: Vice President

TTC INVESTORS II LLC

By AEA Tanning Investors Inc.,
its managing member

By: ___________________________________
Name: Christopher Mahan
Title: Vice President

TTC INVESTORS IA LLC

By AEA Tanning Investors Inc.,
its managing member

By: ___________________________________
Name: Christopher Mahan
Title: Vice President

-22-
<PAGE>

TTC INVESTORS IIA LLC

By AEA Tanning Investors Inc.,
its managing member

By: ___________________________________
Name: Christopher Mahan
Title: Vice President

-23-

<PAGE>

EXHIBIT 10.20

================================================================================

AMENDED AND RESTATED
SHAREHOLDER AGREEMENT

by and among

TANNING TECHNOLOGY CORPORATION

and

the parties listed as signatories hereto

Dated as of July 20, 1999

================================================================================
<PAGE>

TABLE OF CONTENTS

ARTICLE I: DEFINITIONS.............................................1

Section 1.1. Definitions........................................1

ARTICLE II: REPRESENTATIONS AND WARRANTIES.........................3

Section 2.1. Representations and Warranties.....................3

ARTICLE III: CORPORATE GOVERNANCE..................................4

Section 3.1. Voting of Shares...................................4
Section 3.2. Composition of the Board of Directors..............4
Section 3.3. Committees.........................................5
Section 3.4. Certificate of Incorporation and By-LawS...........5

ARTICLE IV: TERMINATION............................................5

ARTICLE V: GENERAL PROVISIONS......................................6

Section 5.1. Effective Date.....................................6
Section 5.2. Exclusive Agreement; No Third-Party Beneficiaries..6
Section 5.3. Governing Law, Etc.................................6
Section 5.4. Successors and Assigns.............................7
Section 5.5. Severability.......................................7
Section 5.6. Notices............................................7
Section 5.7. Counterparts; Facsimile Signatures.................8
Section 5.8. Interpretation.....................................8
Section 5.9. Amendment..........................................8
Section 5.10. Extension; Waiver..................................8
Section 5.11. Enforcement of Agreement...........................9
Section 5.12. Further Assurances.................................9
<PAGE>

AMENDED AND RESTATED

SHAREHOLDER AGREEMENT
---------------------

THIS AMENDED AND RESTATED SHAREHOLDER AGREEMENT, is made as of July
__, 1999 (this "Agreement"), by and among Tanning Technology Corporation, a
---------
Delaware corporation (the "Company"), Courtney Rose Corporation, a Colorado
-------
corporation ("Courtney"), WinSoft Corporation, a Colorado corporation
--------
("WinSoft"), Hippeli Enterprises, Inc., a Colorado corporation ("Hippeli"),
------- -------
(Courtney, WinSoft and Hippeli are collectively referred to herein as the
"Original Members"), Tanning Family Partnership, L.L.L.P. ("TFP"), Larry G.
- -----------------
Tanning, Christine A. Tanning, Larry G. Tanning Irrevocable Trust for the
Benefit of His Lineal Descendants ("LGT Trust"), Christine A. Tanning
---------
Irrevocable Trust for the Benefit of His Lineal Descendants ("CAT Trust"), Bipin
---------
Agarwal, Toni Hippeli (the Original Members and TFP, Larry G. Tanning, Christine
A. Tanning, LGT Trust, CAT Trust, Bipin Agarwal and Toni Hippeli are referred to
herein as the "Tanning Parties"), AEA Tanning Investors Inc., a Delaware
---------------
corporation ("AEA"), TTC Investors I LLC, a Delaware limited liability company
("TTC I"), TTC Investors II LLC, a Delaware limited liability company ("TTC
----- ---
II"), TTC Investors IA LLC, a Delaware limited liability company ("TTC IA") and
- -- ------
TTC Investors IIA LLC, a Delaware limited liability company ("TTC IIA") (AEA,
-------
TTC I, TTC II, TTC IA and TTC IIA are collectively referred to herein as "TTC").
---
WHEREAS, the parties are party to a Shareholder Agreement dated as of
January 31, 1997, as amended prior to the date hereof (the "Original Shareholder
--------------------
Agreement");
- ---------

WHEREAS, the parties desire to make certain changes to the Original
Shareholder Agreement, and to amend and restate such Original Shareholder
Agreement to read in its entirety as set forth below;

ARTICLE I

DEFINITIONS

Section 1.1. Definitions
-----------

"Agreement": as defined in the preamble to this Agreement.
---------
<PAGE>

"Audit Committee": means such committee as established by the Board
---------------
of Directors.

"Board of Directors": the board of directors of the Company.
------------------

"By-Laws": means the Amended and Restated By-Laws of the Company as
-------
in effect on the date hereof, as they may be amended from time to time
hereafter.

"CAT Trust": as defined in the preamble to this Agreement.
---------

"Certificate of Incorporation": means the Amended and Restated
----------------------------
Certificate of Incorporation of the Company as in effect on the date hereof, as
it may be amended from time to time hereafter.

"Common Stock": the common stock of the Company (all classes) now or
------------
hereafter authorized to be issued.

"Company": as defined in the preamble to this Agreement.
-------

"Compensation Committee": means such committee as established by the
----------------------
Board of Directors.

"Courtney": as defined in the preamble to this Agreement.
--------

"Director": a member of the Board of Directors.
--------

"Effective Date": as defined in Section 5.1.
--------------

"Hippeli": as defined in the preamble to this Agreement.
-------

"LGT Trust": as defined in the preamble to this Agreement.
---------

"Litigation": as defined in Section 4.2.
----------

"Original Shareholder Agreement": as defined in the preamble to this
------------------------------
Agreement.

"Person": any natural person, corporation, partnership, firm,
------
association, trust, government, governmental agency or other entity, whether
acting in an individual, fiduciary or other capacity.

"Shareholders": the Tanning Parties and TTC.
------------

"Shares": shares of Common Stock.
------

-2-
<PAGE>

"Tanning Parties": as defined in the preamble to this Agreement.
---------------

"TFP": as defined in the preamble to this Agreement.
---

"TTC": as defined in the preamble to this Agreement.
---

"Voting Common Stock": Common Stock the holders of which are
-------------------
generally entitled to vote for the election of the board of directors of the
Company.

"WinSoft": as defined in the preamble to this Agreement.
-------

ARTICLE II

REPRESENTATIONS AND WARRANTIES

-3-
<PAGE>

ARTICLE III

CORPORATE GOVERNANCE

Section 3.1. Voting of Shares. (a) From and after the date hereof,
----------------
each Shareholder shall vote all Shares owned or controlled by him or it and
shall take all other necessary or desirable actions within his or its control
(including, without limitation, attendance at meetings in person or by proxy for
purposes of obtaining a quorum and execution of written consents in lieu of
meetings), to effectuate the provisions of this Agreement including, without
limitation, causing the composition of the Company's Board of Directors and
committees to be as contemplated by Sections 3.2 and 3.3 and to cause the
election of the nominees described therein.

(b) From and after the date hereof, the Company and its Subsidiaries
shall take all necessary or desirable actions within its control (including,
without limitation, calling special board and stockholder meetings) to
effectuate the provisions of this Agreement.

Section 3.2. Composition of the Board of Directors. (a) On and after
-------------------------------------
the date hereof, the Board of Directors shall initially be comprised of seven
Directors [,subject to expansion after the date hereof by action of the Board of
Directors].

(b) The Shareholders acknowledge that Article VII of the Company's
Certificate of Incorporation provides for staggered terms of the Directors, with
Directors serving in Class I, Class II, or Class III. The Shareholders agree
that until the first annual meeting of shareholders following the date hereof,
the Board of Directors shall be composed as follows:

(i) Class I - Toni Hippeli and Michael Shanahan

(ii) Class II - Christopher Mahan and Joseph Roebuck

(iii) Class III - Larry Tanning, Bipin Agarwal and Henry Skelsey

(c) From and after the date hereof, Directors shall be nominated as
follows (it being understood that such nomination shall include any nomination
of any incumbent Director for reelection to the Board of Directors):

(i) TTC shall have the right to designate one Director in
Class II of the Board of Directors (it being understood that Christopher Mahan
is TTC's initial designee as set forth in clause (b) above);

-4-
<PAGE>

(ii) TFP shall have the right to designate one Director, in any
class, to the Board of Directors (it being understood that Larry Tanning is
TFP's initial designee as set forth in clause (b) above);

(iii) WinSoft shall have the right to designate one Director, in
any class, to the Board of Directors (it being understood that Bipin Agarwal is
WinSoft's initial designee as set forth in clause (b) above);

(d) If there are insufficient vacancies in a particular class of
directors, the available positions shall be allocated first to the nominee of
TTC (as to Class II only), second to the nominee of TFP, and third to the
nominee of WinSoft (it being understood that each of TTC, TFP and WinSoft shall
not have the right to have more than one nominee on the Board of Directors at
any time).

(e) Each of TTC, TFP and WinSoft, respectively, shall have the right
(i) to remove, with or without cause, any Director nominated in accordance with
this Section 3.2 by each of TTC, TFP or Winsoft, respectively, and (ii) to
designate any replacement for a Director nominated in accordance with this
Section 3.2 by TTC, TFP or Winsoft, respectively, (including the initial
designees during the period prior to the first annual meeting of shareholders
following the date hereof) upon the death, resignation, retirement,
disqualification or removal from office of such Director. The Board of
Directors shall duly appoint as a Director each person so designated to fill a
vacancy on the Board of Directors.

Section 3.3. Committees. TTC shall have the right to designate one
----------
member of each of the Audit Committee and the Compensation Committee of the
Board of Directors.

Section 3.4. Certificate of Incorporation and By-Laws. The parties
----------------------------------------
to this Agreement shall take or cause to be taken all lawful action necessary to
ensure at all times that the Company's Certificate of Incorporation and By-Laws
are not at any time inconsistent with the provisions of this Agreement.

ARTICLE IV

TERMINATION

The rights and obligations of any Shareholder contained in this
Agreement, including the rights to nominate a director and/or to appoint
committee members, shall terminate if, at any time from and after the date
hereof, such Shareholder either (a) owns less than 10% of the issued and
outstanding Common Stock or, (b) in the case of TTC, owns less than 10% of the
issued and outstanding Common Stock or its constituent limited liability
companies have been terminated, liquidated or dissolved.

-5-
<PAGE>

ARTICLE V

GENERAL PROVISIONS

Section 5.1. Effective Date. The effective date of this Agreement
--------------
shall be the closing date of the Company's initial public offering (the
"Effective Date"). Notwithstanding the foregoing, the provisions of Section
--------------
3.2(a) increasing the size of the Company's board of directors to seven persons
shall be effective as of the date hereof. If the Effective Date does not occur
on or prior to October 31, 1999, or the transactions contemplated thereby are
abandoned, this Agreement shall be of no further force and effect and the
Original Shareholders Agreement shall continue to be in full force and effect.

Section 5.2. Exclusive Agreement; No Third-Party Beneficiaries.
-------------------------------------------------
This Agreement, the Stock Purchase Agreement and the Related Agreements (as
defined in the Stock Purchase Agreement) constitute the sole understanding of
the parties with respect to the subject matter hereof and any verbal or written
communication between the parties prior to the adoption of this Agreement shall
be deemed merged herein and of no further force and effect. Notwithstanding
anything contained in this Agreement to the contrary, nothing in this Agreement,
express or implied, is intended to confer on any Person other than the parties
hereto or their respective heirs, successors, executors, administrators and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.

Section 5.3. Governing Law, Etc. This Agreement shall be construed
------------------
in accordance with and governed by the laws of the State of Delaware applicable
to agreements made and to be performed wholly within such jurisdiction. Each of
the parties hereto hereby irrevocably and unconditionally consents to submit to
the exclusive jurisdiction of the courts of the State of Delaware and of the
United States of America in each case located in the County of New Castle for
any action, proceeding or investigation in any court or before any governmental
authority ("Litigation") arising out of or relating to this Agreement and the
----------
transactions contemplated hereby (and agrees not to commence any Litigation
relating thereto except in such courts), and further agrees that service of any
process, summons, notice or document by U.S. registered mail to its respective
address set forth in Section 5.6 shall be effective service of process for any
Litigation brought against it in any such court. Each of the parties hereto
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any Litigation arising out of this Agreement or the transactions
contemplated hereby in the courts of the State of Delaware or the United States
of America in each case located in the County of New Castle and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such Litigation brought in any such court has been brought
in an inconvenient forum.

-6-
<PAGE>

Section 5.4. Successors and Assigns. Neither this Agreement nor any
----------------------
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the holders of 75% of the issued and outstanding Voting
Common Stock held by the parties hereto. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.

(a) If to any of the Tanning Parties, to:

Tanning Technology Corporation
4600 South Ulster Street, Suite 380
Denver, Colorado 80237
Attention: Mark W. Reinhardt
Telecopy: 303 220-9958

(b) If to TTC, to:

AEA Tanning Investors Inc.
c/o AEA Investors Inc.
Park Avenue Tower
65 East 55th Street
New York, New York 10022
Attention: Christine J. Smith, Esq.
Telecopy: 212 702-0518

-7-
<PAGE>

with a copy to:

Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Sanford Krieger, Esq.
Telecopy: 212 859-4000

or at such other address for a party as shall be specified by like notice.

Section 5.9. Amendment. This Agreement may not be amended except
---------
by an instrument in writing signed on behalf of the holders of 75% of the issued
and outstanding Voting Common Stock held by the parties hereto; provided
however, that no amendment may be made which adversely affects the rights of a
party hereto without the written agreement of such party (except to the extent
affecting all Shareholders equally with respect to rights granted to all
Shareholders equally).

Section 5.10. Extension; Waiver. At any time the parties may extend
-----------------
the time for the performance of any of the obligations or other acts of the
other parties, waive any inaccuracies in the representations and warranties
contained in this Agreement and waive compliance with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
signed on behalf of such party. The waiver by any party hereto of a breach of
any provision hereunder shall not operate to be construed as a waiver of any
prior or subsequent breach of the same or any other provision hereunder.

-8-
<PAGE>

Section 5.12. Further Assurances. At any time, or from time to
------------------
time, after the date hereof, the parties agree to cooperate with each other, and
at the request of any other party, to execute and deliver any further
instruments or documents and to take al such further actions as any party may
reasonably request in order to evidence or effectuate the consummation of the
transactions contemplated hereby and to otherwise carry out the intent of the
parties hereunder.

-9-
<PAGE>

IN WITNESS WHEREOF, this Agreement has been signed on behalf of each
of the parties hereto as of the date first above written.

TANNING TECHNOLOGY CORPORATION

By:
------------------------------
Name:
Title:

COURTNEY ROSE CORPORATION

By:
------------------------------
Name:
Title:

WINSOFT CORPORATION

By:
------------------------------
Name:
Title:

HIPPELI ENTERPRISES, INC.

By:
------------------------------
Name:
Title:

-10-
<PAGE>

TANNING FAMILY PARTNERSHIP, L.L.L.P.
By Courtney Rose Corporation,
its general partner

By:
------------------------------
Name:
Title:

---------------------------------
Larry G. Tanning

---------------------------------
Christine A. Tanning

LARRY G. TANNING GRANTOR
RETAINED ANNUITY TRUST

By Larry G. Tanning,
its trustee

By:
------------------------------
Name: Larry G. Tanning
Title: Trustee

-11-
<PAGE>

CHRISTINE A. TANNING GRANTOR
RETAINED ANNUITY TRUST

By Christine A. Tanning,
its trustee

By:
------------------------------
Name: Christine A. Tanning
Title: Trustee

---------------------------------
Bipin Agarwal

---------------------------------
Toni Hippeli

AEA TANNING INVESTORS INC.

By:
------------------------------
Name: Christopher Mahan
Title: Vice President

-12-
<PAGE>

TTC INVESTORS I LLC

By AEA Tanning Investors Inc.,
its managing member

By:
------------------------------
Name: Christopher Mahan
Title: Vice President

TTC INVESTORS II LLC

By AEA Tanning Investors Inc.,
its managing member

By:
------------------------------
Name: Christopher Mahan
Title: Vice President

TTC INVESTORS IA LLC

By AEA Tanning Investors Inc.,
its managing member

By:
------------------------------
Name: Christopher Mahan
Title: Vice President

-13-
<PAGE>

TTC INVESTORS IIA LLC

By AEA Tanning Investors Inc.,
its managing member

By:
------------------------------
Name: Christopher Mahan
Title: Vice President

-14-

<PAGE>

Exhibit 10.30

TANNING TECHNOLOGY CORPORATION

1997 STOCK OPTION PLAN

ARTICLE 1

GENERAL

1.1 Purpose. The purpose of this Tanning Technology Corporation 1997
-------
Stock Option Plan (the "Plan") is to provide for certain key employees,
officers, independent contractors with and/or directors of Tanning Technology
Corporation, a Delaware corporation (the "Company"), and its subsidiaries and
affiliates, an incentive (i) to join and/or remain in the service of the Company
and its subsidiaries and affiliates, (ii) to maintain and enhance the long-term
performance and profitability of the Company and its subsidiaries and affiliates
and (iii) to acquire a proprietary interest in the success of the Company and
its subsidiaries and affiliates.

1.2 Definition of Certain Terms.
---------------------------

(a) "Agreement" means an agreement issued pursuant to Section
2.1.

(b) "Board" means the Board of Directors of the Company.

(d) "Committee" means the Committee appointed to administer the
Plan in accordance with Section 1.3.

(e) "Company" means Tanning Technology Corporation, a Delaware
corporation.

(f) "Common Stock" means the shares of Class C common stock, par
value $.01 per share, of the Company and any other shares into which such common
stock shall thereafter be exchanged by reason of a recapitalization, merger,
consolidation, split-up, combination, exchange of shares or the like.

(g) "Optionee" means an employee, officer, independent contractor
with and/or director of the Company or any of its subsidiaries or affiliates who
has been awarded any Option under this Plan.
<PAGE>

(h) "Option" means a "nonqualified" stock option, as described in
Section 1.5, granted under the Plan.

(i) The terms "parent corporation" and "subsidiary corporation"
as used herein shall have the meaning given those terms in Code section 425(e)
and (f), respectively. A corporation shall be deemed a parent or a subsidiary
only for such periods during which the requisite ownership relationship is
maintained.

(j) "Plan" means this Tanning Technology Corporation Stock Option
Plan.

(k) "Termination With Cause," with respect to any Optionee, means
termination by the Company or any of its subsidiaries or affiliates of such
Optionee's employment for: (i) misappropriation of corporate funds, (ii)
conviction of a felony or a crime involving moral turpitude, (iii) failure to
comply with directions of the Chief Executive Officer or other superiors of the
Optionee or the Board of Directors of the Company or any of its subsidiaries or
affiliates, (iv) gross negligence and willful misconduct, or (v) any other
behavior identified in the Optionee's employment agreement (if any) which gives
rise to termination for cause.

(l) Permitted Transferee" means, with respect to any person, such
person's immediate family, trusts solely or primarily for the benefit of such
person or such person's family members, and partnerships, limited liability
companies or other corporations in which such person or such person's family
members and/or such trusts are the majority partners or shareholders as the case
may be. For this purpose, "immediate family" of a person means the person's
spouse, parents, children, stepchildren and grandchildren.

1.3 Administration.
--------------

(a) Subject to Section 1.3(e), the Plan shall be administered by
a committee of the Board which shall consist of at least two directors and which
shall have the

-2-
<PAGE>

power of the Board to authorize awards under the Plan. The members of the
Committee shall be appointed by, and may be changed from time to time in the
discretion of, the Board.

(b) The Committee shall have the authority (i) to exercise all of
the powers granted to it under the Plan, (ii) to construe, interpret and
implement the Plan and any Agreement executed pursuant to Section 2.1 in
accordance with the terms thereof, (iii) to prescribe, amend and rescind rules
and regulations relating to the Plan, (iv) to make all determinations necessary
or advisable in administering the Plan, (v) to correct any defect, supply any
omission and reconcile any inconsistency in the Plan, and (vi) to grant Options
on such terms, not inconsistent with the Plan, as it shall determine.

(d) No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any award
thereunder.

(e) Notwithstanding anything to the contrary contained herein:
(i) until the Board shall appoint the members of the Committee, the Plan shall
be administered by the Board; and (ii) the Board may, in its sole discretion, at
any time and from time to time, resolve to administer the Plan. In either of the
foregoing events, the term "Committee" as used herein shall be deemed to mean
the Board.

1.4 Persons Eligible for Awards. Awards under the Plan may be made
---------------------------
from time to time to such key employees, officers, independent contractors with
and/or directors of the Company or its subsidiaries and/or affiliates as the
Committee shall in its sole discretion select.

1.5 Types of Awards Under the Plan. Awards may be made under the
------------------------------
Plan in the form of stock options, which shall be "nonqualified" stock options
subject to the provisions of section 83 of the Code, all as more fully set forth
in Article 2.

1.6 Shares Available for Awards.
---------------------------

(a) Subject to Section 3.4 (relating to adjustments upon changes
in capitalization), the maximum number of shares of Class C Common Stock with
respect to which

-3-
<PAGE>

Options may be awarded under the Plan shall be equal to 10,046,440 shares.
Shares of Common Stock covered by Options granted under the Plan which expire or
terminate for any reason shall again become available for award under the Plan.

(b) Shares that are issued upon the exercise of Options awarded
under the Plan shall be authorized and unissued or treasury shares of Common
Stock.

(c) Without limiting the generality of the preceding provisions
of this Section 1.6, the Committee may, but solely with the Optionee's consent,
agree to cancel any award of Options under the Plan and issue new Options in
substitution therefor, provided that the Options as so substituted shall satisfy
all of the requirements of the Plan as of the date such new Options are awarded.

ARTICLE 2

STOCK OPTIONS

2.1 Agreements Evidencing Stock Options
-----------------------------------

(a) Options awarded under the Plan shall be evidenced by
Agreements which shall not be inconsistent with the terms and provisions of the
Plan, and which shall contain such provisions as the Committee may in its sole
discretion deem necessary or desirable. Without limiting the generality of the
foregoing, the Committee may in any Agreement impose such restrictions or
conditions upon the exercise of an Option or upon the sale or other disposition
of the shares of Common Stock issuable upon exercise of an Option as the
Committee may in its sole discretion determine. By accepting an award pursuant
to the Plan each Optionee shall thereby agree that each such award and shares of
Common Stock acquired upon exercise of an Option shall be subject to all of the
terms and provisions of the Plan, including, but not limited to, the provisions
of Section 1.3(d).

(b) Each Agreement shall set forth the number of shares of Common
Stock subject to the Option granted thereby.

(c) Each Agreement relating to Options shall set forth the per
share amount payable by the Optionee to the Company upon exercise of the Option
evidenced

-4-
<PAGE>

thereby, which shall not be less than the fair market value of the underlying
shares of Common Stock at the time of grant, except as otherwise determined by
the Committee.

2.2 Term of Options.
---------------

Each Agreement shall set forth the period during which the Option
evidenced thereby shall be exercisable, whether in whole or in part, such
periods to be determined by the Committee in its discretion.

2.3 Exercise of Options. Subject to the provisions of this Article
-------------------
2, each Option granted under the Plan shall be exercisable as follows:

(a) Unless the applicable Agreement expressly provides otherwise,
Options awarded to Optionees under the terms of the Plan will be exercisable
only in accordance with the following vesting schedule:

Cumulative
Percentage of
Applicable Date Total Shares
--------------- ------------

On the first anniversary of the date of
the applicable Agreement 25%
On the second anniversary of the date of
the Agreement 50%
On the third anniversary of the date of
the Agreement 75%
On the fourth anniversary of the date of
the Agreement 100%

The Committee may modify this vesting schedule in any manner that it deems
appropriate in any Agreement, and may provide different vesting schedules in
different Agreements in its sole discretion. Except as the Committee may
otherwise provide, in the event that Optionee's employment, Board membership, or
independent contractor relationship with the Company is terminated for any
reason prior to the date on which the Optionee's right to exercise the Options
has fully vested pursuant to this Section 2.3(a), the Options will immediately
cease to be exercisable with respect to any and all shares which have not vested
as of the date of such termination.

-5-
<PAGE>

(b) Unless the applicable Agreement otherwise provides, an Option
granted under the Plan may be exercised from time to time as to all or part of
the shares as to which such Option shall then be exercisable.

(c) An Option shall be exercisable by the filing of a written
notice of exercise with the Company, on such form and in such manner as the
Committee shall in its sole discretion prescribe, and a copy of such form shall
be included with the Agreement.

(d) Any written notice of exercise of an Option shall be
accompanied by payment of the exercise price for the shares being purchased.
Such payment shall be made by check payable to the Company (or the equivalent
thereof acceptable to the Committee). As soon as practicable after receipt of
such payment, the Company shall deliver to the Optionee a certificate or
certificates for the shares of Common Stock so purchased.

2.4 Termination of Options.
----------------------

(a) Notwithstanding anything to the contrary in this Plan, except
as the Agreement may otherwise provide or as set forth in Section 2.4(b),
Section 2.4(c) or Section 2.4(d), Options granted to an Optionee (and already
vested but not yet exercised) shall terminate on the date which is 90 days
after; 1) termination of his employment (for employee Optionees) with the
Company for any reason (other than death or disability in which case the Options
shall terminate on the date which is 180 days after the date of such
termination), 2) termination of services on the Board (for non-employee Board
members) for any reason (other than death or disability in which case the
Options shall terminate on the date which is 180 days after the date of such
termination), 3) termination of services as an independent contractor or the
reduction of such services below levels specified in the independent
contractor's Option Agreement.

(b) In the event of a Termination With Cause of an Optionee by
the Company, the Committee may determine within a period of sixty (60) days from
the date of Termination With Cause, in its sole and absolute discretion, to
terminate any or all Options granted to an Optionee so that such Options are
expired and no longer exercisable, and

-6-
<PAGE>

Optionee's rights under this Plan and the related Stock Option Agreement(s)
shall immediately expire upon such determination. The Committee shall notify
Optionee in writing of its determination by the end of such sixty (60) day
period, and the Committee's failure to so notify Optionee shall permit Optionee
to exercise all Options which were exercisable by Optionee on the date of his or
her Termination With Cause. Such written notice, if given, shall indicate the
number of option shares, if less than all of Optionee's vested Options at the
date of Termination With Cause, which may be exercised by Optionee. During the
period prior to such determination, no Options held by Optionee may be
exercised. If the Committee determines that Optionee may exercise some or all of
his or her Options, Optionee shall have ninety (90) days from the date of such
notice to exercise some or all of such Options.

(c) If at the time in question the Common Stock is not publicly
traded on a national securities exchange or over-the-counter market, in the
event that an Optionee's employment, Board membership, or independent contractor
relationship with the Company is Terminated for any reason, the Company at its
election, on giving ten days written notice to Optionee, may (i) repurchase any
and all shares of Common Stock then owned by Optionee which were previously
acquired by Optionee through exercise of Options granted under this Plan and
(ii) cancel any unexpired Options which have vested under the terms of the Plan
but have not been exercised [provided however, that if such termination was a
Termination with Cause, Section 2.4(b) shall govern rather than this Section
2.4(c)(ii)], subject in each case to payment of the purchase price described
below. The purchase price payable by the Company to the Optionee on exercise of
its right to repurchase under (i) above will be the fair market value of the
Common Stock held by the Optionee which is being repurchased, determined as of
the date of the repurchase. The purchase price payable by the Company to
Optionee on exercise of the right to cancel unexpired vested but unexercised
Options under (ii) above will be the fair market value of the Options in
question determined as of the date of the cancellations. In either of the above
cases, the fair market value will be determined by the Board in its reasonable
and absolute discretion.

-7-
<PAGE>

(d) In the event of a Non-Control Transaction (as hereinafter
defined), (A) all outstanding Options shall remain outstanding and subject to
the terms and conditions of the Plan, including the vesting schedule contained
in Section 2.3(a), and (B) each Optionee shall be entitled to receive in respect
of each share of Common Stock subject to the Option, upon exercise of such
Option after the vesting thereof, the same amount and kind of stock, securities,
cash, property or other consideration that each holder of a share of Common
Stock was entitled to receive (the "Consideration") in the Non-Control
Transaction in respect of a share. In the event of a Transaction (as
hereinafter defined), each outstanding Option shall vest and be fully
exercisable, and, as of the date of the occurrence of the Transaction (the
"Transaction Date"), the Company shall have the right, among other rights, to
(i) cancel any or all Options which have not been exercised as of the
Transaction Date, (ii) require that each outstanding option be converted in
connection with such Transaction into the Consideration payable in connection
with such Transaction, less the exercise price of such Option, and/or (iii) in
the event the provisions of Section 2.4(a) are applicable, treat the Options as
described in Section 2.4(a) except that each outstanding Option shall vest and
be fully exercisable.

"Transaction" means (i) the approval by stockholders of the
liquidation or dissolution of the Company, (ii) a sale or other disposition of
51% or more of the outstanding interests or voting stock, respectively, of the
Company, (iii) the merger or consolidation of the Company with or into any
entity, or (iv) a sale or other disposition of substantially all of the assets
of the Company; provided, however, that the term "Transaction" shall exclude
-----------------
each transaction which is a "Non-Control Transaction." "Non-Control
Transaction" means (i) a merger or consolidation following which those persons
who owned directly or indirectly a majority of the outstanding interests or
shares of voting stock immediately prior to such merger or consolidation will
own directly or indirectly a majority of the outstanding interests or shares of
voting stock of the surviving corporation, (ii) a sale or other disposition of
interests or capital stock, respectively, of the Company following which those
persons who owned directly or indirectly a majority of the outstanding interests
or shares of voting stock immediately prior to such sale will own directly or

-8-
<PAGE>

indirectly a majority of the outstanding interests or shares of voting stock of
the purchasing entity, (iii) a sale or other disposition of substantially all of
the assets of the Company to an affiliate, or (iv) an initial public offering of
the Company.

-9-
<PAGE>

ARTICLE 3

MISCELLANEOUS

3.1 Amendment of the Plan;
Modification of Awards.
----------------------

(a) The Board may, without stockholder approval, from time to
time suspend or discontinue the Plan or revise or amend it in any respect
whatsoever, except that no such suspension, discontinuance, revision or
amendment shall adversely alter or impair any rights or obligations under any
award theretofore made under the Plan without the consent of the person to whom
such award was made; and further provided that the Board may, in its discretion,
require stockholder approval of any changes or amendments to the Plan which the
Board, in its discretion, believes is necessary or appropriate for any reason.

(b) With the consent of the Optionee and subject to the terms and
conditions of the Plan (including Section 3.1(a)), the Committee may amend
outstanding Agreements with such Optionee, for example, to (i) accelerate the
time or times at which an Option may be exercised or (ii) extend the scheduled
expiration date of the Option.

3.2 Non-Transferability. No Option shall be transferable
-------------------
by the Optionee other than by will or by the laws of descent and distribution or
pursuant to a domestic relations order (within the meaning of Rule 16a-12
promulgated under the Securities Exchange Act of 1934, as amended), and an
Option shall be exercisable during the lifetime of such Optionee only by the
Optionee or his or her guardian or legal representative. Notwithstanding the
foregoing, the Committee may permit at the time of grant of an Option or
thereafter, that the Option may be transferred to Permitted Transferees of the
Optionee, and for purposes of this Plan, a Permitted Transferee of an Optionee
shall be deemed to be the Optionee. The terms of an Option shall be final,
binding and conclusive upon the transferees, beneficiaries, executors,
administrators, heirs and successors of the Optionee.

3.3 Withholding of Taxes. The Company shall be entitled to withhold
--------------------
an amount sufficient to satisfy any federal, state and other governmental tax
requirements related to

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<PAGE>

an Option. Whenever, under the Plan, shares of Common Stock are to be delivered
upon exercise of an Option, the Company shall be entitled to require as a
condition of delivery that the Optionee remit an amount sufficient to satisfy
all federal, state and other governmental tax withholding requirements related
thereto.

3.4 Adjustments Upon Changes in Capitalization. If and to the extent
------------------------------------------
specified by the Committee, in its sole discretion, the exercise price for
Options and the number of shares of Common Stock which may be issued pursuant to
the exercise of Options granted under the Plan may be appropriately adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from the subdivision or combination of shares of Common Stock or other
capital adjustments, or the payment of a stock dividend after the effective date
of this Plan; provided, however, that any Options to purchase fractional shares
of Common Stock resulting from any such adjustment shall be eliminated.
Adjustments under this Section 3.4 shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive.

3.5 Right of Discharge Reserved. Nothing in this Plan or in any
---------------------------
Agreement shall confer upon any employee or other person the right to continue
in the employment or service of the Company or any of its subsidiaries or
affiliates or affect any right which the Company or any of its subsidiaries or
affiliates may have to terminate the employment or service of such employee or
other person.

3.6 No Rights as a Stockholder. No Optionee or other person holding
--------------------------
an Option shall have any of the rights of a stockholder of the Company with
respect to shares subject to an Option until the issuance of a stock certificate
to him for such shares. Except as otherwise provided in Section 3.4, no
adjustment shall be made for dividends, distributions or other rights (whether
ordinary or extraordinary, and whether in cash, securities or other property)
for which the record date is prior to the date such stock certificate is issued.

3.7 Nature of Payments.
------------------

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<PAGE>

(a) Any and all payments of shares of Common Stock or cash
hereunder shall be granted, transferred or paid in consideration of services
performed by the Optionee for the Company or any of its subsidiaries or
affiliates.

(b) All such grants, issuances and payments shall constitute a
special incentive payment to the Optionee and shall not, unless otherwise
determined by the Committee, be taken into account in computing the amount of
salary or compensation of the Optionee for the purposes of determining any
pension, retirement, death or other benefits under (i) any pension, retirement,
life insurance or other benefit plan of the Company or any of its subsidiaries
or affiliates or (ii) any agreement between the Company or any of its
subsidiaries or affiliates and the Optionee.

3.8 Non-Uniform Determinations.
--------------------------

The Committee's determinations under the Plan need not be uniform
and may be made by it selectively among persons who receive, or are eligible to
receive, awards under the Plan (whether or not such persons are similarly
situated). Without limiting the generality of the foregoing, the Committee shall
be entitled, among other things, to make non-uniform and selective
determinations, and to enter into non-uniform and selective Agreements, as to
(i) the persons to receive awards under the Plan, and (ii) the terms and
provisions of awards under the Plan.

3.9 Other Payments or Awards. Nothing contained in the Plan shall be
------------------------
deemed in any way to limit or restrict the Company or any of its subsidiaries or
affiliates or the Committee from making any award or payment to any person under
any other plan, arrangement or understanding, whether now existing or hereafter
in effect.

3.10 Restrictions.
------------

(a) If the Committee shall at any time determine that any
Consent (as hereinafter defined) is necessary or desirable as a condition of, or
in connection with, the granting of any award under the Plan, the issuance or
purchase of shares or the exercise of other rights hereunder or the taking of
any other action hereunder (each such action being hereinafter

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<PAGE>

referred to as a "Plan Action"), then such Plan Action shall not be taken, in
whole or in part, unless and until such Consent shall have been effected or
obtained to the full satisfaction of the Committee. Without limiting the
generality of the foregoing, if (i) the Committee is entitled under the Plan to
make any payment in cash, Common Stock or both, and (ii) the Committee
determines that a Consent is necessary or desirable as a condition of, or in
connection with, payment in any one or more of such forms, the Committee shall
be entitled to determine not to make any payment whatsoever until such Consent
shall have been obtained in the manner aforesaid.

(b) The term "Consent" as used herein with respect to any Plan Action
means (i) any and all listings, registrations, qualifications or similar
requirements in respect thereof upon any securities exchange or under any
federal, state or local law, rule or regulation, (ii) any and all written
agreements and representations by the grantee with respect to the disposition of
shares, or with respect to any other matter, which the Committee shall deem
necessary or desirable to comply with the terms of any such listing,
registration, qualification or similar requirement or to obtain an exemption
from the requirement that any such listing, qualification or registration be
made and (iii) any and all consents, clearances and approvals in respect of a
Plan Action by any governmental or other regulatory bodies, or by the Company's
stockholders.

3.11 Section Headings. The section headings contained herein are for
----------------
the purposes of convenience only and are not intended to define or limit the
contents of said sections.

3.12 Effective Date and Term of Plan.
-------------------------------

(a) This Plan shall be deemed adopted and become effective upon
the approval thereof by the Board.

(b) The Plan shall terminate 10 years after the date on which
it becomes effective, and no awards shall thereafter be made under the Plan.
Notwithstanding the foregoing, all awards made under the Plan prior to the date
on which the Plan terminates shall

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<PAGE>

remain in effect until such awards have been satisfied or terminated in
accordance with the terms and provisions of the Plan.

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