SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 00-19813
InfoNow Corporation
-------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3083360
-------- ----------
(State of incorporation) (I.R.S. Employer Identification No.)
1875 Lawrence Street, Suite 1100, Denver, Colorado, 80202
---------------------------------------------------------
(Address of principal executive offices) (Zip Code)
303-293-0212
------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
As of October 28, 1998, there were 6,815,243 shares of the Registrant's common
stock outstanding.
Transitional Small Business Disclosure Format Yes ___ No X
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INFONOW CORPORATION
INDEX
PART I. FINANCIAL INFORMATION Page No.
--------
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Unaudited Balance Sheets - September 30, 1998
and December 31, 1997...............................................3
Unaudited Statements of Operations - For the Three Months and
Nine Months Ended September 30, 1998 and September 30, 1997.........4
Unaudited Statement of Stockholders Equity (Deficit) - For the
Nine Months Ended September 30, 1998................................5
Unaudited Statements of Cash Flows - For the Nine Months
Ended September 30, 1998 and September 30, 1997.....................6
Notes to Unaudited Consolidated Financial Statements..................7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS...........................................8
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION.....................................................12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................12
SIGNATURES............................................................13
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PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
INFONOW CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(US Dollars in Thousands)
Assets September 30, December 31,
1998 1997
---- ----
(Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 1,464 $ 325
Restricted cash investments 76 0
Accounts receivable, net 372 177
Other current assets 56 20
-------- --------
Total current assets 1,968 522
Property and Equipment, net 743 647
Software development costs, net of accumulated
amortization of $519 and $384 at September 30, 1998
and December 31, 1997 respectively 12 146
Other assets and deferred charges 12 9
-------- --------
Total assets $ 2,735 $ 1,324
======== ========
CURRENT LIABILITIES:
Notes Payable - current portion $ 253 $ 209
Accounts payable and accrued expenses 483 407
Unearned revenue and prepaid service fees 388 263
-------- --------
Total current liabilities 1,124 879
CAPITAL LEASE OBLIGATION 103 5
NOTES PAYABLE 9 42
STOCKHOLDER'S EQUITY
Common stock, $.001 par value; 15,000,000 shares
authorized, 6,815,243 and 5,364,179 shares
issued and outstanding at September 30, 1998
and December 31, 1997 respectively 7 5
Additional paid-in capital 23,887 21,904
Accumulated deficit (22,395) (21,511)
-------- --------
Total stockholder's equity 1,499 398
-------- --------
Total liabilities and stockholder's equity $ 2,735 $ 1,324
======== ========
The accompanying notes are an integral part of these financial statements
3
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INFONOW CORPORATION AND SUBSIDARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share amounts)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------------ ------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES $ 680 $ 302 $ 1,641 $ 689
OPERATING EXPENSES:
Cost of sales 428 344 1,282 1,192
Selling, general and administrative 521 342 1,281 1,275
----------- ----------- ----------- -----------
Total operating expenses 949 686 2,563 2,467
----------- ----------- ----------- -----------
Net loss from operations (269) (384) (922) (1,778)
OTHER INCOME (EXPENSE):
Interest income (expense), net 19 2 32 14
Other non-operating income 0 0 6 0
----------- ----------- ----------- -----------
Loss from continuing operations (250) (382) (884) (1,764)
DISCONTINUED OPERATIONS:
Income (loss) from operations
of Cimarron 0 (882) 0 (300)
----------- ----------- ----------- -----------
NET LOSS AND
COMPREHENSIVE LOSS $ (250) $ (1,264) $ (884) $ (2,064)
=========== =========== =========== ===========
Basic and diluted EPS per common share:
Continuing operations $ (.04) $ (.07) $ (.15) $ (.32)
Discontinued operations 0 (.17) 0 (.06)
----------- ----------- ----------- -----------
Net loss $ (.04) $ (.24) $ (.15) $ (.38)
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 6,815,243 5,364,179 5,927,195 5,434,214
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements
4
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<CAPTION>
INFONOW CORPORATION AND SUBSIDARY
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED) For the nine months ended
September 30, 1998
(US Dollars in Thousands)
Common Stock Additional Accumulated
Shares Amount Paid-in Capital Deficit
------ ------ --------------- -------
<S> <C> <C> <C> <C>
BALANCES, December 31, 1997 5,364,179 5 $ 21,904 $ (21,511)
Issuance of common stock
in exchange for note 2,000 -- 1 --
Common shares valued at US$1.75
per share for cash in March 27, 1998
private placement, net of financing
costs of $19,000 450,000 1 769 --
Non-cash charges related to the
issuance of options and warrants to
purchase common stock issued to
consultants -- -- 76 --
Common shares issued upon exercise
of warrants and options at prices
ranging from $0.40 to $1.40
per share 999,064 1 1,137 --
Net loss -- -- -- (884)
--------- --------- --------- ---------
BALANCES, September 30, 1998 6,815,243 $ 7 $ 23,887 $ (22,395)
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements
5
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<CAPTION>
INFONOW CORPORATION AND SUBSIDARY
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(US Dollars in Thousands)
For the Nine Months Ended
September 30,
-------------------------
1998 1997
---- ----
CASH FLOWS USED IN OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (884) $(2,064)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 420 450
Impairment of long-lived assets -- 499
Allowance for bad debt 12 --
Compensation expense recognized in
connection with stock warrant issuance 76 --
Gain on extinguishment of debt -- --
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (207) 23
Increase (decrease) in other assets and deferred charges (3) 2
(Increase) decrease in other current assets (35) 42
Increase (decrease) in payables and accrued liabilities 76 (53)
Increase (decrease) in unearned revenue 125 (49)
------- -------
Net cash flows used in operating activities (420) (1,150)
CASH FLOWS FROM(USED IN)INVESTING ACTIVITIES:
Purchase of property and equipment (229) (144)
Purchase of data -- (100)
Increase in restricted cash (76) --
------- -------
Net cash flow used in investing activities (305) (244)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 769 (48)
Proceeds from the exercise of options and warrants 1,137 4
Payment of capital lease obligations (8) (3)
Payment of related party obligation -- (100)
Proceeds from notes payable 9 --
Principal payment on debt obligations (43) (85)
------- -------
Net cash flows from financing activities 1,864 (232)
Net increase (decrease) in cash and cash equivalents 1,139 (1,626)
CASH AND CASH EQUIVALENTS, beginning of period 325 2,050
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 1,464 $ 424
======= =======
Supplemental Information:
Cash paid during period for interest $ 10 $ 22
The accompanying notes are an integral part of these financial statements
6
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INFONOW CORPORATION AND SUBSIDARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial position and
operating results for the interim periods. Certain amounts for the nine months
ending September 30, 1997 have been reclassified to conform with current year
classifications. Such reclassifications had no effect on net loss.
The financial statements as of December 31, 1997, have been derived from
audited financial statements which contained an explanatory paragraph in the
auditors report describing uncertainties concerning the Company's ability to
continue as a going concern. The financial statements should be read in
conjunction with the financial statements and accompanying notes contained in
the Company's Form 10-KSB for the fiscal year ended December 31, 1997. The
results of operations for the nine months ended September 30, 1998 are not
necessarily indicative of the results that will be achieved for the entire
fiscal year ending December 31, 1998.
Note 2. SUPPLEMENTAL CASH FLOW DISCLOSURES
On September 21, 1998, the Company purchased various items of computer
equipment by entering into a lease agreement. The transaction is treated as a
capital lease, resulting in increases in fixed assets of $152,000, current
liabilities of $46,000, and long-term liabilities of $106,000.
Note 3. EQUITY TRANSACTIONS
On March 27, 1998, the Company completed a private placement of 450,000
shares of its common stock at $1.75 per share, which was above the market price
of the Company's common stock at the date of the transaction. Total gross
proceeds from the sale of stock were $788,000. The Company served as its own
placement agent, incurring $19,000 in costs.
During the three months ended June 30, 1998, the Company issued 999,064
shares of common stock in conjunction with the exercise of options and warrants.
The per-share price range of $0.40 to $1.40 resulted in gross proceeds to the
Company of $1,137,000.
The Company issued options and warrants to purchase 135,000 shares of the
Company's common stock in lieu of compensation for investor relations and
recruiting services. The Company expensed $76,000 related to the issuance of
these options and warrants during the nine months ended September 30, 1998 in
accordance with FAS 123.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
General Information and Overview
The Company is a leading provider of outsourced Internet services for
one-to-one marketing. InfoNow is a leader in Turning Your Prospects into SalesTM
by providing an integrated suite of outsourced services which enable companies
to use the Internet and automated voice response to sell more effectively and
efficiently. The services utilize Internet and GIS technology to reliably and
cost-effectively tell current and prospective customers where they can find
their nearest reseller, branch, or service center, provide lead and prospect
information and support targeted promotion programs. The Company's services can
be deployed through the Client's web site and call center as well as through an
automated voice response system. The Company sells its services under multi-year
service contracts that include a one-time set-up fee and ongoing monthly service
fees. InfoNow serves clients in ten countries including eight of the ten largest
global computer and networking firms and six of the eight largest banks in North
America, as well as other industry leaders like American Airlines, FedEx,
Maytag, Shell, and United Healthcare. Additional information about the Company
can be viewed on the World Wide Web at www.infonow.com.
During the last 12 months, the Company has experienced a significant
increase in its backlog and revenues from sales of its services without a
significant corresponding increase in its operating expenses. The Company
believes that most of its infrastructure costs, such as servers, technical
personnel, telecommunications and certain of its data costs are largely fixed
and are not expected to vary significantly with an increase in client contracts
in the near future. The management of the Company believes that the majority of
the infrastructure is in place to support a sufficient number of clients for the
Company to achieve profitability. The Company's success in achieving
profitability is primarily dependent on market acceptance and future sales of
its services to additional customers to offset operating costs. Although
significant selling efforts are under way to add new customer contracts, the
limited operating history of the Company makes it difficult or impossible to
predict the exact timing and amount of these future sales.
Results of Operations
The results from continuing operations for the three months and nine months
ended September 30, 1998 and 1997 reflect the revenues and expenses of the
Company's service operations. The Company sold all the assets of its Cimarron
subsidiary, which produced interactive media and other business presentations,
on December 11, 1997. The results of Cimarron's business have been classified as
discontinued operations for the three months and nine months ended September 30,
1997.
Three Months Ended September 30, 1998 compared to the results for the Three
Months Ended September 30, 1997
Net Revenues. The Company's revenues from continuing operations consist
primarily of setup fees from new contracts and monthly service fees from ongoing
contracts for its services. Total sales increased by $378,000, or 225% for the
three months ended September 30, 1998, compared to the revenues in the prior
year. The increased revenues were generated by additional contracts sold and
implemented during the last 12 months. The number of contracts in backlog at
September 30, 1998 was 63 as compared with 25 on September 30, 1997.
Cost of Sales. The cost of sales decreased from 114% of sales in the
three-month period ended September 30, 1997, to 63% of sales for the three-month
period ended September 30, 1998. This decrease is primarily due to the increased
revenues generated by additional contracts sold and implemented during the
current year. The total cost of sales over the same period rose by 24% or
$84,000. This increase is mainly due to an increase in the salaries and related
benefits of additional technical personnel hired during the year. The small
increase relative to the increase in sales is due to the large amount of
relatively fixed costs contained in the cost of goods sold.
Selling and Marketing. Selling and marketing expenses, as a percent of
revenues, increased from 40% for the three months ended September 30, 1997 to
45% for the three months ended September 30, 1998. Total selling and marketing
8
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expenses increased by $187,000, or 253% for the three months ended September 30,
1998, as compared to the three month period ended September 30, 1997. Increases
in the salaries, commission costs and benefits of additional sales personnel
were offset by the decrease in trade show and advertising and promotion
expenses. Selling and Marketing expenses, especially sales commission expenses,
which are based on a percentage of new contracted sales, are expected to
increase in relation to increases in revenues.
General and Administrative. General and administrative expenses decreased
from 73% of sales for the three months ended September 30, 1997, to 31% of sales
for the three months ended September 30, 1998. This decrease is primarily due to
increased revenues generated by additional contracts sold and implemented during
the prior year during a period when the total amount of general and
administrative expenses decreased by 4%, or $8,000. This decrease is primarily
due to reduced salaries and related costs compared to the prior year's quarter.
These expenses are not expected to increase significantly as additional client
contracts and related revenues are added for the remainder of the current year.
Non-Operating Income (expense). Net non-operating income was $2,000 for the
three months ended September 30, 1997 compared to a net non-operating income of
$19,000 for the three months ended September 30, 1998. The increase is mainly
due to additional interest income on cash and cash equivalents.
Net Loss from Continuing Operations. The net loss of the Company for the
three months ended September 30, 1998 decreased by approximately $994,000 or
80%, as compared to the results of the three months ended September 30, 1997.
This decrease is primarily due to increased revenues generated by additional
contracts sold and implemented during the prior year without corresponding
increases in operating expenses.
Nine Months Ended September 30, 1998 compared to the results for the Nine Months
Ended September 30, 1997
Net Revenues. The Company's revenues from continuing operations consist
primarily of setup fees from new contracts and monthly service fees from ongoing
contracts for its services. Total sales increased by $952,000, or 138% for the
nine months ended September 30, 1998, compared to the revenues in the prior
year. The increased revenues were generated by additional contracts sold and
implemented during the current year. The number of contracts implemented as of
September 30, 1998 was 49 compared to 18 as of September 30, 1997. The number of
contracts in backlog as of September 30, 1998 was 63 compared to 25 as of
September 30, 1997.
Cost of Sales. The cost of sales decreased from 173% of sales in the nine
month period ended September 30, 1997 to 78% of sales for the nine month period
ended September 30, 1998. This decrease is primarily due to the increased
revenues generated by additional contracts sold and implemented during the prior
year. The total cost of sales over the same period rose by 8% or $90,000. This
increase is mainly due to an increase in depreciation expense on equipment put
into service and an increase in the salaries and related benefits of additional
technical personnel during the prior year.
Selling and Marketing. Selling and marketing expenses, as a percent of
revenues, decreased from 70% for the nine months ended September 30, 1997 to 41%
for the nine months ended September 30, 1998. This decrease is primarily due to
the increased revenues generated by additional contracts sold and implemented
during the prior year. Total selling and marketing expenses increased by
$182,000, or 38% for the nine months ended September 30, 1998, as compared to
the nine month period ended September 30, 1997. The increase in expenses was
primarily due to the addition of staff in order to generate growth. Increases in
the salaries, commission costs and benefits of additional sales personnel were
offset by the decrease in trade show and advertising and promotion expenses.
Selling and Marketing expenses, especially sales commission expenses, which are
based on a percentage of new contracted sales, are expected to increase in
relation to increases in revenues.
General and Administrative. General and administrative expenses decreased
from 115% of sales for the nine months ended September 30, 1997, to 37% of sales
for the nine months ended September 30, 1998. This decrease is primarily due to
9
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increased revenues generated by additional contracts sold and implemented during
the prior year while the total amount of general and administrative expenses has
decreased by 22%, or $176,000. This decrease is primarily due to reduced
salaries and related costs compared to the first nine months of the prior year.
These expenses not expected to increase significantly as additional client
contracts and related revenues are added for the remainder of the current year.
Non-Operating Income (expense). Net non-operating income was $14,000 for
the nine months ended September 30, 1997 compared to a net non-operating income
of $38,000 for the nine months ended September 30, 1998. The increase is mainly
due to increased interest income on cash and cash equivalents and small gains
due to sales of assets and gains from debt extinguishment.
Net Loss from Continuing Operations. The net loss of the Company for the
nine months ended September 30, 1998 decreased by approximately $1,180,000 or
57%, as compared to the results of the nine months ended September 30, 1997. The
results of the nine months ended September 30, 1997 include a non-cash gain of
$364,000 related to the retirement of common shares originally issued in
conjunction with the acquisition of Navigist. Also included in the results of
the nine months ended September 30, 1997 is a non-cash charge to the impairment
of long-lived assets of $862,000 reflecting the write-off of all remaining
unamortized goodwill recorded in the acquisition of the company's former
subsidiary, Cimarron. Without the non-cash gain and the non-cash charge in the
nine months ended September 30, 1997, the net loss of the Company for the nine
months ended September 30, 1998 decreased by 44% or $681,000 compared to the
first nine months of the prior year. This decrease is primarily due to increased
revenues generated by additional contracts sold and implemented during the
current year without corresponding increases in operating expenses.
Liquidity and Capital Resources
The Company had cash and equivalents of $1,464,000 at September 30, 1998,
compared to $325,000 at December 31, 1997, or a net increase of $1,139,000. This
increase was due to a private equity financing on March 27, 1998 which resulted
in net proceeds of $769,000, the exercise of stock options and warrants during
the second quarter which resulted in gross proceeds of $1,137,000, and loan
proceeds on March 4, 1998 of $9,000. This increase was offset by $420,000 of
cash utilized in the operations of the Company, $229,000 used to purchase data
and computer equipment, an increase in restricted cash of $76,000 and $51,000
net debt service costs.
The Company has made significant progress in commercializing its services
with 63 contracts in backlog as of September 30, 1998 and has significantly
reduced the cash needed to fund its operations compared to the prior year. Cash
utilized in operations was $420,000 for the nine months ended September 30, 1998
compared to $1,150,000 used for operations in the nine months ended September
30, 1997. This improvement is due to additional sales of its services without
corresponding increases in operating expenses of the Company.
The Company currently projects that available cash balances together with
projected cash flow from operations will be sufficient to fund the Company's
operations until the company can achieve cash flow breakeven without additional
external financing. These projections assume that the Company does not
substantially increase cash used in its current operations and that overall
operating costs of the Company will not change significantly as new client
contracts are added.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of certain computer programs being
written using two digits rather than four to indicate the applicable year. As a
result, computer programs with date-sensitive software may incorrectly recognize
a date using "00" as the year 1900 rather than the year 2000. Such an error
could result in a system failure or miscalculations resulting in disruptions of
operations, including a temporary inability to process normal business
transactions.
The Company has recently examined its production and internal
administrative systems for year 2000 issues. As a result of that review, the
Company has determined that no significant modifications will be required to
10
<PAGE>
make its systems year 2000 compliant and does not expect that any modifications
required will have a material impact on its business, operations or financial
condition. The Company has not completed its assessment of the year 2000
compliance of its principal vendors. The Company expects to complete this review
by March 1999.
Forward Looking Statements
The Company's actual results may vary materially from the forward-looking
statements made above. The Company intends that such statements be subject to
the safe harbor provision of the Securities Act. The Company's forward-looking
statements include the plans and objectives of management for future operations
and relate to: (i) the ability of the Company to generate future sales for the
Company's service, (ii) market acceptance of its service, (iii) success of the
Company in forecasting and meeting the demand of the customers for its services,
including maintaining technical performance of the system as new customers are
added, (iv) the Company's ability to obtain financing to purchase equipment
needed to provide service to additional customers, (v) the Company's ability to
maintain pricing and adequate profit margins on its products and services (vi)
the Company's ability to retain qualified technical personnel (vii) the
Company's ability to develop future enhancements to the Company's services and
control development costs of those, (viii) and the ability of the Company to
raise additional capital, if needed.
The foregoing assumptions are based on judgments with respect to, among
other things, future economic, competitive and market conditions, and future
business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the Company's ability to control. There
are also other risks which could cause the Company's revenues or costs to vary
markedly from the forward-looking statements made above, such as the risk that
the market demand for the Company's services may not develop as expected or if
it does develop, that the Company will be able to generate sufficient sales to
fund its operations.
Accordingly, although the Company believes that the assumptions underlying
the forward-looking statements are reasonable, any such assumption could prove
to be inaccurate and therefore there can be no assurance that the results
contemplated in forward-looking statements will be realized and any statements
should not be regarded as are presentation by the Company or any other person
that the Company's objectives or plans will be achieved. Additional disclosure
of factors that could cause actual results to differ materially from those in
the forward-looking statements may be found in the Company's documents on file
with the Commission, including its Form 10-KSB for the year ended December 31,
1997 and its registration statement on Form SB-2.
11
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PART II. OTHER INFORMATION
--------------------------
ITEM 5. OTHER INFORMATION
The Securities and Exchange Commission has amended the provisions of Rule
14a-4 under the Securities Exchange Act of 1934 to provide that the Company's
proxies solicited in connection with its annual meeting of shareholders,
including the 1999 annual meeting, may confer discretionary voting authority on
Company management with respect to certain types of shareholder proposals that
may be raised at the annual meeting unless the proposing shareholder notifies
the Company at least 45 days prior to the date of mailing the prior year's proxy
that such proposal will be made at the meeting. The deadline for such notices in
connection with the Company's 1999 annual meeting of shareholders is February
22, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - Included, as exhibits are the items listed on the Exhibit
Index. The Registrant will furnish a copy of any of the exhibits
listed upon payment of $5.00 per exhibit to cover the costs to the
Registrant of furnishing such exhibit.
(b) Reports on Form 8-K
No reports were filed on form 8-K during the nine months ended September
30, 1998
12
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: November 13, 1998
INFONOW CORPORATION
(Registrant)
/s/ Michael W. Johnson
------------------------------------
Michael W. Johnson
Chief Executive Officer, President and Director
(Principal Executive Officer)
/s/ Kevin D. Andrew
------------------------------------
Kevin D. Andrew
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
13
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EXHIBIT INDEX
Exhibit
Number Description
------ -----------
3.1 Certificate of Incorporation of the Company, as Amended.(A)
3.3 Bylaws of the Company, as Amended.(B)
4.1 Form of Common Stock Certificate for the Registrant's Common Stock,
$.001 par value per share.(B)
4.4 Form of Class C Warrant.(C)
10.14 InfoNow Corporation 1990 Stock Plan as amended.
10.29 Employment Agreement between the Company and W. Brad Browning dated
January 9, 1996.(E)
10.30 Employment Agreement between the Company and Kevin Andrew dated March
1, 1996.(E)
10.32 Agreement between the Company and Environmental Systems Research
Institute, Inc. ("ESRI") dated March 6, 1996.(E)
10.33 Stock Purchase and Sale Agreement by and among VDC Paradigms, Inc.,
Craig Michaelis, David Wertzberger and InfoNow Corporation dated
December 13, 1996.(A)
10.34 Employment Agreement between the Company and Donald E. Cohen dated May
22, 1995, as amended.(A)
10.35 Asset Sale Agreement for sale of assets to Cimarron Dog and Pony
Company, Inc. dated December 11, 1997.(F)
10.36 Michael W. Johnson employment agreement dated January 1, 1998.(F)
10.37 Agreement dated October 23, 1997 between the Company and Michael W.
Johnson regarding sale of the Company.(F)
10.38 Letter Agreement between the Company and Michael Basch dated September
21, 1998.
27.1 Financial Data Schedule
- ----------------------
(A) Incorporated by reference from the Company's Annual Report on Form 10-K for
the year ended December 31, 1996.
(B) Incorporated by reference from Registration Statement No. 33-43035 on Form
S-1 dated February 14, 1992.
(C) Incorporated by reference from Post-Effective Amendment No. 2 to
Registration Statement No. 33-43035 on Form S-1 dated July 13, 1993.
(D) Incorporated by reference from Post-Effective Amendment No. 3 to
Registration Statement No. 33-43035 on Form S-1 dated September 30, 1996.
(E) Incorporated by reference from the Company's Annual Report on Form 10-K for
year ended December 31, 1995.
(F) Incorporated by reference from the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1997.
14
INFONOW CORPORATION EXHIBIT 10.14
1990 STOCK OPTION PLAN
(AMENDED AND RESTATED AS OF JANUARY 23, 1998)
1. Purpose of the Plan.
--------------------
This stock option plan (the "Plan") is intended to encourage ownership
of the stock of INFONOW CORPORATION, a Delaware corporation (the "Company"), by
employees of the Company and its subsidiaries, to induce qualified personnel to
enter and remain in the employ of the Company or its subsidiaries and otherwise
to provide additional incentive for optionees to promote the success of its
business.
2. Stock Subject to the Plan.
--------------------------
(a) The total number of shares of the authorized but unissued or
treasury shares of the common stock, $.001 par value, of the Company ("Common
Stock") for which options may be granted under the Plan shall not exceed
2,200,000 shares, subject to adjustment as provided in Section 12 hereof.
(b) If an option granted or assumed hereunder shall expire or
terminate for any reason without having been exercised in full, the unpurchased
shares subject thereto shall again be available for subsequent option grants
under the Plan.
(c) Stock issuable upon exercise of an option granted under the Plan
may be subject to such restrictions on transfer, repurchase rights or other
restrictions as shall be determined by the Board of Directors of the Company
(the "Board").
3. Administration of the Plan.
---------------------------
(a) The Plan shall be administered by the Board of Directors (the
"Board") or by a committee composed solely of two or more directors
("Committee") each of whom is a Non-Employee Director. A Non-Employee Director
is a person who satisfies the definition of a "non-employee director" set forth
in Rule 16b-3 under the Exchange Act or any successor rule or regulation, as it
may be amended from time to time. The Committee or the Board, as the case may
be, shall have full authority to administer the Plan, including authority to
interpret and construe any provision of the Plan and any stock options granted
thereunder, and to adopt such rules and regulations for administering the Plan
as it may deem necessary in order to comply with the requirements of the Code or
in order that stock options that are intended to be incentive stock options will
be classified as incentive stock options under the Code, or in order to conform
to any regulation or to any change in any law or regulation applicable thereto.
The Board shall have the power to reprice and accelerate the vesting of stock
1
<PAGE>
options. The Board may reserve to itself any of the authority granted to the
Committee as set forth herein, and it may perform and discharge all of the
functions and responsibilities of the Committee at any time that a duly
constituted Committee is not appointed and serving. All references in this Plan
to the "Committee" shall be deemed to refer to the Board whenever the Board is
discharging the powers and responsibilities of the Committee, and to any special
committee appointed by the Board to administer particular aspects of this Plan.
All actions taken and all interpretations and determinations made by the
Committee in good faith (including determinations of fair market value) shall be
final and binding upon all participants, the Company and all other interested
persons. No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to this Plan,
and all members of the Committee shall, in addition to their rights as
directors, be fully protected by the Company with respect to any such action,
determination or interpretation.
(b) Rule 16b-3 under the Securities Exchange Act of 1934 (the "Act")
provides that the grant of a stock option to a director or officer of a company
will be exempt from the provisions of Section 16(b) of the Act if the conditions
set forth in said Rule are satisfied. Unless otherwise specified by the Board,
grants of options hereunder to individuals who are officers or directors of the
Company shall be made in a manner that satisfies the conditions of said Rule.
4. Type of Options.
----------------
Options granted pursuant to the Plan shall be authorized by action of
the Board (or a committee designated by the Board) and may be designated as
either incentive stock options meeting the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or non-qualified options
which are not intended to meet the requirements of such Section 422 of the Code,
the designation to be in the sole discretion of the Board. Options designated as
incentive stock options that fail to continue to meet the requirements of
Section 422 of the Code shall be redesignated as non-qualified options
automatically without further action by the Board on the date of such failure to
continue to meet the requirements of Section 422 of the Code.
5. Eligibility.
------------
Options designated as incentive stock options may be granted only to
officers and key employees (including directors who are employees) of the
Company or of any subsidiary corporation (herein called "subsidiary" or
"subsidiaries"), as defined in Section 424(f) of the Code and the Treasury
Regulations promulgated thereunder (the "Regulations"). Options designated as
non-qualified options may be granted to directors, officers and key employees
of, and consultants to, the Company or of any of its subsidiaries.
2
<PAGE>
In determining the eligibility of an individual to be granted an
option, as well as in determining the number of shares to be optioned to any
individual, the Board shall take into account the position and responsibilities
of the individual being considered, the nature and value to the Company or its
subsidiaries of his or her service and accomplishments, his or her present and
potential contribution to the success of the Company or its subsidiaries, and
such other factors as the Board may deem relevant.
No option designated as an incentive stock option shall be granted to
any employee of the Company or any subsidiary if such employee owns, immediately
prior to the grant of an option, stock representing more than 10% of the voting
power or more than 10% of the value of all classes of stock of the Company or a
parent or a subsidiary (a "Ten-Percent Shareholder"), unless the purchase price
for the stock under such option shall be at least 110% of its fair market value
at the time such option is granted and the option, by its terms, shall not be
exercisable more than five (5) years from the date it is granted. In determining
the stock ownership under this paragraph, the provisions of Section 424(d) of
the Code shall be controlling. In determining the fair market value under this
paragraph, the provisions of Section 7 hereof shall apply.
6. Option Agreement.
-----------------
Each option shall be evidenced by an option agreement (the
"Agreement") duly executed on behalf of the Company and by the optionee to whom
such option is granted, which Agreement shall comply with and be subject to the
terms and conditions of the Plan. The Agreement may contain such other terms,
provisions and conditions which are not inconsistent with the Plan as may be
determined by the Board, including provisions for longer post- termination
exercise periods, provided that options designated as incentive stock options
shall meet all of the conditions for incentive stock options as defined in
Section 422 of the Code. No option shall be granted within the meaning of the
Plan and no purported grant of any option shall be effective until the Agreement
shall have been duly executed on behalf of the Company and the optionee. More
than one option may be granted to an individual.
7. Option Price.
-------------
The option price or prices of shares of Common Stock for options
designated as non-qualified stock options shall be the fair market value of
Common Stock as determined by the Board. The option price or prices of shares of
Common Stock for incentive stock options shall be the fair market value of such
Common Stock at the time the option is granted as determined by the Board in
accordance with the Regulations promulgated under Section 422 of the Code. If
such shares are then listed on any national securities exchange, the fair market
value shall be the mean between the high and low sales prices, if any, on the
largest such exchange on the date of the grant of the option or, if none, shall
be determined by taking a weighted average of the means between the highest and
lowest sales on the nearest date before and the nearest date after the date of
grant in accordance with Treasury Regulations Section 25.2512-2. If such shares
3
<PAGE>
are not then listed on any such exchange, the fair market value of such shares
shall be the mean between the closing "Bid" and the closing "Asked" prices, if
any, as reported in the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") for the date of the grant of the option, or, if
none, shall be determined by taking a weighted average of the means between the
highest and lowest sales on the nearest date before and the nearest date after
the date of grant in accordance with Treasury Regulations Section 25.2512-2. If
such shares are not then either listed on any such exchange or quoted on NASDAQ,
the fair market value shall be the mean between the average of the "Bid" and the
average of the "Asked" prices, if any, as reported in the National Daily
Quotation Service for the date of the grant of the option, or, if none, shall be
determined by taking a weighted average of the means between the highest and
lowest sales on the nearest date before and the nearest date after the date of
grant in accordance with Treasury Regulations Section 25.2512-2. If the fair
market value cannot be determined under the preceding three sentences, it shall
be determined in good faith by the Board.
8. Manner of Payment: Manner of Exercise.
--------------------------------------
(a) Options granted under the Plan may provide for the payment of the
exercise price in the manner set forth in the Option Agreement or as otherwise
authorized by the Board, which shall be (i) delivery of cash or a check payable
to the order of the Company in an amount equal to the exercise price of such
options, (ii) delivery of shares of Common Stock of the Company owned by the
optionee having a fair market value equal in amount to the exercise price of the
options being exercised, (iii) having the Company withhold whole shares of
Common Stock issuable upon exercise of the stock option, as part or full payment
for the exercise of a stock option, or (iv) any combination of (i), (ii) and
(iii), provided, however, that payment of the exercise price by delivery of
shares of Common Stock owned by such optionee may be made only if such payment
does not result in a charge to earnings for financial accounting purposes as
determined by the Board. The fair market value of any shares of Common Stock
which may be delivered upon exercise of an option shall be determined by the
Board in accordance with Section 7 hereof. Pyramiding of options is permitted in
the sole discretion of the Board.
(b) To the extent that the right to purchase shares under an option
has accrued and is in effect, options may be exercised in full at one time or in
part from time to time, by giving written notice, signed by the person or
persons exercising the option, to the Company, stating the number of shares with
respect to which the option is being exercised, accompanied by payment in full
for such shares as provided in subparagraph (a) above. Upon such exercise,
delivery of a certificate for paid-up non-assessable shares shall be made at the
principal office of the Company to the person or persons exercising the option
at such time, during ordinary business hours, not more than thirty days (30)
from the date of receipt of the notice by the Company, as shall be designated in
such notice, or at such time, place and manner as may be agreed upon by the
Company and the person or persons exercising the option.
4
<PAGE>
(c) With respect to any non-qualified option granted under the Plan,
the Company's obligation to deliver shares upon the exercise of such option
shall be subject to the option holder's satisfaction of all applicable federal,
state and local income and employment tax withholding requirements. The Company
and an employee optionee may agree to withhold shares of Common Stock purchased
upon exercise of an option to satisfy any such withholding requirements.
9. Exercise of Options.
--------------------
Each option granted under the Plan shall, subject to Section 10(b) and
Section 12 hereof, be exercisable at such time or times and during such period
as shall be set forth in the Agreement; provided, however, that no option
granted under the Plan shall have a term in excess of ten (10) years from the
date of grant.
To the extent that an option to purchase shares is not exercised by an
optionee when it becomes initially exercisable, it shall not expire but shall be
carried forward and shall be exercisable, on a cumulative basis, until the
expiration of the exercise period. No partial exercise may be made for less than
1,000 full shares of Common Stock.
10. Terms of Options: Exercisability.
---------------------------------
(a) Term.
-----
(1) Options granted under the Plan shall be for a term fixed by
the Board at the time of grant; provided, however, that each incentive stock
option granted to an employee other than a Ten-Percent Shareholder shall expire
not more than ten (10) years from the date of the granting thereof, and shall be
subject to earlier termination as herein provided.
(2) Each incentive stock option granted to a Ten Percent
Shareholder shall expire not more than five (5) years from the date of the
granting thereof, and shall be subject to earlier termination as herein
provided.
(3) Except as provided in this Section 10, an option designated
as an incentive stock option granted to any employee optionee who ceases to be
an employee of the Company or one of its subsidiaries shall terminate on the
last day of the month next following the month in which such optionee ceases to
be an employee of the Company or one of its subsidiaries, or on the date on
which the option expires by its terms, whichever occurs first. However, the
Board, at its discretion, may grant or modify the terms of non-incentive options
which by their terms expire at a later date.
(4) If such termination of employment is because of dismissal for
cause or because the employee is in breach of any employment agreement, such
option will terminate on the date the optionee ceases to be an employee of the
Company or one of its subsidiaries.
5
<PAGE>
(5) If such termination of employment is because the optionee has
become permanently disabled (within the meaning of Section 22 of the Code), such
option shall terminate on the last day of the twelfth month from the date such
optionee ceases to be an employee, or on the date on which the option expires by
its terms, whichever occurs first.
(6) In the event of the death of any optionee, any option granted
to such optionee shall terminate on the last day of the twelfth month from the
date of death, or on the date on which the option expires by its terms,
whichever occurs first.
(b) Exercisability.
---------------
(1) Except as provided below, an option granted to an employee
optionee who ceases to be an employee of the Company or one of its subsidiaries
shall be exercisable only to the extent that the right to purchase shares under
such option has accrued and is in effect on the date such optionee ceases to be
an employee of the Company or one of its subsidiaries.
(2) An option granted to an employee optionee who ceases to be an
employee of the Company or one of its subsidiaries because he or she has become
permanently disabled, as defined above, shall be exercisable for the full number
of shares covered by such option.
(3) In the event of the death of any optionee, the option granted
to such optionee may be exercised for the full number of shares covered thereby,
whether or not under provisions of Section 9 hereof the optionee was entitled to
do so at the date of his or her death, by the estate of such optionee, or by any
person or persons who acquired the right to exercise such option by bequest or
inheritance or by reason of the death of such optionee.
11. Assignability.
--------------
The right of any optionee to exercise any option granted to him or her
shall not be assignable or transferable by such optionee otherwise than by will
or the laws of descent and distribution, and any such option shall be
exercisable during the lifetime of such optionee only by him. Notwithstanding
the preceding sentence, the Committee, in its sole discretion, may permit the
assignment or transfer of a nonstatutory stock option and the exercise thereof
by a person other than the optionee, on such terms and conditions as the
Committee in its sole discretion may determine. Any such terms shall be set
forth in the Option Agreement. Any option granted under the Plan shall be null
and void and without effect upon the bankruptcy of the optionee to whom the
option is granted, or upon any attempted assignment or transfer, except as
herein provided, including without limitation any purported assignment, whether
6
<PAGE>
voluntary or by operation of law, pledge, hypothecation or other disposition,
attachment, trustee process or similar process, whether legal or equitable, upon
such option. The terms of any rights under this Plan in the hands of a
transferee or assignee shall be determined as if held by the optionee and shall
be of no greater extent or term than if the transfer or assignment had not taken
place.
12. Recapitalizations. Reorganizations and the Like.
------------------------------------------------
In the event that the outstanding shares of Common Stock are changed
into or exchanged for a different number or kind of shares or other securities
of the Company or of another corporation by reason of any reorganization,
merger, consolidation, recapitalization, reclassification, stock split-up,
combination of shares, or dividends payable in capital stock, appropriate
adjustment shall be made in the number and kind of shares as to which options
may be granted under the Plan and as to which outstanding options or portions
thereof then unexercised shall be exercisable, to the end that the proportionate
interest of the optionee shall be maintained as before the occurrence of such
event; such adjustment in outstanding options shall be made without change in
the total price applicable to the unexercised portion of such options and with a
corresponding adjustment in the option price per share.
In addition, unless otherwise determined by the Board in its sole
discretion, in the case of any (i) sale or conveyance to another entity of all
or substantially all of the property and assets of the Company or (ii) Change in
Control (as hereinafter defined) of the Company, the purchaser(s) of the
Company's assets or stock may, in his, her or its discretion, deliver to the
optionee the same kind of consideration that is delivered to the shareholders of
the Company as a result of such sale, conveyance or Change in Control, or the
Board may cancel all outstanding options in exchange for consideration in cash
or in kind which consideration in both cases shall be equal in value to the
value of those shares of stock or other securities the optionee would have
received had the option been exercised (to the extent then exercisable) and no
disposition of the shares acquired upon such exercise been made prior to such
sale, conveyance or Change in Control, less the option price therefor. Upon
receipt of such consideration by the optionee, his or her option shall
immediately terminate and be of no further force and effect. The value of the
stock or other securities the optionee would have received if the option had
been exercised shall be determined in good faith by the Board, and in the case
of shares of Common Stock, in accordance with the provisions of Section 7
hereof. The Board shall also have the power and right to accelerate the
exercisability of any options, notwithstanding any limitations in this Plan or
in the Agreement upon such a sale, conveyance or Change in Control. Upon such
acceleration, any options or portion thereof originally designated as incentive
stock options that no longer qualify as incentive stock options under Section
422 of the Code as a result of such acceleration shall be redesignated as
non-qualified stock options. A "Change in Control" shall be deemed to have
occurred if any person, or any two or more persons acting as a group, and all
affiliates of such person or persons, who prior to such time owned less than
twenty-five percent (25%) of the then outstanding Common Stock, shall acquire
such additional shares of Common Stock in one or more transactions, or series of
transactions, such that following such transaction or transactions, such person
or group and affiliates beneficially own fifty percent (50%) or more of Common
Stock outstanding.
7
<PAGE>
Upon dissolution or liquidation of the Company, all options granted
under this Plan shall terminate, but each optionee (if at such time in the
employ of or otherwise associated with the Company or any of its subsidiaries)
shall have the right, immediately prior to such dissolution or liquidation, to
exercise his or her option to the extent then exercisable. If by reason of a
corporate merger, consolidation, acquisition of property or stock, separation,
reorganization, or liquidation, the Board shall authorize the issuance or
assumption of a stock option or stock options in a transaction to which Section
424(a) of the Code applies, then, notwithstanding any other provision of the
Plan, the Board may grant an option or options upon such terms and conditions as
it may deem appropriate for the purpose of assumption of the old option, or
substitution of a new option for the old option, in conformity with the
provisions of such Section 425(a) of the Code and the Regulations thereunder,
and any such option shall not reduce the number of shares otherwise available
for issuance under the Plan.
No fraction of a share shall be purchasable or deliverable upon the
exercise of any option, but in the event any adjustment hereunder of the number
of shares covered by the option shall cause such number to include a fraction of
a share, such fraction shall be adjusted to the nearest smaller whole number of
shares.
13. No Special Employment Rights.
-----------------------------
Nothing contained in the Plan or in any option granted under the Plan
shall confer upon any option holder any right with respect to the continuation
of his or her employment by the Company (or any subsidiary) or interfere in any
way with the right of the Company (or any subsidiary), subject to the terms of
any separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the option holder from
the rate in existence at the time of the grant of an option. Whether an
authorized leave of absence, or absence in military or government service, shall
constitute termination of employment shall be determined by the Board at the
time.
14. Restrictions on Issue of Shares.
--------------------------------
(a) Notwithstanding the provisions of Section 8, the Company may delay
the issuance of shares covered by the exercise of any option and the delivery of
a certificate for such shares until one of the following conditions shall be
satisfied:
(1) The shares with respect to which such option has been
exercised are at the time of the issue of such shares effectively registered or
qualified under applicable federal and state securities acts now in force or as
hereafter amended; or
8
<PAGE>
(2) Counsel for the Company shall have given an opinion, which
opinion shall not be unreasonably conditioned or withheld, that such shares are
exempt from registration and qualification under applicable federal and state
securities acts now in force or hereafter amended.
(b) It is intended that all exercises of options shall be effective,
and the Company shall use its best efforts to bring about compliance with the
above conditions within a reasonable time, except that the Company shall be
under no obligation to qualify shares or to cause a registration statement or a
post effective amendment to any registration statement to be prepared for the
purpose of covering the issue of shares in respect of which any option may be
exercised, except as otherwise agreed to by the Company in writing.
15. Purchase for Investment; Rights of Holder on Subsequent Registration.
---------------------------------------------------------------------
Unless the shares to be issued upon exercise of an option granted
under the Plan have been effectively registered under the Securities Act of
1933, as now in force or hereafter amended (the "1933 Act"), the Company shall
be under no obligation to issue any shares covered by any option unless the
person who exercises such option, in whole or in part, shall give a written
representation and undertaking to the Company which is satisfactory in form and
scope to counsel for the Company and upon which, in the opinion of such counsel,
the Company may reasonably rely, that he or she is acquiring the shares issued
pursuant to such exercise of the option for his or her own account as an
investment and not with a view to, or for sale in connection with, the
distribution of any such shares, and that he or she will make no transfer of the
same except in compliance with any rules and regulations in force at the time of
such transfer under the 1933 Act, or any other applicable law, and that if
shares are issued without such registration, a legend to this effect may be
endorsed upon the securities so issued. In the event that the Company shall,
nevertheless, deem it necessary or desirable to register under the 1933 Act or
other applicable statutes any shares with respect to which an option shall have
been exercised, or to qualify any such shares for exemption from the 1933 Act or
other applicable statutes, then the Company may take such action and may require
from each optionee such information in writing for use in any registration
statement, supplementary registration statement, prospectus, preliminary
prospectus or offering circular as is reasonably necessary for such purpose and
may require reasonable indemnity to the Company and its officers and directors
from such holder against all losses, claims, damages and liabilities arising
from such use of the information so furnished and caused by any untrue statement
of any material fact therein or caused by the omission to state a material fact
requires to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made.
9
<PAGE>
16. Loans.
------
The Company may make loans to optionees to permit them to exercise
options. If loans are made, the requirements of all applicable federal and state
laws and regulations
regarding such loans must be met.
17. Modification of Outstanding Options.
------------------------------------
The Board may authorize the amendment of any outstanding option with
the consent of the optionee when and subject to such conditions as are deemed to
be in the best interests of the Company and in accordance with the purposes of
the Plan.
18. Approval of Stockholders.
-------------------------
The Plan shall be subject to approval by the vote of stockholders
holding at least a majority of the voting stock of the Company voting in person
or by proxy at a duly held stockholders meeting, or by written consent of all of
the stockholders, within twelve (12) months after the adoption of the Plan by
the Board and shall take effect as of the date of adoption by the Board upon
such approval. The Board may grant options under the Plan prior to such
approval, but any such option shall become effective as of the date of grant
only upon such approval and, accordingly, no such option may be exercisable
prior to such approval.
19. Termination and Amendment of Plan.
----------------------------------
Unless sooner terminated as herein provided, the Plan shall terminate
on February 22, 2000, ten (10) years from the date upon which the Plan was duly
adopted by the Board. The Board may at any time terminate the Plan or make such
modification or amendment thereof as it deems advisable; provided, however, that
except as provided in this Section 19, the Board may not, without the approval
of the stockholders of the Company obtained in the manner stated in Section 18,
increase the maximum number of shares for which options may be granted or change
the designation of the class of persons eligible to receive options under the
Plan. Termination or any modification or amendment of the Plan shall not,
without the consent of an optionee, affect his or her rights under an option
theretofore granted to him or her.
20. Reservation of Stock.
---------------------
The Company shall at all times during the term of the Plan reserve and
keep available such number of shares of stock as will be sufficient to satisfy
the requirements of the Plan and shall pay all fees and expenses necessarily
incurred by the Company in connection therewith.
10
<PAGE>
21. Limitation of Rights in the Option Shares.
------------------------------------------
An optionee shall not be deemed for any purpose to be a stockholder of
the Company with respect to any of the options except to the extent that the
option shall have been exercised with respect thereto and, in addition, a
certificate shall have been issued theretofore and delivered to the optionee.
22. Notices.
--------
Any communication or notice required or permitted to be given under
the Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to the Company, to its principal place of business,
attention: President, and, if to an optionee, to the address as appearing on the
records of the Company.
11
September 21, 1998
Michael Basch
PO Box 990
Clear Lake Oaks, California 95423
Dear Michael:
InfoNow Corporation is pleased to offer you employment as Vice President, Client
Development. The position is one that offers great challenge and an opportunity
for accelerated professional growth in a dynamic environment.
Your compensation for this position will be as follows:
* Semi-monthly gross salary in the amount of $4,583.33, paid on the 15th and
last day of each month.
* You will be eligible to participate in a Sales Incentive Program to earn
additional cash compensation based on results achieved during your term of
employment. Your total annual maximum potential earnings under this Plan
will be $150,000. Earnings under this Program will be paid quarterly. The
criteria for incentive earnings under this program and for the Sales Plan
objectives will be established between you and the CEO during the first
month of your employment. CEO has the final say regarding Sales Plan
objectives.
* Six, one-time payments of $1,750, paid each pay period for the first three
months of your employment. (total of $3500 per month for three months).
* Up to $10,000 to cover expenses you incur in moving from California to
Colorado and for any associated temporary living expenses while you find a
permanent residence.
* Participation in InfoNow's Employee Stock Option Plan. The Company will
grant you 175,000 options upon commencement of your service and approval by
InfoNow's Board of Directors. These options will be priced at $1.40, the
current Board approved level for InfoNow Officer option grants. Options
will vest at a rate of 1/36 of total original option award per month.
Options will continue vesting at this rate until the total original amount
is vested. Upon request, resignation, or termination of employment, your
vested options will be subject to execution within 30 days. Vested options
have a minimum of five-year exercise period from the date of award. All
options granted under this agreement shall vest immediately upon a merger
of the Company where it is not the surviving entity, the sale of
substantially all of the Company's assets or the termination of your
employment immediately following a change of control of the Company.
<PAGE>
* Should you be terminated without Cause during the term of your employment,
you will receive a one-time payment equal to 25% of your base salary,
payable within 15 days of your termination.
The Company currently provides numerous benefits to its employees including
health insurance, life insurance, 401(k) plan, up to $45 per month parking
reimbursement, and vacation, sick, and holiday plans. These and any other
benefits and practices of the Company are described in detail in the Employee
Handbook, including the requirement that you sign and comply with a proprietary
information and non-disclosure/non-compete agreement as a condition of
employment with InfoNow.
Mike, we are looking forward to having you join us at InfoNow on September 30,
1998.
Sincerely,
Michael W. Johnson
President and CEO
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from InfoNow's
Quarterly report to stockholders for the nine months ended September 30, 1998,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1464
<SECURITIES> 0
<RECEIVABLES> 372
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1968
<PP&E> 1578
<DEPRECIATION> 835
<TOTAL-ASSETS> 2735
<CURRENT-LIABILITIES> 1124
<BONDS> 0
0
0
<COMMON> 7
<OTHER-SE> 1499
<TOTAL-LIABILITY-AND-EQUITY> 2735
<SALES> 1641
<TOTAL-REVENUES> 1641
<CGS> 1282
<TOTAL-COSTS> 2563
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (10)
<INCOME-PRETAX> (884)
<INCOME-TAX> 0
<INCOME-CONTINUING> (884)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (884)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.15)
</TABLE>
