U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM TO
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Commission File Number 0-23952
AVERT, INC.
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(Name of small business issuer in its charter)
COLORADO 84-1028716
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
301 REMINGTON, FORT COLLINS, COLORADO 80524
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (970) 484-7722
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: None
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
COMMON STOCK, No Par Value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or an
amendment to this Form KSB. [ ]
The issuer's revenues for the year ended December 31, 1999 were
$12,608,000.
The aggregate market value of the voting stock held by non-affiliates of
the issuer as of March 16, 2000 was $78,038,478.
As of March 16, 2000 the issuer had outstanding 3,260,025 shares of Common
Stock, No par Value, its only class of Common Stock.
DOCUMENT INCORPORATED BY REFERENCE
The following document is incorporated by reference into Part III of this
Annual Report on Form 10-KSB: Definitive Proxy Statement for the issuer's 2000
Annual Meeting of Shareholders.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [ X ]
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Part I
"The Company" or "Avert" is used in this report to refer to Avert, Inc. The
Company may from time to time make written or oral forward-looking statements,
including statements contained in the Company's filings with the Securities and
Exchange Commission and its reports to shareholders. Item 1 contains
forward-looking statements that are made pursuant to the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995. These
statements include, without limitation, statements relating to Avert's growth
and business strategies, regulatory matters affecting Avert, other plans and
objectives of Avert, management for future operations and activities, expansion
and growth of Avert's operations and other such matters. The words "believes,"
"expects," "intends," "strategy," "considers" or "anticipates" and similar
expressions identify forward-looking statements. The Company does not undertake
to update, revise or correct any of the forward-looking information. Readers are
cautioned that such forward-looking statements should be read in conjunction
with the Company's disclosures under the heading: "Cautionary Statement for
Purposes of the 'Safe Harbor' Provisions of the Private Securities Litigation
Reform Act of 1995" beginning on page 11.
ITEM 1. Description of Business.
General
The Company was organized as a Colorado corporation in June 1986 under the
name Hire Risk Services Corporation. In May 1987, the Company changed its name
to Avert, Inc. Avert began as an information service bureau engaged primarily in
the business of verifying job applicant background information for employers.
Thought the Company's general business strategy has remained consistent
throughout the years, there has been a concentrated focused on making technology
its competitive advantage in the most recent years.
Avert has developed into an Internet company providing information services
targeted primarily at helping companies match employee background information
with employer job requirements through the verification of job applicant
background information. The employee background reports are obtained through
source document retrieval, public record database searches, Company databases,
and a national network of couriers (engaged on an independent contractor basis)
developed and managed by the Company since its incorporation in June, 1986. The
data products and services currently provided by the Company consist of:
criminal records, workers' compensation histories, driving records, employment
and personal reference checks, credit histories, social security number use,
name and address verification, and education and credential verifications, and
employment application forms. The Company believes that the demand for
pre-employment services is increasing as employers realize the benefits of
assuring a better quality hire and managing bad hire risk. The Company has
approximately 11,100 customers located throughout the United States. The
Company's business strategy is to accelerate market presence throughout the
United States.
Markets
The Company markets its hiring support products and services throughout the
United States. Although any company with employees is a potential customer of
Avert, the Company believes that industries or businesses with one or more of
the following characteristics benefit most from background checking:
o High risk of liability for negligent hiring lawsuits relating to the action
or inaction of employees;
o Physically demanding jobs;
o Regulated industries such as health care, transportation, etc.
o Industries such as information technology where there are tight labor
markets that are forcing companies to hire from new or non-traditional
sources;
o Industries that demand a high degree of integration and employee
information management;
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o Employees with access to goods and cash of employers;
o High employee turnover; and
o Desire for better quality employees, not only with respect to competence,
but also integrity.
o Industries in which one or more of these characteristics exist include:
construction; retail; manufacturing; property management, medical,
including nursing homes, hospitals and in-home health care providers; and
city and county governments, including schools.
Products and Services
General. The Company's products and services are designed to support the
hiring process by helping verify job applicant information for employers and
consist of retrieval of public records, internal database searches, technology
aided searches through the use of the Company's in-house computer system, and
both automated and manual retrieval of public records by Avert's network courier
system. Avert customers may request and receive records through a private Avert
network, a secured, membership-only Internet connection, or by telephone, mail
and facsimile. Over 80% of Avert's business is conducted over the internet. This
network is available 24 hours per day, seven days a week. Avert customizes its
Internet service for larger customers on a both a for-fee and free service basis
(based on factors such as contract length, order volumes, scope of enhancement).
Avert does not sell or license software to its customers.
The price to Avert's customers of the reports prepared by the Company vary
in price from $0 to $50.50 per report depending upon the type and location of
background check requested by the customer. The reports may be viewed on screen
or printed in either Avert's or the customer's offices. The reports remain in a
computer file in Avert's host computer system for two years and are available to
the customer at no additional cost during that period. New Avert customers are
required to pay a set up fee to open an account and to sign a Consumer Report
User Agreement ("User Agreement"). If an existing account is inactive for 12
consecutive months, the account may be put on inactive status.
The Company's computer systems are Oracle based, with the databases running
on two Mid-range Digital Equipment Corporation Alpha processors with dual CPUs,
1 Gigabyte of RAM and 120 gigabytes of storage, configured to operate in a
scalable and fault tolerant environment. The Oracle Application Server supports
our WEB interface and is hosted on dual XION processors for load balancing, data
management, and rapid backup and recovery. Security is managed by Checkpoint
Firewall One hosted on a Sun Workstation. The company also runs a multiple RAID
array set to maintain customer data in a secure, recoverable environment.
During 1996 the Company budgeted approximately $1.5 million to develop new
software and upgrade its existing software, of which approximately $450,000 was
expended in 1996, approximately $1,181,000 was expended in 1997, and
approximately $191,000 was expended in 1998. The upgrade was completed in April,
1998. The total cost of the upgrade was approximately $1.82 million, and
exceeded the $1.5 million budget by $322,000. It is the Company's belief that
the investments made in the new computer system, implemented in April, 1998,
have made it possible to extend our market by leveraging our fundamental
competencies in process management, technology, and order/delivery systems (see
examples below). There continues to be a concentrated focus on processing
improvements to enable more profitable growth. The Company believes the new
software and upgrade of its existing software allows the Company to: (1) manage
its higher volume with a lower cost per transaction; (2) introduce new products
and services at a much quicker pace; (3) directly integrate the Company's
information technology systems with strategic partners, suppliers, and large
customers; and (4) maintain the Company's competitive position and provide
leading edge, but safe and proven, technology for its customers.
The Company's network courier system consists primarily of persons and
small companies variously located throughout the United States. The couriers are
engaged as independent contractors by written agreements which provides for
payment of a fee on a per document, per day or monthly basis. The number of
couriers in each state depends on the size of the state, population density,
number of counties within the state, and the organization of the court systems
within the state. In first quarter of 1999, the Company completed phase one of
an on-line vendor management system to aid in managing of its courier network.
This project has allowed Avert to more accurately track the performance of its
vendors while improving the expediting process, resulting in a reduction of
production cycle time by 20% for criminal history products and 82% for workers
compensation reports. Additional improvements to the vendor payment process have
allowed Avert to pay its couriers only for what was returned in a timely and
accurate manner by implementing a procedure in which Avert provides a detailed
Summary of Charges to each vendor on a monthly basis instead of relying on
vendor invoices. Direct vendor costs in 1999, on criminal histories were reduced
by 8%, and workers compensation reports by 2.19%. During the vendor project, the
Company identified a primary vendor with whom it has developed a data interface.
This increase in automation has resulted in quicker court record searches and
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decreased internal personnel costs. This vendor performs approximately 35% of
county criminal histories, equating to approximately 15% of all court records
provided to its customers. The Company believes that if this vendor were lost,
until a replacement vendor could be implemented, the Company might experience
minimal delay in the retrieval of records and a minimal increase in internal
personnel costs. No assurance can be given that Avert will not be affected more
materially.
Products and Services. Avert currently offers the following products and
services:
Criminal Histories--Searches selected geographical areas for the
presence of a criminal record. This background information is available
statewide from 35 states including District of Columbia and from all 3,139
counties in the United States on a county-by-county basis or from federal
district courts. The remaining 16 states do not have an accessible statewide
depository for this type of information. This information is retrieved by Avert
through its network courier system, computer access directly into the states and
certain counties or, in some instances, by facsimile, mail, and telephone. In
January 2000, Avert added Felony Plus+ to this product line. FelonyPlus+ reports
provide any and all felony and misdemeanor information on felony crimes as well
as any misdemeanor information that might be available at the same court. In
February, 2000, Wants and Warrants was added to the criminal history product
line. This product provides information on extraditable warrants on a nationwide
basis and advises where the applicant is wanted. It is the only Avert product
that is nationwide in its scope.
Workers' Compensation Histories--Used to confirm on-the-job injuries
in compliance with the Americans with Disabilities Act of 1990 (referred to
herein as the "ADA"). Avert has been collecting and storing workers'
compensation data since the Company's inception. The Company currently has
approximately 3.7 million workers' compensation records in its database, and
believes that it was the first information service bureau to compile this type
of data on a nationwide basis and offer this background service to employers.
Avert can currently provide workers' compensation information from 38 states,
District of Columbia, and Puerto Rico, through the use of its database and
couriers. Such information from the remaining twelve states is not currently
available because of state law prohibiting the release of the information,
refusal by the states to release the information or inadequate state record
retrieval systems.
Credential Reference Check/Education Reference Check--Confirms date of
attendance, degrees earned, or association credentials. This background
information is obtained by Avert personnel directly from the educational
institutions or associations through the use of the telephone, fax or mail.
Employment Reference Check/Personal Reference Check--Provides a
standard reference check confirming dates of employment, salary, duties and
title information, with the ability to add custom questions in order to meet
specific customer needs. The product gives employers a wide range of reference
choices. This background information is also obtained by Avert personnel by
telephone, fax or mail directly from previous employers or personal references.
First Check--Confirms that the applicant is using a valid social
security number.
Motor Vehicle Driving Reports--Confirms driving records. This
background information is retrieved by Avert through a nonaffiliated third party
and is available from 47 states, all Canadian provinces, and Puerto Rico. This
same information could be obtained directly by the Company from the source or
from other nonaffiliated third parties. These reports and the credit reports
discussed below are the only two products for which Avert serves as a broker. In
October 1999, Avert began offering MVR Express. This product is focused
specifically on reducing the time it takes for employers to gather hiring
information. Currently, Avert offers express access to 28 states, with plans to
add more as they become available. Results are usually available on-line in the
customer's email inbox in one to two hours.
Credit Link--Confirms certain credit information. This background
information is a special form of a common "credit report" designed for
employment purposes only. The report complies with current provisions of the
Fair Credit Reporting Act, as amended ("FCRA"). See "Government Regulation"
below in this Item 1. Avert serves as a broker for this information for all
three of the major credit bureaus (Equifax, Experian, and TransUnion) and
retrieves the information from these credit bureaus through software purchased
by Avert from a nonaffiliated third party. Avert customers may order any
combination of the three credit bureaus. Avert offers an Instant Credit Link,
which is a Credit Link described above, available instantly, and is only
available through TransUnion.
Name Link--Reports use of a social security number. This product or
service identifies names and addresses associated with a social security number.
This information is obtained from TransUnion and Experian credit bureaus.
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Employment Application Forms--These employment forms have been
developed by Avert and, in Avert's judgment, if used properly by employers,
comply with current provisions of the ADA and Title VII requirements. The forms
contain a universal release form for those states which require an applicant's
signature and include the required IRS Form W-4 and the Department of Justice
Employment Eligibility Verification (I-9). The forms also include an affirmative
action questionnaire and a conditional job offer form. All forms have been
updated to ensure compliance with the revised Fair Credit Reporting Act
requirements. The application portion of the form sets forth the questions in a
manner which, together with company policy, will permit an employer to conduct a
background search.
Instant Address Link--Through its links with TransUnion credit bureau
the Company offers an address locator service that identifies any reported
addresses (up to 20) for an applicant, based on social security number usage.
Customers can match the findings of the report with information provided by the
applicant. Additionally, Instant Address Link "builds" a ready to go order for
criminal records searches that match the addresses identified. Customers can
order the criminal records on-line with only a click of the mouse.
Adverse Action--As a result of changes to the FCRA in 1997 and 1998,
employers are required to notify applicants of any information obtained from a
consumer reporting agency that may adversely affect the applicants employment
potential with the employer. Further, the applicant must be informed of his/her
rights and be provided a copy of the findings. Avert will provide this Adverse
Action service on a fee per applicant basis.
AvertSelect--In 1998 the Company contracted with Interactive Voice
Technology for the purpose of providing screening services that do not fall
under the FCRA regulations. AvertSelect is an automated applicant registration
and interview system to pre-screen potential applicants. AvertSelect was piloted
by a current customer for acceptance in 1998 and announced as a new product
offering.
Avert will confirm the validity of the social security number of each
subject of a background check, if the customer provides the Company with the
number. If the social security number is valid, Avert will provide the customer
with the state name and year of issuance. This service is currently rendered for
no additional cost to the customer in conjunction with another Avert product
purchased by the customer and regardless of the type of search.
In addition to the foregoing products and services, Avert offers the
following Membership Programs:
o Avert Advantage Online Program: In January 1999, the Company began
offering customers the Avert Advantage Online program service. As
members of this program, customers can utilize employment risk
management services developed for many of the largest employers in
American business. These tools in the hiring process are intended to
reduce risk and improve probability of hiring safe, honest and
competent employees. For $20 a month, members may receive consulting
assistance to help make informed employment decisions, access to an
online Human Resources chat room, and policies and procedures reviewed
by experienced employment law attorneys, unlimited free First Checks
(TM) to pre-screen illegal applicants, and unlimited free use of the
Instant Address Link (TM) to identify all recorded places of
residence. In addition, Avert Advantage Online customers also receive
a 15% discount on all Avert products. The Company has approximately
730 customer members in this program.
o Avert Advantage Program: The Company also still offers a lower cost
Avert Advantage customer membership service to its customers that
allows them to qualify for special discounts and services.. This
service provides access to a library of Human Resources documents
including hiring processes and forms, access to Avert's Knowledgelink
Help Desk for consulting assistance and unlimited free First Checks.
Additionally, this service provides instant access to hiring process
information. Advantage customers also receive a discount based on the
number of months they have been a customer. A $10.00 monthly fee is
collected for most Advantage members. The Company has obtained
approximately 2,550 of such customers.
o ADP Subscription Model: Avert began its rollout of products and
services during the third quarter of 1999 with Automatic Data
Processing (see "Business Strategy-Distribution Partnerships below in
this Item 1). The focus of this partnership agreement is for ADP's
Emerging Business Services division and its Major Accounts division to
actively market two new product packages to their customers utilizing
a monthly subscription-pricing scheme. Members of the ADP subscription
model pay a flat monthly subscription rate based on their number of
employees, turnover rates and product package. This format uses a
combination of cross-referenced and cascading on-line services to
provide ADP's customers with a cost-effective way to help screen
employees and reduce their hiring risk. As of year-end 1999, there
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were approximately 1,400 customers obtained through the EBS channel
(companies with less than 100 employees) and the MAJORS channel
(companies with 100 to 999 employees0 accounted for approximately 200
Avert customers.
Business Strategy
Avert's primary objective is to position the Company as one of the highest
quality, most innovative hiring support companies in the United States and,
ultimately, to expand that service and reputation into the international market
and the broader markets of internet staffing and recruiting, insurance, Human
Resources, benefits administration, drug testing and skills testing. The Company
believes its general business focus is to mold technology, service, products,
and profitability into a top web-based business that leverages the Company's
processing abilities with its ability to provide new ways to present Avert's
products through the rapidly expanding Internet economy.
The basic elements of Avert's strategies are as follows:
o Accelerated Market Presence. Avert intends to continue the acceleration of
its market presence throughout the United States by aggressively pursuing
new products, extending partner channels and further expanding and refining
our traditional sales and marketing techniques used over the past several
years, including: (1) face-to-face selling with prospective customers,
primarily larger companies; (2) in-house telemarketing to existing
customers and to prospective customers who have shown an interest in
purchasing Avert's products and services; (3) marketing partnerships with
providers of human resource software and service products; (4) Internet
marketing programs through links to the company's Web Site; (5)
participation in trade shows and seminars; (6) advertising in trade
publications; (7) public relations; and (8) independent resellers. See
"Marketing and Sales" below in this Item 1.
o Development of New Revenue. As a general matter, many of Avert's products
and services have been developed and added to the Company's product line as
a result of requests or suggestions from existing or prospective customers.
For this reason, the Company will continue to listen to its customers or
prospective customers for new product and service ideas. In addition, the
Company intends to develop new or additional revenue from: (1) re-packaging
and customizing of its existing products, such as packaged pricing for
products and services; (2) development of new products; and (3) enhancement
of existing products and (4) improving customer value through new features,
functions and improved delivery times. Furthermore, the Company is seeking
strategic relationships with companies having a large customer base of
their own, which can re-market Avert's products and services as an add-on
or integration with their own products. Avert also seeks strategic
relationships with companies in other industries. See "Marketing and Sales"
below in this Item 1.
o Long-term Customer Relationships. The Company is committed to providing
quality products and services to its customers. Management believes that
the Company's emphasis on building long-term relationships with its
customers has played a significant role in Avert's success. Management
further believes that these relationships are important not only to
generate additional sales from existing customers, but also for customer
referrals. A large percentage of the Company's sales have been generated by
referrals from customers. The Company intends to (1) run a campaign of
tips, value added hiring ideas and new product updates that will be sent to
customers 9 to 10 times per year, (2) continue to monitor its larger
customers and provide customer service through its large account team, (3)
establish implementation teams for larger, new customers, and (4) create a
more strategic and integrated partnership relationship with our larger
customers by building customized interfaces and services that integrate
Avert staffing support directly into the customer's hiring process.
o Quality Customer Service and Support. In order to offer customers quality
service and support, Avert has developed and will continue to enhance a
client service and support program which includes: (1) the availability of
a customer service representative twelve hours a day Monday through Friday;
(2) specific large customer support team, (3) in-house training and phone
monitoring of all customer service representatives on Avert products; (4)
quality control checks for Avert products; and (4) minimum acceptable
performance guidelines for employees. In addition, Avert realizes the
importance of long-term employees to the success of its operations and,
therefore, strives to provide a positive work environment and benefits
package for employees.
o Technological. In 1999, Avert was recognized as one of the top 50 web-based
businesses by CIO Magazine. Avert will continue to champion new technology
that can enhance the quality of service, and ease of use, for Avert
customers. In addition, Avert intends to use the Internet to improve
relationships among its vendors, customers, and partners. Efforts in the
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technological arena have allowed Avert to aggressively pursue suitable
marketing partnerships and streamlining our internal processes to become
more efficient.
o Ultimate International Market Development. Currently, revenues from
international sales are not significant. Although the Company's ultimate
goal is to expand internationally, Avert will not do so until it has
significantly increased its sales and marketing presence in the United
States. International possibilities include Canada, since Canada most
closely resembles the United States market, sales to foreign companies
hiring Americans and the European market.
o Research and Development. Avert has created a new market and partnership
development initiative for the 2000 fiscal year that will focus on the
research and development of e-business solutions. This initiative will look
for new sales and marketing channels, new products, and new business
development opportunities that have been enabled by the growth of the
internet community.
o Distribution Partnerships. Aggressive partnership initiatives were realized
as the Company signed partnerships or joint marketing agreements with a
diverse group of companies who are providers of human resource software
and/or services. Avert recognizes that today's employers value the idea of
a one-stop resource to which they can look to fulfill many of their HR
needs. The Company wholly embraces partners who are leaders in applying
Internet technologies to human resource and risk management applications.
In general, partners introduce Avert to their customer base and encourage
the use of Avert products and services through an easy to use Internet
connection. Avert and partners share revenues (in varying percentages) from
the partner customer base. Examples of new partnerships during 1999 follow:
1) Automatic Data Processing (New York Stock Exchange/AUD): In 1999 Avert
announced two agreements with Automatic Data Processing to enter into
a joint marketing partnership. The first agreement calls for Avert
services to be offered electronically to ADP customers through the
Emerging Business Services division, ("EBS") which consists of
employers of 1 to 99 employees nationwide. The second agreement calls
for Avert services to be offered nationwide to ADP customers in the
Major Accounts division ("MAJORS") consisting of employers of 100 to
999 employees. As of year-end 1999, the EBS portion of the partnership
accounted for approximately 1,400 customers, and the MAJORS portion of
the partnership accounted for approximately 200 customers. See
Management's Discussion and Analysis or Plan of Operations in Item 6
below for discussion of associated revenues for this partnership.
2) CareerMag.com: A partnership was announced with one of the most
comprehensive employment and career resources on the Web, and its
sister company, HRLIBRARY.COM, the newest membership site for HR
research information, products and services. In June 1999
CareerMag.com began offering their clients access to a simple,
effective background checking process through AVERTadvantage
Online(TM) . The partnership meets the demand to provide access to a
complete online HR resource that caters to employers' needs from the
beginning of the recruiting process to the completion of the applicant
hire. In addition, the Company considers the partnership an experiment
in internet lead generation.
3) LeadersOnline(TM) (trademark of Heidrick and Struggles): A partnership
was formed in April 1999 with an online recruiting service from
Heidrick and Struggles, the leading worldwide IT executive recruiting
firm. The Company considers this relationship an experimental
partnership in offering internet-based screening services to the
high-end executive recruiting industry. Avert is linked through
LeadersOnline(TM) recruiting service, a subsidiary of Heidrick and
Struggles. The LeadersOnline(TM) recruiting process locates strong
candidates and reduces the risk of hiring unqualified candidates by
providing background verifications. Avert usually provides background
checking information within 48 hours via a secure online connection.
4) At Your Business.com. AYB represents a Internet Business Portal
relationship that offers array of small business products - including
Avert's employment and staffing services, to small and medium sized
customers. To date, this relationship has allowed Avert to expand its
Internet presence and its Internet lead sources.
o Acquisitions of Other Companies and/or Product Lines. The Company may
consider the acquisition of other companies, assets and/or product lines
that either complement or expand Avert's existing business. Target
companies are regional or state background checking companies or companies
with complementary products such as drug testing, skills testing or safety
and security products. The Company may use cash or stock or a combination
of stock and cash to effect any such acquisitions. The Company has had, and
may continue to have, discussions from time-to-time with potential
acquisition candidates, but no acquisition has been made nor is any
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currently considered probable. No assurance can be given that the Company
will be successful in these efforts, if pursued.
Marketing and Sales
The Company's marketing program consists of direct marketing activities,
advertising, exhibitions at trade shows, the Internet utilizing banner pages and
other techniques, public relations activities and in-house telemarketing. All of
the leads generated by these marketing activities are referred to new customer
tele-sales representatives for follow-up and, if applicable, for obtaining the
documentation (including executed User Agreements) needed to open new customer
accounts.
Avert employs direct marketing for lead generation, marketing communication
and market development. There are 14 employees at the Company's headquarters in
Fort Collins, Colorado, who are involved in marketing activities. Additionally,
the Company has established an association channel to develop and convert leads
to sales and to implement territory development programs.
Various forms of direct marketing techniques such as fax, direct mail and
target advertising are used to generate leads. Qualified leads are distributed
to the Company's in-house telemarketing staff. The Company's marketing programs
for territory development include, advertising, co-branding with franchise
customers, exhibitions at trade shows and public relations.
In 1999 the Company continued its focus on sales to large corporate
($100,000 annual revenue potential) accounts that match the Company's profile
for a "targeted" customer. A "targeted" customer is served through Internet
workflow management of its internal hiring process. Avert has several such
customers that use AvertNet (Avert's on-line system) to this advantage and
believes that there is a rapidly growing number of large customers that meet
this requirement. There is a specific personnel resource dedicated to these
corporate accounts, along with an implementation team when applicable. The
indirect sales channel includes resellers who value-add to and private-label
Avert products. Currently there are approximately 700 resellers.
Customers
The Company has approximately 11,800 customers located throughout the
United States. During 1999, sales were made in 50 states, the District of
Columbia, Puerto Rico, Virgin Islands, and Canada. Approximately 61% of total
sales were made in 10 states (Colorado, Texas, California, Illinois, Oregon,
Missouri, Florida, Minnesota, New York and Tennessee), with Colorado sales
representing approximately 18.6% of total sales, and Texas sales representing
approximately 9.8% of total sales. The Company's business strategy is to
accelerate market presence throughout the United States. The single largest
customer of Avert accounted for approximately 10.1% of total Avert sales during
1999. If this customer were lost, Avert's revenues would be materially affected.
Historically, the Company experiences a seasonal slow down in its business
in the fourth quarter due to decreased hiring by retailers, starting in
mid-November and continuing through the holiday season, and by industries
affected by inclement weather.
Government Regulation
The Company is a "consumer reporting agency" within the meaning of that
term as used in, and therefore is subject to, the provisions of the FCRA and is
regulated by the Federal Trade Commission ("FTC") under the Federal Trade
Commission Act. Under the provisions of the FCRA, a consumer reporting agency
may furnish a "consumer report" to a customer (other than a consumer or in
response to a court order), only if such agency has reason to believe that,
among other matters, the customer intends to use the information for a
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permissible purpose, including in connection with a credit transaction involving
the consumer on whom the information is to be furnished or the review or
collection of an account of the consumer or the customer otherwise has a
legitimate need for the information in connection with a business transaction
concerning the consumer. The background checking reports of Avert are consumer
reports for purposes of the FCRA. In addition, certain of Averts consumer
reports are "investigative consumer reports" within the meaning of that term
under the FCRA. The FCRA also prohibits disclosure of obsolete information
concerning a consumer. Obsolete information generally means information which is
more than seven years old. The Consumer Reporting Employment Clarification Act
of 1998 ("CRECA") amended the FCRA, among other things, to extend the definition
of obsolete information for criminal convictions. Criminal convictions may be
reported for an indefinite number of years.
The FCRA requires a consumer reporting agency to maintain reasonable
procedures designed to ensure that the proscriptions on the use of obsolete
information are not violated, and that the information contained in a consumer
credit report is used for a proper purpose. In addition, a consumer reporting
agency must follow reasonable procedures to assure maximum accuracy of the
information concerning the consumer about whom the report relates. See
subcaption "Legal Considerations" below in this Item 1. The FCRA also requires a
consumer reporting agency, upon request from a consumer, to disclose all
information about that consumer in a consumer report, together with the source
and the recipients of the information. In some cases, this information must be
delivered to the consumer at no cost, and, in others, the agency may charge a
reasonable fee. Avert historically has not charged such a fee.
The Consumer Credit Reporting Reform Act ("CCRRA") of 1996 amended the FCRA
and added new requirements on consumer reporting agencies providing consumer
reports for employment purposes, and persons who regularly furnish information
to the consumer reporting agency. The requirements include: providing customers
with a notification of their responsibilities under the FCRA; obtaining
certifications from customers that they are performing certain specific actions
as required by the FCRA, providing the subject of the report with a free copy of
the report if adverse action is taken by an employer based on information in the
consumer report, and providing a copy of a Summary of Your Rights under the Fair
Credit Reporting Act with each consumer report. The CCRRA also prohibits a
person from procuring a consumer report, or causing a consumer report to be
procured, on a consumer for employment purposes unless: (a) a clear and
conspicuous written disclosure has been made to the consumer before the report
is procured or caused to be procured, in a document that consists solely of the
disclosure, that a consumer report may be obtained for employment purposes; and
(b) the consumer has authorized in writing the procurement of the report by that
person.
The CCRRA also placed new requirements on the resale of consumer reports. A
consumer reporting agency providing consumer reports to a reseller must now
obtain the identity of the end user of the information for each report. In
addition, the consumer reporting agency must receive certifications from
resellers that their customers are performing the same specific actions as are
required of the consumer reporting agency's direct customers, and ensure that
reports are being resold only for permissible purposes. This applies mostly to
the persons who procure the report for resale.
The FCRA provides that an investigative consumer report may not be prepared
on any consumer unless (1) such consumer receives notice thereof in writing not
later than three days after the date on which the report was first requested,
which must include a statement, among others, that the consumer has the right to
request complete disclosure of the nature and scope of the investigation
requested. The CRECA also provides that consumers who apply for employment by
mail, telephone, computer or other similar means, must be provided by oral,
written or electronic means, notice that a consumer report may be obtained for
employment purposes and provided with a copy of a Summary of Your Rights Under
the Fair Credit Reporting Act.
The FCRA further provides that if the consumer requests disclosure of the
information, the consumer reporting agency must make such disclosure in writing
not later than five days after the date on which the request for disclosure was
received. A consumer reporting agency may not be held liable for any violation
of the FCRA provisions relating to investigative consumer reports if that agency
shows by preponderance of the evidence that at the time of the violation such
agency maintained reasonable procedures to assure compliance with those
provisions. Of the Company's current products, education/credential
confirmations and personal and employment reference checks are investigative
consumer reports for purposes of the FCRA.
The FCRA provides for civil liability sanctions against a consumer
reporting agency by a consumer for willful or negligent noncompliance with the
FCRA and criminal sanctions against officers and directors thereof who knowingly
and willfully disclose information in a report to a person not authorized to
receive the information.
The ADA makes it unlawful to discriminate in employment against a qualified
individual with a disability. The ADA does not directly apply to businesses
9
<PAGE>
conducted by consumer reporting companies such as the Company. It does, however,
apply to employers with 15 or more employees and prohibits such employers from
making inquiries of a prospective employee as to medical and injury inquiries,
job-related or not, until after a conditional job offer has been made. This
means, among other matters, that inquiries by an employer as to prior workers'
compensation claims and injuries cannot be made until after a conditional job
offer has been made.
State laws also impact the Company's business. There are a number of states
which have laws similar to the FCRA, and some states which have human rights
laws more strict than the ADA. In addition, to the Company's knowledge at least
ten states require companies engaged in the type of business conducted by the
Company to be licensed in order to conduct business within those states. See
discussion below. A large number of states also regulate the type of information
which can be made available to the public and/or impose conditions to the
release of the information. For example, some state laws prohibit access to
certain types of information, such as workers' compensation histories or
criminal histories, while others restrict access without a signed release from
the subject of the report. In addition, many privacy and consumer advocates and
federal regulators have become increasingly concerned with the use of personal
information, particularly credit reports. Attempts have been made and will
continue to be made by these groups to adopt new or additional federal and state
legislation to regulate the use of personal information. Federal and/or state
laws relating to consumer reporting agencies and/or access and use of personal
information, in particular, and privacy and civil rights, in general, amended or
enacted in the future could materially adversely impact Avert's operations.
To the Company's knowledge, at least 10 states of the 50 states in which
the Company sold its products and services during 1999 require consumer
reporting agencies, such as the Company, to obtain a license to conduct business
within those states. The Company has obtained the necessary licenses in five of
those states, and is in the process of obtaining licenses in the remaining five
states. In addition, Avert presently is reviewing the laws of three other states
to determine if licensing is required. The Company also contacts each state on
an annual basis to determine if licensing is required. Though requirements can
change, the Company believes that the remaining 37 states do not have a
licensing requirement for the Company. Although the Company believes that it
will be able to obtain licenses in other states if necessary, the inability to
do so could have an adverse impact on the Company's operations. Operation of an
unlicensed business is a misdemeanor under the laws of many states generally
punishable by fines and/or imprisonment and could be grounds for denial of a
license, if required.
Legal Considerations
Under general legal concepts and, in some instances, by specific state and
federal statute, the Company could be held liable to customers and/or to the
subjects of background checking reports prepared by the Company for inaccurate
information or misuse of the information. The FCRA contains civil liability
provisions for willful and negligent noncompliance with its requirements. The
FCRA further provides in effect that, except for liability for willful or
negligent noncompliance with the FCRA and false information furnished with
malice or willful intent to injure a consumer, neither a consumer reporting
agency, any user of information nor any person who furnishes information to a
consumer reporting agency will be liable to the consumer for defamation,
invasion of privacy or negligence based on information disclosed to such
consumer under the provisions of the FCRA.
The Company has developed and implemented internal policies designed to
help ensure that background information retrieved by it concerning a consumer is
accurate and that it otherwise complies with the provisions of the FCRA. In
addition, each customer of Avert is required to sign a User Agreement, wherein
such customer agrees, among other matters, to accept responsibility for using
information provided by Avert in accordance with the provisions of the FCRA, the
ADA, and all other applicable federal and state laws and regulations including
federal and state equal opportunity laws and regulations. Avert also has
internal checks in place regarding access and release of such information.
Additionally, Avert requires that all employees sign a written acknowledgment
covering the proper procedures for handling confidential information.
Avert maintains errors and omissions insurance covering claims by its
customers or by the subjects of its reports for alleged inaccurate or misuse of
information. The insurance provides coverage of up to $1,000,000 per claim
($2,000,000 aggregate) and has a deductible of $10,000 per occurrence. To date,
Avert has been named as a co-defendant or defendant in only four lawsuits
alleging violations of the FCRA, three of which the courts have dismissed. Avert
currently is a defendant in a case filed on or about April 29, 1999, in the
Superior Court of the State of California, in and for the County of Santa Clara,
styled Obadiah Lewis v. Avert, Inc. and Does 1 to 30. See "Legal Proceedings" in
Item 3 below.
10
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Competition
The background checking industry is highly fragmented. The Company faces
both direct and indirect competition for its products and services. In addition,
many companies perform employee background checking in-house.
Direct Competition. There are a large number of companies engaged in the
sale of one or more of the background checking products sold by the Company, and
the Company believes that this number will increase. A significant number of
these competitors are small companies operating on a local or regional basis;
while some are large companies operating on a national scale. To the Company's
knowledge, the background-checking portion of the businesses of its larger
direct competitors is currently a small portion of their overall operations.
Unlike many of its direct competitors, the Company serves as a broker for only
two of its products, credit link reports and motor vehicle driving reports, and
obtains the data for the remainder of its products from the source. The Company
believes that this helps to give it a competitive advantage as to price,
quality, and delivery time. The Company also believes that it has a competitive
advantage over many of its competitors because of the wide variety of products
that it can offer to customers, and because of it's newly developed internet
electronic commerce capabilities. Many of the Company's competitors, however,
have substantially greater financial and personnel resources than the Company.
In addition, it is possible that one or more of the Company's larger direct
competitors could expand their background checking product line in the future.
Indirect Competition. The Company faces indirect competition from a number
of companies engaged in, among others, drug, aptitude and attitude testing,
handwriting analysis and on-the-job trial employment (employee leasing). These
procedures, though often used with background checking, compete with Avert's
products and services. Most of these competitors operate on a national scale and
have substantially greater financial and personnel resources than the Company.
In addition, it is possible that one or more of these competitors could expand
their product lines in the future to include background checking products and
services.
Employees
As of March 16, 2000, the Company employed a total of 86 employees, of
which 73 are full-time employees and 13 are part-time employees. Of these 86
employees, 12 full-time employees and two part-time employees are involved in
sales and marketing, seven full-time employees and four part-time employees are
involved in finance and administration, seven full-time employees and two
part-time employees are involved in programming/information systems, and 29
full-time employees and five part-time employees are involved in information
retrieval/order processing, 17 full-time employees are involved in data
processing/customer service, and one full time person is involved in research
and development. None of the Company's employees is represented by labor unions
or is subject to collective bargaining arrangements. Avert considers its
relations with its employees to be good.
ITEM 2. Description of Property.
The Company owns and is sole occupant of an approximate 14,600 square foot
office building, located in downtown Fort Collins, Colorado. The building,
located on a 29,400 square-foot parcel of land, was constructed by the Company
in March, 1996 at a total cost of approximately $1.2 million. The land and
construction costs were paid entirely from internal funds of the Company. No
portion of the proceeds of the Company's initial public offering was used for
these purposes.
ITEM 3. Legal Proceedings.
Avert currently is a defendant in a case in the Superior Court of the State
of California, in and for the County of Santa Clara, originally filed on or
about April 29, 1999 styled Obdiah Lewis v. Avert, Inc. and Does 1 to 30. The
complaint seeks monetary damages and alleges that Avert negligently obtained and
released to third parties false information about the plaintiff's criminal
history. Specifically, the complaint alleges that Avert advised the present and
11
<PAGE>
a potential employer that the plaintiff had pled guilty to robbery and received
a jail term of 176 days. The complaint further alleges that because of this
information the plaintiff was terminated from a job and prevented from obtaining
new employment. The complaint asserts that the information Avert reported was
libelous and done with a conscious disregard of the plaintiff's rights. Avert
has paid the $10,000 deductible on its errors and omissions insurance policy for
this case. Avert has denied liability and intends to vigorously defend this
claim.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None.
-------------------------
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Avert is including the following cautionary statement to take advantage of
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995 for any forward-looking statement made by, or on behalf of, Avert. The
factors identified in this cautionary statement are important factors (but not
necessarily all of the important factors) that could cause actual results to
differ materially from those expressed in any forward-looking statement made by,
or on behalf of, Avert. Where any such forward-looking statement includes a
statement of the assumptions or bases underlying such forward-looking statement,
Avert cautions that, while it believes such assumptions or bases to be
reasonable and makes them in good faith, assumed facts or bases almost always
vary from actual results, and the differences between assumed facts or bases and
actual results can be material, depending upon the circumstances. Where, in any
forward-looking statement, Avert, or its management, expresses an expectation or
belief as to the future results, such expectation or belief is expressed in good
faith and believed to have a reasonable basis, but there can be no assurance
that the statement of expectation or belief will result or be achieved or
accomplished. Taking into account the foregoing, the following are identified as
important risk factors that could cause actual results to differ materially from
those expressed in any forward-looking statement made by, or on behalf of, the
Avert:
Avert's Business Strategy to Acquire Other Companies, Assets, and/or
Product Lines Could Divert Management Time and Avert's Financial Resources and
Adversely Impact Avert's Growth Rate. Though the Company's business strategy has
been described (See "Business Strategy" in Item 1 above), Avert may consider
using the net proceeds of the initial public offering, and the exercise of the
Redeemable Warrants to acquire other companies, assets and/or product lines that
either complement or expand its existing business. Implementation of these
strategies could involve a number of risks, including diversion of management
time and Avert's financial resources to increased marketing efforts, review of
acquisition candidates and assimilation of the acquired intangible assets. The
impact of these strategies on Avert's operations, both long-term and short-term,
remains unknown, but because of the foregoing factors, among others, Avert's
growth rate for at least the short term could be adversely impacted. In
addition, no portion of the net proceeds of the IPO has been allocated for any
specific acquisition, and, although Avert has identified and has held, and will
continue to hold, discussions from time-to-time with potential acquisition
candidates, no acquisition has been made and none nor is any currently
considered probable. Accordingly, no assurance can be given that Avert will be
successful in acquiring other companies, assets or product lines if pursued.
Government Regulation on the Use of Personal Information Could Adversely
Impact Avert's Financial Condition and Operations. Avert is a "consumer
reporting agency" within the meaning of the term as used in the FCRA and,
therefore, must comply with the various consumer credit disclosure requirements
of the FCRA. Willful or negligent noncompliance would result in civil liability
to the subjects of reports. Also, the ADA contains pre-employment inquiry and
confidentiality restrictions designed to prevent discrimination against
individuals with disabilities in the hiring process. Although the ADA does not
directly regulate Avert's business, Avert's customers use of certain information
to them is regulated, both in respect to the type of information and the timing
of its use. State laws also impact the Company's business. There are a number of
states that have laws similar to the FCRA, and some states that have human
rights laws more strict than the ADA. In addition, to Avert's knowledge, at
least ten states require companies engaged in the type of business to be
licensed in order to conduct business within those states. See "Licensing
Requirements," below in this section. A large number of states also regulate the
type of information which can be made available to the public and/or impose
conditions to the release of the information. For example, some state laws
prohibit access to certain types of information, such as workers' compensation
histories or criminal histories, while others restrict access without a signed
release from the subject of the report. In addition, many privacy and consumer
advocates and federal regulators have become increasingly concerned with the use
12
<PAGE>
of personal information, particularly credit reports. Attempts have been made
and will continue to be made by these groups to adopt new or additional federal
and state legislation to regulate the use of personal information. Federal
and/or state laws relating to access and use of personal information, in
particular, and privacy and civil rights, in general, amended or enacted in the
future could materially adversely impact Avert's operations.
Avert's Inability to Obtain Any Necessary Licenses From States Could Have
an Adverse Impact on Avert's Financial Condition and Operations. To Avert's
knowledge, at least ten states of the 50 states in which Avert sold its products
and services during 1999 require consumer reporting agencies, such as Avert, to
obtain a license to conduct business within those states. Avert has obtained the
necessary licenses in five of those states, and is in the process of obtaining
licenses in the remaining five states. In addition, Avert presently is reviewing
the laws of three other states to determine if licensing is required. Avert
conducts periodic reviews of state licensing requirements. Though requirements
can change, Avert believes that the remaining 37 states do not have a licensing
requirement for Avert. The inability to obtain any necessary licenses from other
states could have an adverse impact on Avert's operations. Operation of an
unlicensed business is a misdemeanor under the laws of many states generally
punishable by fines and/or imprisonment and could be grounds for denial of a
license, if required.
Liability for Inaccurate Information or Misuse of Information Could
Adversely Impact Avert's Financial Condition and Operations. Under general legal
concepts and, in some instances, by specific state and federal statute, Avert
could be held liable to customers and/or to the subjects of Avert prepared
background checking reports for inaccurate information or misuse of the
information. Avert maintains internal policies designed to help ensure that
background information it retrieves is accurate and that it otherwise complies
with the provisions of the FCRA. In addition, Avert maintains errors and
omissions liability insurance to cover claims by customers or the subjects of
reports. The insurance provides for up to $1 million per claim coverage ($2
million aggregate) and has a deductible of $10,000 per occurrence. To date, the
Company has been named as a co-defendant in four lawsuits alleging violations of
the FCRA. Three of these lawsuits have been dismissed by the court. The
remaining lawsuit is pending See Item 3 above "Legal Proceedings" for current
legal activity. No assurance can be given that claims made against Avert in the
future can be successfully defended. Uninsured losses from claims could
adversely impact the operations and financial condition of Avert.
The Loss of Avert's President Could Have a Detrimental Effect on Avert.
Avert's success continues to be dependent upon the efforts of its key personnel,
particularly Dean A. Suposs, its President. The loss of Mr. Suposs' services
could have a detrimental effect.
Competition in the Industry Could Have a Material Adverse Impact on Avert's
Financial Condition and Operations. Avert faces both direct and indirect
competition for its products and services. Direct competitors are other
background checking companies. Indirect competitors are companies engaged in,
among others, drug, aptitude and attitude testing, handwriting analysis, and
on-the-job trial employment (employee leasing). Avert believes that there are a
large number of direct competitors. A significant number of these competitors
are small companies operating on a local or regional basis, while some are large
companies operating on a national scale. Avert also believes that there are a
number of indirect competitors, with most of them operating on a national basis.
Many of Avert's competitors have financial and personnel resources substantially
greater than those of Avert. As more companies enter the market, and if larger,
direct competitors place more emphasis on the employment background segment of
their operations and/or indirect competitors expand their businesses to include
background checking products and services, the competition within the industry
could become more intense. Accordingly, no assurance can be given that Avert
will be able to continue to compete favorably in this industry.
Loss of Significant Customer Would Adversely Impact Avert's Financial
Condition and Operations. During 1999, a single customer accounted for
approximately 10.1% of Avert's total sales. The loss of this customer (or a
significant portion of this customer's business) would materially affect Avert's
revenues and could have a material adverse impact on Avert's financial condition
and operations.
13
<PAGE>
PART II
ITEM 5. Market for Common Equity and Related Stockholder Matters.
The Company's Common Stock is traded on the NASDAQ National Market under
the symbol AVRT and began trading on December 7, 1994. The following table sets
forth the high and low sales prices of the Common Stock for the periods
indicated as reported by the NASDAQ National Market. The quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.
High Low
---- ---
1998:
First quarter ......................................... 9-1/4 7-1/2
Second quarter ........................................ 8 5-1/2
Third quarter ......................................... 7-1/8 3-3/4
Fourth quarter ........................................ 6-1/4 3-1/2
1999:
First quarter ......................................... 5-1/8 3-1/4
Second quarter ........................................ 7-1/8 3-1/4
Third quarter ......................................... 8-1/4 6-3/32
Fourth quarter ........................................ 13-3/8 7-7/8
There were approximately 170 holders of record (approximately 1,750
beneficial holders) of the Company's Common Stock on March 21, 2000.
On February 22, 2000, Avert declared a special cash dividend of $0.18 per
common share payable on March 28, 2000 to shareholders of record on March 14,
2000. The Company paid a $0.12 per common share cash dividend on March 24, 1999
and a $0.10 per common share cash dividend on March 23, 1998. Avert has not paid
any other cash dividends since the year ended December 31, 1993. Avert generally
intends to retain its earnings to support the operations and growth of its
businesses. Any other future cash dividends would depend on future earnings,
capital requirements, Avert's financial condition and other factors the Board of
Directors deems relevant.
The following subparagraph sets forth information concerning equity
securities sold during 1999 that were not registered under the Securities Act of
1933, as amended (the "Securities Act"):
(a) During May 1999, options to purchase a total of 1,000 shares of
Avert's Common Stock were automatically granted under the Avert, Inc.
Non Employee Directors Stock Option Plan to Stephen D. Joyce, one of
Avert's directors. The exercise price for the 1,000 shares underlying
the options granted to Mr. Joyce is $6.25 per share for a total
exercise price under these options of $6,250.00. The options have a
five-year term and vest one year after the dates of the grant.
No underwriter was involved in this transaction, and no sales
commissions, fees, or similar compensation were paid to any person in
connection with the grant of the options. Avert believes that the
grant of the options and the continuing offer of the shares underlying
the options was and is exempt from the registration requirements of
Section 5 of the Securities Act by virtue of Section 4(2) thereof, as
transactions not involving any public offering. More specifically, the
optionee is a director of Avert and is able to fend for himself with
access to information upon which an investment decision can be made.
14
<PAGE>
On June 29, 1994, Avert completed an initial public offering ("IPO") of
1,000,000 Units at an initial public offering price of $5.25 per Unit (total
gross proceeds of $5,250,000). Each Unit consisted of one share of the Avert's
Common Stock and one Redeemable Warrant. The IPO was made pursuant to a
Registration Statement on Form SB-2 (SEC File No. 33-76726-D) declared effective
by the Securities and Exchange Commission on June 22, 1994.
Neidiger/Tucker/Bruner, Inc., Denver, Colorado, served as Representative of the
Underwriters.
Two Redeemable Warrants entitled the holder to purchase one share of Common
Stock at a price of $6.50 per share. The expiration date of the Redeemable
Warrants was initially December 22, 1995, but was extended to April 30, 1996,
and further extended to April 30, 1997, at which date they expired. A total of
176,250 Redeemable Warrants were exercised resulting in the issuance of 88,125
shares of Common Stock and receipt of gross proceeds totaling approximately
$572,800. The total expenses incurred by Avert for its account in connection
with the issuance and distribution of the Units sold in the IPO and pursuant to
the exercise of the Redeemable Warrants, including underwriting discounts and
commissions, expenses paid to or for the Underwriters and other expenses, were
approximately $909,200 ($867,900 for the IPO and $41,300 for the exercise of the
Redeemable Warrants). None of such expenses were paid directly or indirectly to
directors or officers of Avert or any of their associates, to persons owning 10%
or more of any class of security of Avert or to affiliates of Avert. The net
proceeds from the IPO and the exercise of the Redeemable Warrants (a total of
$4,913,600 ($4,382,100 from the IPO and $531,500 from the exercise of the
Redeemable Warrants)) are currently intended to be used to acquire other
companies, assets and/or product lines that either complement or expand Avert's
existing business. None of the net proceeds has been expended to date.
ITEM 6. Management's Discussion and Analysis or Plan of Operation.
This Item 6 contains forward-looking statements that are made pursuant to
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These statements include, without limitation, statements relating to
growth in sales, liquidity, Avert expectations regarding new software and
software upgrades and related funding, impact of inflation on operations and
other such matters. The words "expected," "believes," "expects" or "estimates"
and similar expressions identify forward-looking statements. The Company does
not undertake to update, revise or correct any of the forward-looking
information. Readers are cautioned that such forward-looking statements should
be read in conjunction with the Company's disclosures under the heading:
"Cautionary Statement for Purposes of the 'Safe Harbor' Provisions of the
Private Securities Litigation Reform Act of 1995" beginning on page 11.
Results of Operations
Comparison of years ended December 31, 1999 and December 31, 1998
Net revenues increased from $9,961,800 in 1998 to $12,608,400 in 1999 or
approximately 26.6%. This increase was primarily due to the following factors:
1) Continued overall growth of the customer base
2) Continued use by the customer base of criminal history records
15
<PAGE>
3) Increased program membership by the customer base
4) Improved turnaround time for motor vehicle records
5) Increased subscription fees resulting from ADP partnership
The breakdown of net revenues, exclusive of product discounts and other
miscellaneous income items, is as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 31, 1998
----------------- -----------------
% of % of Percent of
Revenues Revenues Revenues Revenues Increase/(Decrease)
-------- -------- -------- -------- ------------------
<S> <C> <C> <C> <C> <C>
Products:
Workers' compensation
histories .................. $ 844,500 6.7% $ 940,200 9.4% (10.2%)
Criminal history reports ......... $ 7,072,600 56.1% $ 5,569,900 55.9% 27.0%
Reference Checking/credit
reports .................... $ 1,316,000 10.4% $ 1,181,600 11.9% 11.4%
Motor vehicle driving records .... $ 1,433,100 11.4% $ 988,300 9.9% 45.0%
Other products/services: ......... $ 1,548,500 12.3% $ 957,800 9.6% 61.7%
Education/Credential
verification
Social security number
check
Name Link
Employment application
forms
Service sales
Interest income ..................... $ 335,300 2.7% $ 319,100 3.2% 5.1%
Net Revenues ........................ $12,608,400 $ 9,961,800 26.6%
</TABLE>
Management considers 1999 a year in which Avert began to leverage its
fundamental competencies in process management, technology, and order/delivery
systems. There was concentrated focus on processing improvements to enable more
profitable growth. It is the Company's belief that the investments made in a new
computer system, implemented in April, 1998, have made improved efficiencies and
financial condition possible. Discussion of the above items and other relevant
information regarding Avert's financial performance in 1999 follow:
1) Continued overall growth of the customer base
There were a total of 5,585 new customers added in 1999 as compared to
2,336 new customers added in 1998. This represents an increase of
approximately 139%. The ADP partnership was responsible for
approximately 1,900 new customers in 1999. See description of ADP
partnership in "Business Strategy/Distribution Partnership" above). In
addition, the number of customers actually utilizing the service
increased from approximately 7,900 in 1998 to approximately 11,800 in
1999, or a 49.4% increase. The dollars spent per customer however,
decreased from approximately $1,213 in 1998 to $1,036 in 1999,
representing a 14.6% decrease. Avert believes this decrease is a
result of the historical low unemployment rate, allowing for few
applicants available per job opening for background verification.
2) Continued use by the customer base of criminal history records
The number of criminal history records actually processed increased
from approximately 377,000 to 459,400, a 21.9% Increase when comparing
1998 to 1999. Criminal history revenues increased approximately 27%
from 1998 to 1999. They accounted for 56.1% of total net revenue in
1999, representing approximately $7,072,600 as compared to 55.9% of
total net revenue in 1998, representing approximately $5,569,900. The
Company believes there is a continuing trend nationwide, as well as
increased regulation for mandatory checking of criminal records. The
Company continues to focus on obtaining quick and accurate data.
3) Increased program membership by the customer base
As discussed above, Avert has both Avert Advantage and Avert Advantage
Online programs. (See "Products and Services/Membership Programs" in
Item above for description). As the customer base grows, the
16
<PAGE>
membership in these programs increase as well. Revenues resulting from
both of the programs increased from approximately $290,000 in 1998 to
approximately $479,500 in 1999, or approximately a 65.3% increase.
4) Addition of large customers utilizing motor vehicle records
Motorvehicle records increased approximately 45% from 1998,
representing approximately $444,800 in revenues in 1998, to
approximately $1,433,100 in revenues in 1999. Internal enhancements
specific to this product line, improving turnaround time were
implemented in first quarter 1999, positively impacted the customer
base in their quest for quicker hiring decisions. Enhanced automated
features make this product attractive to several large customers which
has increased the usage of this product. In addition, the Company
believes that MVR Express, introduced in October 1999, will continue
to address the Company's goal to further improve turnaround time for
this product.
5) Increased subscription fees resulting from ADP partnership
The partnership with ADP previously discussed was responsible for
subscription revenues of approximately $150,700 for the EBS portion of
the partnership, and approximately $56,500 for the MAJORS portion of
the partnership. The Company believes this partnership to be one that
could create substantial revenues in the upcoming year as well.
Net revenues generated in the area of reference checking/credit reports
increased from approximately $1,181,600 in 1998 to approximately $1,316,000 in
1999. These products represented approximately 11.9% of total net revenues in
1998, as compared to approximately 10.4% of total net revenues in 1999. The
reference checking area is becoming challenged due to the increased requirement
by employers to have applicant releases prior to releasing information about
past employment. This step has added increased customer involvement and can
sometimes negatively impact turnaround time.
Net revenues from workers' compensation histories continue to decrease as a
percentage of total net revenues, but remains the fourth largest product line,
representing approximately 6.7% of total net revenues in 1999, as compared to
9.4% of total net revenues in 1998. Sales of workers' compensation histories are
expected to continue to decline in total net revenues due to regulation and
necessity of releases from the respective applicant to process the product.
Other Products and Services revenue increased approximately 61.7% when
comparing 1999 to 1998. The product contributing the most revenue in this
category was Name Link, a product linking names, addresses and social security
numbers, representing approximately $210,900 in 1999 revenues as compared to
approximately $192,700 in 1998 revenues. Another product in this category,
Instant Address Link increased from approximately $3,900 in 1998 to
approximately $105,700 in 1999. Through its links with TransUnion credit bureau,
the Company offers an address locator service that identifies reported addresses
for an applicant, based on social security number usage. Customers can match the
findings of the report with information provided by the applicant. Additionally,
Instant Address Link "builds" a ready to go order for criminal records searches
that match the addresses identified. Customers can order the criminal records
on-line with just a click of the mouse.
Service sales, a subset of Other Products and Services, which are not
itemized in the chart above, increased from approximately $559,900 in 1998 to
approximately $1,175,100 in 1999, representing an approximate 109.9% growth. The
program membership and subscription revenues, which are a part of this category,
already discussed previously accounted for the majority of revenue in this
category. In addition, start up fees paid when new customers initially become
clients of Avert accounted for approximately $290,400 in revenues in 1999, as
compared to approximately $96,800 in revenues in 1998. There is a direct
correlation to the increase in the number of new customers to the increase in
start-up fee revenues. Service sales also include miscellaneous research,
special service fees, and order entry fees charged to clients.
All expense categories decreased as a percentage of total net revenues.
Avert's 1999 focus was to leverage technology for improved efficiencies and
financial condition made possible by the computer conversion implemented in
1998. There have been some minor reclassifications of expenses for simpler
internal reporting. A breakdown of expenses is as follows:
17
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 31, 1998
----------------- ----------------- Increase/(Decrease)
% of % of % of Revenue
Revenues Revenues Revenues Revenues 1999 over 1998
-------- -------- -------- -------- ------------------
<S> <C> <C> <C> <C> <C>
Search and product ................... $5,699,400 45.2% $4,966,500 49.9% (4.7)%
Marketing ............................ 1,367,200 10.8% 1,492,700 15.0% (4.2)%
General and administrative ........... 1,318,700 10.5% 1,144,900 11.5% (1.0)%
Software development and
maintenance ....................... 527,700 4.2% 581,900 5.7% (1.5)%
Depreciation and
amortization ...................... 623,700 4.9% 563,900 5.7% (0.8)%
---------- ---- ---------- ---- ----
Expenses ............................. $9,536,700 75.6% $8,749,900 87.8% (12.2)%
</TABLE>
The decrease in 1999 over 1998 of search and product fees as a percentage
of total net revenues, was primarily a result of decreased personnel and
temporary costs due to the technological enhancements made in the operations
area. Specifically, there were 24.77 full-time equivalents in the operations
departments in 1999, as compared to 30.15 in 1998. This represents an
approximate 17.8% decrease in personnel, equating to approximately $509,000 in
revenue per operations full-time equivalent in 1999, as compared to
approximately $330,400 in 1998.
Marketing expenses, as a percentage of total net revenues, decreased from
approximately 15.0% in 1998 to approximately 10.8% in 1999. This decrease was
primarily attributable to the decrease in lead generation costs that were
approximately $351,500 in 1998 and approximately $117,300 in 1999. The Company
reduced expenditures in certain lead generation activities such as yellow pages
advertising and broadcast fax as it transitions its marketing activities to
web-based lead generation programs and distribution partnerships. Examples of
web-based lead generation activities include web site links with other human
resource providers, banner advertisements, listings on Internet portals, email
messages sponsored by human resource publications, and additional information
services on our own web site. There was also decreased personnel-related
expenses. The Company believes that there will be an increased marketing expense
in the way of revenue pass-through payments to distribution partnerships as more
of distribution partnerships are developed and implemented.
The General and Administrative expense category decreased slightly when
expressed as a percentage of total net revenues from approximately 11.5% in 1998
to approximately 10.5% in 1999.
There was a decrease in software development and maintenance expenses
expressed as a percentage of total net revenues from approximately 5.7% in 1998
to approximately 4.2% in 1999. The primary reason for the decrease is reduced
fees of approximately $100,000 associated with third-party consultants in 1999
that were utilized in 1998. After implementation of the computer system in 1998,
consultants were used to troubleshoot problems and other minor software
development. See "Liquidity and capital Resources" below in this Item. The
Company continues to focus on making technology its strategic advantage in its
relationships with customers, partners and suppliers.
There was a decrease in depreciation and amortization expenses when
expressed as a percentage of total net revenues, from approximately 5.7% in 1998
to approximately 4.9% in 1999. The decrease was due to the fact that there was
no substantial software development project capitalized in 1999 as there was in
1998.
Income before income taxes increased from approximately $1,211,900 in 1998
to approximately $3,071,700 in 1999, or approximately 153.5% and represented
approximately 12.2% of net revenues in 1998 compared to approximately 24.4% in
1999.
The combined federal and state income tax rate for 1999 and 1998 was 39%
and 38%, respectively, resulting in net income of approximately $740,000 or
$0.22 per share, on 3,440,000 (weighted average shares plus common stock
equivalents) for 1998 as compared to approximately $1,898,300 in net income of
$0.57 per share on 3,314,000 (weighted average shares plus common stock
equivalents) for 1999.
Comparison of years ended December 31, 1998 and December 31, 1997
Net revenues increased from $9,490,800 in 1997 to $9,961,800 in 1998 or
approximately 5.0%. This increase was primarily due to the continued overall
growth of the customer base and its use of criminal history records. The
18
<PAGE>
breakdown of net revenues, exclusive of product discounts and other
miscellaneous income items, is as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
----------------- -----------------
% of % of Percent of
Revenues Revenues Revenues Revenues Increase/(Decrease)
-------- -------- -------- -------- ------------------
<S> <C> <C> <C> <C> <C>
Products:
Workers' compensation
histories ....................... $ 940,200 9.4% $1,114,200 11.7% (15.6%)
Criminal history reports .............. $5,569,900 55.9% $4,754,300 50.1% 17.2%
Reference Checking/credit
reports ......................... $1,181,600 11.9% $1,223,800 12.9% (3.4%)
Motor vehicle driving records ......... $ 988,300 9.9% $1,000,000 10.5% (1.2%)
Other products/services: .............. $ 979,300 9.8% $ 986,900 10.4% ( .8%)
Education/Credential
verification
Social security number
check
Name Link
Employment application
forms
Service sales
Interest income .......................... $ 319,100 3.2% $ 315,200 3.9% 1.2%
Net Revenues ............................. $9,961,800 $9,490,800 5.0%
</TABLE>
Avert, Inc. experienced relatively flat growth during 1998 on most products
and services offered. Management considered 1998 a year of building, transition,
and change. It was a year that had negative financial impact, but a year that
represented much technological improvement. It is believed, that the activities
Avert performed in 1998 were necessary in order to leverage its technology for
improved future efficiencies and financial condition. The following three
factors contributed to Avert's financial performance in 1998:
1) INCREASED CUSTOMER CREDITS: Avert records customer credits as a direct
reduction in the appropriate sales category, rather than one
separate"credits given" line. During the implementation period of the
new computer system and months that followed, Avert enacted a "no
questions asked" credit policy for any problems customers experienced,
or perceived they experienced, due to the conversion. This policy
resulted in a significant amount of credits of approximately $553,900
or 5.6% of total net revenues in 1998, as compared to approximately
$248,900 or 2.6% of total net revenues in 1997. This increase
dramatically impacted average selling prices and revenues as a whole
for the year.
2) VOLUME DISCOUNTS RESULTING IN REDUCED MARGINS: Avert provides volume
discounts, which resulted in reduced margins and revenues. Avert's
largest customer, accounting for approximately 9% of total revenues,
grew approximately 30%, while the Company's overall business grew
approximately 5%. Due to their discounted pricing, this negatively
affected Avert's overall revenue growth for 1998.
3) CRIMINAL HISTORY PRICING: Prior to the conversion to the new system,
Avert provided combination felony/misdemeanor criminal records for one
combined price (2-for-1). Once converted, the Company split the
products and attempted to charge for both parts separately. Due to
backlash from large customers for this decision, Avert was forced to
give misdemeanors free until new prices could be negotiated. This
greatly affected Criminal History revenues for 1998.
19
<PAGE>
In total dollars, criminal history reports contributed the most net
revenues, representing approximately $5,569,900 in net revenues in 1998, as
compared to $4,754,300 in net revenues in 1997. The criminal history reports
product line has increased to represent approximately 55.9% of total net
revenues in 1998, as compared to approximately 50.1% of total net revenues in
1997. The Company believes there is a continuing trend nationwide, as well as
increased regulation for mandatory checking of criminal records. The Company
continues to focus on obtaining quick and accurate data, by increased leveraging
of internal improvements gained from the recent computer system implementation.
Net revenues generated in the area of reference checking/credit reports
decreased slightly from approximately $1,223,800 in 1997 to approximately
$1,181,600 in 1998. These products represented approximately 11.9% of total net
revenues in 1998, as compared to approximately 12.9% of total net revenues in
1997.
Net revenues from workers' compensation histories continue to decrease as a
percentage of total net revenues, and has slipped to represent the fourth
largest product line, approximately 9.4% of total net revenues in 1998. Sales of
workers' compensation histories are expected to continue to decline in total net
revenues due to regulation and necessity of releases from the respective
applicant to process the product.
Other Products and Services revenue remained flat when comparing 1998 to
1997. The product contributing the most revenue in this category was Name Link,
a product linking names, addresses and social security numbers, representing
$192,700 in 1998 as compared to $203,800 in 1997. Service sales, which are not
itemized in the chart above, increased from $520,100 in 1997 to $559,900 in
1997, representing an approximate 7.7% growth. Service sales include Avert
Advantage membership, start-up fees, extended criminal history fees,
miscellaneous research fees, and order entry fees charged to clients.
In conjunction with the computer conversion in 1998, the Company
implemented a new General Ledger system, which provides additional detail
regarding indirect costs. Due to this implementation, the Company is better able
to identify indirect costs, and therefore the 1998 amounts were re-classified to
better categorize expenses. This reclassification, not available in 1997, does
in no way affect the bottom line reported results. All expense categories
increased as a percentage of total net revenues except Marketing. As mentioned
above, Avert's 1998 focus was to complete the computer conversion project, which
resulted in additional indirect expenditures in order to meet that objective. A
breakdown of expenses is as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
----------------- ----------------- Increase (Decrease)
% of % of % of Revenue
Expenses Revenue Expenses Revenue 1998 over 1997
-------- ------- -------- ------- ------------------
<S> <C> <C> <C> <C> <C>
Search and product ................. $4,644,100 46.6% $4,182,100 44.1% 2.5 %
Marketing .......................... 1,492,700 15.0% 1,435,800 15.1% (0.1)%
General and administrative ......... 1,467,400 14.7% 1,246,300 13.1% 1.6%
Software development and
maintenance ..................... 581,900 5.8% 364,100 3.8% 2.0%
Depreciation and
amortization .............. 564,000 5.7% 404,500 4.3% 1.4%
---------- ---- ---------- ---- ----
Expenses ........................... $8,750,100 87.8% $7,632,800 80.4% 7.4%
</TABLE>
The increase in 1998 over 1997 of search and product fees as a percentage
of total net revenues, was a result of increased personnel and temporary costs
due to the additional training and overtime required for the computer
conversion. In addition, there were additional direct costs associated with the
reference checking and name link product groups.
Marketing expenses, as a percentage of total net revenues, decreased from
approximately 15.1% in 1997 to approximately 15.0% in 1998. There was a
decreased in personnel related expenses, but an increase in lead generation and
advertising costs. Avert has an on-going marketing campaign designed to target
20
<PAGE>
lead generation, marketing communication and market development for both current
customers and new customers, via in-house marketing personnel and partner
relationships.
As predicted, there was an increase in software development and maintenance
expenses expressed as a percentage of total net revenues from approximately 3.8%
in 1997 to approximately 5.8% in 1998. The primary reason for the increase is
that personnel costs directly associated with the development and implementation
of the computer system were capitalized with the software project in 1997 and
the first three months of 1998, but all costs are being expensed since April,
1998. In addition, after implementation of the computer system, payments of
approximately $100,000 were made to third parties to troubleshoot problems and
other minor software development, which were expensed in operations. See
"Liquidity and capital Resources" below in this Item. The Company continues to
focus on making technology its strategic advantage in its relationships with
customers, partners and suppliers.
There was an increase in depreciation and amortization expenses when
expressed as a percentage of total net revenues, from approximately 4.3% in 1997
to approximately 5.7% in 1998. The increase was due to the increased capitalized
costs associated with the software development project which were fully
amortized prior to April, 1998. Depreciation expense will increase in 1999 as
1998 included only nine months of depreciation related to this project.
Income before income taxes decreased from $1,858,000 in 1997 to $1,211,700
or approximately 34.8% and represented approximately 19.6% of net revenues in
1997 compared to approximately 12.2% in 1998.
The combined federal and state income tax rate for 1998 and 1997 was 39%
and 34%, respectively, resulting in net income of $1,218,000, or $.35 per share,
on 3,488,000 (weighted average shares plus common stock equivalents) for 1997,
as compared to net income of $739,800 or $0.22 per share, on 3,440,000 (weighted
average shares plus common stock equivalents) for 1998. This tax increase was
primarily a result of state (enterprise zone) tax credits received in 1997,
which effectively reduced the prior year rate.
Liquidity and Capital Resources
Avert's financial position at December 31,1999, remained strong with
working capital at that date of approximately $8,495,000 compared to
approximately $7,349,000 at December 31, 1998. Cash and cash equivalents at
December 31, 1998 were approximately $531,000 and increased to approximately
$1,569,000 at December 31, 1999. Net cash provided from operations for the year
ended December 31, 1999, was approximately $2,282,000, and consisted primarily
of net income of $1,898,000, a $355,000 increase in trading investments, a
$361,000 net increase in accrued expenses, and a depreciation expense of
$624,000. Net cash provided from operations for the year ended December 31,
1998, was approximately $1,420,000, and consisted primarily of net income of
$740,000, a $107,000 decrease in trading investments, a $120,000 net decrease in
prepaid expenses, and a depreciation expense of $564,000. Avert had capital
expenditures of approximately $287,000 for the year ended December 31, 1999, as
compared to approximately $305,000 for 1998. During 1999, Avert used cash in
financing activities to purchase $548,000 of its Common shares outstanding, and
to pay a $419,000 dividend. Avert has declared an approximate $586,800 dividend
in 2000.
Inflation
The Company believes that the results of its operations are not dependent
upon or affected by inflation.
ITEM 7. Financial Statements.
Financial Statements are filed as a part of this report at the end of Part
III hereof beginning at page F-1, Index to Consolidated Financial Statements,
and are incorporated herein by this reference.
ITEM 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
21
<PAGE>
PART III
The information required by Part III is omitted from this report because
the Company will file a definitive Proxy Statement for the Company's 2000 Annual
Meeting of Shareholders (the "Proxy Statement") pursuant to Regulation 14A of
the Securities Exchange Act of 1934 not later than 120 days after the end of the
fiscal year covered by this Form 10-KSB. Certain information included in the
aforementioned definitive Proxy Statement is incorporated herein by reference.
ITEM 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
The information required by this Item is incorporated herein by reference
to the Proxy Statement.
ITEM 10. Executive Compensation.
The information required by this Item is incorporated herein by reference
to the Proxy Statement.
ITEM 11. Security Ownership of Certain Beneficial Owners and Management.
The information required by this Item is incorporated herein by reference
to the Proxy Statement.
ITEM 12. Certain Relationships and Related Transactions.
The information required by this Item is incorporated herein by reference
to the Proxy Statement.
ITEM 13. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3.1 Articles of Incorporation, as amended, of the Registrant. (2)
3.2 Bylaws, as amended, of the Registration. (2)
3.3 Excerpt from Articles of Incorporation of the Registrant
Regarding Common Stock and Preferred Stock. (2)
10.1 Form of Consumer Report User Agreement between Registration and
customer of Registrant for changes in FCRA dated September, 1997.
(8)
10.1.1 Revised form of Consumer Report User Agreement-Employment
between Registrant and customer of Registrant. (8)
10.1.2 Revised form of Consumer Report User Agreement between Registrant
and customer of Registrant for changes in available programs,
billing options, etc. for customers beginning approximately
September, 1999.
10.1.3 Revised form of Consumer Report User Agreement between Registrant
and customer of Registrant for changes necessary for use on the
Avert web site.
10.1.4 Revised form of Consumer Report User Agreement between
Registrant and ADP EBS customers beginning approximately June,
1999.
10.1.5 Revised Form of Consumer Report User Agreement between Registrant
and ADP MAJORS customers beginning approximately July, 1999.
10.1.6 Consumer Report User Addendum between Registrant and customer of
Registrant for selection of payment methods.
22
<PAGE>
10.1.7 Revised form of Consumer Report User Addendum between Registrant
and customer of Registrant to be used for Staffing Related Firms.
10.1.8 Revised form of Consumer Report User Addendum between Registrant
and customer of Registrant to be used for Security Related Firms.
10.2 Revised form of Consumer Report User Agreement-Non Employment
between Registrant and customer of Registrant. (7)
10.3 Employment Agreement dated as of January 1, 1994, between the
Registrant and Dean A. Suposs. (2)
10.3.1 Employment Agreement Renewal dated January 5, 1999, between the
Registrant and Dean A. Suposs.
10.4 Employer Report Subscriber Agreement, dated March 29, 1991,
between the Registrant and TRW, Inc. (1)
10.4.1 Reseller Service Agreement, dated September 25, 1997, between the
Registrant and TRW, Inc. (2)
10.4.2 Experian (formerly TRW, Inc.) Reseller Certification of
Compliance dated May 4, 1998. (8)
10.5 Credit Bureau Service Agreement, dated March 30, 1992, between
the Registrant And TransUnion. (1)
10.5.1 TransUnion Amendment to Service Agreement dated May 5, 1998. (8)
10.5.2 TransUnion Amendment to Service Agreement dated December 30,
1999.
10.6 Amended and Restated 1994 Stock Incentive Plan. (3)
10.7 Non-Employee Directors' Stock Option Plan. (2)
10.8 Letter Agreements, Dated March 24, 1995, with Ace Hardware
Corporation and Loss Prevention Services relating to sales of the
Registrant's Products. (4)
10.9 Amended and Restated 1994 Stock Incentive Plan and Incentive
Stock Option Agreement between Leonard Koch and the Registrant.
(6)
10.9.1 Amended and Restated 1994 Stock Incentive Plan and Incentive
Stock Option Agreement between Dean A. Suposs and the Registrant
dated January 1, 2000.
10.10 Amended and Restated 1994 Stock Incentive Plan Incentive Stock
Option Agreement, dated June 10, 1996, between Jerry Thurber and
the Registrant. (6)
10.10.1 Amended and Restated 1994 Stock Incentive Plan Incentive Stock
Option Agreement dated December 16, 1999, between Registrant and
Jerry Thurber.
10.11 Amended and Restated 1994 Stock Incentive Plan Incentive Stock
Option Agreement, dated July 1, 1996, between Jamie Burgat and
the Registrant. (6)
10.12 Restrac/Avert Avertnet Reseller Agreement dated January 4, 1999
between Registrant and Registrant. (8)
23
<PAGE>
10.13 Distribution Partnership Agreement dated December 13, 1998
between Registrant and Heidrick and Struggles.
10.14 Distribution Partnership Term Sheet between Registrant and
Careermag.com dated June 8, 1999.
10.15 Distribution and Marketing Rights Agreement between Registrant
and AtYourBusiness.com dated September 15, 1999.
10.16 Agreement for Electronic Payments between Registrant and First
State Bank of Fort Collins dated June 7, 1999.
10.17 Profit Sharing Plan for 1999
23.1 Consent of Hein + Associates LLP
27.1 Financial Data Schedule-1999
- -------------------------
(1) Filed as an Exhibit to the initial Registration Statement (File No.
33-76726-D) filed with the Securities and Exchange Commission on March
21, 1994.
(2) Filed as an Exhibit to Amendment No. 1 to the Registration Statement
(File No. 33-76726-D) filed with the Securities and Exchange
Commission on April 26, 1994.
(3) Filed as an Exhibit to Amendment No. 2 to the Registration Statement
(File No. 33-76726-D) filed with the Securities and Exchange
Commission on May 24, 1994.
(4) Filed as an Exhibit to Post-Effective Amendment No. 1 to the
Registration Statement (File No. 33-76726-D) filed with the Securities
and Exchange Commission on May 4, 1995.
(5) Filed as an Exhibit to Form 10-KSB for the year ended December 31,
1995 filed with the Securities and Exchange Commission on March 9,
1996.
(6) Filed as an Exhibit to Post-Effective Amendment No. 2 to the
Registration Statement (File No. 33-76726-D) filed with the Securities
and Exchange Commission on October 23, 1996.
(7) Filed as an Exhibit to Form 10-KSB for the year ended December 31,
1997 filed with the Securities and Exchange Commission on March 30,
1998.
(8) Filed as an Exhibit to Form 10-KSB for the year ended December 31,
1998 filed with the Securities and Exchange Commission on March 23,
1999.
(b) Reports on Form 8-K.
The following current reports on Form 8-K were filed during the calendar
quarter ended December 31, 1999:
1) Form 8-K, dated October 5, 1999, regarding press release announcing
that Avert Inc. added Express Motor Vehicle Records to expedite
background checks.
2) Form 8-K, dated October 13, 1999, regarding press release announcing
that Avert Inc. announced record financial results for the third
quarter and nine-month period.
3) Form 8-K, dated November 30, 1999, regarding press release announcing
a partnership between Avert and AtYourBusiness.com Partner to Offer
Pre-employment Screening Solutions Online.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AVERT, INC.
Date: March 27, 2000 By: /s/ Dean A. Suposs
----------------------------------------
Dean A. Suposs
President and Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities indicated as of March 30, 1999.
Signature Title
--------- -----
/s/ Dean A. Suposs Chairman of the Board; and President
- --------------------------------------
Dean A. Suposs
(Principal Executive Officer)
Vice President of Operations; Treasurer;
/s/ Jamie M. Burgat and Assistant Secretary
- --------------------------------------
Jamie M. Burgat
(Principal Financial and Accounting Officer)
/s/ D. Michael Vaughan Director
- --------------------------------------
D. Michael Vaughan
/s/ Stephen C. Fienhold Director
- --------------------------------------
Stephen C. Fienhold
/s/ Stephen D. Joyce Secretary; and Director
- --------------------------------------
Stephen D. Joyce
25
<PAGE>
Avert, Inc.
Financial Statements
December 31, 1999
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Avert, Inc.
Fort Collins, Colorado
We have audited the accompanying balance sheet of Avert, Inc. as of December 31,
1999, and the related statements of income, shareholders' equity and cash flows
for the years ended December 31, 1999 and 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 financial position of Avert, Inc. as of December 31,
1999, and the results of its operations and its cash flows for the years ended
December 31, 1999 and 1998, in conformity with generally accepted accounting
principles.
/s/ HEIN + ASSOCIATES LLP
HEIN + ASSOCIATES LLP
Denver, Colorado
January 28, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
AVERT, INC.
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents ..................................................... $ 1,569,000
Marketable securities ......................................................... 6,361,000
Accounts receivable, net of allowance of $103,000 ............................. 1,602,000
Prepaid expenses and other .................................................... 99,000
-----------
Total current assets .......................................................... 9,631,000
PROPERTY AND EQUIPMENT, net ................................................... 2,797,000
-----------
TOTAL ASSETS .................................................................. $12,428,000
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .............................................................. $ 500,000
Accrued expenses .............................................................. 486,000
Income taxes payable .......................................................... 150,000
-----------
Total current liabilities ..................................................... 1,136,000
DEFERRED INCOME TAXES ......................................................... 340,000
COMMITMENTS (NOTE 5)
SHAREHOLDERS' EQUITY:
Preferred stock, no par value, authorized 1,000,000 shares; none outstanding .. --
Common stock, no par value, authorized 9,000,000 shares; 3,263,000 shares
issued and outstanding ........................................................ 3,924,000
Retained earnings ............................................................. 7,028,000
-----------
Total shareholders' equity .................................................... 10,952,000
-----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .................................... $12,428,000
===========
</TABLE>
See accompanying notes to these financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
AVERT, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------
1999 1998
---- ----
<S> <C> <C>
NET REVENUES:
Search and product fees ............................. $ 12,215,000 $ 9,638,000
Interest and other income ........................... 393,000 324,000
----------- -----------
12,608,000 9,962,000
EXPENSES:
Search and product costs ............................ 5,699,000 4,966,000
Marketing ........................................... 1,367,000 1,493,000
General and administrative .......................... 1,319,000 1,145,000
Software development and maintenance ................ 528,000 582,000
Depreciation ........................................ 624,000 564,000
------------ -----------
9,537,000 8,750,000
------------ -----------
INCOME BEFORE INCOME TAXES ............................... 3,071,000 1,212,000
Income tax expense .................................. (1,173,000) (472,000)
------------ -----------
NET INCOME ............................................... $ 1,898,000 $ 740,000
============ ===========
NET INCOME PER COMMON SHARE:
Basic ............................................... $ .57 $ .22
============ ===========
Diluted ............................................. $ .55 $ .21
============ ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic ............................................... 3,314,000 3,440,000
============ ===========
Diluted ............................................. 3,422,000 3,504,000
============ ===========
</TABLE>
See accompanying notes to these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
AVERT, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
FROM JANUARY 1, 1998 THROUGH DECEMBER 31, 1999
COMMON STOCK Total
--------------------------- Retained Shareholders'
Shares Amount Earnings Equity
------ ------ -------- -------------
<S> <C> <C> <C> <C>
BALANCES, January 1, 1998 .................. 3,488,000 5,276,000 5,159,000 10,435,000
Dividend paid ......................... -- -- (350,000) (350,000)
Shares repurchased .................... (165,000) (814,000) -- (814,000)
Net income ............................ -- -- 740,000 740,000
------------ ------------ ------------ ------------
BALANCES, December 31, 1998 ................ 3,323,000 $ 4,462,000 $ 5,549,000 $ 10,011,000
Dividend paid ......................... -- -- (419,000) (419,000)
Shares purchased ...................... 2,000 10,000 -- 10,000
Shares repurchased .................... (62,000) (548,000) -- (548,000)
Net income ............................ -- -- 1,898,000 1,898,000
------------ ------------ ------------ ------------
BALANCES, December 31, 1999 ................ 3,263,000 $ 3,924,000 $ 7,028,000 $ 10,952,000
============ ============ ============ ============
</TABLE>
See accompanying notes to these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
AVERT, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................................... $ 1,898,000 $ 740,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation .................................................... 624,000 564,000
Bad debt expense ................................................ 53,000 72,000
Deferred income taxes ........................................... (107,000) (19,000)
Loss (gain) on sale of asset .................................... 4,000 2,000
Changes in operating assets and liabilities:
(Increase) decrease in:
Trading investments, net .............................. (355,000) 107,000
Accounts receivable ................................... (594,000) 2,000
Prepaid expenses and other current assets ............. 44,000 120,000
Increase (decrease) in:
Accounts payable ...................................... 204,000 (92,000)
Accrued expenses ...................................... 361,000 (76,000)
Income taxes payable .................................. 150,000 --
----------- -----------
Net cash provided by operating activities ....................... 2,282,000 1,420,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment .............................. (289,000 (338,000)
Proceeds from sale of property and equipment .................... 2,000 33,000
----------- -----------
Net cash used in investing activities ...................... (287,000) (305,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of shares outstanding .................................. (548,000) (814,000)
Proceeds from exercise of warrants and options .................. 10,000 --
Dividends declared .............................................. (419,000) (350,000)
----------- -----------
Net cash used in financing activities ...................... (957,000) (1,164,000)
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS ................................ 1,038,000 (49,000)
CASH AND CASH EQUIVALENTS, beginning of year ......................... 531,000 580,000
----------- -----------
CASH AND CASH EQUIVALENTS, end of year ............................... $ 1,569,000 $ 531,000
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -
Income taxes paid ............................................... $ 994,000 $ 415,000
=========== ===========
</TABLE>
See accompanying notes to these financial statements.
F-6
<PAGE>
AVERT, INC.
NOTES TO FINANCIAL STATEMENTS
I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Nature of Operations - Avert, Inc. (the Company) was
incorporated in Colorado in 1986 to develop the use of databases to
accumulate and provide information for sale relating to an individual's
workers' compensation claims, criminal history, driving record, credit
rating, education, and previous employment. The Company provides this
service to a diverse group of customers throughout the United States.
Cash and Cash Equivalents - For purposes of the statement of cash flows,
all highly liquid debt instruments with original maturities of three months
or less are considered to be cash equivalents.
Marketable Securities - Marketable securities consist of government backed
debt securities which mature within one year or less. The securities are
classified as trading securities and are stated at market, which
approximates cost at December 31, 1999.
Concentration of Credit Risk and Financial Instruments - Concentrations of
credit risk consist primarily of cash equivalents, short-term investments
and accounts receivable with the Company's various customers. The Company's
cash equivalents and short-term investments consist of money market funds
and government backed debt securities issued by various institutions. The
Company's credit policy is designed to limit the Company's exposure to
concentrations of credit risk. Accordingly, the Company's accounts
receivable include a variety of organizations throughout the United States.
The Company estimates an allowance for uncollectible amounts based on
revenues, and when specific credit problems arise. Management's estimates
have been adequate during historical periods, and management believes that
all significant credit risks have been identified at December 31, 1999.
Property and Equipment - Property and equipment are stated at cost.
Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets, which is generally five years, except
for the Company's building which is 30 years.
The Company incurs costs for computer software development for enhancing
and maintaining its data base system and to provide "on-line" services to
its customers. In 1996, the Company embarked on a major upgrade to its
database system to expand its service to its customers. In April 1998, this
project was completed. During 1999 and 1998, the Company capitalized major
enhancements costs of approximately $130,000 and $191,000, consisting
principally of payments to third parties. These capitalized software costs
are being amortized over five years and commenced as the project was
completed. Maintenance and routine upgrades are expensed in operations.
Impairment of Long-Lived Assets - The Company periodically assesses the
recoverability of the carrying amount of long-lived assets, including
intangible assets. A loss is recognized when expected future cash flows are
less than the carrying amount of the asset. The impairment loss is
determined as the difference by which the carrying amount of the asset
exceeds its fair value. Assets to be disposed of are carried at the lower
of their financial statement carrying amounts or fair value less costs to
sell.
Income Taxes - The Company accounts for income taxes under the liability
method, which requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included
in the financial statements or tax returns. Under this method, deferred tax
F-7
<PAGE>
AVERT, INC.
NOTES TO FINANCIAL STATEMENTS
assets and liabilities are determined based on the difference between the
financial statements and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to
reverse.
Net Income Per Share - Basic earnings per share (EPS) excludes dilution for
common stock equivalents and is computed by dividing income or loss
available to common shareholders by the weighted average number 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 and resulted in the
issuance of common stock. In 1999 and 1998, diluted common and common
equivalent shares outstanding includes 108,000 and 64,000 common equivalent
shares, respectively, consisting of stock options and warrants, determined
using the treasury stock method.
Comprehensive Income (Loss) - Comprehensive income is defined as all
changes in stockholders' equity, exclusive of transactions with owners,
such as capital investments. Comprehensive income includes net income or
loss, changes in certain assets and liabilities that are reported directly
in equity such as translation adjustments on investments in foreign
subsidiaries, and certain changes in minimum pension liabilities. The
Company's comprehensive income was equal to its net income for all periods
presented in these financial statements.
Stock-Based Compensation - As permitted under the Statement of Financial
Accounting Standards No. 123 (SFAS No. 123), Accounting for Stock-Based
Compensation, the Company accounts for its stock-based compensation in
accordance with the provisions of Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to Employees. As such, compensation
expense is recorded for options granted to employees on the date of grant
only if the current market price of the underlying stock exceeded the
exercise price. Certain pro forma net income and EPS disclosures for
employee stock option grants are also included in the notes to the
financial statements as if the fair value method as defined in SFAS No. 123
had been applied. Transactions in equity instruments with non-employees for
goods or services are accounted for by the fair value method.
Impact of Recently Issued Accounting Standards - SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities, was issued in June 1998.
This statement establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair
value. This statement is effective for the Company's financial statements
for the year ended December 31, 2000 and the adoption of this standard is
not expected to have a material effect on the Company's financial
statements.
Use of Estimates - The preparation of the Company's financial statements in
conformity with generally accepted accounting principles requires the
Company's management to make estimates and assumptions that affect the
amounts reported in these financial statements and accompanying notes.
Actual results could differ from those estimates.
Reclassifications - Certain reclassifications have been made to 1998
financial information to conform to 1999 presentations. Such
reclassifications had no effect on net income.
F-8
<PAGE>
AVERT, INC.
NOTES TO FINANCIAL STATEMENTS
II. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following at December 31, 1999:
Land $ 210,000
Building and improvements 1,219,000
Computer hardware and software 2,864,000
Furniture and equipment 617,000
-----------
4,910,000
Less accumulated depreciation (2,113,000)
-----------
$ 2,797,000
===========
III. INCOME TAXES:
The actual income tax expense differs from the "expected" tax expense
(computed by applying the U.S. Federal corporate income tax rate of 34%
for each period) as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1999 1998
---- ----
Amount % Amount %
----- -- ------ --
<S> <C> <C> <C> <C>
Computed "expected" tax expense ................... $ 1,044,000 34.0% $ 412,000 34.0%
State income taxes, net of Federal income
tax benefit ..................................... 123,000 4.0% 49,000 4.0%
Non-deductible expenses and other ................. 6,000 .2% 11,000 0.9%
----------- ----- --------- -----
Total income tax expense .......................... $ 1,173,000 38.2% $ 472,000 38.9%
========== ===== ========= =====
</TABLE>
Income tax expense (benefit) consists of the following:
Years Ended December 31,
-----------------------
1999 1998
---- ----
Current $1,280,000 $ 491,000
Deferred (107,000) (19,000)
---------- ---------
Total income tax expense $1,173,000 $ 472,000
========== =========
Temporary differences between the financial statement carrying amounts and
tax basis of assets and liabilities that give rise to the net deferred tax
liability relates primarily to differences in capitalized software costs.
F-9
<PAGE>
AVERT, INC.
NOTES TO FINANCIAL STATEMENTS
IV. SHAREHOLDERS' EQUITY:
Stock Option Plan - In 1994, the Company adopted a stock incentive plan
(the Stock Option Plan) that authorizes the issuance of up to 363,337
shares of common stock. In 1997, the Company increased the number of
authorized shares to 525,000. Pursuant to the Stock Option Plan, the
Company may grant "incentive stock options" (intended to qualify under
Section 422 of the Internal Revenue Code of 1986, as amended),
non-qualified stock options and restricted stock or a combination thereof.
Incentive and non-qualified stock options may not be granted at an exercise
price of less than the fair market value of the common stock on the date of
grant (except for holders of more than 10% of common stock, whereby the
exercise price must be at least 110% of the fair market value at the date
of grant for incentive stock options). The term of the options may not
exceed 10 years. At December 31, 1999, the Company had granted options
under the Stock Option Plan to purchase 464,000 shares of which 300,664
options are vested and the balance will vest over one to five years.
Options outstanding for the Stock Option Plan at December 31, 1999 have
exercise prices that range from $4.19 to $9.97.
In 1994, the Company adopted the Non Employee Directors' Stock Option Plan
(the Outside Directors' Plan), which provides for the grant of stock
options to non-employee directors of the Company and any subsidiary. An
aggregate of 30,000 shares of common stock are reserved for issuance under
the Outside Directors' Plan. The exercise price of the options will be the
fair market value of the stock on the date of grant. Outside directors are
automatically granted options to purchase 1,000 shares initially and an
additional 1,000 shares for each subsequent year that they serve, up to a
maximum of 5,000 shares per director. Each option is exercisable one year
after the date of grant and expires four years thereafter. As of December
31, 1999, 15,000 options have been granted, of which 12,000 are vested and
outstanding. Exercise prices for the directors' options outstanding at
December 31, 1998 range from $5.25 to $8.00.
The following is a table of activity under these plans.
Weighted
Outside Average
Stock Directors' Exercise
Option Plan Plan Price
----------- ---------- ---------
OPTIONS OUTSTANDING, January 1, 1998 ...... 364,000 11,000 $ 5.42
Options exercised or expired .............. (10,000) -- $ 5.25
Options granted ........................... -- 3,000 $ 6.79
-------- ------- -----
OPTIONS OUTSTANDING, December 31, 1998 .... 354,000 14,000 5.44
Options exercised or expired .............. -- (2,000) 5.25
Options granted ........................... 110,000 1,000 4.73
-------- ------- -----
OPTIONS OUTSTANDING, December 31, 1999 .... 464,000 13,000 $ 5.27
======== ======= =====
For all options granted during 1999 and 1998, the weighted average market
price of the Company's common stock on the grant date was approximately
equal to the weighted average exercise price. The weighted average
remaining contractual life for all options and warrants as of December 31,
1999 was approximately 6 years. At December 31, 1999, options for 312,664
shares were exercisable, with a weighted average exercise price of $5.38,
and options for the remaining shares become exercisable pro rata through
2004. If not previously exercised, options outstanding at December 31,
1999, will expire as follows:
F-10
<PAGE>
AVERT, INC.
NOTES TO FINANCIAL STATEMENTS
Weighted
Average
Number of Exercise
Year Shares Price
---- --------- --------
2000 3,000 $6.17
2001 3,000 $5.58
2002 3,000 $7.46
2003 3,000 $6.79
2004 221,000 $5.23
2006 60,000 $5.00
2007 73,300 $6.17
2008 700 $7.63
2009 110,000 $4.71
---------
477,000
=========
Pro Forma Stock-Based Compensation Disclosures - The Company applies APB
Opinion 25 and related interpretations in accounting for its stock options
and warrants which are granted to employees. Accordingly, no compensation
cost has been recognized for grants of options and warrants to employees
since the exercise prices were not less than the fair value of the
Company's common stock on the grant dates. Had compensation cost been
determined based on the fair value at the grant dates for awards under
those plans consistent with the method of SFAS No. 123, the Company's net
income and earnings per share would have been reduced to the pro forma
amounts indicated below.
Years Ended December 31,
-----------------------
1999 1998
---- ----
Net income applicable to common stockholders:
As reported ............................. $ 1,898,000 $ 740,000
Pro forma ............................... $ 1,788,000 $ 670,000
Net income per common share - basic:
As reported ............................. $ .57 $ .22
Pro forma ............................... $ .54 $ .20
Net income per common share - diluted:
As reported ............................. $ .55 $ .21
Pro forma ............................... $ .52 $ .19
F-11
<PAGE>
AVERT, INC.
NOTES TO FINANCIAL STATEMENTS
For purposes of this disclosure, the weighted average fair value of the
options granted in 1999 and 1998 was $1.96 and $4.59, respectively. The
fair value of each employee option and warrant granted in 1999 and 1998 was
estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted average assumptions:
Years Ended December 31,
-----------------------
1999 1998
---- ----
Expected volatility 52% 80%
Risk-free interest rate 6.0% 5.5%
Expected dividends -- --
Expected terms (in years) 5 5
Public Offering - In June 1994, the Company completed its initial public
offering of 1,000,000 units and received net proceeds of $4,382,300. Each
unit sold for $5.25 and consisted of one share of common stock and one
redeemable warrant. Two redeemable warrants entitled the holder to purchase
one share of common stock for $6.50 through April 1997. In connection with
this offering, the underwriter received a redeemable warrant to purchase
100,000 units at $6.30 per unit. This redeemable warrant expired without
exercise in June 1999. During 1997, 176,250 warrants were exercised for
88,125 shares of common stock at $6.50 per share and the remaining warrants
expired unexercised. The Company received net proceeds of $530,800.
Preferred Stock - The Company has authorized 1,000,000 shares of preferred
stock. Such shares are issuable in such series and preferences as may be
determined by the Board of Directors.
V. COMMITMENTS:
Employee Bonus - In 1994, the Company formalized a five-year employment
agreement whereby the Company president receives a bonus of 6% of income
before taxes and bonus, but after deducting investment income. During 1999,
the employment agreement was extended an additional five years and revised
whereby the percentage of the bonus increases based on profits on an
incremental basis from 6% up to 9%. The total bonus expense for 1999 and
1998 was approximately $181,000 and $56,000, respectively.
F-12
<PAGE>
AVERT, INC.
NOTES TO FINANCIAL STATEMENTS
401(k) Savings - In 1995, the Company implemented a 401(k) profit sharing
plan (the Plan). Eligible employees may make voluntary contributions to the
Plan, which are matched by the Company equal to 50% of the employee's
contribution up to a maximum of $1,500. The amount of employee
contributions is limited as specified in the Plan. Company contributions to
the Plan in 1999 and 1998 were insignificant.
Profit Sharing - In 1999, the Company implemented a bonus profit sharing
plan, whereby all employees are eligible. Employees can receive up to a
maximum of 20% of profits in excess of 12% of revenues. This bonus,
however, is only paid if revenues increase at least 12% over prior year and
the Company maintains at least 12% of revenues as profits. During 1999, the
employees received approximately $59,000.
Litigation - The Company is subject to legal proceedings and claims which
have arisen in the ordinary course of its business. Management believes,
based on its discussion with counsel, that the outcome of these matters
will not have a material effect on the Company's financial position;
however, there can be no assurance in this regard.
VI. CONCENTRATIONS OF CREDIT RISK:
Credit risk represents the accounting loss that would be recognized at the
reporting date if counterparties failed completely to perform as
contracted. Concentrations of credit risk (whether on or off balance sheet)
that arise from financial instruments exist for groups of customers or
counterparties when they have similar economic characteristics that would
cause their ability to meet contractual obligations to be similarly
effected by changes in economic or other conditions. Management believes
the allowance for doubtful accounts is sufficient to cover the related
credit risk on credit sales.
Approximately 10% of the Company's search and product revenues are from one
customer.
F-13
<PAGE>
EXHIBIT INDEX
Exhibit
Number Document Description
------- --------------------
3.1 Articles of Incorporation, as amended, of the Registrant. (2)
3.2 Bylaws, as amended, of the Registration. (2)
3.3 Excerpt from Articles of Incorporation of the Registrant
Regarding Common Stock and Preferred Stock. (2)
10.1 Form of Consumer Report User Agreement between Registration and
customer of Registrant for changes in FCRA dated September, 1997.
(8)
10.1.1 Revised form of Consumer Report User Agreement-Employment
between Registrant and customer of Registrant. (8)
10.1.2 Revised form of Consumer Report User Agreement between Registrant
and customer of Registrant for changes in available programs,
billing options, etc. for customers beginning approximately
September, 1999.
10.1.3 Revised form of Consumer Report User Agreement between Registrant
and customer of Registrant for changes necessary for use on the
Avert web site.
10.1.4 Revised form of Consumer Report User Agreement between
Registrant and ADP EBS customers beginning approximately June,
1999.
10.1.5 Revised Form of Consumer Report User Agreement between Registrant
and ADP MAJORS customers beginning approximately July, 1999.
10.1.6 Consumer Report User Addendum between Registrant and customer of
Registrant for selection of payment methods.
10.1.7 Revised form of Consumer Report User Addendum between Registrant
and customer of Registrant to be used for Staffing Related Firms.
10.1.8 Revised form of Consumer Report User Addendum between Registrant
and customer of Registrant to be used for Security Related Firms.
10.2 Revised form of Consumer Report User Agreement-Non Employment
between Registrant and customer of Registrant. (7)
10.3 Employment Agreement dated as of January 1, 1994, between the
Registrant and Dean A. Suposs. (2)
10.3.1 Employment Agreement Renewal dated January 5, 1999, between the
Registrant and Dean A. Suposs.
10.4 Employer Report Subscriber Agreement, dated March 29, 1991,
between the Registrant and TRW, Inc. (1)
10.4.1 Reseller Service Agreement, dated September 25, 1997, between the
Registrant and TRW, Inc. (2)
10.4.2 Experian (formerly TRW, Inc.) Reseller Certification of
Compliance dated May 4, 1998. (8)
10.5 Credit Bureau Service Agreement, dated March 30, 1992, between
the Registrant And TransUnion. (1)
<PAGE>
10.5.1 TransUnion Amendment to Service Agreement dated May 5, 1998. (8)
10.5.2 TransUnion Amendment to Service Agreement dated December 30,
1999.
10.6 Amended and Restated 1994 Stock Incentive Plan. (3)
10.7 Non-Employee Directors' Stock Option Plan. (2)
10.8 Letter Agreements, Dated March 24, 1995, with Ace Hardware
Corporation and Loss Prevention Services relating to sales of the
Registrant's Products. (4)
10.9 Amended and Restated 1994 Stock Incentive Plan and Incentive
Stock Option Agreement between Leonard Koch and the Registrant.
(6)
10.9.1 Amended and Restated 1994 Stock Incentive Plan and Incentive
Stock Option Agreement between Dean A. Suposs and the Registrant
dated January 1, 2000.
10.10 Amended and Restated 1994 Stock Incentive Plan Incentive Stock
Option Agreement, dated June 10, 1996, between Jerry Thurber and
the Registrant. (6)
10.10.1 Amended and Restated 1994 Stock Incentive Plan Incentive Stock
Option Agreement dated December 16, 1999, between Registrant and
Jerry Thurber.
10.11 Amended and Restated 1994 Stock Incentive Plan Incentive Stock
Option Agreement, dated July 1, 1996, between Jamie Burgat and
the Registrant. (6)
10.12 Restrac/Avert Avertnet Reseller Agreement dated January 4, 1999
between Registrant and Registrant. (8)
10.13 Distribution Partnership Agreement dated December 13, 1998
between Registrant and Heidrick and Struggles.
10.14 Distribution Partnership Term Sheet between Registrant and
Careermag.com dated June 8, 1999.
10.15 Distribution and Marketing Rights Agreement between Registrant
and AtYourBusiness.com dated September 15, 1999.
10.16 Agreement for Electronic Payments between Registrant and First
State Bank of Fort Collins dated June 7, 1999.
10.17 Profit Sharing Plan for 1999
23.1 Consent of Hein + Associates LLP
27.1 Financial Data Schedule-1999
- -------------------------
(1) Filed as an Exhibit to the initial Registration Statement (File No.
33-76726-D) filed with the Securities and Exchange Commission on March
21, 1994.
<PAGE>
(2) Filed as an Exhibit to Amendment No. 1 to the Registration Statement
(File No. 33-76726-D) filed with the Securities and Exchange
Commission on April 26, 1994.
(3) Filed as an Exhibit to Amendment No. 2 to the Registration Statement
(File No. 33-76726-D) filed with the Securities and Exchange
Commission on May 24, 1994.
(4) Filed as an Exhibit to Post-Effective Amendment No. 1 to the
Registration Statement (File No. 33-76726-D) filed with the Securities
and Exchange Commission on May 4, 1995.
(5) Filed as an Exhibit to Form 10-KSB for the year ended December 31,
1995 filed with the Securities and Exchange Commission on March 9,
1996.
(6) Filed as an Exhibit to Post-Effective Amendment No. 2 to the
Registration Statement (File No. 33-76726-D) filed with the Securities
and Exchange Commission on October 23, 1996.
(7) Filed as an Exhibit to Form 10-KSB for the year ended December 31,
1997 filed with the Securities and Exchange Commission on March 30,
1998.
(8) Filed as an Exhibit to Form 10-KSB for the year ended December 31,
1998 filed with the Securities and Exchange Commission on March 23,
1999.
EXHIBIT 10.1.2
Please read and complete this agreement and fax to
Avert. If you are dissatisfied for any reason,
notify Avert in writing within 30 days of the date
you signed this agreement. Your account will be
closed and your $50.00 set-up fee (less charges
for products and services ordered) will be
refunded.
Avert Inc.
301 Remington Street
Fort Collins, CO 80524
888 606 7869
800 237 4011 FAX
Consumer Report User Agreement
YOUR CUSTOMER NUMBER IS
-----------------------
Business Name (User)____________________________________________________________
Address ________________________________________________________________________
Street City State Zip
Code
Main Contact Name ______________________________________________________________
First Last Title
Phone #__________________ Fax # ____________________ Email______________________
Second Contact Name (if applicable) ____________________________________________
First Last Title
Phone #__________________ Fax # ____________________ E-mail ____________________
Billing Contact Name (if different from main contact) __________________________
Phone #__________________ Fax # ____________________ E-mail ____________________
1. Please describe your company' s business.___________________________________
________________________________________________________________________________
2. List approximate number of employees._______________________________________
3. How long has your company been in business?_________________________________
4. Is your company in a: ( ) Commercial ( ) Industrial ( ) Residential
( ) Other (please explain) Building? _______________________________________
________________________________________________________________________________
5. Identify two principles (or owners) of your business, or if your company
stock is traded on a recognized stock exchange,please provide the symbol and
exchange.
- -------------------------- -------------------------------------- ------------
Name Title Phone
- -------------------------- -------------------------------------- ------------
Name Title Phone
- -------------------------- -----------------------------------
Symbol Exchange
User certifies that the "Terms for Consumer Report User Agreement" have been
read and agrees to the terms as written.
- --------------------------------------------------------------------------------
User Authorized Signature Title Date
- --------------------------------------------------------------------------------
Avert, Inc. Authorized Signature Title Date
6. Select One Account Option: (Check appropriate box)
__Basic Account __AVERTadvantage for $10/month __AVERTadvantage Online
for $20/month
7. If you intend to use reports containing information obtained from credit
bureaus, (i.e., Name Link, Instant Address Link, CreditLink, etc.) please
provide a copy of ONE of the following items listed below: (Check appropriate
box)
__Sales Tax License __Business License __Articles of Incorporation
8. Select One Billing Option: (Check appropriate box)
__Bill $50.00 Set-up Fee to Credit Card (Net 30 days billing for all other
charges)
<PAGE>
__Direct Debit (Addendum required)
__Bill Any Charges from Avert to Credit Card on an Ongoing Basis
__Net 30 Days Billing Option
9. If paying set-up fee and/or other charges by credit card, please complete the
following: (Visa, Mastercard and American Express accepted)
- --------------------------------------------------------------------------------
Card Type Credit Card Number Expiration Date Cardholder Name
Terms for Consumer Report User Agreement
This agreement by and between Avert, Inc. and the company named on the Consumer
Report User Agreement Form (User) and/or its designated agent(s) consists of the
following understandings and conditions:
USER CERTIFIES AND AGREES TO:
1. Use the services of and the reports received from Avert in strict compliance
with all provisions of the Fair Credit Reporting Act (FCRA), Public Law 91-508
and the Americans with Disabilities Act (ADA 1990), and all other applicable
federal and state laws and regulations including federal and state equal
opportunity laws and regulations.
2. Review the Notice to Users of Consumer Reports: Obligations of Users under
the FCRA at www.avert.com/fcra and perform legal obligations as set forth in
said Notice.
3. Use the information provided by Avert for the User's exclusive use only,
except to disclose said information to the subject of the report, and for
employment purposes only, and only in accordance with applicable law.
4. Make a clear and conspicuous disclosure to the applicant or employee, in
writing and in a separate document, that a consumer report may be obtained for
employment purposes.
5. Make a clear and accurate disclosure to the applicant or employee if an
investigative consumer report (reference check) will be obtained, including a
statement informing the subject of the report that additional information is
available if requested.
6. Obtain the proper written authorization from the applicant or employee for
any consumer report prior to requesting any report.
7. Provide proper notice to the applicant or employee, a copy of the report
obtained, and a Summary of Rights, as required by the FCRA, if an adverse
decision regarding employment is going to be made due to information in any
report obtained from Avert, Inc.
8. Ensure that reports will be requested only by User's designated
representatives and forbid employees from obtaining reports on themselves,
associates or any other person except in the exercise of their official duties.
9. Recognize that information is obtained and managed by fallible sources, and
that for the fee charged,Avert does not guarantee or insure the accuracy or the
depth of information provided.
10. Assume responsibility for the final verification of the applicant's
identity.
11. Base employment decisions or any actions on the User's lawful policies and
procedures and recognize that Avert employees are not allowed to render any
legal opinions regarding information contained in a consumer report.
<PAGE>
12. Recognize that once Avert, Inc. has delivered your customer number to the
main contact person listed on this agreement, that the security and
dissemination of this unique customer number is the responsibility of the person
signing this agreement. Avert will neither release information nor take orders
for services unless the customer number is provided.
13. Pay for services based on a statement system similar to ones used by
telephone companies.Terms are NET 30 days. Accounts in arrears will assume a
finance charge of 2% per month or the highest lawful rate, whichever is less. If
an account goes to collection, User agrees to pay all expenses, including
reasonable legal fees.
14. Provide credit information on User as may be requested by Avert, Inc. during
the course of this agreement.
15. Be aware that, if an account remains inactive for twelve consecutive months,
it may be closed and a new User Agreement may be required to re-open the
account.
16. Acknowledge that a facsimile of this agreement is as valid as an original.
17. Recognize that in order to remain in compliance with laws and regulations
governing consumer reporting agencies Avert may make modifications to this
agreement from time to time. These modifications may be mailed to the User and
the User's use of Avert's services after the date specified in the communication
will be construed as your agreement and implied consent to these modifications.
AVERT AGREES TO:
1. Comply with all applicable laws in the preparation and transmission of
reports as defined in 15 USC-1681 et seq, regulated by the Federal Trade
Commission.
2. Follow reasonable quality assurance procedures to assure maximum possible
accuracy of information.
3. Re-verify at no cost any disputed report when either the User or the subject
makes a request in accordance with applicable law. Avert's response shall be
made in writing and delivered in a timely manner.
4. Maintain consumer report information and transaction details for a minimum of
two years. During an inquiry, the subject of the report has the right to learn
the name of the User ordering information and has the right to receive a copy of
the report ordered by the User when a lawful request is made to Avert.
5. Provide all information to the consumer as required by the Fair
Credit Reporting Act.
6. Maintain confidentiality of its data acquisition and
verification methodology.
7. Avert may, at its sole discretion, terminate
service to any User.
EXHIBIT 10.1.3
Terms for User Agreement
Read first, then fill out User Agreement
Consumer Report User Agreement
Please read and complete this agreement and fax to Avert. If
you are dissatisfied for any reason, notify Avert in writing YOUR CUSTOMER
within 30 days of the date you signed this agreement. Your NUMBER IS
account will be closed and your $50.00 set-up fee (less -------------
charges for products and services ordered) will be refunded. ----------
BUSINESS INFORMATION (Address must be physical location of company)
Business Name (User)
- --------------------------------------------------------------------------------
Address
------------------------------------------------------------------------
City State Zip Code
Main Contact Name
--------------------------------------------------------------
First Last Title
Phone # Fax # E-mail
------------------ -----------------
Second Contact Name (if applicable)
---------------------------------------------
First LastT itle
Phone # Fax # E-mail
------------------ -----------------
Billing Contact (if different from main contact)
--------------------------------
First Last Title
Phone # Fax # E-mail
------------------ -----------------
1. Please describe your company's business.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. List approximate number of employees. _______
3. How long has your company been in business? ______
4. Is your company in:
Commercial
[______________]Industrial
[______________]Residential
[______________]Other (please explain) Building?
- --------------------------------------------------------------------------------
5. Identify two principals (or owners) of your business, or if your company
stock is traded on a recognized stock exchange, please provide the symbol and
exchange.
- --------------------------------------------------------------------------------
Name Title Phone
- --------------------------------------------------------------------------------
Name Title Phone
<PAGE>
- --------------------------------------------------------------------------------
Symbol Exchange
6. Select One Account Option: (Check Appropriate box)
Basic Account
[______________]AVERTadvantage ($10/month)
[______________]AVERTadvantage Online($20/month)
7. If you intend to use reports containing information obtained from credit
bureaus, (i.e. Name Link, Instant Address Link, Credit Link, etc.) please
provide a copy of ONE of the following items listed below: (Check Appropriate
box)
[_______________]Sales Tax License
[_______________]Business license
[_______________]Articles of Incorporation
8. Select One Billing Option: (Check appropriate box)
[_______________]Bill $50.00 Set-up Fee to Credit Card (Net 30 days for all
other charges)
[_______________]Bill Any Charges from Avert to Credit Card on an Ongoing Basis
[_______________]Direct Deposit (Addendum Required)
[_______________]Net 30 Days Billing Option
9. If paying set-up fee and/or other charges by credit card, please complete the
following : (Visa, mastercard and American Express accepted)
Card Type _______________________________________
Credit Card Number ______________________________
Expiration Date _________________________________
Cardholder Name _________________________________
User certifies that the "Terms for Consumer Report User Agreement" have been
read and agrees to the terms as written.
x
----------------------------------------------------------------------
User Authorized Signature Title Date
----------------------------------------------------------------------
Avert, Inc. Authorized Signature Title Date
After reading through the terms and conditions,
return to the Avert User Agreement
TERMS FOR CONSUMER REPORT USER AGREEMENT
This agreement by and between Avert, Inc. and the company named on the
Consumer Report User Agreement Form (User) and/or its designated agent(s)
consists of the following understandings and conditions:
<PAGE>
User certifies and agrees to:
Use the services of and the reports received from Avert in strict compliance
with all provisions of the Fair Credit Reporting Act (FCRA), Public Law 91-508
and the Americans with Disabilities Act (ADA 1990), and all other applicable
federal and state laws and regulations including federal and state equal
opportunity laws and regulations.
Review the Notice to Users of Consumer Reports: Obligations of Users under the
FCRA and perform legal obligations as set forth in said Notice.
Use the information provided by Avert for the User's exclusive use only, except
to disclose said information to the subject of the report, and for employment
purposes only, and only in accordance with applicable law.
Make a clear and conspicuous disclosure to the applicant or employee, in writing
and in a separate document, that a consumer report may be obtained for
employment purposes.
Make a clear and accurate disclosure to the applicant or employee if an
investigative consumer report (reference check) will be obtained, including a
statement informing the subject of the report that additional information is
available if requested. Obtain the proper written authorization from the
applicant or employee for any consumer report prior to requesting any report.
Provide proper notice to the applicant or employee, a copy of the report
obtained, and a Summary of Rights, as required by the FCRA, if an adverse
decision regarding employment is going to be made due to information in any
report obtained from Avert, Inc.
Ensure that reports will be requested only by User's designated representatives
and forbid employees from obtaining reports on themselves, associates or any
other person except in the exercise of their official duties.
Recognize that information is obtained and managed by fallible sources, and that
for the fee charged, Avert does not guarantee or insure the accuracy or the
depth of information provided.
Assume responsibility for the final verification of the applicant's identity.
Base employment decisions or any actions on the User's lawful policies and
procedures and recognize that Avert employees are not allowed to render any
legal opinions.
Recognize that once Avert, Inc. has delivered your customer number to the main
contact person listed on this agreement, that the security and dissemination of
this unique customer number is the responsibility of the person signing this
agreement. Avert will neither release information nor take orders for services
unless the customer number is provided.
Pay for services based on a statement system similar to ones used by telephone
companies. Terms are NET 30 days. Accounts in arrears will assume a finance
charge of 2% per month or the highest lawful rate, whichever is less. If an
account goes to collection, User agrees to pay all expenses, including
reasonable legal fees.
Provide credit information on User as may be requested by Avert, Inc. during the
course of this agreement.
Be aware that, if an account remains inactive for twelve consecutive months, it
may be closed and a new User Agreement may be required to reopen the account.
Acknowledge that a facsimile of this agreement is as valid as an original.
<PAGE>
Recognize that in order to remain in compliance with laws and regulations
governing consumer reporting agencies Avert may make modifications to this
agreement from time to time. These modifications may be mailed to the User and
the User's use of Avert's services after the date specified in the communication
will be construed as your agreement and implied consent to these modifications.
Avert agrees to:
Comply with all applicable laws in the preparation and transmission of reports
as defined in 15 USC-1681 et seq, regulated by the Federal Trade Commission.
Follow reasonable quality assurance procedures to assure maximum possible
accuracy of information.
Re-verify at no cost any disputed report when either the User or the subject
makes a request in accordance with applicable law. Avert's response shall be
made in writing and delivered in a timely manner.
Maintain consumer report information and transaction details for a minimum of
two years. During an inquiry, the subject of the report has the right to learn
the name of the User ordering information and has the right to receive a copy of
the report ordered by the User when a lawful request is made to Avert.
Provide all information to the consumer as required by the Fair Credit Reporting
Act.
Maintain confidentiality of its data acquisition and verification methodology.
Avert may, at its sole discretion, terminate service to any User.
EXHIBIT 10.1.4
www.avert.com www.adp.com
Consumer Report User Agreement
YOUR AVERT CUSTOMER NUMBER IS: _____________________________
__Avert should assign one Avert customer number to correspond with the unique
Company Code/Region Code of the ADP client.
__ Avert should assign multiple Avert customer numbers to correspond with the
multiple Company Codes/Region Codes associated with this ADP client. Multiple
User Agreements are attached for each Avert customer number.
__This client requires a unique set up design for billing, delivery, or multiple
Avert customer numbers, etc. Avert, Inc. should contact the ADP client before
activating the account.
Business Name (User) ___________________________________________________________
Address ________________________________________________________________________
Street City State Zip Code
Phone # _____________________ Fax # ________________________E-mail Address _____
Main Contact Name (s) __________________________________________________________
First Last Title
Billing Contact Name (if different from main contact)
________________________________________________________________________________
Phone # _____________________ Fax # ________________________E-mail Address _____
Please describe your company's business. _______________________________________
Standard Industry Code (SIC Code) __________________ How long has your company
been in business? ____________Years Identify one principal (or owner) of your
business or symbol if company is publicly traded.
- ----------------------- ---------------------- -------------------- ------------
Name Title Phone Symbol
Select password _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ (up to 15 characters) Do you have
an Internet connection? __Yes __
_____ [a] Total # of CURRENT Employees ADPSafehire Price
_____ [b] Forecast Annual # of NEW Hires __ - 24 employees $30.00/month
_____ [c] Forecast Annual # of REPLACEMENT Hires __ - 74 employees $60.00/month
_____ Total Turnover Rate Percentage (b+c)/a __ - 99 employees $90.00/month
Monthly Subscription Fee Amount $__________
One Time Set Up Fee $ 150.00
Transaction Date: Will be between the 1st and 5th business day of each month.
Bank Name _______________________________ Account Name _________________________
Bank Address ___________________________________________________________________
Street City State Zip
Bank Phone ____________________________ Bank Contact Name ______________________
Bank Transit /ABA # _______________ Account Number _____________________________
User certifies that the "Terms for Consumer Report User Agreement" have been
read and agrees to the terms as written.
X_______________________________________________________________________________
User Authorized Signature Title Date
- --------------------------------------------------------------------------------
Avert, Inc. Authorized Signature Title Date
- --------------------------------------------------------------------------------
ADP (EBS) District Manager Date
ADP Company Code: ___ ___ ___ ADP Region Code: ___ ___ ___
ADP Sales Office Code: ___ ___ ___ ___ DM Code: ___ ___
[ ] Client [ ] Prospect [ ] Standalone [ ] Upgrade Platform: __AP __EZPay
DM Name: ___________________________________________ DM Phone ( ____ )__________
NOTES: (for ADP use only)
<PAGE>
EBS EMPUA99.04
www.avert.com o www.adp.com
Terms for Consumer Report User Agreement
This agreement by and between Avert, Inc. and the company named on the Consumer
Report User Agreement (User) and/or its designated agent(s) consists of the
following understandings and conditions:
User certifies and agrees to:
1. Use the services of and the reports received from Avert in strict compliance
with all provisions of the Fair Credit Reporting Act (FCRA), Public Law 91-508
and the Americans with Disabilities Act (ADA 1990), and all other applicable
federal and state laws and regulations including federal and state equal
opportunity laws and regulations.
2. Review the Notice to Users of Consumer Reports: Obligations of Users under
the FCRA at www.avert.com/fcra and perform legal obligations as set forth in
said Notice.
3. Use the information provided by Avert for the User' s exclusive use only,
except to disclose said information to the subject of the report, and for
employment purposes only, and only in accordance with applicable law.
4. Make a clear and conspicuous disclosure to the applicant or employee, in
writing and in a separate document, that a consumer report may be obtained for
employment purposes.
5. Make a clear and accurate disclosure to the applicant or employee if an
investigative consumer report (reference check) will be obtained, including a
statement informing the subject of the report that additional information is
available if requested.
6. Obtain the proper written authorization from the applicant or employee for
any consumer report prior to requesting any report.
7. Provide proper notice to the applicant or employee, a copy of the report
obtained, and a Summary of Rights, as required by the FCRA, if an adverse
decision regarding employment is going to be made due to information in any
report obtained from Avert, Inc.
8. Ensure that reports will be requested only by User' s designated
representatives and forbid employees from obtaining reports on themselves,
associates or any other person except in the exercise of their official duties.
9. Maintain a file of all applicant release authorizations and make such file
available for review by ADP or Avert.
10. Recognize that information is obtained and managed by fallible sources, and
that for the fee charged, Avert does not guarantee or insure the accuracy or the
depth of information provided.
11. Assume responsibility for the final verification of the applicant' s
identity.
12. Base employment decisions or any actions on the User' s lawful policies and
procedures and recognize that Avert employees are not allowed to render any
legal opinions regarding information contained in a consumer report.
13. Recognize that once Avert, Inc. has delivered your customer number to the
main contact person listed on this agreement, that the security and
dissemination of this unique customer number is the responsibility of the person
signing this agreement. Avert will neither release information nor take orders
for services unless the customer number is provided.
14. Order the Subscription Product offered through the Avert/ADP partnership for
new and potential employees only.
15. Recognize that for the Subscription Fee indicated on the reverse of this
agreement, Avert will provide an unlimited number of Subscription Product orders
to the User for new and potential employees only.
<PAGE>
16. Recognize that the User may order any reports, services and forms in
addition to the Subscription Product. Those fee-based Avert reports, services,
and forms will be billed to the User in addition to the Subscription Fee on a
per-transaction basis.
17. Recognize that Avert may adjust the User' s Subscription Fee, with 30 days
written notice, based on acknowledged receipt of change in employee headcount.
18. Provide credit information on User as may be requested by Avert, Inc. during
the course of this agreement.
19. Recognize that payment of the set up fee and prorated first month of
Subscription Fee will be processed upon completion of account set up. Any future
Subscription Fee and any additional fee-based Avert reports, services and forms
will be billed at the beginning of each month.
20. If you are dissatisfied for any reason, notify Avert in writing within 30
days of the date you signed this agreement and your account will be closed and
your set up fee (less charges for Subscription Fee and fee-based reports,
services or forms) will be refunded. Terms for Consumer Report User Agreement
This agreement by and between Avert, Inc. and the company named on the Consumer
Report User Agreement (User) and/or its designated agent(s) consists of the
following understandings and conditions:
21. Authorize and request Avert, Inc. to effect payment of any amounts owed by
User to Avert Inc., as amounts become due by authorizing debit entries to User'
s account at BANK. User hereby authorizes and requests BANK to accept any debit
entries initiated by Avert, Inc., and to debit the same to my account without
liability for the correctness of the entries. This authorization shall remain in
effect unless and until revoked in writing by an authorized representative of
User to BANK and Avert, Inc. as per the terms of this agreement.
22. Recognize that User acknowledges that if sufficient funds are not available
by the date required pursuant to the foregoing provisions of the Agreement, (1)
User will immediately become solely responsible for all amounts owed, and all
related penalties and interest due then and thereafter, (2) and all Avert, Inc.
services may, at Avert, Inc.' s option, be immediately suspended, (3) neither
Bank nor Avert, Inc. will have any further obligation to User or any third party
with respect to any such charges and (4) Avert, Inc. may take such action as it
deems appropriate to collect Avert, Inc.' s fees.
23. Recognize that if any change is made by Avert, Inc. in the date of the
billing cycle on or after which such entries are to be debited to such account,
Avert, Inc. shall, within not less than seven (7) calendar days before the first
entry to be affected by such change is to be debited to such account, send to
User written notification of the new date on or after which such entries are to
be debited to such account. The provision will not apply if the User has
authorized the initiation of a single entry to his account or if the User has
agreed that entries representing indebtedness to his account may be debited at
any time after the indebtedness is incurred.
24. Recognize that User may by written notice to BANK and Avert, Inc. stop
payment of any entry initiated or to be initiated by Avert, Inc. to User' s
account pursuant to this agreement but such notice must be received by BANK in
such time and in such manner as to afford BANK and Avert, Inc. fourteen (14)
business days to act on it.
25. Recognize that if an entry is erroneously initiated by Avert, Inc. to User'
s account, User shall have the right to have the amount of such entry credited
to such account by BANK if within fifteen (15) calendar days following the date
on which BANK sent or made available to User a statement of account or
notification pertaining to such entry. User shall send or deliver to BANK and
Avert, Inc. a written notice identifying such entry, stating that such entry was
in error and requesting BANK and Avert, Inc. to credit the amount thereof to
such account.
<PAGE>
26. Be aware that, if an account remains inactive for twelve consecutive months,
it may be closed and a new User Agreement may be required to reopen the account.
27. Acknowledge that a facsimile of this agreement is as valid as an original.
28. Recognize that in order to remain in compliance with laws and regulations
governing consumer reporting agencies Avert may make modifications to this
agreement from time to time. These modifications may be mailed to the User and
the User' s use of Avert' s services after the date specified in the
communication will be construed as your agreement and implied consent to these
modifications.
Avert agrees to:
1. Comply with all applicable laws in the preparation and transmission of
reports as defined in 15 USC-1681 et seq, regulated by the Federal Trade
Commission.
2. Follow reasonable quality assurance procedures to assure maximum possible
accuracy of information.
3. Re-verify at no cost any disputed report when either the User or the subject
makes a request in accordance with applicable law. Avert' s response shall be
made in writing and delivered in a timely manner.
4. Maintain consumer report information and transaction details for a minimum of
two years. During an inquiry, the subject of the report has the right to learn
the name of the User ordering information and has the right to receive a copy of
the report ordered by the User when a lawful request is made to Avert.
5. Provide all information to the consumer as required by the Fair Credit
Reporting Act.
6. Maintain confidentiality of its data acquisition and verification
methodology.
7. Avert may, at its sole discretion, terminate service to any User.
www.avert.com i www.adp.com EBSEMPUA99.04
EXHIBIT 10.1.5
www.avert.com i www.adp.com
Consumer Report User Agreement
YOUR AVERT CUSTOMER NUMBER IS: _____________________________
__Avert should assign one Avert customer number to correspond with the unique
Company Code/Region Code of the ADP client.
__ Avert should assign multiple Avert customer numbers to correspond with the
multiple Company Codes/Region Codes associated with this ADP client. Multiple
User Agreements are attached for each Avert customer number.
__This client requires a unique set up design for billing, delivery, or multiple
Avert customer numbers, etc. Avert, Inc. should contact the ADP client before
activating the account.
Business Name (User) ___________________________________________________________
Address ________________________________________________________________________
Street City State Zip Code
Phone # _____________________ Fax # ________________________E-mail Address _____
Main Contact Name (s) __________________________________________________________
First Last Title
Billing Contact Name (if different from main contact)
________________________________________________________________________________
Phone # _____________________ Fax # ________________________E-mail Address _____
Please describe your company's business. _______________________________________
Standard Industry Code (SIC Code) __________________ How long has your company
been in business? ____________Years Identify one principal (or owner) of your
business or symbol if company is publicly traded.
- ----------------------- ---------------------- -------------------- ------------
Name Title Phone Symbol
User certifies that the "Terms for Consumer Report User Agreement" have been
read and agrees to the terms as written.
X_______________________________________________________________________________
User Authorized Signature Title Date
- --------------------------------------------------------------------------------
Avert, Inc. Authorized Signature Title Date
- --------------------------------------------------------------------------------
ADP (Majors) District Manager Date
_____ [a] Total # of CURRENT Employees ADPSecureHire (check the appropriate box)
_____ [b] Forecast Annual # of NEW Hires __#1 __#2 __#3 __#____
_____ [c] Forecast Annual # of REPLACEMENT Hires
_____ Total Turnover Rate Percentage (b+c)/a
Monthly Subscription Fee Amount $__________
One Time Set Up Fee $ 150.00
Transaction Date: Will be between the 1st and 5th business day of each month.
Bank Name _______________________________ Account Name _________________________
Bank Address ___________________________________________________________________
Street City State Zip
Bank Phone ____________________________ Bank Contact Name ______________________
Bank Transit /ABA # _______________ Account Number _____________________________
User certifies that the "Terms for Consumer Report User Agreement" have been
read and agrees to the terms as written.
X_______________________________________________________________________________
User Authorized Signature Title Date
- --------------------------------------------------------------------------------
Avert, Inc. Authorized Signature Title Date
- --------------------------------------------------------------------------------
ADP (EBS) District Manager
ADP Company Code: ___ ___ ___ ADP Region Code: ___ ___ ___
ADP Sales Office Code: ___ ___ ___ ___ DM Code: ___ ___
[ ] Client [ ] Prospect [ ] Standalone [ ] Upgrade Platform: __AP __EZPay
DM Name: _______________________________________ DM Phone ( _____ ) ____________
MAJORSEMPUA99.04
<PAGE>
NOTES: (for ADP use only)
Terms for Consumer Report User Agreement
This agreement by and between Avert, Inc. and the company named on the Consumer
Report User Agreement (User) and/or its designated agent(s) consists of the
following understandings and conditions:
User certifies and agrees to:
1. Use the services of and the reports received from Avert in strict compliance
with all provisions of the Fair Credit Reporting Act (FCRA), Public Law 91-508
and the Americans with Disabilities Act (ADA 1990), and all other applicable
federal and state laws and regulations including federal and state equal
opportunity laws and regulations.
2. Review the Notice to Users of Consumer Reports: Obligations of Users under
the FCRA at www.avert.com/avertnet and perform legal obligations as set forth in
said Notice.
3. Use the information provided by Avert for the User' s exclusive use only,
except to disclose said information to the subject of the report, and for
employment purposes only, and only in accordance with applicable law.
4. Make a clear and conspicuous disclosure to the applicant or employee, in
writing and in a separate document, that a consumer report may be obtained for
employment purposes.
5. Make a clear and accurate disclosure to the applicant or employee if an
investigative consumer report (reference check) will be obtained, including a
statement informing the subject of the report that additional information is
available if requested.
6. Obtain the proper written authorization from the applicant or employee for
any consumer report prior to requesting any report.
7. Provide proper notice to the applicant or employee, a copy of the report
obtained, and a Summary of Rights, as required by the FCRA, if an adverse
decision regarding employment is going to be made due to information in any
report obtained from Avert, Inc.
8. Ensure that reports will be requested only by User' s designated
representatives and forbid employees from obtaining reports on themselves,
associates or any other person except in the exercise of their official duties.
9. Maintain a file of all applicant release authorizations and make such file
available for review by ADP or Avert.
10. Recognize that information is obtained and managed by fallible sources, and
that for the fee charged, Avert does not guarantee or insure the accuracy or the
depth of information provided.
11. Assume responsibility for the final verification of the applicant' s
identity.
12. Base employment decisions or any actions on the User' s lawful policies and
procedures and recognize that Avert employees are not allowed to render any
legal opinions regarding information contained in a consumer report.
<PAGE>
13. Recognize that once Avert, Inc. has delivered your customer number to the
main contact person listed on this agreement, that the security and
dissemination of this unique customer number is the responsibility of the person
signing this agreement. Avert will neither release information nor take orders
for services unless the customer number is provided.
14. Order the Subscription Product offered through the Avert/ADP partnership for
new and potential employees only.
15. Recognize that for the Subscription Fee indicated on the reverse of this
agreement, Avert will provide an unlimited number of Subscription Product orders
to the User for new and potential employees only.
16. Recognize that the User may order any reports, services and forms in
addition to the Subscription Product. Those fee-based Avert reports, services
and forms will be billed to the User in addition to the Subscription Fee on a
per-transaction basis.
17. Recognize that Avert may adjust the User's Subscription Fee, with 30 days
written notice, based on acknowledged receipt of change in employee headcount.
18. Recognize that Avert, Inc. may adjust User' s Subscription Fee, after six
months and every six months thereafter, if User' s total turnover rate increases
into the range requiring higher custom pricing.
19. Provide credit information on User as may be requested by Avert, Inc. during
the course of this agreement.
20. Recognize that payment of the set up fee and prorated first month of
Subscription Fee will be processed upon completion of account set up. Any future
Subscription Fee and any additional fee-based Avert reports, services and forms
will be billed at the beginning of each month.
21. If you are dissatisfied for any reason, notify Avert in writing within 30
days of the date you signed this agreement and your account will be closed and
your set up fee (less charges for Subscription Fee and fee-based reports,
services and forms) will be refunded.
22. Authorize and request Avert, Inc. to effect payment of any amounts owed by
User to Avert Inc., as amounts become due by authorizing debit entries to User'
s account at BANK. User hereby authorizes and requests BANK to accept any debit
entries initiated by Avert, Inc., and to debit the same to my account without
liability for the correctness of the entries. This authorization shall remain in
effect unless and until revoked in writing by an authorized representative of
User to BANK and Avert, Inc. as per the terms of this agreement.
23. Recognize that User acknowledges that if sufficient funds are not available
by the date required pursuant to the foregoing provisions of the Agreement, (1)
User will immediately become solely responsible for all amounts owed, and all
related penalties and interest due then and thereafter, (2) and all Avert, Inc.
services may, at Avert, Inc.' s option, be immediately suspended, (3) neither
Bank nor Avert, Inc. will have any further obligation to User or any third party
with respect to any such charges and (4) Avert, Inc. may take such action as it
deems appropriate to collect Avert, Inc.' s fees.
24. Recognize that if any change is made by Avert, Inc. in the date of the
billing cycle on or after which such entries are to be debited to such account,
Avert, Inc. shall, within not less than seven (7) calendar days before the first
entry to be affected by such change is to be debited to such account, send to
User written notification of the new date on or after which such entries are to
be debited to such account. The provision will not apply if the User has
authorized the initiation of a single entry to his account or if the User has
agreed that entries representing indebtedness to his account may be debited at
any time after the indebtedness is incurred.
<PAGE>
25. Recognize that User may by written notice to BANK and Avert, Inc. stop
payment of any entry initiated or to be initiated by Avert, Inc. to User' s
account pursuant to this agreement but such notice must be received by BANK in
such time and in such manner as to afford BANK and Avert, Inc. fourteen (14)
business days to act on it.
26. Recognize that if an entry is erroneously initiated by Avert, Inc. to User'
s account, User shall have the right to have the amount of such entry credited
to such account by BANK if within fifteen (15) calendar days following the date
on which BANK sent or made available to User a statement of account or
notification pertaining to such entry. User shall send or deliver to BANK and
Avert, Inc. a written notice identifying such entry, stating that such entry was
in error and requesting BANK and Avert, Inc. to credit the amount thereof to
such account.
27. Be aware that, if an account remains inactive for twelve consecutive months,
it may be closed and a new User Agreement may be required to reopen the account.
28. Acknowledge that a facsimile of this agreement is as valid as an original.
29. Recognize that in order to remain in compliance with laws and regulations
governing consumer reporting agencies Avert may make modifications to this
agreement from time to time. These modifications may be mailed to the User and
the User' s use of Avert' s services after the date specified in the
communication will be construed as your agreement and implied consent to these
modifications.
Avert agrees to:
1. Comply with all applicable laws in the preparation and transmission of
reports as defined in 15 USC-1681 et seq, regulated by the Federal Trade
Commission.
2. Follow reasonable quality assurance procedures to assure maximum possible
accuracy of information.
3. Re-verify at no cost any disputed report when either the User or the subject
makes a request in accordance with applicable law. Avert' s response shall be
made in writing and delivered in a timely manner.
4. Maintain consumer report information and transaction details for a minimum of
two years. During an inquiry, the subject of the report has the right to learn
the name of the User ordering information and has the right to receive a copy of
the report ordered by the User when a lawful request is made to Avert.
5. Provide all information to the consumer as required by the Fair Credit
Reporting Act.
6. Maintain confidentiality of its data acquisition and verification
methodology.
7. Avert may, at its sole discretion, terminate service to any User.
www.avert.com i www.adp.com MAJORSEMPUA99.04
EXHIBIT 10.1.6
CONSUMER REPORT USER AGREEMENT
ADDENDUM FOR PAYMENT METHODS
Terms
User does not wish to pursue automatic withdrawal as the desired method of
payment. Instead, the User certifies and agrees to:
* Pay for services based on an electronic statement system similar to the
format used by telephone companies. Terms are NET 30 days. Accounts in
arrears will assume a finance charge of 2% per month or the highest lawful
rate, whichever is less. If an account goes to collection, User agrees to
pay all expenses, including reasonable legal fees.
One-time Set-Up Fee $150.00
Monthly Subscription Fee Amount $__________
o Bill Set-Up Fee to Credit Card
o Bill Set-Up Fee, Monthly Subscription Fee and any fee-based Avert, Inc.
reports, services and forms to Credit Card on an on-going basis.
- --------------------------------------------------------------------------------
Card Type Credit Card # Exp. Date Name of Cardholder
(Visa, Mastercard and American Express accepted.)
* To complete account set up, Avert, Inc. will need to receive a signed
copy of the standard Consumer Report User Agreement in addition to
this signed Addendum.
------------------------------------------------------------------------
User Authorized Signature Title Date
------------------------------------------------------------------------
Avert Authorized Signature Title Date
EXHIBIT 10.1.7
CONSUMER REPORT USER AGREEMENT
ADDENDUM FOR STAFFING RELATED FIRMS
Terms
Avert Customer # ________________
Company Name (as it appears on User Agreement) _________________________________
In addition to the standard 'Terms of the Consumer Report User Agreement',
User certifies and agrees:
* To use the Avert service for the sole purpose of performing
pre-employment screening background checks on individuals
applying for employment with User
* Not to resell any aspect of the Avert service to User's clients
* To recognize that Avert may review User's Subscription Fee every
30 days to identify whether User's usage exceeds 50% (yearly
applicants screened/current number of employees)
* To recognize that if User's usage exceeds 50%, then Avert may
increase User's Subscription Fee (this clause supercedes clause
#18 on the standard Consumer Report User Agreement)
* To pay for services via direct debit method
* To complete account set up, Avert, Inc. will need to receive a signed
copy of the standard Consumer Report User Agreement in addition to
this signed Addendum.
-----------------------------------------------------------------------
User Authorized Signature Title Date
-----------------------------------------------------------------------
Avert Authorized Signature Title Date
ADP Staffing Related Industries
EXHIBIT 10.1.8
CONSUMER REPORT USER AGREEMENT
ADDENDUM FOR SECURITY FIRMS
Terms
Avert Customer # ________________
Company Name (as it appears on User Agreement) ______________________________
In addition to the standard 'Terms of the Consumer Report User Agreement',
User certifies and agrees:
* To use the Avert service for the sole purpose of performing
pre-employment screening background checks on individuals
applying for employment with User
* Not to resell any aspect of the Avert service to User's clients
* To recognize that Avert may review User's Subscription Fee every
30 days to identify whether User's usage exceeds 50% (yearly
applicants screened/current number of employees)
* To recognize that if User's usage exceeds 50%, then Avert may
increase User's Subscription Fee (this clause supercedes clause
#18 on the standard Consumer Report User Agreement)
* To pay for services via direct debit method
* To complete account set up, Avert, Inc. will need to receive a signed
copy of the standard Consumer Report User Agreement in addition to
this signed Addendum.
------------------------------------------------------------------------
User Authorized Signature Title Date
------------------------------------------------------------------------
Avert Authorized Signature Title Date
ADP Security Firms
EXHIBIT 10.3.1
DATE: 01/05/99
TO: Avert Board of Directors
FROM: Compensation Committee: Steve Fienhold
Michael Vaughan
SUBJECT: Renewal of Dean Suposs employment contract
Based on the following accomplishments of the Company over the past give
years under the direction of Mr. Suposs, the Compensation Committee has
rewritten his employment contract.
o Over the past five years, Avert has progressed from a privately owned
company to a publicly traded enterprise.
o Over the past five years, Avert has nearly tripled its growth in
revenues. Gross revenues have increased from about $3.5 million to
about $10 million. Over this same period, this growth in sales has
been accomplished with less than double the number of employees (from
40 to 72).
o Avert has increased its financial strength over the past five years.
During that period, the Company has been profitable in each month. The
Company has a substantial cash balance and no long-term debt. It has a
new building that meets the needs of its operations with room to
expand.
o The Company has hired and retained strong and experienced upper
management. The Company's management personnel are stronger than ever
before.
o Avert has complied with major law changes in the Fair Credit Reporting
Act. Avert is one of the few companies that is compliant with all
Federal and state statutes.
o The Company has been completely re-engineered with new
software/hardware. This process has positioned Avert to take advantage
of efficiencies in technology, and of trends in the industry. Avert is
able to add new products and services at a much faster rate, and to be
more responsive to our customer and vendor needs. Also, with the new
technology, Avert is positioned to expand more rapidly through
electronic commerce and the Web.
o With its new technology, Avert is able to seek out strategic sales
partners. Three major pilot programs are currently underway.
o Avert has developed a successful telemarketing and marketing
communications plan for small customers. The Company's marketing
program brings in about 2,500 to 3,000 new accounts each year.
The terms of the employment contract are as follows:
1) Expires 12/31/2003.
2) Annual salary of $120,000, payable in 26 equal payments
annually.
3) Annual bonus based on pre-tax earnings, exclusive of
investment income, as follows:
Pre-Tax Earnings Bonus Percent
---------------- -------------
First $1,500,000 6%
$1,500,001-$2,000,000 7%
$2,000,001-$2,500,000 8%
Over $2,500,000 9%
4) Stock options of 100,000 shares with an exercise price equal
to market price on the date of this contract, or $4.188 per
share. Such options to be vested equally over a five-year
period, and expire in ten years from date of grant.
5) Auto allowance of $300 per month.
----------------------------------------
Dean A. Suposs, President
EXHIBIT 10.5.2
Agreement
for the Resale
of
TRACE, ReTRACE And IDSearch
This Agreement is made by and between Avert. Inc. (Reseller) and Trans Union LLC
(Trans Union) as of the date indicated below.
1. Reseller may obtain from Trans Union any or all of the following:
a) Name and address information upon entering a social security number
into the Trans Union system (herein called TRACE);
b) Social Security information upon entering a name and address (herein
called ReTRACE); and
c) Name, address and social security number upon entering name, address
and social security number or name and social security number
(IDSearch).
for the purpose of reselling any or all of them to qualified customers as
defined below. Trans Union will also make available to Reseller access to a
database of information provided by its subscribers, other third parties,
and independently assembled, that consists of addresses, telephone numbers,
Social Security Numbers and other data (not individually identifiable) as
may from time to time be added, used or potentially useable in
unsatisfactory credit experiences (hereinafter called "Hawk"). Reseller may
make Hawk available to Subscriber with any of the foregoing products upon
request under the terms and conditions set forth herein.
1. The foregoing products are referred to herein collectively as "The Products".
No credit information shall be supplied in response to such an inquiry for any
of The Products.
2. Reseller shall require its customers to sign a Service Agreement for TRACE,
ReTRACE and IDSearch in the form attached hereto as Exhibit A, wherein such
customers state the nature of their business, and the appropriate use for The
Products, in accordance with the individual Reference Service Group Principles
(IRSG). Reseller may obtain a copy of the IRSG Principles from Trans Union, or
from the IRSG at www.irsg.org. Reseller shall take reasonable steps to verify
who its customers are, and that their certifications are accurate. Reseller
shall retain copies of all documentation evidencing the steps taken to verify
its customers and their certifications, as well as copies of signed service
agreements from its customers, so long as such customer is purchasing one of The
Products and for a period of three (3) years thereafter. Reseller shall not sell
any of The Products to another reseller, buy may sell The Products only to
qualified end users.
3. Reseller agrees to comply with the IRSG Principles, and obtain an assurance
review annually from an independent auditing firm, as required by the IRSG
Principles, and present the assessment letter to Trans Union annually, no later
than April 1 of each full calendar year during this Agreement remains in effect.
In the event such a letter is not received, or Reseller fails such assessment,
this Agreement shall be terminated by Trans Union as set forth below.
4. The Products or data therefrom may be transferred without change, may be
reformatted by Reseller, or may be merged with other data obtained by Reseller
from other sources. Each report obtained by Reseller hereunder shall be used
only one time, and only by or on behalf of the user for whom it was requested.
Reseller may not archive or otherwise retain or use any report obtained
hereunder for any other purpose.
5. Reseller may advertise its services on the Internet or another proprietary
computer system. However The Products may not be sold and delivered over a
public computer network. In the event Reseller believes that adequate security
has been established to permit on line network or Internet access to The
Products, with no risk of any party other than the appropriate party obtaining
the report, Reseller shall apply to Trans Union for approval of its security
procedures. Approval must then be obtained from Trans Union's computer access
Security Department, in writing, before any such deliveries of The Products can
occur.
<PAGE>
Failure to obtain such prior approval shall result in termination of this
Agreement.
6. Reseller shall pay a fee for each inquiry for any of The Products, according
to Trans Union's current published fee schedule then in effect. Additionally,
Reseller agrees to pay to Trans Union any applicable membership fee or monthly
minimum according to the published fee schedule. Reseller agrees to pay Trans
Union upon receipt of the statement for the services rendered during the
previous thirty (30) day period according to the current rate schedules in
effect. Trans Union reserves the right to change the charges from time to time,
but no change in such charges shall become effective as to the Reseller earlier
than thirty (30) days after written notice thereof shall have been given by
Trans Union to the Reseller. There shall be no refunds or rebates of any annual
Reseller fee under this Agreement. All Reseller fees are compensation for
supplying service and carrying the account.
7. Trans Union agrees to maintain information as obtained from available
sources. Trans Union shall use good faith in attempting to obtain information
from sources deemed reliable, but does not guarantee the accuracy of the
Products, and in no event shall Trans Union be held liable in any manner
whatsoever for any loss or injury to Reseller resulting from the obtaining or
furnishing of the Products; and further Reseller agrees to hold Trans Union
harmless and indemnify it from any and all claims, losses, and damages arising
out of alleged liability or failure of the Reseller to keep and perform any of
its obligations described herein.
8. This Agreement shall remain in force and effect for one year from date
hereof, and thereafter, from year to year, on the same basis as set forth herein
except that either party may cancel this Agreement at any time upon notice at
least ten (10) days prior to the end of the current monthly payment period.
9. Trans Union may audit Reseller's compliance with the requirements of this
Agreement, during business hours and upon reasonable notice. It is further
agreed, however, that with just cause, such as delinquency or violation of the
terms of this Agreement, including but not limited to Reseller's failure to
obtain an assessment letter or a comply with an IRSG or legal requirement, or
Reseller's failure to fully cooperate in any audit, Trans Union may, upon its
election, discontinue serving the Reseller and cancel this Agreement
immediately.
10. The parties hereto agree that this instrument is the full and complete
Agreement between them regarding the furnishing of The Products, and is not to
be altered, varied, or enlarged upon by any verbal promises, statements, or
representations not expressed herein. This Agreement shall be not binding on
either party until accepted by Trans Union.
Trans Union LLC Reseller: _______________________________
By: _______________________________ By: _____________________________________
Print Name: _______________________ Print Name: _____________________________
Title: ____________________________ Address: ________________________________
Date: _____________________________ Date: ___________________________________
EXHIBIT 10.9.1
AVERT, INC.
AMENDED AND RESTATED
1994 STOCK INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT
This agreement (the "Agreement") is made January 5, 1999, between Avert,
Inc., a Colorado corporation (the "Company"), and Dean A. Suposs (the
"Optionee"). The Company hereby grants Optionee an option (the "Option") to
purchase One Hundred Thousand (100,000) of the Company's common shares, no par
value (the "Common Shares"), for a purchase price (the "Option Price") of $4.188
per Common Share. The Option has been granted pursuant to the Avert, Inc.
Amended and Restated 1994 Stock Incentive Plan (the "Plan") and shall include
and be subject to all provisions of the Plan, which are hereby incorporated
herein by reference, and shall be subject to the following provisions of this
Agreement:
1. Term and Vesting. Subject to the provisions of this Agreement, including
but not limited to paragraph 6 hereof, and the Plan, this option may be
exercised in blocks of 100 shares or any multiple thereof after the date of this
Agreement and prior to 5:00 p.m., on January 1, 2009, (the "Expiration Date")
but not thereafter, in accordance with the following:
(a) immediately on January 1, 2000, this option may be exercised for
up to 20,000 shares of the total Common Shares covered hereby: and
(b) immediately on January 1, of each of the four succeeding years,
this options may be exercised on each of those dates for up to an
additional 20,000 shares of the total Common Shares covered hereby;
so that on and after January 1, 2004, and continuing until the
Expiration Date this option may be exercised for up to 100% of the
total Common Shares included in this option; provided, however, that
notwithstanding the provisions of 1(a) or 1(b) hereof, but subject to
the further provisions of this Agreement, if prior to January 1, 2004,
Optionee's employment with the Company is terminated by the Company
without cause under the terms of Paragraph 9.1 of the Employment
Agreement between the Company and Optionee, dated as of January 1,
1994, and a Change in Control as defined in the Plan has not occurred
theretofore, this option may be exercised for up to an additional
10,000 shares of the total Common Shares covered hereby (or in the
event such termination should occur prior to the first anniversary
date of this Agreement and a Change in Control has not theretofore
occurred, 10,000 shares of the total Common Shares covered hereby),
effective on the date of such termination.
2. Method of Exercise. Exercise of this option shall be affected by the
Optionee giving written notice to the Company (in the form attached hereto as
Exhibit A, whose covenants and substantive provisions are hereby made part of
this Agreement) which shall:
(a) state that the Option is thereby being exercised, the number of
shares of Common Shares with respect to which the Option is being
exercised, each person in whose name any certificates for the Common Shares
should be registered and his or her address and social security number;
(b) be signed by the person or persons entitled to exercise the Option
and, if the Option is being exercised by anyone other than the Optionee, be
accompanied by proof satisfactory to counsel for the Company of the right
of such person or persons to exercise the Option under the Plan and all
applicable laws and regulations; and
(c) be accompanied by such representations, warranties or agreements
with respect to the investment intent of such person or persons exercising
the Option as the Company may reasonably request in form and substance
satisfactory to counsel for the Company.
3. Payment of Price. Upon exercise of the Option, the Company shall deliver
a certificate or certificates for such Common Shares to the specified person or
persons at the specified time upon receipt of the full purchase price for such
Common Shares by any method of payment authorized by the Plan.
<PAGE>
4. Transferability. The Option shall not be transferable by the Optionee
except as expressly provided by the Plan. The Option shall be exercisable
(subject to any other applicable restrictions on exercise) only by the Optionee
for his own account, except in the events of the death or disability of the
Optionee, in either of which events the Option shall be exercisable (subject to
any other applicable restrictions on exercise) only by the Optionee's estate
(acting through its fiduciary) or by the Optionee's duly authorized legal
representative, respectively.
5. Restrictions on Exercise. The Option is subject to all restrictions in
this Agreement or in the Plan. As a condition of any exercise of the Option, the
Company may require the Optionee or his successor to make any representation and
warranty to comply with any applicable law or regulation or to confirm any
factual matters reasonably requested by counsel for the Company.
6. Early Termination of Option. Notwithstanding Paragraph 1 of this
Agreement, the Option shall terminate, expire and become invalid and
nonexercisable on the date three months following the date of termination of the
Optionee's employment as an employee of the Company or a subsidiary corporation
(other than by reason of death or permanent and total disability within the
meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended
(the "Code")).
7. Taxes. The Optionee hereby agrees to pay to the Company, in accordance
with the terms of the Plan, any federal, state or local taxes of any kind
required by law to be withheld with respect to the Option granted hereunder. If
the Optionee does not make such payment to the Company, the Company shall have
the right to withhold from any payment of any kind otherwise due to the Optionee
from the Company, any federal, state or local taxes of any kind requires by law
to be withheld with respect to the Option or the Common Shares to be purchased
by the Optionee under Section 422 or any successor section thereto of the Code.
8. Investment Representation. The Optionee agrees that any Common Shares of
the Company which the Optionee may acquire by virtue of the Option shall be
acquired for investment purposes only and not with a view to the distribution or
resale, and may not be transferred, sold, assigned, pledged, hypothecated or
otherwise disposed of by the Optionee unless (i) a registration statement or
post-effective amendment to a registration statement under the Securities Act of
1933 as amended (the "Securities Act"), with respect to said Common Shares has
become effective so as to permit the sale or other disposition of said shares by
the Optionee; or (ii) there is presented to the Company an opinion of counsel
satisfactory to the Company to the effect that the sale or other proposed
disposition of said shares by the Optionee may lawfully be made otherwise than
pursuant to an effective registration statement or post-effective amendment to a
registration statement relating to the said share under the Securities Act.
9. Consent to Jurisdiction. The Optionee hereby consents to the
jurisdiction of the state court of general jurisdiction sitting in Larimer
County, Colorado, to resolve all questions arising under or out of this
Agreement.
10. Definitions. Unless otherwise defined in this Agreement, capitalized
terms will have the same meanings given them in the Plan.
AVERT, INC.
DATE OF GRANT: January 5, 1999 By: ____________________________
Steve Fienhold
Michael Vaughan
Compensation Committee
Avert, Inc. Board of Directors
ACCEPTANCE OF AGREEMENT
The Optionee hereby: (a) acknowledges receiving a copy of the Plan, which is
attached to this Agreement, and represents that he is familiar with all
provisions of the Plan; (b) accepts this Agreement and the Option granted to him
under this Agreement subject to all provisions of the Plan and this Agreement;
and (c) agrees to accept as binding, conclusive and final all decisions or
interpretations of the Company.
Date: January 5, 1999 ____________________________
Optionee - Dean A. Suposs
EXHIBIT 10.10.1
AVERT, INC.
AMENDED AND RESTATED
1994 STOCK INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT
This agreement (the "Agreement") is made December 16, 1999, between Avert,
Inc., a Colorado corporation (the "Company"), and Jerry Thurber (the
"Optionee"). The Company hereby grants Optionee an option (the "Option") to
purchase Ten Thousand (10,000) of the Company's common shares, no par value (the
"Common Shares"), for a purchase price (the "Option Price") of $9.969 per Common
Share. The Option has been granted pursuant to the Avert, Inc. Amended and
Restated 1994 Stock Incentive Plan (the "Plan") and shall include and be subject
to all provisions of the Plan, which are hereby incorporated herein by
reference, and shall be subject to the following provisions of this Agreement:
1. Term and Vesting. Subject to the provisions of this Agreement, including
but not limited to paragraph 6 hereof, and the Plan, this option may be
exercised in blocks of 100 shares or any multiple thereof after the date of this
Agreement and prior to 5:00 p.m., on December 16, 2009, (the "Expiration Date")
but not thereafter, in accordance with the following:
(a) immediately on December 16, 2000, this option may be exercised for
up to 2,000 shares of the total Common Shares covered hereby: and
(b) immediately on December 16, of each of the four succeeding years,
this options may be exercised on each of those dates for up to an
additional 2,000 shares of the total Common Shares covered hereby;
so that on and after December 16, 2004, and continuing until the
Expiration Date this option may be exercised for up to 100% of the
total Common Shares included in this option; provided, however, that
notwithstanding the provisions of 1(a) or 1(b) hereof, but subject to
the further provisions of this Agreement, if prior to December 16,
2004, Optionee's employment with the Company is terminated by the
Company without cause under the terms of Paragraph 9.1 of the
Employment Agreement between the Company and Optionee, dated as of
June 10, 1996, and a Change in Control as defined in the Plan has not
occurred theretofore, this option may be exercised for up to an
additional 1,000 shares of the total Common Shares covered hereby (or
in the event such termination should occur prior to the first
anniversary date of this Agreement and a Change in Control has not
theretofore occurred, 1,000 shares of the total Common Shares covered
hereby), effective on the date of such termination.
2. Method of Exercise. Exercise of this option shall be affected by the
Optionee giving written notice to the Company (in the form attached hereto as
Exhibit A, whose covenants and substantive provisions are hereby made part of
this Agreement) which shall:
(a) state that the Option is thereby being exercised, the number of
shares of Common Shares with respect to which the Option is being
exercised, each person in whose name any certificates for the Common Shares
should be registered and his or her address and social security number;
(b) be signed by the person or persons entitled to exercise the Option
and, if the Option is being exercised by anyone other than the Optionee, be
accompanied by proof satisfactory to counsel for the Company of the right
of such person or persons to exercise the Option under the Plan and all
applicable laws and regulations; and
(c) be accompanied by such representations, warranties or agreements
with respect to the investment intent of such person or persons exercising
the Option as the Company may reasonably request in form and substance
satisfactory to counsel for the Company.
3. Payment of Price. Upon exercise of the Option, the Company shall deliver
a certificate or certificates for such Common Shares to the specified person or
persons at the specified time upon receipt of the full purchase price for such
Common Shares by any method of payment authorized by the Plan.
<PAGE>
4. Transferability. The Option shall not be transferable by the Optionee
except as expressly provided by the Plan. The Option shall be exercisable
(subject to any other applicable restrictions on exercise) only by the Optionee
for his own account, except in the events of the death or disability of the
Optionee, in either of which events the Option shall be exercisable (subject to
any other applicable restrictions on exercise) only by the Optionee's estate
(acting through its fiduciary) or by the Optionee's duly authorized legal
representative, respectively.
5. Restrictions on Exercise. The Option is subject to all restrictions in
this Agreement or in the Plan. As a condition of any exercise of the Option, the
Company may require the Optionee or his successor to make any representation and
warranty to comply with any applicable law or regulation or to confirm any
factual matters reasonably requested by counsel for the Company.
6. Early Termination of Option. Notwithstanding Paragraph 1 of this
Agreement, the Option shall terminate, expire and become invalid and
nonexercisable on the date three months following the date of termination of the
Optionee's employment as an employee of the Company or a subsidiary corporation
(other than by reason of death or permanent and total disability within the
meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended
(the "Code")).
7. Taxes. The Optionee hereby agrees to pay to the Company, in accordance
with the terms of the Plan, any federal, state or local taxes of any kind
required by law to be withheld with respect to the Option granted hereunder. If
the Optionee does not make such payment to the Company, the Company shall have
the right to withhold from any payment of any kind otherwise due to the Optionee
from the Company, any federal, state or local taxes of any kind requires by law
to be withheld with respect to the Option or the Common Shares to be purchased
by the Optionee under Section 422 or any successor section thereto of the Code.
8. Investment Representation. The Optionee agrees that any Common Shares of
the Company which the Optionee may acquire by virtue of the Option shall be
acquired for investment purposes only and not with a view to the distribution or
resale, and may not be transferred, sold, assigned, pledged, hypothecated or
otherwise disposed of by the Optionee unless (i) a registration statement or
post-effective amendment to a registration statement under the Securities Act of
1933 as amended (the "Securities Act"), with respect to said Common Shares has
become effective so as to permit the sale or other disposition of said shares by
the Optionee; or (ii) there is presented to the Company an opinion of counsel
satisfactory to the Company to the effect that the sale or other proposed
disposition of said shares by the Optionee may lawfully be made otherwise than
pursuant to an effective registration statement or post-effective amendment to a
registration statement relating to the said share under the Securities Act.
9. Consent to Jurisdiction. The Optionee hereby consents to the
jurisdiction of the state court of general jurisdiction sitting in Larimer
County, Colorado, to resolve all questions arising under or out of this
Agreement.
10. Definitions. Unless otherwise defined in this Agreement, capitalized
terms will have the same meanings given them in the Plan.
AVERT, INC.
DATE OF GRANT: December 16, 1999 By: ____________________________
Dean Suposs
President and Chairman
ACCEPTANCE OF AGREEMENT
The Optionee hereby: (a) acknowledges receiving a copy of the Plan, which is
attached to this Agreement, and represents that he is familiar with all
provisions of the Plan; (b) accepts this Agreement and the Option granted to him
under this Agreement subject to all provisions of the Plan and this Agreement;
and (c) agrees to accept as binding, conclusive and final all decisions or
interpretations of the Company.
Date: December 16, 1999 ____________________________
Optionee - Jerry Thurber
EXHIBIT 10.13
Distribution Partnership Agreement
This Distribution Partnership Agreement ("Agreement") is entered into as of
December 13, 1998 between Avert, Inc. ("AVERT,") a Colorado Corporation with its
principal place of business at 301 Remington Street - Fort Collins, CO 80524,
and Heidrick & Struggles, Inc. ("Heidrick,") a Delaware Corporation with its
principal place of business at 233 South Wacker Drive, Suite 4200, Chicago, IL.
60606-6303.
1. Nature of Agreement
1.1 AVERT is engaged in the business of developing services and software
products to assist corporations and staffing companies perform pre-employment
screening.
1.2 Heidrick is engaged in executive recruiting.
1.3 The parties propose entering into an Agreement concerning the development of
an Internet based pre-employment screening and recruiting service. The parties
will seek to develop technology and relationships with constituencies of
candidates for placement within companies.
1.4 Heidrick will offer Avert Inc. pre-employment screening services to clients
as part of its Internet offering currently referred to as the Heidrick &
Struggles Internet Recruiting Venture (H&S IRV). Avert products and services
shall be priced to Heidrick clients in such a way as to be imbedded in overall
H&S IRV pricing or consistent with the Avert volume discount schedule.
2. Service Level
2.1 H&S IRV will offer pre-employment services in such a maner to identify Avert
as the information provider and key contact for customer service issues.
2.2 Avert will provide products and services to Heidrick clients with equivalent
quality and service levels as provided to similar Avert direct customers.
2.3 Avert will provide services for H&S IRV client applicants equivilant to
those provided to its direct customers.
3. Administration Fee
3.1 Heidrick will pay Avert Inc. a $1,000 per year Administration Fee for each
H&S IRV client eligible to use Avert pre-employment services. The fee shall be
calculated and billable upon customer set up for Avert services and on
subsequent anniversary dates of account set up.
3.2 Eligible Heidrick H&S IRV clients shall receive services to include,
multiple site account administration, AvertAssure national implementation
services, unlimited First Checks, assistance with product and service bundling
specific to individual Heidrick client requirements and two years of archival
services for all reports ordered from Avert as an H&S IRV client.
4. Revenue Sharing
4.1 All Avert product and services revenue over and above the Administration Fee
will be shared between Avert Inc. and Heidrick. Avert shall bill Heidrick an
amount equivalent to 60% of the then current list price for products and
services included in the attached schedule. Avert will provide a minimum of 30
days notice of any changes in prices by amending the price schedule.
4.2 Products and service invoices will be prepared monthly and terms for payment
are net 45.
<PAGE>
5. Term
5.1 The term of this agreement shall be two years from date of execution by both
parties and shall automatically renew annually if not terminated by either party
30 days prior to the anniversary date of the agreement.
5.2 During the initial term of this agreement and any automatic extensions
either party may cancel this agreement for convienience with 120 days prior
written notice.
6. Exclusivity
6.1 Avert agrees not to enter into similar agreements, during the term of this
agreement, with any third parties engaged in executive search that are the same
as, or functionally equivalent to Heidrick. Specifically, Avert shall not engage
in discussions with Korn Ferry, Spencer Stuart, Russell Reynolds, LAI, or Egon
Zender.
6.2 Heidrick agrees not to enter into similar agreements, during the term of
this agreement, with companies directly competitive to Avert that provide
similar products, services and on-line software systems.
7. Confidentiality
7.1 Unless required by law, each party, along with its affiliates, agents and
employees (collectively "Recipient") agrees that without the consent of the
other party in writing it will not disclose to any third party, or use any
information (I) contained in a document (on paper or in electronic form) marked
confidential, (II) disclosed orally and identified at the time of disclosure as
confidential or subsequently identified in writing as confidential by the
disclosing party, and (III) concerning the nature of this agreement between the
parties (collectively "Confidential Information"), unless mutually agreed to in
writing by the parties for such purposes as press releases and other marketing
activities.
7.2 The Recipient's obligation under this section of the agreement will exist
for a 5-year period commencing from the date of receipt. Recipient will use the
same care and discretion that the Recipient employs to protect its own
information and products that it does not want disclosed.
7.3 "Confidential Information" will not include information that (I) is in or
enters the public domain without breach of this Agreement by Recipient; (II)
Recipient lawfully receives from a third party without restriction on disclosure
and without breach of a non disclosure obligation; (III) Recipient develops
independently, which it can prove with written evidence. Notwithstanding the
foregoing, recipient will not disclose or release any software products or
documentation disclosed by the other party to any third party during or after
the term of this Agreement without the written consent of the disclosing party.
7.4 Any copies of the Confidential Information should be marked and treated as
such or if verbally conveyed, each party shall notify the other of its
confidential nature prior to disclosure.
7.5 If a Final Agreement has not been executed, then upon termination of this
Agreement, the parties agree to return the other's Confidential Information,
including all copies, upon request.
7.6 The parties agree to use their best efforts to avoid disclosure of the fact
or object of their negotiations and to restrict all internal communications
concerning the negotiations to those recipients to whom such information must be
disclosed in order to effectively conduct the negotiations. Except as otherwise
required by law, the parties agree not to issue any press releases or make any
public announcements regarding the negotiations without the prior written
approval of the other.
7.7 Despite any captions, headings, or restrictions regarding proprietary
matters or any nondisclosure notices or policy statements contained in the
Confidential Information, this Section 6 constitutes the sole and exclusive
Agreement of the parties concerning the Confidential Information and any
information exchanged or disclosed in connection with the negotiations.
<PAGE>
8 Product Development
8.1 Heidrick agrees to use its best efforts to design, develop, market and
maintain an internet solution (H&S IRV) for clients to implement a recruiting
system consistent with the process flow diagram included as Exhibit A in this
agreement. Heidrick in its sole discretion will determine the timing and
availability of its internet solution to its clients.
8.2 Avert agrees to use its best efforts to develop and maintain a seamless
interface to the Heidrick H&S IRV system to enable access to Avert
pre-employment screening services.
8.3 Avert agrees to use its best efforts to update its interface to coincide
with Heidrick H&S IRV product releases as long as the interface protocols remain
standard with industry open architecture and as long as Heidrick does not
initiate more than two major product releases per year. Heidrick will
communicate its specifications for changes to the interface 120 days in advance
of the scheduled release date and Avert will respond 90 days in advance of the
scheduled release date if it is unable to meet specifications.
8.4 Avert agrees to provide for fee quotations for services required outside of
the terms of this agreement but related to the H&S IRV project.
9 Marketing
9.1 Heidrick agrees to use its best efforts to promote and sell the H&S IRV
system. The marketing & sales promotion plan shall be communicated to Avert on a
regular basis, with sufficient lead time, to allow Avert to coordinate sales and
marketing assistance.
9.2 Avert agrees to support the Heidrick marketing plan with marketing
communications support, sales training support and on site sales support during
the Beta program.
9.3 Avert agrees to quote additional sales support assistance on a fee basis for
sales support following the Beta program.
10 Compliance with State and Federal Statutes
10.1 Heidrick agrees to include terms and conditions for H&S IRV clients that is
substantially similar to the terms and conditions of the Avert User Agreement
included as an attachment to this agreement.
10.2 Heidrick agrees to insure that all transactions submitted by the H&S IRV
system can be identified and attributed to a particular authorized H&S IRV
client.
10.3 Avert Inc. agrees to conduct its business to be in compliance with the
provisions of the Fair Credit Reporting Act and with any applicable State and
Federal regulations.
11 Indemnification
11.1 Heidrick agrees to indemnify and hold harmless Avert Inc. for all legal
actions arising from Heidrick not being compliant with the Fair Credit reporting
Act.
11.2 Avert agrees to indemnify and hold harmless Heidrick for all legal actions
arising from Avert not being compliant with the Fair Credit Reporting Act.
12 Limitation of Liability
12.1 Neither party shall make a claim against, or be liable to, the other party
or its affiliates or agents for any damages, including, without limitation, lost
profits or injury to business reputation, resulting from the continuation or
abandonment of negotiations and the consequences of such continuation or
abandonment of negotiations. Neither party shall make a claim against, or be
liable to, the other party or its affiliates or agents for any special,
incidental, or consequential damages, including, without limitation, lost
profits, based on any breach, default, or negligence of such other party, its
affiliates, or agents with respect to this Agreement.
<PAGE>
13 Equitable Relief
13.1 Each party acknowledges and agrees that, if there is any breach of this
Agreement, including, without limitation, unauthorized use or disclosure of
Confidential Information or other information of the other party, the
non-breaching party will suffer irreparable injury that may not be compensated
by money damages and therefore may not have an adequate remedy at law.
Accordingly, if either party institutes an action or proceeding to enforce the
provisions of this Agreement, such party may be entitled to obtain such
injunctive relief, specific performance, or other equitable remedy from a court
of competent jurisdiction as may be necessary or appropriate to prevent or
curtail any such breach, threatened or actual. These will be in addition to and
without prejudice to such other rights as such party may have in law or in
equity.
14 Entire Agreement
14.1 The parties acknowledge that this Agreement expresses their entire
understanding and Agreement, and that there have been no warranties,
representations, covenants or understandings made by either party to the other
except such as are expressly set forth in this section. The parties further
acknowledge that this Agreement supersedes, terminates and otherwise renders
null and void any and all prior Agreements or contracts whether written or oral,
entered into between AVERT and Heidrick with respect to the matters expressly
set forth in this Agreement.
15 Notification & Contract Administration.
15.1 All notices hereunder shall be in writing and shall be delivered to the
attention of a party's designated contact, with a copy to its president, at the
address set forth on the first page of this Agreement, or to such other person
or address as shall have been provided by notice hereunder. The contacts
initially designated are:
Heidrick: Michael F. Arrigo & H&S General Council
Avert Inc. Leonard J. Koch
16 Assignability
16.1 Except as expressly provided herein, a party's rights and obligations under
this agreement are not assignable other than to its parent or subsidiary or a
successor to substantially all of its business.
17 Jurisdiction
17.1 This agreement shall be governed by and construed in accordance with the
laws of Colorado.
We have carefully reviewed this contract and agree to and accept its terms
and conditions. We are executing this Agreement as of the day and year first
written above.
AVERT, Inc.: Heidrick & Struggles, Inc.:
- ------------------------------- ---------------------------
By:____________________________ By:________________________
Name:__________________________ Name: _____________________
Title:_________________________ Title: ____________________
<PAGE>
Exhibit A
H&S IRV Process Diagram
<PAGE>
Avert Product & Services List Price and Volume Discount Schedule
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EXHIBIT 10.14
Careermag.com - Avert
Distribution Partnership
Term Sheet
June 8, 1999
Careermag.com and Avert desire to enter into an agreement for the distribution
of Avert Services and Products to Careermag.com customers and prospects. The
following terms and conditions are agreed to for the purpose of constructing a
Distribution Partnership agreement.
Overview
o This agreement includes the marketing of AvertAdvantage memberships to
Careermag.com current clients and potential clients of HRLibrarry.com. and
Global Employment Solutions (GES).
o Avert shall be responsible to develop and maintain products, services and
any mutually agreed to integration between Careermag.com and Avert
processing environments.
o Careermag.com shall be responsible to market and obtain orders for
AvertAdvantage memberships to its customer and prospect base. Careermag.com
delivered customer shall be defined as a customer who has executed a
Careermag.com / Avert co-branded user agreement.
o Careermag.com may elect as an alternative to providing a "delivered
customer" to Avert to provide a qualified lead for follow up by Avert New
Customer Sales Representatives.
Product Offering and Product Price
o Advantage Online memberships shall include unlimited First Check and
Instant Address Locator products, unlimited access to the HRCare site,
unlimited email access of the Knowledgelink HR help desk, unlimited access
to Advantage online documents and a 15% discount on all additional Avert
products through the Avertnet OrderXpert site.
o Careermag.com may elect to resell Advantage Online memberships directly to
its target market or may elect to package Advantage Online as part of its
HRLibrarry or other subscription program. In either case it is agreed that
the customer perception of the value of such offering is at least $20.00
per month.
Avert may increase prices for Advantage Online memberships consistent with its
AvertAdvantage Online memberships pricing. Avert will notify Careermag.com of
such price increase 90 days prior to the effective date of the price change.
Revenue Sharing or Commission programs
o Careermag.com shall be entitled to 40% of the list price for Advantage
Online memberships (currently $20.00 per month list price) for all
"delivered customers" or leads that result in an Advantage Online customer.
Payment will be in the form of a commission for all "delivered customers"
billed through customary Avert billing methods. Payment will be in the form
of a 40% discount off list price for Advantage Online memberships if
memberships are sold as a part of other Careermag.com subscription
programs.
o In the event Careermag.com forwards a client contact as a lead to Avert NCS
and client subsequently agrees to an Advantage Online memberships payment
to Careermag.com shall commence on the sixth month of customer payments to
Avert.
o Careermag.com shall also earn a commission for all additional products
ordered by Careermag.com "delivered customers." The commission will be 5%
of product revenues for the first twelve months and 10% of product revenue
thereafter as long as the customer continues the Advantage Online
membership. Product commissions are not payable for clients forwarded to
Avert NCS as leads.
<PAGE>
Careermag.com Agrees to:
o Forward completed order documents including any documents for FCRA
compliance.
o Email Careermag.com clients with any start up and/or customer training
materials.
o Be responsible for the costs associated with the production of all sales
literature and sales training.
o Make payments to Avert for products and services ordered under this
agreement within 30 days of invoice.
o Allow on-site visits at Averts option to Careermag.com place of business
o Market Advantage Online memberships to its customers and clients
o Keep Avert informed of problems encountered with Avert products and
services
o Indemnification of Avert from Careermag.com non compliance under FCRA
Avert Agrees to:
o Assist with development of marketing materials and sales training materials
o Provide sales support from its offices in Ft. Collins
o Provide additional billable sales support for certain accounts when
requested by Careermag.com
o Perform all customer set up activities within 48 hours of receipt of a
"delivered customer" user agreement.
o Upsell Careermag.com "delivered customers" with the same frequency and
urgency as its own direct customers.
o Process and fulfill orders in the same manner and urgency as its direct
customers
o Provide copies of all compliance documents in electronic format to
Careermag.com for distribution to Careermag.com acquired clients.
o Allow visits at Careermag.com option to Avert headquarters
o Inform Careermag.com of problems with Avert products or services, changes
in products and services and required changes in marketing or sales
documents relating to changes in products and services
o Assist Careermag.com in integrating Avert OrderXpert into Careermag.com
processing environment.
o Indemnification of Careermag.com from costs associated with Avert
non-compliance under the FCRA.
Events of Default and remedies of default
o Either party may terminate the agreement for reasons of default. Injured
party will provide written notification of default. The party in default
shall have 30 days to remedy the default condition prior to termination of
the agreement.
o Parties will treat each other's confidential information as equivalent its
own confidential material for five years from the receipt of such
information. Confidential materials do not include information in the
public domain or disclosed by third parties not a party to this agreement.
In the event of termination all confidential materials shall be returned to
the owner party.
<PAGE>
o Nether party shall hire an employee of the other party during the term of
this agreement or for one year following the termination of this agreement.
o Official notification for each party shall be Gary Resnikoff for
Careermag.com and Leonard Koch for Avert Inc.
Term and Termination
o The term of the agreement shall be for one year with an automatic one-year
renewal unless either party provides 30 days prior written notice of
cancellation. Cancellation may for any reason.
o The agreement shall terminate, if not terminated as per the provisions of
the agreement, after seven years from the effective date of the agreement.
- ---------------------------- --------------------------------
Gary Resnikoff Leonard Koch
President, Careermag.com VP Business Development, Avert. Inc.
EXHIBIT 10.15
ATYOURBUSINESS.COM
DISTRIBUTION AND MARKETING RIGHTS
AGREEMENT
THIS AGREEMENT (this "Agreement") is entered into as of September 15 1999,
(the "Effective Date") by and between (i) HRONLINE, INC. (to become
AtYourBusiness.com, Inc.), a Delaware corporation with its principal offices at
6000 Executive Boulevard, Suite 601, Rockville, MD 20852 ("AYB.com"), and (ii)
Avert, INC., a Colorado corporation with its principal offices at 301 Remington,
Ft. Collins, CO 80524 ("Avert").
RECITALS
WHEREAS, AYB.com owns and manages a business on the World Wide Web at the
domain names AtYourBusiness.com and ayb.com, which will offer certain products
and services to businesses, and to individuals employed by or owning such
businesses;
WHEREAS, Avert provides services including background investigations and
WHEREAS, Avert and AYB.com would like to offer Avert's services through the
Site.
NOW THEREFORE, in consideration of the mutual covenants of the Parties and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Parties, intending to be legally bound, agree as
follows:
1. DEFINITIONS
1.1. "Avert Brand Marks" means the Avert name and logo(s), including all
associated artwork, graphics, and icons, trademarks, trade names, and
other Avert product or service designations.
1.2. "Avert Customer(s)" means those End Users and Subscribers who purchase
Services from Avert through the Site or the Co-Branded Pages.
1.3. "Avert User Agreement" means the then-current agreement, substantially
the same as the agreement offered to current Avert prospects and
customers, for End Users to enroll in the Avert services; provided
that AYB.com has determined that Avert's then-current agreement is
sufficient in form and content to adequately protect AYB.com's
interests and Intellectual Property Rights.
1.4. "AYB.com Brand Marks" means all AYB.com names and logos, including all
associated artwork, graphics, icons and other AYB.com product or
service designations.
1.5. "Co-Branded Page(s)" means those Web pages developed pursuant to this
Agreement and Hosted by Avert, containing both AYB.com Brand Marks and
Avert Brand Marks, which are set up for the purpose of selling the
Services under the Avert domain names. "Co-Branded Page(s)" also means
pages developed pursuant to this Agreement hosted by AYB.com and
contain both AYB.com and Avert Brand Marks.
1.6. "Confidential Information" means any trade secrets relating to either
Party's business, product or service plans, designs, costs, prices,
data, names, finances, marketing plans, business opportunities,
personnel, research development or know-how including all non-public
information embodied in, represented by, compiled or relating to
AYB.com or the Services, whether having existed, now existing, or to
be developed or created in the future, whether tangible or intangible,
and whether or how stored, compiled or memorialized physically,
electronically, graphically, photographically or in writing, covered
by this Agreement and acknowledged by the Parties to be valuable,
special and unique assets of the disclosing Party, the disclosure of
which may be materially damaging. "Confidential Information" shall not
include information that: (i) is or becomes generally known or
available by publication, commercial use or otherwise through no fault
of the receiving Party; (ii) is known and has been reduced to tangible
form by the receiving Party at the time of disclosure and is not
subject to restriction; (iii) is independently developed or learned by
<PAGE>
the receiving Party; (iv) is lawfully obtained from a third party that
has the right to make such disclosure; or (v) is made generally
available by the disclosing Party without restriction on disclosure.
All Source Code shall be Confidential Information for purposes of this
Agreement.
1.7. "Content" means any and all graphics, text, video, and audio related
to the of Avert services that Avert provides to AYB.com for posting on
the Site.
1.8. "End User" means an individual visitor to the Site or the Co-Branded
Page(s).
1.9. "FCRA" means the Fair Credit Reporting Act as amended.
1.10."Intellectual Property Rights" means trade secrets, patents,
copyrights, trademarks, service marks, and similar rights of any type
under the laws of any governmental authority, including, without
limitation, all applications and registrations relating to patents,
copyrights, trademarks and service marks, whether presently existing
or created in the future.
1.11."Objectionable Materials" means any textual or graphical material
including without limitation the Content, the Site, or the Co-Branded
Pages, or material under the control of either party hereto referring
to the Content, the Site, or the Co-Branded Pages that: a) is
factually inaccurate, misleading, or deceptive; b) infringes any
Intellectual Property Rights of any third party; c) is libelous,
defamatory, obscene, sexually explicit or pornographic, intended to
harass or annoy, or which violates any civil or criminal laws.
1.12."Services" means all products and services and the accompanying price
list provided by Avert and listed in Schedule A.
1.13."Subscribers" means those End Users who subscribe to the AYB.com Site
or services.
2. GRANT OF LICENSES
2.1. Avert hereby grants and licenses to AYB.com the non-exclusive,
non-transferable, license to market, promote, sublicense, display,
distribute, reproduce, transmit, and create derivative works from the
Content.
2.2. During the term of this Agreement, Avert hereby grants to AYB.com a
non-exclusive, royalty-free, worldwide license to reproduce,
distribute, transmit, publicly perform, publicly display and digitally
perform the Avert Brand Marks in conjunction with the Site and in any
other media intended to promote or advertise the availability of the
Services via the Site.
2.3. Use of Brand Marks
2.3.1. AYB.com Brand Marks. For the Term, AYB.com grants Avert a
non-exclusive, non-transferable license to use, display, and
distribute the AYB.com Brand Marks solely in connection with the
use and promotion of the Services and the Site. Avert shall
ensure that any AYB.com Brand Marks displayed on any World Wide
Web site that Avert controls links any pages on the Site that
AYB.com requests. Avert acknowledges that the AYB.com Brand Marks
are the sole property of AYB.com. Nothing herein shall grant
Avert any right, title or interest in the AYB.com Brand Marks.
The use of the AYB.com Brand Marks shall inure to the benefit of
AYB.com. Notwithstanding the foregoing, AYB.com reserves the
right to approve the form and placement of the AYB.com Brand
Marks, such approval not to be unreasonably withheld or delayed.
2.3.2. Avert Marks. For the Term, Avert grants to AYB.com a
non-exclusive, non-transferable license to use, display, and
distribute the Avert Brand Marks solely in connection with the
use and promotion of the Services and the Site. AYB.com shall
ensure that any Avert Brand Marks displayed on the Site links to
Web sites that Avert controls, and Avert shall supply the URLs
for the Web pages to which AYB.com shall link. AYB.com
acknowledges that the Avert Brand Marks are the sole property of
Avert. Nothing herein shall grant AYB.com any right, title or
interest in the Avert Brand Marks. Notwithstanding the foregoing,
Avert reserves the right to approve the form and placement of the
Avert Brand Marks, such approval not to be unreasonably withheld
or delayed.
2.3.3. The use of the Avert Brand Marks shall inure to the benefit of
Avert.
<PAGE>
3. Development, DELIVERY AND TESTING
3.1. Using the marketing materials and the relevant links to Avert pages
and servers AYB.com will create, provide, and support web page(s)
within the Site primarily devoted to marketing the Services,
co-branded by AYB.com and Avert. Such web pages are subject to the
approval of Avert, which approval shall not be unreasonably withheld.
AYB.com shall post Content that relates to the Services, subject to
the terms of this Agreement and to the approval of AYB.com, which
approval shall not be unreasonably withheld.
3.2. AYB.com reserves the right to remove any Content developed by Avert
pursuant to this Agreement if any such Content: (i) causes any
technical difficulties or interference with the operation or intended
functionalities of the Site; (ii) violates any of AYB.com's then
current terms of service, privacy policies, or other policies; (iii)
constitutes Objectionable Materials; (iv) otherwise violates any laws,
rules, or regulations of any jurisdiction.
3.3. Both parties acknowledge that the effectuation and completion of
online transactions related to the Services shall require the
integration of both parties' hardware and software. Therefore, the
parties agree to make reasonable efforts to test and integrate such
hardware and software such that online transactions can be effectuated
and completed.
4. Additional obligations of Avert
Avert shall:
4.1. Provide, develop and maintain Services for use by Avert Customers.
Avert Customers shall receive at least the same level and quality of
service and customer support as any other purchaser of any of Avert's
goods and services. Perform all sign up and set up activities for
Avert Customers hereunder within 48 hours of receipt of an Avert User
Agreement as currently offered to existing Avert prospects and
customers.
4.2. Provide and assist with development of marketing materials and sales
training materials for the Services and the Co-Branded Pages as the
parties may mutually agree.
4.3. In all cases, provide prompt customer support for the Services to
Avert Customers and to AYB.com via telephone and email, to a standard
reasonably consistent with the best industry practices.
4.4. Provide copies of all compliance documents in electronic format to
AYB.com for distribution to Avert Customers through the Site.
4.5. Inform AYB.com in writing within twenty-four (24) hours of changes in
the availability of the Services.
4.6. Provide reasonable assistance to AYB.com in integrating links and
marketing content into the AYB.com processing environment the Avert
OrderXpert software for processing Avert Customer orders.
4.7. Not release any data, results or information resulting from any
promotional and/or sales activity hereunder to any third party without
the prior express written permission of AYB.com. Avert will treat all
such information as Confidential Information.
4.8. Provide the Services, terms and prices to AYB.com in a fashion no less
favorable than to any other Web-based reseller of the Services
providing similar functionality and generating similar volumes of
business to Avert.
4.9. Honor, and the Content shall at all times be subject to, any
then-current AYB.com privacy notices and policies, terms of service,
design standards, or other policy relating to the Site.
5. Additional Obligations of AYB.COM
AYB.COM SHALL:
5.1. Post the Content on the Site within five (5) days of receipt, and
shall market and promote the Services.
<PAGE>
5.2. Review, delete edit, create, update and otherwise manage the Site and
the Co-Branded Pages. Avert shall have the right, but not the duty to
review or monitor any such Co-Branded Pages and to provide editorial
and design suggestions.
5.3. Market Advantage Online memberships to its customers and clients, as
Advantage Online is currently defined by Avert. For the duration of
this agreement, AYB.com will be entitled to offer the services
currently packaged as Advantage Online even if Advantage Online is
re-configured to offer a lesser selection of services.
5.4. Inform Avert of problems encountered with the Services to the extent
AYB.com is made aware of such problems.
5.5. Inform Avert as to new co-branding opportunities and the creation of
new co-branded sites.
5.6. Present service partners that are reputable within their industry and
in no way damage or otherwise impugn the Avert brand through
association via the AYB.com site(s). AYB.com shall notify Avert about
the inclusion of new service partners at least 30 days in advance of
their placement at the AYB.com site.
5.7. Review and otherwise evaluate other Avert products that Avert requests
to be sold through the AYB.com site. These products include but are
mot limited to business background checks, drug and related testing
and other services Avert currently offers or may offer in the future.
Should AYB.com and Avert agree to market these products through the
AYB.com site, the Attached Schedule(s) that include business terms
shall be amended to include these products and the fees associated
with these products.
5.8. Make available to Avert any content in the topical area of "Human
Resources" if this content is made available on the public side of the
Avert site and if it is available or has been offered to other
partners. The provision of this content will be in the form of, but
not limited to, a "co-branded site" operated by AtYourBusiness.com and
using the look, feel and graphics of Avert for a selected number of
pages. The complete terms and conditions of the co-branded site are
found in another agreement.
6. USER DATA
6.1. AYB.com agrees that individually identifiable data collected via the
Site or the Co-Branded Pages unique to Avert and required as part of
the process of becoming an Avert Member is owned solely by Avert. All
other data collected via the Site for any other product or service
shall be owned by AYB.com, or other third parties as designated by
AYB.com.
6.2. AYB.com will not disclose any Avert-owned information to any third
party without Avert's express permission.
7. TRAINING
7.1. Avert shall, at no cost to AYB.com, provide AYB.com, in a reasonable
time frame, with initial training, training materials and technical
support to assist AYB.com in properly and effectively marketing and
distributing the Services and the Co-Branded Pages.
7.2. Except as otherwise noted thereon, AYB.com may reproduce any training
materials originated by Avert. Any such reproductions shall include
any copyright or similar proprietary notices contained in the items
being reproduced.
8. REVENUE SHARING, PAYMENTS, AND REPORTS
8.1. The Parties agree to the revenue sharing provisions set forth as
Attachment A.
<PAGE>
8.2. AYB.com shall remit to Avert any payments that AYB.com receives
through the Site for any Services within thirty (30) days after the
end of the calendar month in which AYB.com receives such payments.
AYB.com shall provide Avert with a monthly statement detailing the
Services sold and associated payments collected via the Site.
8.3. For Customers and sales who provide payments to Avert for the
Co-Branded Pages, Avert shall remit to AYB.com any payments that Avert
receives through the Co-branded Pages for any Services or goods or
services of AYB.com within thirty (30) days after the end of the
calendar month in which Avert receives such payments. Avert shall
provide AYB.com with a monthly statement detailing the Services and
AYB.com goods and services sold and associated payments collected via
the Site.
9. ADvertising and Promotion
9.1. Approvals. Each party shall submit all advertising or promotional
material, press releases, or other publicity matters that mentions or
refers to the other party's name or brand marks to the other party for
approval, which shall not be unreasonably withheld. Notwithstanding
the foregoing, each party may identify the other party as a customer
and strategic partner (but not as an endorsement) in its advertising,
sales promotion, press releases and other publicity matters.
9.2. Names, Keywords, Metatags.
9.2.1. Starting on [the Effective Date] and for the term of this
Agreement, Avert shall include AYB.com's name and appropriate
keywords submitted by AYB.com related to AYB.com's business,
services and products in the links and other tags found on
Avert's publicly available World Wide Web sites available for use
by the public or by Avert strategic partners.
9.2.2. Starting on [the Effective Date] and for the term of this
Agreement, AYB.com shall include Avert's name and the names of
Avert Services, and appropriate keywords submitted by Avert
related to Avert's Services in the links and other tags found on
the Site.
11. REPRESENTATIONS AND WARRANTIES
11.1 AYB.com represents and warrants to Avert as follows:
11.1.1 AYB.com has all right, title, power and licenses necessary to
grant Avert all rights granted in this Agreement.
11.1.2 The Site does not infringe upon or otherwise violate any
copyright, trade secret, trademark, patent, invention, right of
privacy, known third party rights, or non-disclosure requirements
of any third party. In furtherance of these representations,
Avert's reliance thereon, and subject to Sections found below,
AYB.com shall indemnify and hold Avert, their officers,
directors, agents, and employees harmless against all claims,
demands, or liabilities of or to third parties arising from or in
connection with AYB.com's breach of its representations or
warranties hereunder. This indemnification shall includes Avert's
reasonable attorney's fees and shall survive the expiration or
termination of this Agreement.
11.1.3 The information, services and products presented at the Site
are from sources AYB.com considers reliable. However, AYB.com
shall not be liable for the truth or accuracy of the information,
products, or services. NO WARRANTIES, EXPRESSED OR IMPLIED,
INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE WILL APPLY TO THE INFORMATION, PRODUCTS, OR
SERVICES THAT AYB.COM PROVIDES AT THE SITE. These disclaimers
must be conveyed to all End Users. and in the Avert Subscriber
Agreement
11.1.4. AYB.COM AGREES THAT IT IS SOLELY REPSONSIBLE FOR THE
TRANSMISSION OF DATA TO AND FROM THE SITE. EXCEPT AS OTHERWISE
PROVIDED=AVERT SHALL NOT BE LIABLE FOR ANY DAMAGES OR LOSSES,
INCLUDING WITHOUT LIMITATION INDIRECT, CONSEQUENTIAL, SPECIAL,
INCIDENTAL, OR PUNITIVE DAMAGES RESULTING FROM OR CAUSED BY DATA
<PAGE>
TRANSMISSION ERRORS OR DELAYS TO OR FROM THE SITE. IN NO EVENT
SHALL DAMAGES EXCEED THE TOTAL SUM PAID TO AVERT DURING THE SIX
MONTHS PRECEDING THE MONTH IN WHICH THE DISPUTE AROSE OR IN WHICH
AVERT WAS NOTIFIED OF THE DISPUTE, WHICHEVER IS EARLIER.
11.2. Avert represents and warrants to AYB.com as follows:
11.2.1 Avert has the authority to offer the Services through the Site
and any the Co-Branded Site. Avert has the all rights, title,
power, and licenses necessary to deliver the Services to Avert
Customers and to grant to AYB.com all rights granted in this
Agreement.
11.2.2 The Services will comply with all federal, state and local laws
and regulations, including without limitation FCRA, relating to
the Services and the Content and the Co-Branded Pages. Avert
shall provide evidence of any filings and compliance to AYB.com.
The Services do not currently, and will not infringe upon or
otherwise violate any copyright, trade secret, trademark, patent,
invention, proprietary information, right of privacy, or
non-disclosure rights of any third party or contain any
Objectionable Materials or otherwise in contravention of law, or
known third party rights. In furtherance of these
representations, AYB.com's reliance thereon, and Avert shall
indemnify and hold AYB.com, its corporate affiliates, and any
employee or agent thereof harmless against all claims, demands,
or liabilities of third parties arising from or in connection
with Avert's breach of any of its representations or warranties
hereunder. Avert shall control the defense of any such claims,
demands, or liabilities, and AYB.com shall provide reasonable
cooperation in any such defense. This indemnification shall
include AYB.com's reasonable attorney's fees and shall survive
the expiration or termination of this Agreement.
11.1.3 No other warranties are provided other than as contained in
this Agreement. THE CONTENT ON THE SITE AND CO-BRANDED SITES IS
FURNISHED ON AN "AS IS" BASIS. AVERT MAKES NO REPRESENTATION OR
WARRANTY OF ANY KIND REGARDING SUCH CONTENT, EXCEPT AS PROVIDED
HEREIN. AVERT SPECIFICALLY DISCLAIMS ANY EXPRESS OR IMPLIED
WARRANTIES, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF FITNESS
FOR A PARTICULAR PURPOSE, OR MERCHANTABILITY.
11.1.4 The parties agree that data entry, communication and storage
are subject to a possibility of human and machine errors,
omissions, delays and losses. Neither party undertakes any
liability to the other for any such errors, omissions, delays, or
losses.
12. INDEMNIFICATION
12.1 AYB.com. AYB.com shall indemnify, defend and hold harmless Avert from
any and all damages, liabilities, costs and expenses (including
reasonable attorneys' fees) incurred by Avert arising from or relating
to any third party claim, suit or proceeding alleging that the Site
infringes any third party United States trademark, patent, trade
secret, privacy, copyright or other Intellectual Property Right;
provided that Avert promptly notifies AYB.com in writing of any such
claim and promptly tenders full control of the defense and settlement
of any such claim to AYB.com at AYB.com's expense and with AYB.com's
choice of counsel. Avert shall cooperate with AYB.com, at AYB.com's
expense, in defending or settling such claims and Avert may join in
defense with counsel of its choice at its own expense.
<PAGE>
12.2 Avert Services. Avert shall indemnify, defend and hold harmless
AYB.com from any and all damages, liabilities, costs and expenses
(including reasonable attorneys' fees) incurred by AYB.com arising
from or relating to the marketing, use, or promotion of the Services
provided hereunder. AYB.com shall promptly notify Avert in writing of
any such claim and promptly tender the control of the defense and
settlement of any such claim to Avert at Avert's expense and with
Avert's choice of counsel. AYB.com shall cooperate with Avert, at
Avert's expense, in defending or settling such claim and AYB.com may
join in defense with counsel of its choice at its own expense.
12.3 Mechanics of Indemnity. The indemnifying Party's obligations are
conditioned upon the indemnified Party: (i) giving the indemnifying
Party prompt written notice of any claim, action, suit or proceeding
for which the indemnified Party is seeking indemnity; (ii) granting
control of the defense and settlement to the indemnifying Party; and
(iii) reasonably cooperating with the indemnifying Party at the
indemnifying Party's expense.
13. CONFIDENTIALITY
13.1 Obligation Each Party shall not use any Confidential Information
received from the other Party except as expressly permitted under this
Agreement, and shall not disclose such Confidential Information to any
third party without the other Party's prior written consent, unless
required to do so by court order or other operation of law. Each Party
shall take reasonable measures to prevent the disclosure and
unauthorized use of Confidential Information of the other Party.
13.2 Remedies. Unauthorized use by a Party of the other Party's
Confidential Information will diminish the value of such information.
A breach of this Section 14 shall entitle the non-breaching party to
seek equitable relief to protect its interest herein, including
injunctive relief, as well as money damages.
14. TERM AND TERMINATION
14.1 Term. This Agreement shall commence upon the Effective Date and
continue for one (1) year, unless earlier terminated in accordance
with the provisions of this Agreement. Following the one-year term,
the obligations of Avert to provide the Services shall automatically
renew for another one-year term unless one Party gives the other Party
notice ninety (90) days notice before the end of the ten-current term
that it does not intend to renew this Agreement.
14.2 Termination for Cause. Either Party may terminate this Agreement upon
written notice in the event the other Party materially breaches any of
its obligations under this Agreement and fails to cure such breach
within ten (10) days from written notice.
14.3 Termination for Insolvency. Either Party may terminate this Agreement
immediately upon written notice to the other Party in the event the
other Party (i) ceases to function as a going concern or to conduct
operations in the normal course of business, or (ii) has a petition
filed by or against it under any state or federal bankruptcy or
insolvency law which petition has not been dismissed or set aside
within sixty (60) days of its filing.
<PAGE>
14.4 Termination for Substitution of Payroll Processor. Should AYB.com
replace ADP as the payroll processor on its branded site, Avert may
terminate this agreement on 30 days notice.
14.5 No Liability. Except as expressly required by law, in the event of
termination of this Agreement, neither Party shall be liable to the
other Party, because of such termination, for compensation,
reimbursement or damages on account of the loss of prospective profits
or anticipated sales or on account of expenditures, inventory,
investments, leases or commitments in connection with the business or
goodwill of AYB.com or Avert. Termination shall not, however, relieve
either Party of obligations incurred prior to the termination.
14.6 Survival. The indemnification provisions, the confidentiality
provisions and the miscellaneous provisions shall survive termination
of this Agreement by either Party for any reason.
14.7 No Other Rights/Return of Materials. Upon termination of this
Agreement, each Party will return or destroy, at the other party's
option, all copies of the other party's Confidential Information, and
brand marks in its possession at the time of termination.
15. MISCELLANEOUS PROVISIONS
15.1 Assignment. Neither Party may assign this Agreement without the prior
express written consent of the other Party, except that AYB.com may
assign this Agreement to a wholly owned subsidiary or any successor in
interest to all or substantially all of the assets of AYB.com. Any
attempted assignment in contravention of this Section 17.1 shall be
null and void. Subject to the foregoing, this Agreement will bind and
inure to the benefit of the Parties, their respective successors and
permitted assigns.
15.2 Should AYB.com be acquired or otherwise become affiliated with a
payroll processor in direct competition with ADP, Avert may terminate
this contract on 30 days notice.
15.3 Waiver. No failure or delay by any Party in exercising any right,
power, or remedy under this Agreement, except as specifically provided
herein, shall operate as a waiver of any such right, power or remedy.
15.4 Governing Law; Arbitration. This Agreement shall be governed by the
laws of the State of Maryland, excluding conflict of laws provisions
and excluding the United Nations Convention on Contracts for the
International Sale of Goods. Any dispute arising out of or related to
this Agreement shall be resolved by binding arbitration in Washington,
D.C., conducted in accordance with the Commercial Rules of the
American Arbitration Association. The arbitrator shall have the power
to grant injunctive relief.
15.5 Notices. All notices, demands or consents required or permitted under
this Agreement shall be in writing sent to the parties at the
addresses set forth below. Notice shall be considered delivered and
effective when (i) personally delivered; (ii) the day following
transmission if sent by facsimile; or (iii) one (1) day after posting
when sent by registered private overnight carrier; or (iv) five (5)
days after posting when sent by certified United States mail.
15.6 Independent Contractors. The parties are independent contractors.
Neither of the Parties shall be deemed to be an employee, agent, or
legal representative of the other Party hereto for any purpose and
neither of the Parties hereto shall have any right, power or authority
to create any obligation or responsibility on behalf of the other
Party hereto.
<PAGE>
15.7 Severability. If any provision of this Agreement is held by a court of
competent jurisdiction to be unenforceable, such provision shall be
changed and interpreted so as to best accomplish its original
objectives fullest extent allowed by law. The remaining provisions of
this Agreement shall remain in full force and effect.
15.8 Complete Understanding. This Agreement, including all Schedules
attached hereto, constitutes the final, complete and exclusive
agreement between the Parties with respect to the subject matter
hereof, and supersedes any prior or contemporaneous agreements,
whether written or oral. This Agreement may be amended only in a
writing signed by both parties.
15.9 Counterpart. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of
which together shall constitute one instrument.
15.10 Section Headings. The section headings are for the convenience of the
parties and in no way alter, modify, amend, limit or restrict the
contractual obligations of the parties.
15.11 Force Majeure. Except for Avert's obligation to pay AYB.com or
AYB.com's obligation to pay Avert hereunder, neither Party shall be
liable to the other Party for any failure or delay in performance
caused by reasons beyond its reasonable control, including but not
limited to acts of nature, earthquakes, fires, strikes or shortages of
materials. 15.12 Notices to AYB.com shall be addressed to the
attention of:
AtYourBusiness.com, Inc.
Attention:
Facsimile:
With a copy to:
Piper & Marbury, L.L.P.
1200 Nineteenth Street NW
Washington, DC 20036
Attention: Alan Lewine
Facsimile: (202) 223-2085
Notices to Avert shall be addressed to the attention of:
AVERT, Inc.
Attention:
Leonard Koch
301 Remington Ave.
Ft. Collins, CO 80524
Facsimile: 800 237 4011
with a copy to:
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
Effective Date.
ATYOURBUSINESS.COM, INC.
By:
-----------------------------------------------
Michael Shulman
Chairman and CEO
AVERT, INC.
By:
-----------------------------------------------
Name:
------------------------------------------
Title:
----------------------------------------
EXHIBIT 10.16
AGREEMENT FOR ELECTRONIC PAYMENTS
This agreement is made 6/07/99 by and between Avert, Inc. ("Company") and
First State Bank of Fort Collins, a Colorado corporation, 2900 South College
Avenue, Fort Collins, CO 80525 (the "Bank").
Recitals
A. The Company has requested that the Bank permit it to initiate electronic
entries through the Bank to accounts maintained at the Bank and in other
banks and Financial Institutions by means of the Automated Clearing House
(the "ACH").
B. Such entries may be Credit Entries or Debit Entries.
C. The Bank is willing to act as an Originating Depositary Financial
Institution with respect to such entries in accordance with the terms of
this Agreement and Operating Rules of the National Automated Clearing House
Association, as such rules now exist and as they may be amended form time
to time in the future (the "Rules").
Agreement
In consideration of the mutual promises contained in this Agreement, and
for other valuable consideration, the receipt and sufficiency of which is
acknowledged, the parties agree as follows:
1. Definitions. Unless otherwise defined in this Agreement, the capitalized
terms shall have the meanings provided in the Rules.
2. Compliance with the Rules. The Company acknowledges receipt of a copy of
the Rules as currently written. The Company will comply with and be bound
by the Rules. Any specific obligations of the Company under this Agreement
in no way alter the Company's duty to comply with the Rules. In the event
of any inconsistency between the terms of this Agreement and the Rules, the
Rules shall control.
3. Transmittal of Entries by Company/Security Procedures
3.1 General. The Company will deliver Credit Entries or Debit Entries
(together with the ACH Transmittal Register attached as Schedule A) to
the Bank in accordance with the format, content and specifications
contained in the Rules and this Agreement. The Company authorizes the
Bank to transmit all Entries received by the Bank from the Company in
accordance with the terms of this Agreement. The Company will deliver
each Entry or file to the Bank by the deadlines set forth in the ACH
Processing Schedule attached as Schedule B.
3.2 Hand-Delivered Files (Paper or Disk). Each file of ACH transactions
(either on paper or disk) which is hand- delivered to the Bank will be
accompanied by an ACH Transmittal Register in the form attached as
Schedule A, signed by an authorized signer for the Company. The
Company will maintain on file with the Bank an ACH Authorized
Signature Form listing the then current authorized signers for
Transmittal Registers in the form attached as Schedule C. The Bank
will anticipate the receipt of an ACH file from the Company on each
scheduled processing date identified by the Company and agreed to by
the Bank. Such processing dates are identified on the attached
Schedule F. The Company will notify the Bank if a file will not be
delivered on the scheduled processing date. The Bank will verify that
<PAGE>
the file totals agree with any Company information. In the event ofa
discrepancy in the totals, the Bank will call the Company. In an
authorized representative of the Company is not available for
notification, then the file will not be processed until the next
business day after an authorized representative of the Company can be
contacted and the discrepancy corrected.
3.3 Personal Computer File Transmission. To the extent the Company wishes
to access the ACH system directly, the Company may do so using the
procedures required by First National Bank of Omaha ("FNBO"). The
Company acknowledges receiving a copy of the FNBO information and
procedures packet. The Company will provide the Bank with verification
of the totals contained in the transmission which includes an ACH
Transmittal Register in the form attached as Schedule A signed by an
authorized signer for the Company. The Company will maintain on file
with the Bank an ACH Authorized Signature Form listing the then
current authorized signers for Transmittal Registers in the form
attached as Schedule C. The Bank will anticipate a facsimile in the
form of attached Schedule A from the Company on each scheduled
processing date identified by the Company in writing and agreed to by
the Bank. The Bank will contact FNBO with the file totals on said
Schedule A so FNBO can verify the totals it will be receiving in the
transmission from the Company. The processing dates are identified on
the attached Schedule F. The Company is responsible for ensuring that
FNBO receives the transmission on each processing date indicated in
the processing schedule. In the event of a discrepancy in the file
totals, FNBO will contact the Bank and the Bank will in turn contact
the Company by telephone. If an authorized representative of the
Company is not available for notification, then the file will not be
processed until the next business day after an authorized
representative of the Company can be contacted and the discrepancy
corrected. The Company will notify the Bank if a transmission will not
take place on the prearranged scheduled processing date. The Company
is solely responsible for the accurate creation, modification, and
deletion of the account information maintained on the Company's
personal computer and used for ACH entries. The Company agrees to
comply with written procedures provided by FNBO for ACH entries. The
Company is solely responsible for access by its employees to the data
files maintained on the Company's computer. The Company is responsible
for operator security procedures on the one personal computer licensed
for use of any ACH-related software.
3.4 Security Procedures. The Bank may rely on any written notice or any
other written communication believed by it in good faith to be genuine
and to have been signed by an authorized representative of the
Company, and any such communication shall be deemed to have been
signed by such person.
4. Bank Obligations. In a timely manner, the Bank will process, transmit and
settle the Entries received from the Company in accordance with the Rules
and this Agreement. The Bank will not process, transmit or settle any
Entries on any Federal Reserve Bank holidays identified on Schedule G.
Furthermore, the Bank will have no obligation to transmit Entries if the
Company is in default under this Agreement.
5. Consumer Authorization Requirements. The Copany will obtain written
authorization for all consumer Debit Entries or Credit Entries. Such
authorization will comply with the Rules and the ACH Operating Guidelines.
The Company will retain the original or microfilm or other equivalent to a
microfilm record for two years after termination or revocation of such
authorization.
<PAGE>
6. Pre-Notification - WAIVED
7. Exposure Limits. The Company will comply with the maximum exposure limits
(the maximum file values, frequencies and item values for Entries
transmitted by the Company) as set forth on the attached Schedule D.
8. Company Financial Information. As may be requested by the Bank during the
term of this Agreement, the Company will provide its financial information
to the Bank in a form satisfactory to the Bank. As a result of the Bank's
review of the Company's financial information, the Bank may amend the terms
of this Agreement under Section 18 (Amendments) below.
9. Payment
9.1. Credit Entries. The Company will maintain on account with the Bank for
the term of this Agreement, and will provide immediately available
funds in such account to cover any Credit Entry it initiates not later
than the applicable Settlement Date. The Company authorizes the Bank
to debit such account on the applicable Settlement Date in the amount
of each Entry. Additionally, after the Bank receives the Company's
Credit Entries, the Company authorizes the Bank to place a hold on the
funds in the Company's account for the total amount of the Entry until
the Bank debits such account on the Settlement Date. If the Company
does not provide sufficient available funds to cover any Credit Entry,
the Bank may debit any other account maintained by the Company with
the Bank in order to obtain payment of any Credit Entry.
9.2. Debit Entries. The Company will receive immediately available funds on
the applicable Settlement Date for Debit Entries it initiates.
10. Rejection and Return of Entries.
10.1 By Bank. The Bank will reject any Entry which does not comply with
this Agreement and the Rules. The Bank will notify the Company by
phone of any rejected Entry not later than one business day after such
Entry was rejected. The Bank shall not be responsible for correcting
Entries which have been rejected by the Bank. Furthermore, the Bank
shall have no liability to the Company by reason of the rejection of
any Entry or the fact that notice of rejection is not given at an
earlier time than that provided for in this Agreement.
10.2 By ACH. If any Entry is rejected or returned by the ACH for any
reason, the Company shall be responsible to correct such Entries,
except the Bank will correct any Entry where the ACH rejection was due
to mishandling of such Entry by the Bank unless insufficient data is
available to the Bank to permit it to correct such Entry. The Bank
will notify the Company by phone of the receipt of an Entry which has
been rejected or returned by the ACH not later than one business day
after the business day of such receipt. The Company will provide
available funds within one business day to indemnify the Bank and to
pay any return item fee charged by the Bank if any Debit Entry is
rejected or returned after the Bank has permitted the Company to
withdraw available funds in the amount thereof or if any adjustment
memorandum that relates to any such Entry is received by the Bank.
11. Data Retention. The Company shall retain data on file adequate to permit
correcting of Entries for five (5) business days following the date of
their delivery to the Bank, and shall provide such data to the Bank upon
its request.
<PAGE>
12. Cancellation or Amendment by Company. The Company shall have no right to
cancel or amend any Entry after it is received by the Bank. However, the
Bank will use reasonable efforts to act on a request by the Company to
cancel or amend an Entry prior to transmitting it to the ACH or, in the
case of an "on-us" Credit Entry, prior to crediting the Receiver's account.
The Bank will have no liability if such cancellation or amendment is not
effected.
13. Account Reconciliation. Entries transmitted by the Bank with respect to the
Company's account at the Bank will be reflected on the Company's periodic
statement issued by the Bank. The Company agrees to notify the Bank
promptly of any discrepancy between Company's records and the information
shown on any such periodic statement. If the Company fails to notify the
Bank within ninety (90) days of receipt of a periodic statement containing
such information, the Company agrees that the Bank shall not be liable for
any losses resulting from the Company's failure to give such notice or loss
of interest with respect to an Entry shown on such periodic statement. If
the Company fails to notify the Bank of any such discrepancy within ninety
(90) days of receipt of such periodic statement, the Company shall be
precluded from asserting such discrepancy against the Bank.
14. Warranties. Under the Rules, the Bank makes certain warranties with regard
to Entries it originates for the Company. The Company agrees that it also
makes those same warranties to the Bank, including, but not limited to, the
fact that each Entry is authorized, accurate and timely.
15. Liability, Limitations on Liability, Indemnity
15.1 Extent of Bank's Liability. The Bank shall be responsible only for
performing the services expressly provided for in this Agreement, and
shall be liable only for its negligence in performing those services.
The Bank's liability for loss shall be limited to general monetary
damages under this Agreement for the preceding thirty (30) calendar
days. The Bank shall not be responsible for the Company's acts or
omissions (including without limitation the amount, accuracy,
timeliness of transmittal or due authorization of any Entry received
from the Company) or those of any other person, including without
limitation any Federal Reserve Bank or transmission or communications
facility, any Receiver or Receiving Depository Financial Depository
Financial Institution), and none of such persons shall be deemed the
Bank's agent. The Company agress to indemnify the Bank against any
loss, liability or expense (including attorney's fees and expenses)
resulting from or arising out of any claim of any person that the Bank
is responsible for any act or omission of the Company or any other
person described in this Section 15.1.
15.2 Consequential and Other Damages. In no event shall the Bank be liable
for any consequential, special, punitive or indirect loss or damage
which the Company may incur or suffer in connection with this
Agreement, including without limitation loss or damage from subsequent
wrongful dishonor resulting from the Bank's acts or omissions pursuant
to this Agreement.
<PAGE>
15.3 Performance Excused. Without limiting the generality of the foregoing
provisions, the Bank shall be excused from failing to act or delay in
acting if such failure or delay is caused by legal constraint,
interruption of transmission or communication facilities, equipment
failure, war, emergency conditions or other circumstances beyond the
Bank's control. In addition, the Bank shall be excused from failing to
transmit or delay in transmitting an Entry if such transmittal would
result in the Bank having exceed any limitation upon its intra-day net
funds position established pursuant to present or future Federal
Reserve guidelines or would result in the Bank otherwise violating any
provision of any present or future risk control program of the Federal
Reserve or any rule or regulation of any other U.S. governmental
regulatory authority.
15.4 Indemnity. The Company will indemnify the Bank against any loss,
liability or expense (including reasonable attorney's fees) resulting
from or arising out of (1) any breach of any of the Company's
warranties contained in this Agreement and in the Rules, and (2) any
other breach of this Agreement by the Company, except to the extent
such loss, liability or expense results from the Bank's own
negligence.
16. Bank Fees. The Company will pay to the Bank the fees listed in the attached
Schedule E for providing the services referenced in this Agreement.
17. Inconsistency of Name and Account Number. The Company acknowledges that, if
any Entry describes the Received inconsistently by name and account number,
payment of the Entry may be made on the basis of the account number even if
it identifies a person different from the named Receiver
18. Amendments. From time to time the Bank may amend any of the terms of this
Agreement and any part of attached Schedules A through G. Any such
amendment shall become effective upon receipt of notice of the amendment by
the Company or such later date as may be stated in the Bank's notice to the
Company.
19. Termination. This Agreement may be terminated on ten days' written notice
by either party. Any termination of this Agreement shall not effect any of
the Company's obligations arising prior to such termination.
20. Assignment. The company may not assign this Agreement or any of the rights
or duties under this Agreement to any person without the Bank's prior
written consent.
21. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective legal representatives,
successors and assigns.
22. Governing Law. This Agreement shall be interpreted in accordance with and
governed by Colorado law, United States law (as applicable), and the Rules.
The Company shall comply with applicable United States law when originating
entries under this Agreement.
23. Entire Agreement. This Agreement (including the attached Schedules),
together with any agreement for the Company's account with the Bank, is the
complete and exclusive statement of the agreements between the Bank and the
Company with respect to its subject matter, and it supersedes any prior
Agreement(s) between the Bank and the Company with respect to such subject
matter. In the event of any inconsistency between the terms of this
Agreement and any account agreement with the Bank, the terms of this
Agreement shall govern. If the performance of any services in accordance
with the terms of this Agreement would result in a violation of any present
or future law or regulation to which the Bank is subject and which governs
or affects the transactions contemplated by this Agreement, then this
Agreement shall be deemed amended to the extent necessary to comply with
such law or regulation, and the Bank shall incur no liability to the
Company as a result of such violation or amendment.
Dated the date set forth above.
COMPANY:
Avert, Inc.
By: Jamie M. Burgat, VP Operations
--------------------------------------
BANK:
First State Bank of Fort Collins,
a Colorado corporation
By:
------------------------------------------
<PAGE>
Schedule A: ACH Transmittal Register
Schedule B: ACH Processing Schedule
Schedule C: ACH Authorized Signature Form
Schedule D: ACH Exposure Limits
Schedule E: ACH Origination Fees
Schedule F: ACH Company Processing Dates
Schedule G: Bank Holiday Schedule
EXHIBIT 10.17
Summary of the 1999 Avert, Inc. Profit Sharing Plan
Avert, Inc. is introducing a profit sharing plan for the 1999 designed to focus
all efforts toward increasing revenue and profitability.
Company Goals:
The goal of the 1999 Avert, Inc. Profit Sharing Plan is to focus each employee's
attention on meeting (and surpassing) the stated revenue and profitability goals
for 1999. If the following goals are met, the Company will share a percentage of
profits with all regular employees following the close of the 1999 fiscal year.
In order for employees to qualify for the profit sharing plan, two primary goals
must be met:
1. The company must post Total Revenues (includes Product & Services
Sales + Other Income) in excess of 12% over fiscal year 1998.
2. The company must retain in excess of 12% of revenues as Net Profit
After Tax.
Once both of the above conditions have been met, a percentage of Net Profit
After Tax above 12% of Total Revenues, will be set aside in a profit sharing
pool based on the chart below:
Chart:
| | | |
Total Revenue Growth ........ | 0% | 5% | 7.5% | 10%
- -----------------------------------------------------------------------
| | | |
Net Profit After Tax ........ | 0% | 5% | 7.5% | 10%
| | | |
12% 16% 20%
Example: The Company posts a 21% increase in Total Revenues over FY
1998 and retains 14% as Net Profit After Tax. In this example, Net
Profits After Tax over 12% of Total Revenues would go into the profit
sharing pool. Employees would then receive a total of 15% of the
profit sharing pool, (10% for achieving greater than 20% Total Revenue
growth, and 5% for achieving greater than 12% Net Profit After Tax).
The minimum amount to be paid out of the 1999 Profit Sharing Plan is $0.00 if
both conditions are not met. The maximum would be 20% of Net Profit After Tax
over 12% of Total Revenues for both conditions being met in excess of 20%. Goals
for subsequent years may vary and will be published at the beginning of each
year.
Eligibility:
The Avert Profit Sharing Plan is open to all regular Avert employees employed at
the time of the actual distribution.
Distribution:
Money in the Profit Sharing pool will be distributed among employees employed at
the time of the actual distribution, following the completion of the audit and
close of the financials for the 1999 fiscal year. Distribution is estimated to
be in February, 2000. The money will be distributed in units, with one unit
equal to 12 months of full time service during 1999.
Example: An employee who works 30 hours a week for 12 months would
receive a proportion of one unit. 30 hours per week equals 75% of a
full time schedule, therefore, that employee would receive 75% of one
unit.
Example 2: An employee works full time for the months of September,
October, November and December. 23 months equals 33% of a full year,
therefore, that employee would receive 33% of one unit.
Posting:
Results of operations will be communicated on a quarterly basis. However, for
the purpose of this plan, any calculations are simply estimates and actual
Profit Sharing Units will depend entirely on the Total Revenues and Net Profit
After Tax results of the Company for the entire 1999 fiscal year, as confirmed
by the annual audit following the close of the year.
EXHIBIT 23.1
Avert, Inc.
301 Remington Street
Fort Collins, CO 80524
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference of our report dated January 28,
2000 accompanying the financial statements of Avert, Inc. as of December 31,
1999, and for the years ended December 31, 1999 and 1998 also incorporated by
reference into the Form S-8 Registration Statement of Avert, Inc. and to the use
of our name and the statements with respect to us, as appearing under the
heading "Experts" in the Registration Statement.
/s/ Hein & Associates LLP
HEIN & ASSOCIATES LLP
Denver, Colorado
March 22, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,569,000
<SECURITIES> 6,361,000
<RECEIVABLES> 1,706,000
<ALLOWANCES> (104,000)
<INVENTORY> 0
<CURRENT-ASSETS> 9,631,000
<PP&E> 4,910,000
<DEPRECIATION> (2,113,000)
<TOTAL-ASSETS> 12,428,000
<CURRENT-LIABILITIES> 1,136,000
<BONDS> 0
0
0
<COMMON> 3,924,000
<OTHER-SE> 7,028,000
<TOTAL-LIABILITY-AND-EQUITY> 12,428,000
<SALES> 12,215,000
<TOTAL-REVENUES> 12,608,000
<CGS> 5,699,000
<TOTAL-COSTS> 9,537,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,071,000
<INCOME-TAX> 1,173,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,898,000
<EPS-BASIC> .57
<EPS-DILUTED> .55
</TABLE>
