<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: JULY 12, 2000
CHECKFREE HOLDINGS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Ohio 0-26802 58-2360335
--------------- --------------------- -------------
(STATE OR OTHER (COMMISSION FILE NO.) (IRS EMPLOYER
JURISDICTION OF IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
4411 East Jones Bridge Road
Norcross, Georgia 30092
(678) 375-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER
INCLUDING AREA CODE OF REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICES)
---------------------
Not Applicable
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
---------------------
<PAGE> 2
ITEM 5. OTHER EVENTS.
On July 7, 2000, the Company entered into an Amended and Restated
Merger Agreement to acquire the business of TransPoint, a joint venture among
Microsoft Corporation, First Data Corporation, Citibank, N.A., and various
subsidiaries of each of these entities. Through a series of mergers, the
entities that own the TransPoint business will become our wholly-owned
subsidiaries. In connection with these transactions, the Company will issue an
aggregate of 17,000,000 shares of its common stock to the owners of the
TransPoint business.
Also in this report are the unaudited financial statements of
TransPoint for the period ending March 31, 2000.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS OF THE TRANSPOINT ENTITIES.
<TABLE>
<CAPTION>
The following is a list of the TransPoint audited and unaudited
financial statements filed with this report:
<S> <C>
Independent Auditors' Report.................................................F-1
Consolidated Balance Sheets as of July 3, 1998, July 2, 1999 and March
31, 2000 (unaudited)......................................................F-2
Consolidated Statements of Operations for the Year Ended July 2, 1999,
for the Period from Inception to July 3, 1998, for the Period from
Inception to July 2, 1999, for the Three Months Ended March 31, 2000
(unaudited), for the Three Months Ended March 31, 1999 (unaudited),
for the Nine Months Ended March 31, 2000 (unaudited), for the Nine
Months Ended March 31, 1999 (unaudited), and for the Period from
Inception to March 31, 2000 (unaudited) ..................................F-3
Consolidated Statements of Members' Capital Deficiency for the Year
Ended July 3, 1998, for the Year Ended July 2, 1999, for the Period
from Inception to July 2, 1999, for the Nine Months Ended March 31,
2000 (unaudited), and for the Period from Inception to March 31,
2000 (unaudited) .........................................................F-4
Consolidated Statements of Cash Flows for the Year Ended July 2, 1999,
for the Period from Inception to July 3, 1998, for the Period from
Inception to July 2, 1999, for the Nine Months Ended March 31, 2000
(unaudited), for the Nine Months Ended March 31, 1999 (unaudited),
and for the Period from Inception to March 31, 2000 (unaudited) ..........F-5
Notes to Consolidated Financial Statements...................................F-6
</TABLE>
(C) EXHIBITS.
EXHIBIT NO. DESCRIPTION
23.1 Consent of Deloitte & Touche LLP
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHECKFREE HOLDINGS CORPORATION
Date: July 12, 2000 By: /s/ David Mangum
------------------------------
David Mangum, Executive Vice
President and Chief Financial
Officer
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
MSFDC, L.L.C.
Redmond, Washington
We have audited the accompanying consolidated balance sheets of MSFDC,
L.L.C. and subsidiaries, a development stage company (the Company), as of July
2, 1999, and July 3, 1998, and the related consolidated statements of
operations, members' capital deficiency, and cash flows for the year ended July
2, 1999, and the periods from June 18, 1997 (inception) to July 3, 1998, and
from June 18, 1997 (inception) to July 2, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of July 2, 1999,
and July 3, 1998, and the results of its operations and its cash flows for the
year ended July 2, 1999, and for the periods from June 18, 1997 (inception) to
July 3, 1998, and from June 18, 1997 (inception) to July 2, 1999, in conformity
with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
--------------------------------------
Deloitte & Touche LLP
Seattle, Washington
October 22, 1999 (February 15, 2000, as to Note 4)
F-1
<PAGE> 5
MSFDC, L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, JULY 2, JULY 3,
2000 1999 1998
----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and Cash Equivalents............................ $ 8,018,791 $51,113,749 $ --
Prepaid Expenses..................................... 750,000
Property and Equipment:
Equipment.......................................... 4,757,196 3,924,418 2,004,261
Accumulated depreciation........................... (3,994,563) (2,213,876) (343,409)
----------- ----------- ----------
Total property and equipment............... 762,633 1,710,542 1,660,852
Capitalized Software................................. 9,926,973
----------- ----------- ----------
Total...................................... $19,458,397 $52,824,291 $1,660,852
=========== =========== ==========
LIABILITIES AND MEMBERS' CAPITAL DEFICIENCY
Liabilities:
Checks drawn in excess of bank balances............ $ -- $ -- $ 57,830
Accounts payable (See Note 3)...................... 11,853,496 16,289,271 6,095,216
Accrued liabilities................................ 4,547,358 592,192 361,261
Unearned revenue................................... 4,500,000
----------- ----------- ----------
Commitments (See Note 4)........................... 20,900,854 16,881,463 6,514,307
Minority Interest.................................... 40,328,665 45,936,458
Members' Capital Deficiency:
Membership interest -- MS member................... (20,885,561) (4,996,815) (2,426,694)
Membership interest -- FDC member.................. (20,885,561) (4,996,815) (2,426,761)
----------- ----------- ----------
Total members' capital deficiency.......... (41,771,122) (9,993,630) (4,853,455)
----------- ----------- ----------
Total...................................... $19,458,397 $52,824,291 $1,660,852
=========== =========== ==========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 6
MSFDC, L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE THREE NINE NINE
MONTHS MONTHS MONTHS MONTHS
INCEPTION TO INCEPTION TO ENDED ENDED ENDED ENDED
YEAR ENDED JULY 3, JULY 2, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
JULY 2, 1999 1998 1999 2000 1999 2000 1999
------------ ------------ ------------ ------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES.................... $ -- $ -- $ -- $ 4,290 $ -- $ 7,350 $ --
OPERATING EXPENSES:
Product development (See
Note 3).................. 26,559,520 10,032,522 36,592,042 4,475,873 6,463,850 5,996,849 18,364,993
Selling, general, and
administrative (See Note
3)....................... 18,637,762 5,839,118 24,476,880 14,156,818 5,359,342 32,449,303 12,642,220
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total operating
expenses............ 45,197,282 15,871,640 61,068,922 18,632,691 11,823,192 38,446,152 31,007,213
OTHER EXPENSE (INCOME)...... (463,632) (18,118) (481,750) (142,068) (2,911) (1,053,517) (25,743)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Loss before minority
interest............. 44,733,650 15,853,522 60,587,172 18,486,333 11,820,281 37,385,285 30,981,470
MINORITY INTEREST........... (2,063,542) (2,063,542) (2,732,287) (5,607,793)
----------- ----------- ----------- ----------- ----------- ----------- -----------
NET LOSS.................... $42,670,108 $15,853,522 $58,523,630 $15,754,046 $11,820,281 $31,777,492 $30,981,470
=========== =========== =========== =========== =========== =========== ===========
<CAPTION>
INCEPTION TO
MARCH 31,
2000
------------
(UNAUDITED)
<S> <C>
REVENUES.................... $ 7,350
OPERATING EXPENSES:
Product development (See
Note 3).................. 42,588,891
Selling, general, and
administrative (See Note
3)....................... 56,926,183
-----------
Total operating
expenses............ 99,515,074
OTHER EXPENSE (INCOME)...... (1,535,267)
-----------
Loss before minority
interest............. 97,972,457
MINORITY INTEREST........... (7,671,335)
-----------
NET LOSS.................... $90,301,122
===========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 7
MSFDC, L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF MEMBERS' CAPITAL DEFICIENCY
<TABLE>
<CAPTION>
MS MEMBER FDC MEMBER TOTAL
------------ ------------ ------------
<S> <C> <C> <C>
Capital contributions............................. $ 5,500,067 $ 5,500,000 $ 11,000,067
Net loss.......................................... (7,926,761) (7,926,761) (15,853,522)
------------ ------------ ------------
Balance, July 3, 1998............................. (2,426,694) (2,426,761) (4,853,455)
Capital contributions............................. 18,764,933 18,765,000 37,529,933
Net loss.......................................... (21,335,054) (21,335,054) (42,670,108)
------------ ------------ ------------
Balance, July 2, 1999............................. (4,996,815) (4,996,815) (9,993,630)
Capital contributions (unaudited)
Net loss (unaudited).............................. (15,888,746) (15,888,746) (31,777,492)
------------ ------------ ------------
Balance, March 31, 2000 (unaudited)............... $(20,885,561) $(20,885,561) $(41,771,122)
============ ============ ============
INCEPTION TO JULY 2, 1999
Capital contributions............................. $ 24,265,000 $ 24,265,000 $ 48,530,000
Net loss.......................................... (29,261,815) (29,261,815) (58,523,630)
------------ ------------ ------------
Balance, July 2, 1999............................. $ (4,996,815) $ (4,996,815) $ (9,993,630)
============ ============ ============
INCEPTION TO MARCH 31, 2000
Capital contributions (unaudited)................. $ 24,265,000 $ 24,265,000 $ 48,530,000
Net loss (unaudited).............................. (45,150,561) (45,150,561) (90,301,122)
------------ ------------ ------------
Balance, March 31, 2000 (unaudited)............... $(20,885,561) $(20,885,561) $(41,771,122)
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 8
MSFDC, L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS INCEPTION
YEAR ENDED INCEPTION TO INCEPTION TO ENDED ENDED TO
JULY 2, JULY 3, JULY 2, MARCH 31, MARCH 31, MARCH 31,
1999 1998 1999 2000 1999 2000
------------ ------------ ------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss................ $(42,670,108) $(15,853,522) $(58,523,630) $(31,777,492) $(30,981,470) $(90,301,122)
Adjustments to reconcile
net loss to net cash
used by operating
activities:
Depreciation.......... 1,870,467 343,409 2,213,876 2,755,054 1,366,022 4,968,930
Minority interest
share of loss....... (2,063,542) (2,063,542) (5,607,793) (7,671,335)
Cash provided (used)
by changes in
operating assets and
liabilities:
Checks drawn in
excess of bank
balance.......... (57,830) 57,830
Prepaid Expenses...... (750,000) (750,000)
Accounts payable and
accrued
liabilities...... 10,424,986 6,456,477 16,881,463 (480,609) 1,519,858 16,400,854
Unearned revenue.... 4,500,000 4,500,000
------------ ------------ ------------ ------------ ------------ ------------
Net cash used by
operating
activities..... (32,496,027) (8,995,806) (41,491,833) (31,360,840) (28,095,590) (72,852,673)
INVESTING ACTIVITIES:
Acquisition of
equipment............. (1,920,157) (2,004,261) (3,924,418) (832,778) (4,757,196)
Capitalized software.... (10,901,340) (10,901,340)
------------ ------------ ------------ ------------ ------------ ------------
Net cash used by
investing
activities............ (1,920,157) (2,004,261) (3,924,418) (11,734,118) 0 (15,658,536)
FINANCING ACTIVITIES:
Member capital
contributions......... 37,529,933 11,000,067 48,530,000 28,579,933 48,530,000
Capital contribution
from minority
interest.............. 48,000,000 48,000,000 48,000,000
------------ ------------ ------------ ------------ ------------ ------------
Net cash provided by
financing
activities............ 85,529,933 11,000,067 96,530,000 28,579,933 96,530,000
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS............. 51,113,749 51,113,749 (43,094,958) 484,343 8,018,791
CASH AND CASH EQUIVALENTS:
Beginning of period..... 51,113,749
------------ ------------ ------------ ------------ ------------ ------------
End of period........... $ 51,113,749 $ -- $ 51,113,749 $ 8,018,791 $ 484,343 $ 8,018,791
============ ============ ============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 9
MSFDC, L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: ORGANIZATION AND DESCRIPTION OF BUSINESS
Description of Business -- The purpose of the business is to provide
electronic statement presentment and electronic remittance services to consumers
and businesses using the Internet. The business has been in the development
stage and commenced commercial operations in July 1999.
Organization -- MSFDC, L.L.C. is a Delaware limited liability company and
was formed pursuant to the Limited Liability Company Agreement of MSFDC, L.L.C.
dated as of June 18, 1997 (inception) (the LLC Agreement). The members of MSFDC,
L.L.C. are MS II, L.L.C., a Delaware limited liability company (the MS member),
and First Data L.L.C., a Delaware limited liability company (the FDC member).
The MS member is a wholly owned subsidiary of Microsoft Corporation (MS). The
FDC member is a wholly owned subsidiary of First Data Corporation (FDC).
In September 1998, MSFDC, L.L.C. entered into an arrangement whereby the
electronic bill presentment and payment service business in the United States
previously under development by MSFDC, L.L.C. was contributed to a newly formed
entity, Newco L.L.C. (TransPoint). The members of TransPoint are MSFDC, L.L.C.
and Citicorp Electronic Commerce Inc. (the Citicorp member). The Citicorp member
of TransPoint is a wholly owned subsidiary of Citicorp. In connection with this
new arrangement, two additional entities were formed: New MSFDC, L.L.C.
(TransPoint Technologies and Services) and Jointco L.L.C. (TransPoint
Accounting). The Citicorp member interest in TransPoint Technologies and
Services and TransPoint is 25% and 5%, respectively, with MSFDC, L.L.C. holding
the remaining interests. TransPoint Technologies and Services and TransPoint
each hold 50% capital interests in TransPoint Accounting. These three new
entities are collectively referred to as the TransPoint limited liability
companies.
The TransPoint limited liability companies collectively have rights to all
future domestic revenues generated by the electronic bill presentment and
payment service previously under development by MSFDC, L.L.C. The MS and FDC
members have established a new limited partnership, MSFDC International L.P., to
account for the future international revenues and related costs.
Contributions -- Upon formation of MSFDC, L.L.C. in 1997, the MS member
contributed $50,000 in cash. First Data Resources, Inc. contributed $40,000 in
cash, and Integrated Payment Systems Inc. contributed $10,000 as initial capital
contributions. Immediately following the initial capital contribution,
Integrated Payment Systems Inc. transferred its membership interest to First
Data Resources Inc. These interests were then transferred to First Data L.L.C.
In connection with the formation of the new TransPoint limited liability
companies, Citicorp contributed $48,000,000 in cash as its initial contribution
and MSFDC, L.L.C. contributed $37,529,933. MSFDC, L.L.C. and the Citicorp member
also made nonmonetary contributions to the TransPoint limited liability
companies with a stated value of $446,250,000 and $30,750,000, respectively. The
MSFDC, L.L.C. nonmonetary contribution was in the form of software development,
goodwill, and tangible and intangible assets. The Citicorp member nonmonetary
contribution represented an option to obtain a license of software and
intangible assets and no value has been ascribed to this contribution in the
accompanying consolidated financial statements.
Loss and Cash Flow Allocations -- The allocation of profit and loss and
cash flow of MSFDC, L.L.C. and the TransPoint limited liability companies is
defined in the respective limited liability company agreements. These agreements
generally result in a sharing of ongoing capital contribution requirements and
profit and loss based on initial membership interests. Cash distributions are to
be made annually in an amount equal to the assumed tax liability of the
entities, or if greater, excess cash flow. For financial reporting purposes,
losses from the TransPoint limited liability companies have been allocated to
MSFDC, L.L.C. and the Citicorp member based on their respective capital account
interests of 85% and 15%, respectively. Citicorp loss allocations commenced upon
the date of their capital contribution in April 1999.
F-6
<PAGE> 10
MSFDC, L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Unaudited Interim Financial Statements -- The interim financial information
contained herein is unaudited but, in the opinion of management, reflects all
adjustments which are necessary for a fair presentation of the financial
position, results of operations, and cash flows for the periods presented. All
such adjustments are of a normal, recurring nature. Results of operations for
interim periods presented herein are not necessarily indicative of results of
operations for the entire year.
The unaudited interim financial statements of MSFDC L.L.C. include the
accounts of MSFDC International, L.P., which was formed in April 1999. The
accounts of MSFDC International, L.P. have been combined with those of the MSFDC
L.L.C. due to common ownership, and because the entity is being acquired under
the same transaction as MSFDC L.L.C. (see note 4).
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation -- The financial statements include all majority and wholly
owned subsidiaries (collectively, the Company). Intercompany balances and
transactions have been eliminated in consolidation.
Minority Interest -- Citicorp's capital contributions and share of losses
in the TransPoint limited liability companies has been recorded as a minority
interest.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and related
disclosures. Actual results could differ from those estimates.
Property and Equipment -- Property and equipment is carried at cost, less
accumulated depreciation, and consists primarily of computers and related
technical equipment. Depreciation is provided utilizing the straight-line method
over the estimated useful lives of the assets, which range from one year to 3
years.
The carrying value of equipment is reviewed periodically for impairment. If
the carrying amount of the asset is not recoverable, the asset is considered to
be impaired and the value is adjusted to the estimated fair value.
Income Taxes -- As a limited liability company, the Company is treated as a
partnership for federal and state income tax purposes and its income or loss is
taxable directly to its members. Accordingly, the accompanying financial
statements do not include any income tax provisions.
Product Development -- Product development costs are expensed as incurred.
Statement of Financial Accounting Standards (SFAS) No. 86. Accounting for the
Costs of Computer Software to be Sold, Licensed or Otherwise Marketed, does not
materially affect the Company.
Recent Accounting Pronouncement -- In March 1998, the American Institute of
Certified Public Accountants (AICPA) issued Statement of Position (SOP) 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use. SOP 98-1 requires capitalization and amortization of costs relating to
internal-use software, and was adopted by the Company beginning July 3, 1999.
The adoption of SOP 98-1 resulted in the capitalization of approximately $10.9
million in costs through March 31, 2000 (unaudited). Capitalized costs include
payroll and payroll-related costs for software developed by the Company and the
cost of software purchased from third parties.
As of January 31, the Company began amortizing its capitalized software
costs, using the straight-line method over 36 months, as the software is ready
for its intended use. Quarterly, the Company reviews and measures any impairment
in accordance with the provisions of SFAS No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
Subsequently, the Company licensed the software to third-parties. As of
March 31, 2000, the Company had received $4.5 million (unaudited) in proceeds
from the licensing of the software, and will apply the
F-7
<PAGE> 11
MSFDC, L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
proceeds, net of direct incremental costs of marketing, against the capitalized
software costs as the proceeds are earned.
NOTE 3: RELATED PARTY TRANSACTIONS AND COMMITMENTS
Operating Costs and Reimbursements -- The MS member and the FDC member
provide certain operational services, some of which are reimbursed by the
Company. Selling, general, and administrative expenses related to these services
provided by the MS member and the FDC member for the year ended July 2, 1999,
totaled $2,248,000 and $11,601,000, respectively, and $836,000 and $3,925,000,
respectively, for the period from June 18, 1997 (inception) to July 3, 1998.
Services related to selling, general, and administrative expenses for the
nine-month periods ended March 31, 2000 and 1999 (unaudited) totaled $16,856,000
and $1,433,000, respectively, for the MS member and $3,341,000 and $8,330,000,
respectively, for the FDC member.
Research and Development Costs and Reimbursements -- The MS member and the
FDC member perform certain research and development activities, some of which
are reimbursed by the Company. Research and development expenses related to
these activities performed by the MS member and the FDC member for the year
ended July 2, 1999, and the period from June 18, 1997 (inception) to July 3,
1998, totaled $18,886,000 and $4,279,000, respectively, and $6,502,000 and
$3,155,000, respectively.
Research and development costs for the nine-month periods ended March 31,
2000 and 1999 (unaudited) totaled $15,094,000 and $13,133,000, respectively, for
the MS member and $-0- and $3,327,000, respectively, for the FDC member. Of
research and development costs incurred during the nine-month period ended March
31, 2000, $10,901,000 (unaudited) was capitalized under SOP 98-1 as software
developed for internal use.
Accounts Payable -- Accounts payable includes $11,722,000 and $4,407,000 to
the MS member and the FDC member, respectively, as of July 2, 1999, and
$2,569,000 and $2,582,000 to the MS member and the FDC member, respectively, as
of July 3, 1998.
Accounts payable as of March 31, 2000 (unaudited) includes $11,178,000 and
$543,000 for the MS member and FDC member, respectively.
NOTE 4: SUBSEQUENT EVENTS
On September 24, 1999, the Company entered into a three year sales and
marketing agreement with a third-party whereby the Company guaranteed that the
third-party would realize minimum revenues of $12 million over the term of the
agreement. In the event of a revenue shortfall, the Company is obligated to pay
the difference directly to the third-party.
On February 15, 2000, the Company entered into an agreement to be acquired.
Under the terms of the agreement, the members have agreed that at the closing of
the mergers TransPoint will have available $100 million in cash.
F-8
