EC)

-2 M1 Y 01 Fi t : 2 1ANDERSON & KARRENBERGSCOTT A. CALL (0544 )700 Bank One Tower50 West BroadwaySalt Lake City, UT 84101Telephone : 801/534-1700

I li. . .. I is V 11-1iBY :

P LJ ! Yl C L L R i0E

Liaison Counsel

MILBERG WEISS BERSHADHYNES & LERACH LLP

WILLIAM S . LERACHEDWARD P . DIETRICHSTEPHEN P . POLAPINK600 West Broadway , Suite 1800San Diego , CA 92101Telephone: 619/231-105 8

WOLF HALDENSTEIN ADLERFREEMAN & HERZ, LL P

FRANCIS M . GREGOREKBETSY C. MANIFOLD750 B Street , Suite 2770San Diego , CA 92101Telephone : 6 1 9123 9-45 99

Co-Lead Counsel for Plaintiff s

IN THE UNITED STATES DISTRICT COURT

DISTRICT OF UTAH, CENTRAL DIVISION

MARK SPIEGEL, et al ., On Behalf ofThemselves and All Others Similarly Situated ,

Plaintiffs,

vs .

TENFOLD CORPORATION, WILLIAM M .CONROY, GARY D . KENNEDY, ROBERT PHUGHES, ADAM SLOVIK, JEFFREY L .WALKER, and ROBERT W. FELTON,

Defendants

Case No. 2 :00-CV-652-C(Consolidated)

PROPOSED CLASS ACTION

CONSOLIDATED AMENDEDCOMPLAINT FOR VIOLATIONS OF THEFEDERAL SECURITIES LAW S

JURY DEMANDED

4

INTRODUCTION AND OVERVIE W

1 . This is an action on behalf of all persons who acquired the stock of TenFold

Corporation ("TenFold" or the "Company") between May 21, 1999 and April 12, 2001 (the "Class

Period") for violations of §§11, 12(a)(2) and 15 of the Securities Act of 1993 (the "Securities Act"),

§§10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule lOb-5

promulgated by the SEC. TenFold completed an initial public offering ("IPO") on May 21, 1999

pursuant to a Registration Statement and Prospectus filed with the SEC . In TenFold's Prospectus

and Registration Statement, defendants represented, among other things, that "TenFold is an

innovative software and services company that builds and implements large-scale, complex

applications rapidly and for a fixedprice. We offer the TenFold Guarantee, the industry 's first

money-back guaranteefor large-scale software applications. We deliver applications on time, for

a fixed price, and on target - or we refund our customer 's money ." In addition, the Company

utilizes the "TenFold Way" to identify software system "requirements in four to eight weeks, and

typically deliver the complete, fully tested application in four to eight months ." As a result of these

positive representations, defendants successfully completed TenFold's IPO on May 21, 1999 selling

4 .7 million shares at $17 per share for net proceeds of $34 million .

2. After the IPO, defendants continued to issue false or misleading statements .

Defendants represented the following :

• Demandfor TenFoldproducts and services continues to accelerate .

• The TenFold value proposition is that we deliver fixed-time, fixed-price applications on time and on budget or we refund our customer'smoney. We use the Universal Application to deliver applications tocompanies in months, rather than the years they are accustomed to .

• The UniversalApplication allows us to build complex applicationsfaster than anyone else in the industry . "

• "One of the unique aspects of our business is that the growthdoesn't tend to fluctuate much, partly because our contracts are in 4-8month durations. You also have a lot of reven ue visibility thatyou typicallymight not have with other business models in other companies . . . thecurrent forecast is $154 million, up from $85 million this year. "

-1-

• We signed some of our largest contracts to date in the fourthquarter, evidence of accelerating demand for TenFold applications amongmarket leading customers in our target industries. This gives us greatconfidence as we move into 2000.

• TenFold offers the TenFold Guarantee, the industry's firstmoney-back guarantee for delivering large-scale software applications ontarget, on time, and on budget .

• Our unique development process, the TenFold Way, lets us rapidlybuild sophisticated applications. Our Universal Application and TenFoldComponentWare automate and accelerate applications development andtesting, and let us build large-scale, sophisticated applications quickly andreliably with little or no programming .

• Because TenFold can deliver large-scale applications in relativelyshort time frames, we believe that our applications typically cost less thanthose offered by competitors. By reducing the overall development anddelivery timeframe, we help customers avoid expensive projects that exceedbudgets and schedules.

• Universal Application . We have invented and patented a uniquetechnology-the UniversalApplication -for building complex applicationsdramatically faster than current industry practice. The UniversalApplication is a sophisticated and powerful applications architecture thatreduces design effort and automates and accelerates applicationsdevelopment and testing. The Universal Application lets TenFold beginapplications development projects having pre-built sign ificantfunctionalityand having already solved many complex applications design andimplementation problems. Our applications developers spend timedescribing business requirements and desired functionality - notprogramming .

• "We continue to have strong confidence going into the secondquarter and rest of 2000 . "

• At TenFold, we're revolutionizing the software industry by doingthings dramatically differently - not by following the old rules.

• TenFold's unique on-time, on-budget guarantee always generatesinterest. But it is our ability to rapidly deliver large-scale e-businessapplications that allows us to close sales at a record pace . Our strongbookings performance gives us confidence and momentum going into2000 .

• Our Universal ApplicationTM is breakthrough technology forrapidly building large-scale applications with little or no programming.Seven years ago, TenFold set out to solve one of the software industry'sbiggest challenges - how to build sophisticated applications in months, notyears. We've done it by challenging conventional wisdom. TenFold isrewriting the rules of software development and putting the sacred cows ofour industry out to pasture for good.

-2-

• At TenFold, we deliver sophisticated applications remarkably fast,and for a fixed time and fixed price. Our Universal Applicationdramatically reduces the most sign ificant pitfall in the applicationsdevelopment process : time. As a result, we can deliver completed, testedapplications in the time it often takes others to merely define requirements.In an industry where more than 90% of large applications developmentprojects go well over budget and schedules, TenFold has the blueprint forsuccess .

3 . By February 4, 2000, defendants' false statements artificially inflated TenFold's stock

to $57-1/2 . Defendants took advantage of this artificial inflation and unloaded 505,000 shares of

TenFold stock reaping over $26 .5 million in insider trading proceeds .

4 . In fact, defendants' statements issued in connection with TenFold's IPO and thei r

representations disseminated throughout the Class Period were false or misleading because TenFold

could not build and implement large-scale complex applications rapidly and for a fixed price and

contrary to TenFold's "money-back guarantee," defendants refused to refund customer's payments .

For example :

(a) TenFold's contract with Nielsen Media Research specified that TenFold would

run its first benchmark test in February 1998 . TenFold did not even try to run this test until April

or May of 1998, and when the test was finally run, it was a complete failure .

(b) Although the software for Nielsen called "LASER" was originally to be

completed by July 1998, by June 30, 1998, it was clear that TenFold would not be able to complete

the LASER application by the date specified . Accordingly, the parties changed the delivery date for

the system from July 1998 to January 1999 .

(c) By October 1998, it became clear that TenFold would be unable to meet even

the new January 1999 completion date for Nielsen's LASER system . Concerned about TenFold's

ability to meet Nielsen's performance criteria, Nielsen asked TenFold, in an October 28, 1998 letter,

to reexamine whether it could deliver the LASER application and the feasibility of using TenFold's

technology for the LASER project .

(d) TenFold did not respond to Nielsen's October 28, 1998 letter until

December 10, 1998, at which point it indicated that it was unwilling to terminate the contract an d

-3-

refund Nielsen's payments . TenFold acknowledged that it would fail to meet the original delivery

date, which was five months earlier, and admitted that it also would fail to meet the revised

January 6, 1999 deadline for delivering the LASER application .

(e) Although TenFold originally agreed in the contract with Nielsen that it

expected to complete the entire LASER system by July 1998, TenFold did not complete its first post-

contract attempt at the Concepts Manual - which is supposed to define the functionality TenFold is

to implement in the system - until early 1999 .

(f) TenFold's contract with Ohio Farmers Insurance consisted of a two-phas e

process . The first phase, referred to as the "Build," was the development stage . It commenced on

December 7, 1998 and was to be completed by May 31, 1999 . The second phase, referred to as

"FastStart," was the implementation stage, the development of which was to commence on

March 15, 1999 and conclude on May 31, 1999 (simultaneously with the conclusion of the Build),

followed by a "go-live" date of June 28, 1999. During the project, however, it became apparent that

TenFold was not able to and, in fact, did not live up to its contractual obligations during the Build

and FastStart phases . Specifically, TenFold agreed to provide adequate and competent staffing to

complete all phases of the project . But, TenFold did not provide the promised and necessary staff

members to provide thorough and adequate training to Ohio Farmers' IS employees, and was not able

to provide the necessary assistance to accomplish the promised transfer of knowledge . Indeed,

TenFold even asked Ohio Farmers' IS employees to assist in performing TenFold's obligations,

especially as it relates to reports .

(g) TenFold failed to provide a full-time, dedicated database designer on the Ohio

Farmers project . In fact, TenFold changed database designers several times during the unsuccessful

Build phase . Moreover, TenFold assigned multiple duties to one of its database designers, thus

diverting his full attention from the database development portion of the Build phase .

(h) In March 1999, Ohio Farmers was advised for the first time that TenFold was

developing a computer application known as Line of Business Builder ("LOBE") . Ohio Fanners did

-4-

not agree to incorporate or accept the LOBB or otherwise depart from the BOP (Business Owners

Policy) Commercial Policy Manager promised in its contract with TenFold . Nonetheless, significant

time was lost on Ohio Farmers' project due to TenFold's activity on LOBB . By diverting its

resources and attention to the development of the LOBB to the exclusion of the BOP Commercial

Policy Manager, TenFold lost critical time in the development of the BOP Commercial Policy

Manager which rendered timely completion of the project impossible . In departing from its original

commitment to develop a product unique to Ohio Farmers, TenFold instead was devoting its

resources to the development of other technology not related to Ohio Farmers' project .

(i) TenFold failed to deliver to Ohio Farmers successful Acceptance Tests

("ATs") of all of the functions it was obligated to design. For instance, at the second "graze," of the

60 ATs reviewed, 15 had significant problems . At a mini-graze held on or about May 12, only

2 of 14 ATs were complete and functional . There were serious problems with the remaining 12 ATs .

(j) A letter from Ohio Farmers dated May 21, 1999, the day of TenFold's IPO,

sent via email and certified mail to TenFold's Bernie Mazon and copied to Kennedy and Walker,

stated : "Thank you for talking with us on Tuesday, May 18, 1999 . We are concerned that TenFold

may be unable to meet its commitment to complete and provide a fully tested BOP Commercial

Policy Manager within the time allowed by the contract " because "TenFold is not providing staffing

adequate in number and expertise ." For example, "Bob Stegmaier and Todd Arndt, the Westfield

developers assigned to the project for the main purpose of knowledge transfer, are working 12 hours

or more a day, and, as beginners, are being assigned a significant number of complex tasks without

being provided mentoring support ." Moreover, the May 21, 1999 letter documented that TenFold

was "also behind schedule on a number of its obligations to complete a fully tested BOP

Commercial Policy Manager." For example, "[t]he database design is seriously behind schedule .

This has been ongoing since February and these issues have been documented" and "[g]razing

comments . . . have not been completed ."

-5-

(k) During the month of June 1999, Ohio Farmers and TenFold met on severa l

occasions to discuss TenFold 's non -performance . Ohio Farmers specifically advised TenFold tha t

it failed :

(i) To properly staff the project ;

(ii) To identify and properly schedule development tasks in an orderl y

sequence (dependencies) ;

To provide the technology promised for the project ;

(iv) To provide proper database design and to coordinate changes to the

database ;

(v) To provide a stable environment that would enable Ohio Farmers to

conduct credible Acceptance Testing ;

(vi) To coordinate the Build with FastStart ;

(vii) To meet any of the completion dates or revised dates for the variou s

components of the contract ; and

(viii) To provide a meaningful completion date by which to produce the

promised product .

(1) On June 29,1999, Ohio Farmers advised TenFold that it was suspendin g

further payments on the project until such time as TenFold delivered the Build in accordanc e

with Ohio Farmers' requirements .

(m) On July 7,1999, Ohio Farmers sent a letter to TenFold advising it that, due

to its admitted inability to deliver a completed BOP Commercial Policy Manager by August 31 ,

1999, it wasformally terminating the contact , and Ohio Farmers demanded the return of th e

$5,194,038.26 it paid to date under the contract.

(n) Ohio Farmers agreed to permit TenFold to provide a comprehensiv e

demonstration of the BOP Commercial Policy Manager at its offices in Westfield Center, Ohio o n

August 12 and 13, 1999 that had been developed subsequent to termination of the contract . By letter

-6-

dated August 6,1999, TenFold described the demonstration ofthe BOP Commercial Policy Manager

it planned to present to Ohio Farmers . TenFold also confirmed that it planned to present a completed

product for review and testing by Ohio Farmers . TenFold's so-called completed BOP Commercial

Policy Manager failed to perform in every material respect. At the presentation on August 12,

1999, the BOP Commercial Policy Manager was unable to perform most of the Acceptance Tests

chosen by TenFold for the demonstration , and critical functions of the application remained out

of compliance with Ohio Farmers ' requirements and contractual specifications .

(o) When TenFold began to deliver to Nielsen partial releases of its code in late

1999, it became apparent that the LASER application contained several defects in high-priority areas .

Moreover, the code that was delivered could not be successfully tested by Nielsen . In many cases,

the software did not even have the ability to load data, preventing Nielsen from conducting its

testing .

(p) Utica Mutual Insurance's agreement with TenFold provided a completion dat e

for a "completed, fully tested Commercial Lines Manager" by "August 31, 1999" and provided for

a FastStart Application License and Services "project completion date" of "December 31, 1999 ."

TenFold did not deliver the "completed , fully tested Commercial Lines Manager " by August 31,

1999, or at any time thereafter .

(q) On January 3, 2000, Nielsen received TenFold's 'final " release of the

LASER application code. Nielsen immediately began its application acceptance test efforts. None

of these tests were successful. For example, the test of one specific software function, which should

have executed in minutes, started on March 30 and ran into April 1, 2000, taking 38 hours .

(r) The software written by TenFold for Nielsen contains several significant

design or architectural problems. For example, the database underlying the LASER system does not

provide for adequate data integrity. This means that relationships between data elements in the

database can be lost in the course of normal operation of the system. Because the relationship

-7-

between data elements is often as important as the data itself, the system did not satisfy Nielsen's

operational needs .

(s) When TenFold delivered its "final version" of the software to Nielsen, even

portions of its Universal Application failed . For example, memory failures repeatedly caused

application modules to abort .

(t) Many of the problems in TenFold's development of the LASER application

were caused by the failure of its methodology, the "TenFold Way ." TenFold tries to develop an

application interactively while having its customer "graze" the developing application to test it . This

methodology did not work for the LASER project because "grazing" tested only the transactional

logic of the screens, not the underlying programs that do the actual calculations .

(u) During TenFold' s work on the LASER application for Nielsen, it repeatedl y

moved personnel on and off the LASER project, often moving them to work for other customers .

For example, from November 1997, when it started to work on the LASER application, until the

present, TenFold has assigned eight different executive officers to the LASER project . TenFold has

also assigned six project leaders to the project . Other key TenFold personnel, after working on the

LASER application and gaining relevant expertise, were moved to other TenFold customers,

impeding the successful and timely development of the LASER application .

(v) Negotiations following TenFold's August 31, 1999 material breach of the

Agreement with Utica produced a written amendment to the Agreement signed by Utica and TenFold

that extended "to January 31, 2000" the "TenFold Guarantee" refund trigger date applicable in the

event "TenFold fails to deliver the completed fully tested Commercial Lines Manager within 105

days following the completion due date ." As the January 31, 2000 amended guarantee trigger date

approached without delivery by TenFold, the parties again entered a written amendment to the

Agreement (letter agreement addressed to Jeffrey C . Paige from TenFold's Kenneth W. Jennings, Jr .

dated January 20, 2000, signed by Paige, for Utica, on January 21, 2000) . This amendment extended

the TenFold guarantee trigger date "to February 29, 2000 . "

-8-

(w) As the extended February 29, 2000 guarantee trigger date approached and it

was clear that TenFold would not timely deliver the applications required by the Agreement, Utica

and TenFold entered "Amendment No . One to Master Software License and Services Agreement"

(effective March 14, 2000) which provided, inter alia, that" [t]he parties agree to combine the

existing TenFold Guarantees for Fixed Price Design and Development and FastStart services into

a single , fully guaranteed project, with a completion date of September 30, 2000 ." Thus, the thrice

- extended completion datefor the Commercial Lines Manager was a full 13 months later than

the originally promised August 31, 1999 delivery date .

(x) In a May 1, 2000 letter to Nielsen, TenFold refused to commit to a date o n

which it would complete the LASER application . TenFold was unwilling to make such a

commitment, even though, over two years earlier , it had committed to use its best efforts to

complete the LASER application within four months and had assured Nielsen on several other

occasions that it would be able to build the promised system .

(y) On May 10, 2000, Nielsen notified TenFold that TenFold was in breach of

the Contract and its amendments and that Nielsen was terminating the Contract , subject to

TenFold's 30 day right to cure .

(z) During the Summer of 2000, TenFold indicated that it was working to

deliver by September 30, not its required complete performance , but only applications covering

four of Utica's fourteen lines of insurance business . TenFold failed to provide the required

applications and related start-up services by the September 30, 2000 completion due date . Indeed,

it did not deliver completed applicationsfor any of Utica's fourteen lines of insurance .

(aa) A meeting was held on October 12, 2000, attended by Utica's Paige,

TenFold's Bernie Mazon and TenFold's Doug Walters, who was the person directly responsible

for the project for TenFold. This meeting led to another meeting, held on October 27, 2000, in

which TenFold presented its position, capabilities and suggested plan of action . Paige

participated in that meeting, along with Utica's Brian Lytwynec and Sharon Jachim. TenFold

-9-

was represented by Bernie Mazon and Doug Walters. Jeff Walker, TenFold's Chairman,

participated by video conference. TenFold claimed no more than an ability to complete the

Commercial Lines Manager for 2 lines of business by March 2001 . No date was even suggested

for completion of the Commercial Lines Manager application for the other 12 lines of business

the application was to cover, or for the completion of the related FastStart services .

(bb) A November 2, 2000 letter from Utica's Jeffrey C . Paige to TenFold's General

Counsel, Kenneth W . Jennings, Jr ., noted TenFold's repeated and knowing failures of timely

performance and stated that "Utica will grant no more extensions of the Agreement . "

(cc) A letter from Utica's Jeffrey C . Paige to Bernie Mazon, dated and sent b y

facsimile on November 9, 2000, stated that TenFold's "November 9 response confirms that TenFold's

existing and anticipatory material breaches of the Agreement are incurable ." The letter concluded

that, "[s]uch breaches justify and require immediate termination," and, accordingly, Utica "nowmust

bring the contract to a definitive end. "

5 . Defendants' scheme began to unravel when, on July 10, 2000, TenFold disclose d

preliminary results for the second quarter ending June 30, 2000, which were well below

expectations . The Company announced that it expected to report total revenue in the range of $30-

$32 million and a loss in the range of ($0.03)-($0 .05) per diluted share, which it attributed to "longer

than expected sales cycles, increased expenses in anticipation of increased sales , and delays

encountered on some existing projects . "

6 . After this announcement, the price of TenFold's stock fell nearly 40% to $10-1/4 per

share on volume of about 6.6 million shares, more than 25 times the three-month daily average .

7 . On August 14, 2000, the Company announced its actualresults for the second quarter

ending June 30, 2000. In that press release, the Company announced that its net loss for the quarter

would be $(6 .5) million, or $(0 .19) per share, well below the projections in the July 10, 2000 press

release . Further, TenFold disclosed :

TenFold recently reviewed its significant projects and, as a result, reducedrevenues on certain projects in process and significantly increased accounts

-10-

receivable allowances for the quarter ended June 30, 2000 . After theseadjustments, the revenue and earnings announced today are not within the rangeannounced by the company July 10, 2000 .

Then, on April 11, 2001, subsequent to the release of its fourth quarter 2000 results ,

TenFold held a conference call for analysts, money and portfolio managers, institutional investor s

and large TenFold shareholders to discuss TenFold's fourth quarter results , its business and its

prospects. During the call Peterson stated :

In thefourth quarter, we recorded negative revenues of $14 million. Four items- three items - contributed to this in a significant way. Those were the conversionof nearly all existing projects to a very conservative accounting methodology ofzero profit margin accounting; converting certain of our fixedpriced projects toa T&M [time and materials] basis; and thirdly, eliminating revenues related todisputed contracts . These one-time adjustments alone total $26 million for the

fourth quarter. And the impact of these adjustments, as well as the allowances andrestructuring charges that were recorded, total $39 million in the fourth quarter.For the year we recorded a net loss of $ 80 million. That was comprised of amodest profit in Ql of $2 million and losses then of $7 million , $21 million, andfinally, $54 million in Qs 2,3 and 4. Absent the one-time adjustments, this loss inQ4 would have been reduced to $16 million. As noted in the 10K, our auditorshave issued a going concern opinion . . . . The first hope to reduce it, we reported inQ3 that we believed that TenFold had made many business decisions which madeit difficultfor us to consistently perform. These included that our fixed price,fixed-time guaranteed business model had unintended consequences ; that ourrapid decentralization of our operations into a host of independent verticalbusiness groups caused us many challenges, including diluting our intellectualcapital and our project management expertise ; and lastly, that we rapidly expandedour infrastructure in anticipation of serious growth and we bore the consequencesof that expense base .

9. The truth was finally disclosed in TenFold's Annual Report filed with the SEC on

Form 10-K on April 12, 2001 for the period ended December 31, 2000, which stated:

On May 26, 2000 the United States Securities and Exchange Commission("SEC") issued a Formal Order Directing Private Investigation . The Ordercontains no specific factual allegations . We understand, however, that the SEC isconducting a non-publicfact-finding inquiry into our revenue recognition decisionson approximately 12 contracts .

Changed Business Model

Beginning in the fourth quarter of 2000, we no longer offer the TenFoldGuarantee, and we provide applications development and implementation serviceson a time-and-materials basis, rather than on a fixedprice, fixed-time basis .

While our financial statements have been prepared under the assumption thatwe will continue as a going concern, the independent auditors ' report on our

-11-

financial statements, preparedby KPMG LLP, includes an explanatory paragraphrelating to their substantial doubt as to our ability to continue as a going concern,based upon our historical operating performance, our financial position atDecember 31, 2000 and our involvement in significant legal proceedings .

10. The 200010-K also disclosed that TenFold is in litigation, or possible litigation, wit h

at least nine customers due to TenFold's failure to perform pursuant to contractual agreements an d

for which TenFold recognized some $45 million in revenue during the Class Period .

JURISDICTION AND VENUE

11 . Jurisdiction exists pursuant to §22 of the Securities Act, 15 U .S.C. §77v, §27 of the

Exchange Act, 15 U .S.C. §78aa, and 28 U.S .C . §1331 . The claims asserted arise under §§11 ,

12(a)(2) and 15 of the Securities Act, 15 U .S .C . §§77k, 771(a)(2) and 77o , and §§10 (b) and 20(a) of

the Exchange Act, 15 U.S .C. §§78j(b) and 78t(a), and Rule 10b-5, 17 C .F.R. §240.10b-5 .

12 . Venue is proper in this District pursuant to §22 of the Securities Act, 15 U.S.C . §77v,

and §27 of the Exchange Act, 15 U .S .C . §78aa, and 28 U.S .C . § 1391(b) . Many of the acts giving

rise to the violations complained of occurred in this District .

13 . Defendants used the instrumentalities of interstate commerce , the U.S. mail and the

facilities of the national securities markets .

THE PARTIES

14. On March 7, 2001, this Court appointed Bret K . Clayton, T. Kevin Jackson, Albert

Sapiano and Richard C . Young as the four lead plaintiffs for this action .

15. Defendant TenFold maintains its headquarters in Draper, Utah. During the Clas s

Period , TenFold' s common stock traded in an efficient market on the NASDAQ National Market

System .

16. (a) Defendant William M . Conroy ("Conroy" ) was, at all relevant times ,

Executive Vice President and Chief Operating Officer of the Company . During the Class Period and

as part of the fraudulent scheme, Conroy sold 39,000 shares of TenFold stock at prices as high as $65

per share based on inside information, pocketing over $2 .2 million . Conroy's stock sales during the

Class Period were unusual in timing and amount as set forth below :

-12-

TENFOLD COR PWilliam M . Conroy - Insider Sales Monthly Dollar Volume

May 21 , 1999 to April 30, 200 1

$2.500

$2,00 0

$1,5002I5

7a

8 $1,000

$500

Class Period : 5!21/99 - 41121 01

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

$0 nhi.

M J J A S O N D J F M A M J J A S O N D J F M A

1999 2000 2001

$60

$70

$60

$50

a9$$40

a$30

$20

$1 0

$ 0

(b) Defendant Gary D. Kennedy ("Kennedy") was, at all relevant times, President

and Chief Executive Officer of the Company. Kennedy signed TenFold's Registration Statement for

its IPO and TenFold's annual report filed with the SEC on Form 10-K for the period ending

December 31, 1999. During the Class Period and as part of the fraudulent scheme, Kennedy sold

100,000 shares of TenFold stock at prices as high as $51 per share based on inside information,

pocketing over $5 .1 million. Kennedy's stock sales during the Class Period were unusual in timin g

and amount as set forth below :

- 13-

$ s

$ 5

$4

s

$3

A

$2

$ 1

So

TENFOLD COR PGary D . Kennedy - Insider Sales Monthly Dollar Volume

May 21 , 1999 to April 30, 200 1

Class Period : 5!21199 - 4112J4 1

-- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

--------------- - ---------------------------

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

$80

$70

$60

$50

&2

$40

N

m2

$3 0

$20

$1 0

M J J A S O N D J F M A M J J A S O N D J F M A

1999 2000 2001

(c) Defendant Robert P. Hughes ("Hughes") was, at all relevant times, Senior Vice

President and Chief Financial Officer of the Company . Hughes signed TenFold's Registration

Statement for its IPO and quarterly reports filed with the SEC on Form 10-Q for the periods ended

June 30, 1999, September 30, 1999, March 31, 2000 and June 30, 2000 . He also signed TenFold's

annual report filed with the SEC on Form 10-K for the period ending December 31, 1999 . During

the Class Period and as part of the fraudulent scheme, Hughes sold 40,000 shares of TenFold stock

at prices as high as $51 per share based on inside information, pocketing over $2 million . Hughes'

stock sales during the Class Period were unusual in timing and amount as set forth below :

- 14-

TENFOLD COR PRobert P . Hughes - Insider Sales Monthly Dollar Volume

May 21, 1999 to April 30, 200 1

$2,500

$2,000

$1,500

E

3

$ 51,000

$sao

C km Period: 5/21/99 -4112/01

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

$0M J J A S O ND J F M A M J J A S O N ❑ J F M A

1999 2000 2001

$80

$70

$60

$50

9$40 P

uA

S$3 0

$20

$1 0

$ 0

(d) Defendant Adam Slovik ("Slovik") was, at all relevant times, Senior Vice

President of Worldwide Applications of the Company . During the Class Period and as part of the

fraudulent scheme, Slovik sold 24,000 shares of TenFold stock at prices as high as $65 per share

based on inside information, pocketing over $1 .3 million . Slovik's stock sales during the Class Perio d

were unusual in timing and amount as set forth below :

-15-

TENFOLD COR PAdam Slovik - Insider Sales Monthly Dollar Volume

May 21, 1999 to April 30, 200 1

$2 ,500

$2,000

$1,500

C0W

A $1,000

$500

Class Period: 5/2"9 - 411 2101

---------------- --------------------------

-------------- ---------------------------

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

---------------- -------- ------------------

$0M J J A S O N D J F M A M J J A S O N D J F M A

1999 2000 2001

$80

$70

$60

$50

C

$40

y

C

$3 0

$20

$10

$ 0

(e) Defendant Jeffrey L. Walker ("Walker") was, at all relevant times, Chairman

of the Board and Executive Vice President of the Company . Walker signed TenFold's Registration

Statement for its IPO and TenFold's annual report filed with the SEC on Form 10-K for the period

ending December 31, 1999 . During the Class Period and as part of the fraudulent scheme, Walker

sold 400,000 shares of TenFold stock at prices as high as $52 per share based on inside information,

pocketing over $17 .3 million . Walker's stock sales during the Class Period were unusual in timing

and amount as set forth below :

- 16-

TENFOLD CORPJeffrey L. Walker - Insider Sales Monthly Dollar Volume

May 21, 1999 to April 30, 200 1

$1e

$16

$14

$12

C.Q

$10mE

5s

$6

$4

$2

So

Sao

$70

$60

$50

a$40

U)mS

$3 0

$20

$1 0

$0M J J A S O N ❑ J F M A M J J A S 0 N ❑ J F M A

1999 2000 2001

(f) Defendant Robert W. Felton ("Felton") was, at all relevant times, Director of

the Company and was one of two members of the compensation committee . Felton signed TenFold's

Registration Statement for its 1PO and TenFold's annual report filed with the SEC on Form 10-K for

the period ending December 31, 1999 . During the Class Period and as part of the fraudulent scheme,

Felton sold 2 .9 million shares of TenFold stock at prices as high as $17 per share based on inside

information, pocketing over $49 million. Felton's stock sales during the Class Period were unusual

in timing and amount as set forth below :

- 17-

TENFOLD COR PRobert W. Felton - Insider Sales Monthly Dollar Volume

May 21, 1999 to April 30, 200 1

$60

$50

$40

C Was Period : 5121199 - 411 00 1

m

4

a

E

cc

$20

S10

M J J A S O N ❑ J F M A M J J A S O N ❑ J F M A

1999 2000 2001

$80

$70

$60

$50

mS

$40N

$3 0

$20

$10

$0

17. The individuals named in ¶16(a)-(f) are the "Individual Defendants ." They are liable

for the false statements pleaded herein at f21, 23, 27, 30-31, 40, 46-47, 51-52, 56-57, 61, 65, as

those statements were each "group-published" information for which they were collectively

responsible . The Individual Defendants, by reason of their stock ownership and positions with

TenFold, were controlling persons of TenFold . TenFold controlled each of the Individual

Defendants . These controlling persons are liable under § 15 of the Securities Act and §20(a) of th e

Exchange Act .

BACKGROUND TO CLASS PERIO D

18. Tenfold describes itself as a leading provider of large-scale e-business applications

for customers in banking, communications, energy, healthcare, insurance, investment management

and other industries . TenFold claims to deliver packaged applications that meet customers' need s

-18-

in rapidly changing business environments, and that are flexible to adapt to changing needs over

time. Using its patented Universal ApplicationTM, TenFold claims to deliver applications remarkably

fast, and for a fixed time and fixed price . Until recently, TenFold offered the TenFold Guarantee,

the industry's first money-back guarantee for delivering large-scale software applications on target,

on time, and on budget . TenFold used its "money back" program as a ploy to induce its customers

to sign contracts . TenFold did not honor its money back guarantee with its customers resulting in

multi-million-dollar suits being filed against the Company by several customers, including Nielsen

and Ohio Farmers .

19. TenFold's success was due in large part to the insurance department's ability to recor d

sales . Defendants knowingly hired Bernard Mazon to assume the helm of the department as its

President . Bernard Mazon is a former officer of Policy Management Systems Corporation . In 1997,

both Mazon and Policy Management Systems Corporation were sued by the SEC for improper

accounting practices that misstated the Company's financial results . Despite this history, Kennedy

knowingly hired Mazon to run the department . It would be from this department where, during the

Class Period, much of the questionable sales and receivables would come .

20. On March 8, 1999, TenFold issued a press release entitled, "TenFold Corporation

Files Registration Statement for Proposed Initial Public Offering," which stated :

TenFold is a software and services company that builds and implements large-scalesoftware applications rapidly for a fixed price. TenFold offers the TenFoldGuarantee, the industry 's first money-back guarantee for large-scale softwareapplications . TenFold customers include industry leaders in insurance, investmentmanagement, telecommunications, utilities and energy, healthcare, and banking andcredit.

FALSE AND MISLEADING STATEMENTSDURING THE CLASS PERIOD

21 . On May 21, 1999, TenFold filed a Prospectus and Registration Statement for its IPO

of 4.7 million shares for net proceeds to TenFold of $34 million, which stated :

TenFold is an innovative software and services company that builds andimplements large-scale, complex applications rapidly and for a fixed price. Weoffer the TenFold Guarantee, the industry's first money-back guarantee for large-

-19-

scale software applications. We deliver applications on time, for a fixed price, andon target - or we refund our customer 's money.

We believe that our applications offers the best of both the "buy" and"build" options, giving customers the rapid time-to-market and quali ty benefits of

packaged applications, with the tailored-to-their-businessfeatures of custom-builtsoftware . We believe that it is the combination of our disciplined methodology andour unique technologies that lets us develop applications significantly faster thanalternative approaches . Because TenFold can deliver complex applications inrelatively short time frames, we believe that our applications typically cost less thanthose offered by competitors .

Our disciplined methodology, the TenFold Way, is a start-to-finish approachto working closely with our customers to design, develop, test, deliver, and evolvecustom applications . We use the TenFold Way to identify requirements in four toeight weeks, and typically deliver the complete, fully tested application in four toeight months . The TenFold Way organizes a project into phases, each with well-defined activities and deliverables, and combines continuous communication andcustomer feedback with rapid, iterative development to keep projects on target .

Our unique technologies include the Universal Application and TenFoldComponentWare . The Universal Application is a sophisticated and powerfulapplications architecture that reduces design effort and automates and acceleratesapplications development and testing. The Universal Application lets us beginapplications development projects having a pre-built significantfunctionality andhaving already solved many complex applications design and implementationproblems . TenFold ComponentWare is a library of components, reusable acrossmultiple applications and industries, that lets us add complex, business-specificfunctionality to an application and lets us virtually eliminate applications-specificprogramming .

22. The Prospectus and Registration Statement also included TenFold' s financial result s

for the first quarter of 1999, including revenues of $16.03 million, net income of $373,000, ne t

income applicable to common stock of $125,000 and earnings per share of $ .01 .

23 . On May 21, 1999, TenFold issued a press release entitled, "TenFold Announces

Initial Public Offering," which stated :

SALT LAKE CITY, Utah - May 21, 1999 - TenFold Corporation (Nasdaq :TENF), a software and services company , today announced its initial public offeringof 4,700 ,000 shares of Common Stock at $17 .00 per share . Shares are listed on theNasdaq National Market under the symbol "TENF. "

About TenFold

-20-

TenFold is an innovative software and services company that builds andimplements large-scale, complex applications rapidly and for a fixed price. TheTenFold Guarantee is the industry 's first money-back guarantee for large-scalesoftware applications : TenFold delivers applications on time, on budget, and ontarget - or will refund a customer 's money . TenFold applications supportmulti-tiered, distributed, and Web-based environments, as well as leading databaseplatforms. Customers include leaders in insurance, investment management, bankingand credit, utilities and energy, healthcare, telecommunications, and other industries .

24 . The IPO was successful for TenFold and, due to defendants' favorable financial

results and statements, by June 30, 1999, TenFold's stock was trading above $30 per share .

25 . In fact, TenFold's IPO, Prospectus and Registration Statement were materially fals e

and misleading as TenFold was unable to complete its contractual obligations to its customers

including Westfield Companies, Nielsen Media Research, Inc ., Utica Mutual Insurance and

Crawford and Company . TenFold's first quarter 1999 financial results included revenue TenFold

had recognized despite its failure to fulfill its contractual obligations . Thus, its financial statements

were presented in violation of Generally Accepted Accounting Principles ("GAAP") as described

in ¶¶71-88. In addition, as set forth in detail in ¶¶89-193, defendants' statements issued in

connection with TenFold's IPO were false or misleading because TenFold could not deliver

applications on time, on budget and on target . For example :

(a) TenFold's contract with Nielsen specified that TenFold would run its first

benchmark test in February 1998 . TenFold did not even try to run this test until April or May of

1998, and when the test was finally run, it was a complete failure .

(b) Although the software for Nielsen called "LASER" was originally to be

completed by July 1998, by June 30, 1998, it was clear that TenFold would not be able to complete

the LASER application by the date specified . Accordingly, the parties changed the delivery date for

the system from July 1998 to January 1999 .

(c) By October 1998, it became clear that TenFold would be unable to meet even

the new January 1999 completion date for Nielsen's LASER system . Concerned about TenFold's

ability to meet Nielsen's performance criteria, Nielsen asked TenFold, in an October 28, 1998 letter,

-21 -

to re-examine whether it could deliver the LASER application and the feasibility of using TenFold's

technology for the LASER project .

(d) TenFold did not respond to Nielsen's October 28, 1998 letter until

December 10, 1998, at which point it indicated that it was unwilling to terminate the contract and

refund Nielsen's payments. TenFold acknowledged that it would fail to meet the original delivery

date, which was five months earlier, and admitted that it also would fail to meet the revised

January 6, 1999 deadline for delivering the LASER application .

(e) Although TenFold originally agreed in the contract with Nielsen that it

expected to complete the entire LASER system by July 1998, TenFold did not complete its first post-

contract attempt at the Concepts Manual - which is supposed to define the functionality TenFold is

to implement in the system - until early 1999 .

(f) TenFold's contract with Ohio Farmers consisted of a two-phase process . The

first phase, referred to as the "Build," was the development stage. It commenced on December 7,

1998 and was to be completed by May 31, 1999 . The second phase, referred to as "FastStart," was

the implementation stage, the development of which was to commence on March 15, 1999 and

conclude on May 31, 1999 (simultaneously with conclusion of the Build), followed by a "go-live"

date of June 28, 1999 . During the project, however, it became apparent that TenFold was not able

to and, in fact, did not live up to its contractual obligations during the Build and FastStart phases .

Specifically, TenFold agreed to provide adequate and competent staffing to complete al l phases of

the project . But, TenFold did not provide the promised and necessary staff members to provide

thorough and adequate training to Ohio Farmers' IS employees, and was not able to provide the

necessary assistance to accomplish the promised transfer of knowledge . Indeed, TenFold even asked

Ohio Farmers' IS employees to assist in performing TenFold's obligations, especially as it relates to

reports .

(g) TenFold failed to provide a full-time, dedicated database designer on the Ohio

Farmers project . In fact, TenFold changed database designers several times during the unsuccessful

-22-

Build phase . Moreover, TenFold assigned multiple duties to one of its database designers, thus

diverting his full attention from the database development portion of the Build phase .

(h) In March 1999, Ohio Farmers was advised for the first time that TenFold was

developing a computer application known as Line of Business Builder ("LOBB") . Ohio Farmers did

not agree to incorporate or accept the LOBB or otherwise depart from the BOP Commercial Policy

Manager promised in its contract with TenFold, Nonetheless, significant time was lost on Ohio

Farmers' project due to TenFold's activity on LOBB . By diverting its resources and attention to the

development of the LOBB to the exclusion of the BOP Commercial Policy Manager, TenFold lost

critical time in the development of the BOP Commercial Policy Manager which rendered timely

completion of the project impossible . In departing from its original commitment to develop a

product unique to Ohio Farmers, TenFold instead was devoting its resources to the development of

other technology not related to Ohio Farmers' project .

(i) TenFold failed to deliver to Ohio Farmers successful Acceptance Tests

("ATs") of all of the functions it was obligated to design. For instance, at the second "graze," of the

60 ATs reviewed, 15 had significant problems . At a mini-graze held on or about May 12,1999, only

2 of 14 ATs were complete and functional . There were serious problems with the remaining 12 ATs .

(j) A letter from Ohio Farmers dated May 21, 1999, the day of TenFold's IPO ,

sent via email and certified mail to TenFold's Bernie Mazon and copied to Kennedy and Walker,

stated: "Thank you for talking with us on Tuesday, May 18, 1999 . We are concerned that TenFold

may be unable to meet its commitment to complete and provide a fully tested BOP Commercial

Policy Manager within the time allowed by the contract" because "TenFold is not providing staffing

adequate in number and expertise ." For example, "Bob Stegmaier and Todd Arndt, the Westfield

developers assigned to the project for the main purpose of knowledge transfer, are working 12 hours

or more a day, and, as beginners, are being assigned a significant number of complex tasks without

being provided mentoring support ." Moreover, the May 21, 1999 letter documented that TenFold

was "also behind schedule on a number of its obligations to complete a fully tested BOP

-23-

Commercial Policy Manager ." For example, "[t]he database design is seriously behind schedule .

This has been ongoing since February and these issues have been documented" and "[g]razing

comments . . . have not been completed . "

26 . On July 19, 1999, Deutsche Banc Alex . Brown issued a report on TenFold b y

W. Christopher Mortenson entitled "Solid 2Q Results, Estimates Unchanged," after discussions with

Kennedy and Hughes and was based on and repeated information provided by them . Kennedy or

Hughes reviewed this report before it was issued and assured Mortenson it was accurate . TenFold

copied and distributed it, adopting it as its own . It stated :

DETAILS :

After the close on 7/19, TenFold Corporation reported solid results for its 2Q(Jun), its first quarter following its IPO on 5/21/99 . License revenue, total revenue,operating income and EPS all exceeded our estimates . Results were helped by strongcontributions from the energy, banking & credit, and health care verticals . All of thecompany's 6 verticals, with the exception of Telco, showed strong y/y growth .Management changes in the Telco vertical business group (VBG) are projected toresult in improved performance going forward . We continue to believe thatTenFold's business model is an extremely attractive one . We expected continuedsuccess in signing large, custom developmentprojects based on a proven ability todeliver very rapidly and to guarantee its results .

At the same time, we believe many of these projects will be turned intoapplications products that will be resold . In particular, we expect new products forthe insurance vertical to be available in the 2H . While TenFold's stock is trading ata very high multiple, we believe a premium valuation is justified by the Company'snear and long-term growth prospects and we reiterate our buy investment rating . Weare maintaining our revenue and earnings estimates, but believe upside exists,especially as new application products ship in the 2H .

27. On July 19, 1999, TenFold issued a press release entitled, "TenFold Announces

Second Quarter Results, Record Sales and Income in First Quarter Following Initial Public

Offering," which stated:

SALT LAKE CITY, Utah - July 19, 1999 - TenFold Corporation (Nasdaq :TENF) today announced results for the quarter ended June 30, 1999 . Revenues, netincome, and net income per share for the second quarter of 1999 were $19 .0 million,$1 .1 million, and $0 .03, respectively .

Second quarter revenue of $19 .0 million was up 150% compared to the sameperiod in the prior year, and was up 19% compared to first quarter 1999 revenue of$16 .0 million . Revenues for the first half of 1999 increased 174% over the first halfof 1998 . Revenues from license fees for the second quarter of 1999 increased 396%

-24-

over the same period in the prior year and grew from 20% of total revenues for thesecond quarter of 1998 to 39% of total revenues for the second quarter of 1999 .

Net income for the second quarter was $1 .1 million compared to a loss of$17,000 for the same period in the prior year . Second quarter net income increased184% compared to first quarter net income of $373,000. Net income for the first halfof 1999 was $ 1 .4 million compared to a loss of $418 ,000 for the same period in theprior year .

Second quarter earnings per share of $0 .03 compared to a loss per share of$0.01 for the same quarter in the prior year .

About TenFold

TenFold is an innovative software and services company that buildslarge-scale, complex applications rapidly and for a fixed price. The TenFoldGuarantee is the industry 's first money-back guarantee for large-scale softwareapplications : TenFold delivers applications on time, on budget, and on target orwill refund a customer 's money . TenFold applications support multi-tiered,distributed, and Web-based environments, as well as leading database platforms .Customers include leaders in insurance, investment management, banking and credit,energy, healthcare, telecommunications, and other industries .

28 . In fact, TenFold's financial results for the second quarter 1999 were materiall y

overstated due to its improper revenue recognition on contacts where TenFold had failed to fulfil l

its obligations in violation in GAAP as described in ¶171-88 .

29. Defendants` statements issued between June 1999 and August 1999 were false for th e

reasons set forth in ¶25(a)-O) . The statements between June 1999 and August 1999 were also fals e

or misleading for the following additional reasons :

(a) During the month of June 1999, Ohio Farmers and TenFold met on several

occasions to discuss TenFold's non-performance . Ohio Farmers specifically advised TenFold tha t

it failed :

(i) To properly staff the project;

(ii) To identify and properly schedule development tasks in an orderl y

sequence (dependencies) ;

(iii) To provide the technology promised for the project ;

-25-

(iv) To provide proper database design and to coordinate ch anges to the

database ;

(v) To provide a stable environment that would enable Ohio Farmers t o

conduct credible Acceptance Testing ;

(vi) To coordinate the Build with FastStart ;

(vii) To meet any of the completion dates or revised dates for the variou s

components of the contract ; and

(viii) To provide a meaningful completion date by which to produce th e

promised product.

(b) On June 29,1999, Ohio Farmers advised TenFold that it was suspending

further payments on the project until such time as TenFold delivered the Build in accordance

with Ohio Farmers' requirements .

(c) On July 7,1999, Ohio Farmers sent a letter to TenFold advising it that, due

to its admitted inability to deliver a completed BOP Commercial Policy Manager by August 31,

1999, it was formally terminating the contact , and Ohio Farmers demanded the return of the

$5,194,038.26 it paid to date under the contract .

(d) Ohio Farmers agreed to permit TenFold to provide a comprehensiv e

demonstration of the BOP Commercial Policy Manager at its offices in Westfield Center, Ohio on

August 12 and 13, 1999 that had been developed subsequent to termination of the contract . By letter

dated August 6,1999, TenFold described the demonstration ofthe BOP Commercial Policy Manager

it planned to present to Ohio Farmers . TenFold also confirmed that it planned to present a completed

product for review and testing by Ohio Farmers . TenFold's so-called completed BOP Commercial

Policy Manager failed to perform in every material respect . At the presentation on August 12,

1999, the BOP Commercial Policy Manager was unable to perform most of the Acceptance Tests

chosen by TenFoldfor the demonstration, and critical functions of the application remained out

of compliance with Ohio Farmers ' requirements and contractual specifications .

-26-

30 . TenFold's quarterly report filed with the SEC on Form 10-Q for the period endin g

September 30, 1999, filed on October 14, 1999, stated :

Legal Proceeding s

On September 17, 1999, Ohio Farmers Insurance Company (the "Plaintiff")filed a complaint in the United States District Court for the District of Ohio seeking$5 .8 million from the Company . The complaint alleges that the Company failed todeliver on contractual commitments under a license agreement with the Plaintiff .Based on the information currently available, Company management believes theCompany has valid defenses against Plaintiffs claims and intends to vigorouslydefend the case . Additionally, the Plaintiff owes the Company $3 .9 million underthe license agreement . Management intends to vigorously enforce its rights under thelicense agreement . Company management believes there is a substantial likelihoodthat the Company will succeed in both defending against Plaintiffs claims andasserting its claims for the $3.9 million owed under the license agreement.Although management believes the Company will ultimately prevail against thePlaintiff in the matters explained above, an unfavorable outcome of these mattersmay have a material adverse impact on the Company's operations .

31 . On October 14, 1999, TenFold issued a press release entitled, "TenFold Announce s

Third Quarter Results, Record Sales and Income Continue into Third Quarter," which stated :

SALT LAKE CITY, Utah - October 14, 1999 - TenFold Corporation(Nasdaq: TENF) today announced results for the quarter ended September 30, 1999 .Revenues, net income, and net income per share for the third quarter of 1999 were$23 .5 million, $2 .5 million, and $0 .07, respectively . Third quarter revenue of $23 .5million was up 113% compared to the same period in the prior year, and was up 23%compared to second quarter 1999 revenue of $19 .0 million . Revenues for the firstnine months of 1999 of $58 .5 million increased 145% over the first nine months of1998. Revenues from license fees for the third quarter of 1999 increased 151 % overthe same period in the prior year and grew to 44% of total revenues for the thirdquarter of 1999, up from 39% of total revenues for the second quarter of 1999 .

Third quarter net income of $2 .5 million was up 347% compared to the sameperiod in the prior year . Third quarter net income increased 135% compared tosecond quarter net income of $1 .1 million . Net income for the first nine months of1999 was $3 .9 million compared to $139,000 for the same period in the prior year .

Third quarter earnings per share of $0 .07 compared to $0.01 for the samequarter in the prior year .

"We are delighted with our Q3 operating results," said Gary Kennedy, president andCEO of TenFold Corporation. "We exceeded our sales expectations for the quarterand delivered impressive profit increases ahead ofschedule. Demandfor TenFoldproducts and services continues to accelerate as customers require complexapplications in shorter timeframes . New contracts with market-leading customerscontributed to our license revenues increasing 241 % for the first nine months of thisyear. We are making dramatic progress towards our business strategy of deliveringworld-class, resalable vertical applications for multiple industries . "

-27-

About TenFold

TenFold is an innovative software and services company that builds andimplements large-scale, complex applications rapidly and for a fixed price.TenFold offers the TenFold Guarantee, the industry 'sfirst money-back guaranteefor large-scale software applications: TenFold delivers applications on time, onbudget, and on target - or will refund a customer 's money .

32 . In fact, TenFold's financial results for the third quarter 1999 were materiall y

overstated due to its improper revenue recognition on contacts where TenFold had failed to fulfill

its obligations in violation in GAAP as described in ¶171-88 .

33 . On October 15, 1999, U .S. Bancorp Piper Jaffray issued a report on TenFold by Mar k

Verbeck entitled "Reports Q3 Results Beating Expectations ; Adjusting Est ; Buy," after discussions

with Kennedy and Hughes and was based on and repeated information provided by them . Kennedy

or Hughes reviewed this report before it was issued and assured Verbeck that it was accurate .

TenFold copied and distributed it, adopting it as its own. It stated :

TenFold Reports Q3 Results Beating Expectations; Revenues of $23 .5 MillionExceeded Our Estimate by $1 .7 Million And EPS Of $0 .07 Exceeded Our $0 .05Estimate; Adjusting Estimates To Reflect Acquisition; Maintaining Buy Rating And$38 Price Target

- Large Sale Announced : The Company announced that it has signed a largecontract with one of the nation's largest insurance companies to deliver a newpolicy management application . Because the application will be built uponexisting TenFold technologies, the Company will be able to quicklyimplement a solution for the customer .

- Revenue Visibility: The Company stated, with revenues in hand, there wasno urgency to close deals at the end of the third quarter, leaving an intactpipeline going into the fourth quarter .

- Disputed Contract: An insurance customer is currently in a dispute withTenFold over $9 million ofproducts and services . TenFold informs us thatthe project was delivered before the guarantee date and met the acceptancecriteria. TenFold has consulted with its attorneys and auditors andbelieves the customer's claim is without merit . The customer had paid $5million before discontinuing payment has a $4 million outstanding

-28-

receivable. The majority of this revenue was recognized prior to the thirdquarter .

34 . On October 15, 1999, Deutsche Banc Alex . Brown issued a repo rt on TenFold by

W. Christopher Mortenson entitled " Repo rts Very Strong Results in its First Full Quarter Since IPO,

Raising Estimates ," a fter discussions with Kennedy and Hughes and was based on and repeated

information provided by them . Kennedy or Hughes reviewed this repo rt before it was issued and

assured Mortenson it was accurate . TenFold copied and distributed it, adopting it as its own. It

stated :

DETAILS :

After the close on 10/14, Tenfold reported results for its 3Q (Sep), its first fullquarter as a public company . The results were very impressive and beat our andstreet expectations. Tenfold's unique business model is driving rapid growth inmultiple vertical markets as it delivers large-scale, complex applications to customersfaster than otherwise possible . We reiterate our buy investment rating . Managementhas also indicated that the 4Q is already off to a very strong start with a $4 millionlicense fee transaction already closed . Given the strength of the 3Q and the strongmomentum entering the 4Q we are raising our estimates as follows :

EPS RevenueNew Old New Old

1999 3QA 0.07 0 .04 23 .5 21 . 04Q 0.09 0 .07 26.5 25 . 0Total 0 . 21 0 .16 85 .0 81 . 1

2000 IQ 0.05 0 .05 28 .0 25 .02Q 0.08 0 .07 35 .0 31 .03Q 0.13 0 .11 42.0 38.04Q 0.15 0 .13 52.0 46.0Total 0.42 0 .37 157 .0 140 .0

There was one wrinkle noted on the conference call . One customer has, inthe last few weeks, disputed its final bill from Tenfold and withheld payment.Management believes that it has completed all of its obligations under the contractand is not willing to settle . The revenue was largely recognized in IH 1999 and nofuture revenue is expected. Tenfold's exposure is a potential bad debt write off(which could beat least partially covered by insurance) of up to $3. 8 million. Wedo not, however, think this in any way diminishes the company 's prospects .

35 . On November 3, 1999, Deutsche Banc Alex . Brown issued a repo rt on TenFold

written by W. Christopher Mortenson entitled "Update from the Deutsche Banc Alex. Brown 1999

-29-

Technology Conference," after discussions with Kennedy and Hughes and was based on and repeated

information provided by them . Kennedy or Hughes reviewed this report before it was issued and

assured Mortenson it was accurate . TenFold copied and distributed it, adopting it as its own . It

stated:

-Managementgave a very strong presentation thatfocused on its ability to rapidlybuild "dynamic applications " that address critical business needs in its targetedvertical markets .

- A recent win at AllState, a license sale to Barclay's and six new prospects thatare at or close to signing provide high visibility to the revenue outlook for thecurrent quarter and into early 2000

--Management indicated that it is comfortable with our and Street estimates for the4Q and next year. Expect margin expansion continuing into '01 .

36. On November 4,1999, The Wall Street Transcript published an interview with Gary

Kennedy . During that interview Kennedy stated :

TWST: But you're still going up against some good names . What is it that you bringto the party? What is your competitive advantage ?

Mr. Kennedy: Our belief is that there is tremendous pain in the industry ascompanies face the "buy vs . build" dilemma when looking for mission-criticalsoftware . Most companies struggle to implement large-scale, complex applicationson time and on budget whether they buy packaged applications, build applicationsthemselves, or hire a firm like Andersen Consulting to build them . Often theseapplications are critical to the survival of their business . If companies buy packagedsoftware, it can dictate what they can and can't do in their business . That's realfrustrating . I talk to CEOs every day who have creative ideas and they go to theirCIO and say, "Gee, I'd like to do this," and the standard response is "Our softwarecan't support that." So their progress as a company is being gated by the inflexibilityof their software. But building applications doesn't always ensure success . The lastnumbers I saw indicated that only 8% of large-scale applications projects costing $6-10 million actually succeed . What other industry would tolerate an 8% success rate?The TenFold value proposition is that we deliver fixed-time, fixed-priceapplications on time and on budget or we refund our customer 's money. We usethe Universal Application to deliver applications to companies in months, ratherthan the years they are accustomed to. We believe that the industry has changedand that companies are requiring personalized package applications. In otherwords, they're tired of making a trade-off when it comes to packaged software andare demanding speed, guaranteed delivery, and applications with functionali tyspecific to their business . For example, we would sell the same basic policyadministration application to say, a medium-sized insurance company like Utica, aswe would to a large insurance company . We would customize it differently andpersonalize it to do business the way they want to . So we have essentially built theframework for a policy administration application, but it looks different to everycustomer because we spend 2 or 3 months putting in their workflow and thei r

-30-

business processes . It looks like a custom application , but they get it in a very shortperiod oftime because most of it is already built .

TWST: Given that you have the Universal Application, does that provide you withmeans to take full advantage of what is going on in the marketplace ?

Mr. Kennedy : The Universal Application allows us to build complex applicationsfaster than anyone else in the industry . We combine this technology with about500 bright people, many of whom are experts in our target industries . We hiredomain experts to ensure that we build applications that solve the pressingproblems in each industry .

TWST: If we put all this together , what kind of growth should investors expect fromthe company over the next 3 or 4 years ?

Mr. Kennedy : The company has been growing well over 100% a year. That willbe the case for this year, and we anticipate continued strong revenue growth in thefuture. One of the unique aspects of our business is that the growth doesn't tendto fluctuate much, partly because our contracts are in 4-8 month durations . Youalso have a lot of revenue visibility that you typically might not have with otherbusiness models in other companies. If we finish with a strongfourth quarter andwe have every indication that we'll do that then you'll be able to have highconfidence that we'll have good first and second quarters next year because we'llbe delivering the applications we sold at the end of this year . It would be hard toforecast higher than the banker's assumptions for the year 2000 and they justraised their 2000 revenue estimates by about $15 million. I think the currentforecast is $154 million, up from $85 million this year. We're planning significantgrowth .

TWST : How do you feel about the value the market is currently putting on yourstock?

Mr. Kennedy : Our stock has fluctuated more than it should have given the stablenature of our revenue stream . We've had two quarterly earning reports since goingpublic, the first a little above market expectations, and the second significantly aboveexpectations . I'm not a predictor of what's going to happen out there, but I see nojustification for the kind of recent variation given that our results have been positiveand consistently better than expected .

TWST: If you were sitting down with some potential long-term investors, what twoor three reasons would give them to go out and buy the stock today ?

Mr. Kennedy : I referenced earlier the massive market opportunity for verticalsoftware applications. This creates tremendous opportunity for a company whocan guarantee delivery of fixed-time, fixed price applications. And I see all thecharacteristics in TenFold that I saw in the early days at Oracle . When I joined

-31-

Oracle, our revenues were roughly $1 million . I saw a collection of very brightpeople brought together with sort of a cause to address the needs of a huge market .Now, at TenFold, I see equally bright people who are focused on the needs of a largemarket. Plus, there is a relative dearth of quality competition . Right now, I couldn'tthink of a better place to be . The secondpoint is that in addition to a large market,we have a compelling value proposition . There is so much pain out in theindustry. I almostfeellike we're in a boat and a bunch ofcompanies are out theredrowning. We come rowing by and throw out a life preserver that has TenFold onit. Since they are drowning anyway, they will make every effort to see if our lifepreserver can help them. We just don't have difficulty getting in to seniorexecutives at companies and describing our value proposition that we can buildlarge, complex applications much more quickly than any other solution in themarketplace. We'll build it for a fixed price, and we'll guarantee the results. I wasmeeting the CEO of a large company recently, and after we finished I said, "Well,what do you think?" He said, "Look, I just can't go wrong, I mean, I'maccustomed to spending $20 or $30 million on an application,just rolling the dicethat it might work. With you, I spend that much , maybe less, and I get myapplication or my money back. How can I lose? " Given how many people havefailed in the industry, our message is very compelling. And third, I guess I'm oldfashioned to think that having real revenues and real profit makes sense . While allour applications are Web-based and we're building complex, eBusiness applications,we don't seem to qualify as a dot com company because of our profit orientation .We're not inclined to invest more than we have, and I believe, that long term as aninvestor, successful companies know how to make a profit and have a valueproposition that lends itself well to profitability every quarter . In the last year, ourmargins have been growing significantly . Two quarters ago our operating marginswere 3%. Since then, they have grown to 16% and we have reason to believe theywill go higher . This company knows how to make a profit. We've made a profit fora long time already . We have a strong orientation toward that . Not only are wegrowing rapidly, but because our margins are increasing, our earnings should groweven faster than they have in the past .

37. As a result of these favorable statements, by November 4,1999, TenFold's stock was

trading as high as $41 per share .

38 . Defendants' statements issued between October 14,1999 and November 4,1999 wer e

false for the reasons set forth in ¶¶25(a)-(j), 29(a)-(d) . The statements between October 14, 1999 an d

November 4, 1999 were also false or misleading for the following additional reasons :

(a} When TenFold began to deliver to Nielsen partial releases of its code in lat e

1999, it became apparent that the LASER application contained several defects in high-priority areas .

Moreover, the code that was delivered could not be successfully tested by Nielsen. In many cases,

the software did not even have the ability to load data, preventing Nielsen from conducting its

testing .

-32-

(b) Utica's Agreement with TenFold provided a completion date for a "completed ,

fully tested Commercial Lines Manager" by "August 31, 1999" and provided for a FastStart

Application License and Services "project completion date" of "December 31, 1999 ." TenFold did

not deliver the "completed, fully tested Commercial Lines Manager" by August 31, 1999, or at

any time thereafter .

39. On January 18, 2000, Deutsche Bank Alex . Brown issued a repo rt on TenFold written

by W. Christopher Mortenson, after discussions with Kennedy and Hughes and was based on and

repeated information provided by them . Kennedy and Hughes reviewed this report before it was

issued and assured Mortenson it was accurate . TenFold copied and distributed it, adopting it as its

own. The report forecasted fourth quarter 1999 EPS of $ .09, and stated :

HIGHLIGHTS :

* Announces another large contract win .

* Deals at Chase and Skytel provide significant visibility into 2000 revenue andearnings and reinforce our view that TenFold has strong market momentum .

* No change in estimates . Expect 4Q earnings release on 1131 . Reiterate BUYinvestment rating .

DETAILS :

Over the past few days TenFold has issued press releases regarding two largeand prestigious contract signings . On 1/13 TenFold announced a $22 .5 millioncontract with Skytel, an MCI Worldcom company, and, we believe, the company'slargest single contract ever . On 1/18, TenFold announced a contract with the GlobalInvestor Services unit of the Chase Manhattan Bank for an undisclosed amount thatwe believe was about $11 million . We believe that both deals closed duringTenFold's 4Q 1999 but that the bulk of the revenue will be recognized over thecourse of 2000 as these projects are completed . Of note, the $33 .5 million is justover 20% of our total revenue estimate of $157 million for all of 2000 . In addition,these two contracts alone should produce strong y/y growth in 2 of TenFold's 6targeted vertical markets -- investment management and communications .

TenFold's ability to deliver vertical-specific, mission critical applicationsto companies in multiple vertical markets, positions it for rapid and profitablegrowth in our opinion. TenFold is addressing large, underserved markets with aunique value proposition (rapid time to market coupled with low relative cost) thatis unmatched by any alternative we know of. As large companies are looking toreplace existing systems or build brand new applications for the world ofeBusiness, TenFold is very well positioned Moreover, the fact that revenue isoften recognized over the 6-12 months that a development project takes, provides

-33-

the company with above-average revenue and earnings visibility. We reiterate ourBUY investment rating .

40. On January 31, 2000, TenFold reported record revenues and earnings for the quarter

and year ended December 31, 1999 . The release was entitled "TenFold Reports Record Revenue s

and Earnings for the Quarter and Year Ended December 31, 1999 ; 1999 Revenues Increase 130%

and Net Income Increases 241% Over 1998" and stated :

TenFold Corporation (Nasdaq:TENF), a leading provider of large-scale e-businessapplications, today announced record results for the quarter and year endedDecember 31, 1999 . Total revenues in 1999 were $92 million, an increase of 130%over total revenues in 1998 . Net income was $5.9 million, an increase of 241% over1998 . Net income excluding acquisition-related costs for 1999 was $8 .8 million, up411 % compared to 1998 .

Fourth quarter revenues of $33 .9 million were up 108% compared to the sameperiod in the prior year, and up 44% compared to third quarter 1999 revenues of$23 .5 million . Revenues from license fees for the fourth quarter of 1999 increased263% over the same period in the prior year and grew to an all time high of 70% oftotal revenues . For the year, license revenue grew to 51 % of total revenues up from33% in 1998 .

"Our Q4 results are the culmination of an extremely successful year, "saidGary Kennedy, president and CEO of TenFold Corporation. "Not only did weexceed our sales expectationsfor the quarter and the year, but we also deliveredstrong profit increases well ahead ofschedule. Most important, our bookings weremore than double our previous best quarter . We signed some of our largestcontracts to date in the fourth quarter, evidence of accelerating demand forTenFold applications among market-leading customers in our target industries.This gives us great confidence as we move into 2000 . "

"TenFold provides industry-leading companies dynamic applications to meettheir complex e-business requirements," continued Kennedy . " Our breakthroughUniversalApplication (TM) lets us deliver Web-centric applications in record time .More important, the packaged applications we deliver are sufficiently flexible toadapt to our customers ' changing needs over time. TenFold is well positioned tobenefit from the enormous demand for large-scale e-business applications . "

Net income and diluted earnings per share for the fourth quarter of 1999 were$1 .9 million and $0 .05 . Fourth quarter net income excluding acquisition-relatedcosts, was $4 .9 million, up 208% compared to the same period in the prior year, andup 96% compared to third quarter 1999 net income . Fourth quarter diluted earningsper share excluding acquisition-related costs, was $0 .13 compared to $0 .05 for thesame quarter in the prior year .

Revenues for 1999 were $92 million, up 130% from 1998 . Revenues fromlicense fees for 1999 increased 252% over 1998 . Net income and diluted earning s

-34-

per share for 1999 were $5 .9 million and $0.16. Net income excluding acquisition-related costs for 1999 was $8 .8 million, up 411% compared to 1998 . Dilutedearnings per share excluding acquisition-related costs for 1999 were $0 .24 comparedto $0 .03 for 1998 .

* * *

About TenFold

TenFold Corporation (Nasdaq : TENF) is a leading provider of large-scalee-business applications for customers in banking , communications, energy,healthcare, insurance , investment management and other industries . TenFolddelivers dynamic , Web-centric applications that meet customers' needs in rapidlychanging business environments , and that are flexible to adapt to changing needsover time . TenFold offers the TenFold Guarantee, the industry 's first money-backguarantee for delivering large-scale software applications on target, on time, andon budget .

41 . In fact, TenFold's financial results for the fourth quarter 1999 were materiall y

overstated due to its improper revenue recognition on contacts where TenFold had failed to fulfil l

its obligations in violation in GAAP as described in ¶¶71-88 .

42. On February 1, 2000, Deutsche Banc Alex. Brown issued a repo rt on TenFold writte n

by W. Christopher Mortenson, after discussions with Kennedy and Hughes and was based on and

repeated information provided by them . Kennedy or Hughes reviewed this report before it was

issued and assured Mortenson it was accurate . TenFold copied and distributed it, adopting it as its

own. The report raised estimates for TenFold's first quarter 2000 and stated :

TENFOLD CORPORATION (TENF) "BUY"Spectacular 4Q Results, Raising Estimate s

Date : 01/31/2000 EPS : 1999E 2000E 2001 E

Price : 42 .94 1Q 0 .01 0 .06 NE

52-Wk Range : 53 - 17 2Q 0.03 0 .08 N E

Ann Dividend : 0 .0 3Q 0 .07 0 .13 N E

Ann Div Yld: 0 .00% 4Q 0.13A 0 .17 N EFY (Dec .) 0 .24 0 .44 0 .6 5

*

HIGHLIGHTS :

* TenFold reports spectacular 4Q results that easily exceeded our estimates forlicense and total revenue and EPS . Five of six verticals performed well .

-35-

* 4Q Bookings beat next best quarter by over 100% and more than 2x reportedrevenue such that visibility entering 2000 is very strong as well .

* Raising estimates slightly .

* Reiterate BUY investment rating .

DETAILS :

After the close on 1131, TenFold Corp . reported results of operations for its4Q (Dec) that left us grasping for superlatives . Most impressively, license revenueof $23 .7 million nearly doubled our estimate of $12 million while growing 263% y/yand 131 % sequentially . These results were driven by significant momentum acrossfive of TenFold's six vertical business units and reflect ongoing progress on deals inprocess prior to this quarter as well as very strong new contract signings during thequarter . Perhaps equally impressive, management indicated that total bookings inthe December quarter exceeded$68 million on more than double 4Q total revenue,providing very good visibility into the first half of 2000 .

We reiterate our BUY investment rating on TenFold's shares . The companyhas a unique, high value business proposition, in our view, and is delivering complex,mission critical applications to its targeted verticals through a combination of its coretechnology, a growing portfolio of dynamic application products and a strongservices capability . Based on the 4Q results we are moving our estimates upsomewhat as follows:

EPS Revenue ($millions )New Old New Old

1999 4QA 0.13 0.09 33.9 26. 5Total 0.24 0.21 92.4 85. 0

2000 IQ 0.06 0.05 29.0 28. 02Q 0.08 0.08 35.0 35. 03Q 0.13 0.13 42.0 42. 04Q 0.17 0.15 53.0 52. 0

Total 0.44 0.42 159.0 157. 0

2001 Total 0.65 0.63 240.0 236. 0

We are aware of 4 large contracts that contributed to the extremely strong4Q bookings that were somewhat greater than $68 million . The Bonneville PowerAdministration deal is for a billing and settlement system that was announced inNovember . In January, TenFold announced a $22.5 million contract with Skytel aswell as contracts with Chase Global Investor Services and Royal and Sun Alliance .We believe that these 4 contracts accounted for close to $55 million of the quartersbookings . Given TenFold's conservative revenue recognition policies the bulk ofthese bookings, we estimate, will be recognized in future quarters .

-36-

43 . On February 1, 2000, U .S . Bancorp Piper Jaffray issued a report on TenFold written

by Mark Verbeck, after discussions with Kennedy and Hughes and was based on repeated

information provided by them. Kennedy or Hughes reviewed this report before it was issued and

assured Verbeck it was accurate . TenFold copied and distributed it, adopting it as its own . The

report raised revenue and EPS estimates and stated :

TenFold Reported Impressive Results For 4Q99 With License Revenues AndTotal Revenues Well Beyond Consensus Estimates ; Multiple Verticals ContributedTo The Quarter's Performance; Increasing 2000 Revenue Estimate From $154Million To $155 Million And 2000 EPS Estimate From $0 .43 To $0.45

Highlights :

--Revenues of $33 .9 million exceeded our $26 .7 million estimate by $7 .2 million .This represents a 110% increase over last year . License revenues were well beyondexpectations, coming in at $23 .7 million and included several product sales .

--EPS was $0 .13 beating our estimate and the Street's estimate of $0 .09 .

--Deferred Revenues increased from $6 .5 million to $9 .1million .

--Revenue Visibility . The Company 's bookings are strong at greater than 200%of revenues giving good visibility to future revenues .

--Model And Price Target Revisions . We have revised our model to actual resultsand increase expectations 2000. FY00 revenues increased from $153 .8 million to$154 .9 million and EPS increased from $0 .43 to $0 .45 . We are increasing our pricetarget from $38 to $52-$60 .

--Disputed Contract . The dispute that we noted last quarter appears headed for alengthy court process . TenFold, having consulted with its attorneys and auditors,continues to believe that the customer's claim is without merit .

44. TenFold successfully convinced the market that the customer complaints were

without merit and that the Company's business was strong and its prospects were highly favorable .

As a result, in early February 2000, TenFold's stock traded as high as $61 per share .

45 . Defendants' statements issued between January 18, 2000 and February 1, 2000 were

false for the reasons set forth in ¶¶25(a)-(j), 29(a)-(d), 38(a)-(b) . The statements between January

18, 2000 and February 1, 2000 were also false or misleading for the following additional reasons :

-37-

(a) On January 3, 2000, Nielsen received TenFold's 'final" release of the

LASER application code. Nielsen immediately began its application acceptance test efforts. None

of these tests were successful . For example, the test of one specific software function, which should

have executed in minutes, started on March 30 and ran into April 1, 2000, taking 38 hours .

(b) The software written by TenFold for Nielsen contains several significant

design or architectural problems . For example, the database underlying the LASER system does not

provide for adequate data integrity . This means that relationships between data elements in the

database can be lost in the course of normal operation of the system . Because the relationship

between data elements is often as important as the data itself, the system did not satisfy Nielsen's

operational needs .

(c) When TenFold delivered its "final version" of the software to Nielsen, even

portions of its Universal Application failed . For example, memory failures repeatedly caused

application modules to abort .

(d) Many of the problems in TenFold's development of the LASER application

were caused by the failure of its methodology, the "TenFold Way ." TenFold tries to develop an

application interactively while having its customer "graze" the developing application to test it . This

methodology did not work for the LASER project because "grazing" tested only the transactional

logic of the screens, not the underlying programs that do the actual calculations .

(e) During TenFold' s work on the LASER application for Nielsen, it repeatedl y

moved personnel on and off the LASER project, often moving them to work for other customers .

For example, from November 1997, when it started to work on the LASER application, until the

present, TenFold has assigned eight different executive officers to the LASER project . TenFold has

also assigned six project leaders to the project . Other key TenFold personnel, after working on the

LASER application and gaining relevant expertise, were moved to other TenFold customers,

impeding the successful and timely development of the LASER application .

-38-

(f) Negotiations following TenFold's August 31, 1999 material breach of the

Agreement with Utica produced a written amendment to the Agreement signed by Utica and TenFold

that extended "to January 31, 2000" the "TenFold Guarantee" refund trigger date applicable in the

event "TenFold fails to deliver the completed fully tested Commercial Lines Manager within 105

days following the completion due date ." As the January 31, 2000 amended guarantee trigger date

approached without delivery by TenFold, the parties again entered a written amendment to the

Agreement (letter agreement addressed to Jeffrey C . Paige from TenFold's Kenneth W. Jennings, Jr .

dated January 20, 2000, signed by Paige, for Utica, on January 21, 2000) . This amendment extended

the TenFold guarantee trigger date "to February 29, 2000 . "

46. TenFold's 1999 Annual Report, filed on SEC Form 10-K on March 9, 2000 for the

period ended December 31, 1999 stated :

TenFold Solution

TenFold delivers dynamic, Web-centric applications that meet customers'needs in rapidly changing business environments, and that are flexible to adapt tochanging needs over time . We offer the TenFold Guarantee, the industry 's firstmoney-back guarantee for large-scale software applications. We deliverapplications on time, for a fixed price, and on target - or we refund our customer'smoney . We also offer the TenFold Guarantee when customers choose our optionalFastStart program to implement TenFold applications into production . In addition,we are beginning to license applications that we built for customers to othercompanies in the same industries .

Customer Benefits

TenFold delivers applications that include rich functionality, offer significantflexibility and quality, and solve the complex, expensive, and time-consumingproblems of replacing outdated systems and meeting today's business challenges . Weoffer these customer benefits :

Dynamic Applications that Meet True Needs . We deliver dynamicapplications that meet precise business needs today and adapt to rapidly changingneeds over time, rather than force companies to alter their businesses to conform topackaged applications . We work closely with customers through rapid, multipleiterations to develop applications that meet true needs .

Guaranteed, Fixed-time, Fixed price Delivery. Our straightforwardpromise is that we successfully deliver large-scale applications on time, for a fixedprice, and on target, or we refund our customer 's money. We deliver softwaresolutions that we believe reduce risk by meeting business requirements quickly,reliably, and for a fixed price .

-39-

Rapid Development. We have re-engineered the process of building large-scale software applications. Our unique development process, the TenFold Way,lets us rapidly build sophisticated applications . Our Universal Application andTenFold Component Ware automate and accelerate applications development andtesting, and let us build large-scale, sophisticated applications quickly and reliablywith little or no programming.

Rapid Implementation . Our optional FastStartprogram automates muchof the data conversion , data cleanup , applications interfacing, and productiontesting needed to attain rapid production . We often begin FastStart concurrentwith applications development to shorten the timefrom the start of developmentto production. We also offer FastStart with a fixed- time, fixed price guarantee .

Lower Overall Cost. Because Ten Fold can deliver large-scale applications inrelatively short timeframes, we believe that our applications typically cost less thanthose offered by competitors . By reducing the overall development and deliverytimeframe, we help customers avoid expensive projects that exceed budgets andschedules. In addition, because we can easily enhance and modify TenFoldapplications as customer needs evolve, we believe that our products can lower theoverall cost of owning and operating large-scale applications .

Continuous Innovation and Product Enhancement . We design and build applicationswith functionality and capabilities that not only meet the needs of an individualcustomer, but are also intended to meet the needs of other companies in the samevertical industry . We typically maintain intellectual property rights to the originalapplications we build, so we can license them as applications products to othercompanies . Because we expect many of our applications to become resalableproducts, rather than individual solutions for a single customer, we believe thatcustomers will receive benefits not typically offered by traditional service providersor custom applications developers such as continuous innovation and enhancement,regular upgrades, ongoing support, training, and certification .

TenFold Differentiator s

We successfully deliver applications through four key differentiators . Whilewe believe that each is significant, it is the combination of the four that lets us buildand implement large-scale applications rapidly and lets us offer real business valueto our customers .

The TenFold Way. The TenFold Way is a start-to-finish approach to workingclosely with our customers to design , develop, test, deliver, and evolve customapplications. The TenFold Way organizes a project into phases, each with well-defined activities and deliverables. The TenFold Way combines continuouscommunication and customer feedback with rapid, iterative development to keepprojects on target .

UniversalApplication . We have invented and patented a unique technology - theUniversal Application -for building complex applications dramaticallyfaster thancurrent industry practice. The Universal Application is a sophisticated andpowerful applications architecture that reduces design effort and automates andaccelerates applications development and testing. The Universal Application letsTenFold begin applications development projects having pre-built significant

-40-

functionality and having already solved many complex applications design andimplementation problems. Our applications developers spend time describingbusiness requirements and desiredfunctionality - not programming .

TenFold ComponentWare. TenFold Component Ware is a library of components,reusable across multiple applications and industries , that lets us add complex,business-specific functionality to an application and lets us virtually eliminateapplications-specific programming. TenFold ComponentWare includes capabil-ities such as billing, scoring, and workflow, as well as integration engines . Eachcomponent containsfeatures to serve many different types of applications, acrossmultiple vertical industries .

FastStart. FastStart provides both technology and implementation services toquickly put TenFold applications into production . These services includeconverting and cleansing existing data , integrating with other applications,running a parallel, and managing the implementation project. We offer FastStartwith the same fixed-tine, fixed price, money-back guarantee that we offer forapplications development.

We believe that the integration of our unique applications developmentprocess and innovative technology lets us provide significant business value for ourcustomers .

47. On April 13, 2000, TenFold reported its first quarter results : net income increase d

473% and revenues increased 98% over first quarter 1999 . The release went onto state :

SALT LAKE CITY, April 13 /PRNewswire/ - TenFold Corporation (Nasdaq :TENF), a leading provider of large-scale e-business applications , today announcedresults for the quarter ended March 31, 2000.

First quarter revenues of $31 .7 million were up 98% compared to the sameperiod in the prior year . Net income and diluted earnings per share for the firstquarter of 2000 were $2.1 million and $0 .05, respectively. Net income increased473% over the same period in the prior year . Net income, excluding acquisition-related costs, was $3 .1 million, up 719% compared to the same period in the prioryear . First quarter diluted earnings per share, excluding acquisition-related costs, was$0.08 compared to $0.00 for the same quarter in the prior year .

"We are delighted with the continued acceleration of our businessgrowth,"said Gary Kennedy, president and CEO of TenFold Corporation . "We essentiallydoubled our revenues compared to a year ago, and significantly exceeded ouroperating margin goals for the quarter. Even more important, we delivereddramatic profit increases, more than quadrupling net income over last year. Wesaw particularly strong business growth in our Energy and Communicationsbusinesses . We continue to have strong confidence going into the second quarterand rest of 2000 ."

-41-

About TenFold

TenFold Corporation (Nasdaq : TENF) is a leading provider of large-scalee-business applications for customers in banking, communications, energy,healthcare, insurance, investment management and other industries . TenFolddelivers dynamic, Web-centric applications that meet customers' needs in rapidlychanging business environments, and that are flexible to adapt to changing needsover time. Using its patented Universal ApplicationTM, TenFold deliversapplications remarkably fast, and for a fixed time and fixed price. TenFold offersthe TenFold Guarantee, the industry 's first money-back guaranteefor deliveringlarge-scale software applications on target, on time, and on budget.

48 . In fact, TenFold's financial results for the first quarter 2000 were materially overstate d

due to its improper revenue recognition on contacts where TenFold had failed to fulfill its obligation s

in violation in GAAP as described in ¶¶71-88 .

49. On April 14, 2000, Deutsche Banc Alex . Brown issued a report on TenFold written

by W. Christopher Mortenson, after discussions with Kennedy and Hughes and was based on and

repeated information provided by them . Kennedy or Hughes reviewed this report before it was

issued and assured Mortenson it was accurate . TenFold copied and distributed it, adopting it as its

own. The report forecasted second quarter 2000 EPS of $ .09, and stated :

TENFOLD CORPORATION (TENF) "BUY"Reports Very Strong 1Q Result s

Date :

Price :

52-Wk Range :

Ann Dividend :

Ann Div Yld:

Mkt Cap (mm) :

3-Yr Growth :

Est . Changed Yes

HIGHLIGHTS :

04/13/2000 EPS : 1999A 2000E 2001E

45 .0 1 Q 0 .01 0 .08A NE77 - 17 2Q 0.03 0 .09 N E0 .0 3Q 0 .07 0 .13 N E

0 .00% 4Q 0 .13 0 .18 NE1,571 FY (Dec.) 0 . 26 0 .48 0 .6 850% FY P/EPS NM 93.8X 66 .2 X

CY EPS 0 . 26 0 .48 0 .6 8CY P/EPS NM 93.8X 66.2X

* Very strong IQ results from total revenue and EPS perspective .

* Business momentum and forward visibility is strong across multiple verticals .

* Closes first large e-business deal and first joint sale with Perot Systems .

-42-

* Raising EPS estimates, reiterate BUY investment rating .

DETAILS :

After the close on 4/13, TenFold reported results for its IQ that easilyexceeded our and street estimates for total revenue and for EPS . We believe theseresults further support our belief that TenFold's unique solution deliverycapabilities and its broad multiple vertical market focus enable it to grow rapidlyand profitably for the foreseeable future . At the same time, however, TenFold'sunique business model and the fact that, in any quarter, it deals with a relatively smallnumber of large transactions, can create short term anomalies . In the 1 Q, the revenuemix was very heavily weighted towards services -- the exact opposite of the 12/99quarter. We do not believe this is a cause for concern and sense that the strength inservices results allowed TenFold to not push that hard on closing additional deals inthe quarter . The fact that a $12.5 million contract closed on 4/10 supports our view.We reiterate our BUY investment rating on TenFold's shares . In a toughenvironment for tech stocks it offers both rapidly growing revenues and solid andexpanding profitability . Based on IQ results and our sense that 2Q visibility is verygood, we are raising our estimates somewhat as follows .

EPS RevenueNew Old New Old

2001 I QA 0.08 0.06 31 .7 29 . 02Q 0 .09 0 .08 35 .0 35 . 03Q 0 .13 0 .13 42.0 42 . 04Q 0 .18 0 .17 53 .0 53 . 0

Total 0 .48 0.44 161 .7 159 . 0

2001 Total 0.68 0.65 240.0 240 . 0

Note : Our EPS estimates include the amortization of deferred compensation expenseand exclude the amortization of acquisition related intangibles .

50. Defendants' statements issued between March 9, 2000 and April 14, 2000 were fals e

for the reasons set forth in ¶¶25(a)-a), 29(a)-(d), 38(a)-(b), 45(a)-(f). The statements between

March 9, 2000 and April 14, 2000 were also false or misleading for the following additional reasons :

(a) As the extended February 29, 2000 guarantee trigger date approached and it

was clear that TenFold would not timely deliver the applications required by the Agreement, Utica

and TenFold entered "Amendment No . One to Master Software License and Services Agreement"

(effective March 14, 2000) which provided, inter alia, that" [t]he parties agree to combine the

existing TenFold Guarantees for Fixed Price Design and Development and FastStart services into

a single , fully guaranteed project, with a completion date of September 30, 2000 ." Thus, the thrice

- 43 -

- extended completion date for the Commercial Lines Manager was a full 13 months later than

the originally promised August 31, 1999 delivery date .

51 . In TenFold's 1999 Annual Report, dated June 8, 2000, TenFold stated :

At TenFold, we're revolutionizing the software industry by doing thingsdramatically differently - not by following the old rules . TenFold delivers dynamicpackaged applications that meet customers' needs in rapidly changing businessenvironments, and that are flexible to adapt to changing needs over time. It's anentirely new model for complex e-business applications in the 21st Century andTenFold is leading the way .

TenFold had a banner year in 1999, marked by strong financial performance,steady expansion of our customer base, and further strengthening of our technologyand intellectual property position. We also executed a successful initial publicoffering, which raised $34 million in net proceeds to raise our public profile and helpfuel the company's continued growth.

For the year, our revenues grew 130% to $92 million, and earnings grew evenfaster, up 411 % to $8 .8 million, or $0.24 per share, excluding acquisition costs of $3million. We generated $19 million in positive cash flow and ended the year with $5 8million in cash on our balance sheet. And we reached a 50/50 license-to-revenue mixmuch faster than we expected. This kind offinancial momentum underscores thesuccess of our value proposition . TenFold's unique on-time, on-budget guaranteealways generates interest. But it is our ability to rapidly deliver large-scale e-business applications that allows us to close sales at a record pace. Our strongbookings performance gives us confidence and momentum going into 2000 .

Technology is at the care of TenFold's success. Seven years ago we set outto solve one of the software industry's biggest challenges - how to buildsophisticated applications in months, rather than years. Our UniversalApplicationTM is breakthrough technology for rapidly building large-scaleapplications with little or no programming . Our ongoing goal is to improve,protect, and leverage this technological advantage. Our continual improvementsand enhancements to this underlying technology benefit all our customers .

We are pleased that early in 2000, we received a patent for the UniversalApplication, protecting our ultimate competitive advantage for deliveringapplications in remarkablyfast time frames. Being the defacto standard for large-scale e-business applications is our ultimate aim.

TenFold offers the industry 'sfirst money-back guaranteefor delivering large-scalesoftware applications on target, on time, and on budget. That's definitely notbusiness as usual. Our patented technology, the Universal Application,TM is ourultimate competitive advantage for delivering applications in remarkably fast time

-44-

frames, with little or no programming . We deliver dynamic e-business applicationsthat give customers the functionality they need today and the flexibility to adapt tochanging needs tomorrow. Seven years ago, TenFold set out to solve one of thesoftware industry's biggest challenges - how to build sophisticated applications inmonths, not years. We've done it by challenging conventional wisdom. TenFoldis rewriting the rules of software development and putting the sacred cows of ourindustry out to pasture for good.

At TenFold, we deliver sophisticated applications remarkablyfast, and for a fixedtime and fixedprice. Our Universal Application dramatically reduces the mostsignificantpitfall in the applications development process : time. As a result, wecan deliver completed, tested applications in the time it often takes others to merelydefine requirements. In an industry where more than 90 % of large applicationsdevelopmentprojectsgo well over budget and schedules, TenFold has the blueprintfor success .

52 . On July 10, 2000, TenFold announced disastrous preliminary results for the second

quarter of 2000 . The release went on to state :

TenFold Corporation (Nasdaq:TENF), a leading provider of large-scale e-businessapplications, today announced preliminary results for the second quarter endingJune 30, 2000. For the quarter, the company expects to report total revenue in therange of $30 million to $32 million, compared to $19 million for the second quarterof 1999. In addition, the company expects to report a loss in the range of ($0 .03) to($0.05) per diluted share, compared to a profit of $0.03 per diluted share for thesecond quarter of 1999 . Excluding the amortization of intangible assets relating toacquisition of LongView, the company expects to report a loss in the range of ($0 .01)to ($0.03) per diluted share .

The expected results announced today are lower than the company hadexpected. The company attributes these results primarily to longer than expectedsales cycles, increased expenses in anticipation of increased sales, and delaysencountered on some existing projects .

"We had a few large deals that didn 't close during the quarter, althoughthey still look promising in the near future, " said Gary Kennedy, president andCEO of TenFold Corporation . "This quarter, some of our customer prospectsmoved more slowly than we anticipated to authorize and fund new technologyinitiatives. This is partly related to the price and strategic nature of theapplications we deliver, and the timeframes involved in making large e-businessinvestment decisions . While I am disappointed with these results, we continue to seeevidence of a large market opportunity for our applications, both new andreplacement, and I remain optimistic about our long-term fundamental businessprospects . "

The company expects to release its final results for the second quarter andhost a conference call on July 19, 2000, after the close of the market .

Using its patented Universal Application (TM), TenFold delivers applicationsremarkablyfast, and for a fixed time and fixedprice. TenFold offers the TenFold

-45-

Guarantee, the industry 's first money-back guarantee for delivering large-scalesoftware applications on target, on time, and on budget.

53 . On this announcement, TenFold's shares plummeted nearly 40% from the $17 rang e

to the $10 range .

54. On July 10, 2000, Deutsche Banc Alex . Brown issued a report on TenFold written

by W. Christopher Mortenson entitled "Previews F2Q Miss - Cites Extended Sales Cycles and

Project Delays, Estimates Lowered," after discussions with Kennedy and Hughes and was based on

and repeated information provided by them . Kennedy or Hughes reviewed this report before it was

issued and assured Mortenson it was accurate . It stated :

HIGHLIGHT S

TENF announces preliminary F2Q results below Street expectations .

* Total revenue of $30 to $32 million is up from $19 million y/y but below ourestimate of $35 million .

* A projected loss per share of $0 .01 to $0 .03 compared to our estimate of EPSof $0.09 .

* Management cites longer than expected sales cycles , increased expensesand delays an existing projects as major reasons for the miss .

* Lowering estimates . Maintain BUY investment rating .

TenFold cited three major reasons for its earnings miss .

* Due to longer than expected sales cycles, a number of large deals that thecompany was expecting to close at the end of the quarter slipped. We believe thatthe company was working on 5 or 6 major deals and that none of these dealsclosed during the quarter . Although, we also understand, that none werepermanently lost .

* The company increased expenses in anticipation of increased sales during thequarter . These higher expenses, we believe, are related to TenFold hiring sales andmarketing personnel to drive future business growth and application developers tocomplete existing projects that the company is implementing .

* The company encountered delays on some existing projects. As TenFoldrecognizes revenue upon completion of certain milestonesfor each project that itundertakes , a project delay can lead to a delay in revenue recognition . We believethe delays were primarily in the insurance vertical.

-46-

55 . On July 19, 2000, Deutsche Banc Alex . Brown issued a report on TenFold entitle d

"Delays 2Q Earnings Release to Early August, Downgrading Investment Rating to MARKET

PERFORM," written by W . Christopher Mortenson, after discussions with Kennedy and Hughes and

was based on and repeated information provided by them. Kennedy or Hughes reviewed this report

before it was issued and assured Mortenson it was accurate . It stated:

* On 7110, TenFold previewed a revenue and earn ings shortfall for its 6/00quarter . After the close on 7/19, it announced it was delaying its earnings releasefor the quarter until early August .

* We can't recall an earnings delay that was not the precursor of additional badnews. While we remain fans of TenFold's business model and its technology, we arelowering our investment rating to MARKET PERFORM from Buy until we havemuch better visibility on its current operations .

* Management has stated that the delay is to allow a more detailed review ofall of its projects and its not certain if final results will still be within the rangepreviewed.

No change in estimates, subject to the company reporting final 2Q results .

DETAILS :

TenFold was scheduled to release final earnings for its June quarter after theclose on 7/19. Instead it issued a press release rescheduling the earnings for earlyAugust. We spoke with senior management who indicated a desire to conductdetailed project reviews to ensure accurate 2Q results and to have more time todetermine plans for the balance of the year . TenFold has a complex business modeland approach to revenue recognition. As such, taking time to conduct a moredetailed review, in conjunction with the outside auditors, appears reasonable .However, our experience has been that earnings delays virtually never result in goodnews. Given that the June quarter was already previewed to be below streetexpectations, this increases our uncertainty about the current state of the business toa level that is incompatible with a Buy investment rating . As a result, we arelowering our rating to MARKET PERFORM .

56 . On August 14, 2000, TenFold issued a press release entitled , "TenFold Announce s

New Executive Appointments," which stated :

SALT LAKE CITY, Utah - August 14 , 2000 - TenFold Corporation(Nasdaq : TENF) , a leading provider of large-scale e-business applications, todayannounced two additions to its senior management team .

* *

Robert Hughes, prior chief financial officer for TenFold Corporation, isnow senior vice president and chief financial officer of a TenFold subsidiary .

-47-

"Rob has done an outstanding job as CFO for TenFold Corporation," said GaryKennedy, president and CEO of TenFold Corporation . "I look forward to hiscontinued leadership as part of an initiative that we will announce in the near future . "

William Conroy, former TenFold COO, has left the company to pursueother interests . "Bill has done a terrific job helping us establish the sales andoperations infrastructure for our fast-growing business," said Gary Kennedy . "Wewish him well as he pursues other opportunities . "

About TenFol d

TenFold Corporation (Nasdaq : TENF) is a leading provider of large-scalee-business applications for customers in banking, communications, energy,healthcare, insurance, investment management and other industries . TenFold deliversdynamic packaged applications that meet customers' needs in rapidly changingbusiness environments, and that are flexible to adapt to changing needs over time .Using its patented Universal Application(TM), TenFold delivers applicationsrapidly, and for a fixed time and fixed price. TenFold offers the TenFoldGuarantee, the industry's first money-hack guaranteefor delivering large-scalesoftware applications on target, on time , and on budget .

57. TenFold's actual results were even worse than defendants had suggested on July 10 ,

2000 . On August 14, 2000, TenFold announced its disastrous second quarter results :

SALT LAKE CITY, Aug . 14 /PRNewswire/ - TenFold Corporation (Nasdaq :TENF), a leading provider of large-scale e-business applications, today announcedresults for the quarter ended June 30, 2000 .

Second quarter revenues of $26 .4 million were up 38% compared to $19 .0million for the same period of 1999 . A net loss for the second quarter of $(6 .5)million, or $(0.19) per diluted share, compares to earnings of $1 .1 million, or $0 .03per diluted share, for the same period of 1999. Net loss, excluding acquisition-related costs, for the second quarter of 2000 was $(5 .3) million, or $(0.16) per dilutedshare, down from a net income of $1 .1 million, or $0 .03 per diluted share, for thesame period of 1999 .

TenFold recently reviewed its significant projects and, as a result, reducedrevenues on certain projects in process and significantly increased accountsreceivable allowances for the quarter ended June 30, 2000 . After theseadjustments, the revenue and earnings announced today are not within the rangeannounced by the company July 10, 2000 .

Revenues for the first half of 2000 of $58 .0 million increased 66% over thefirst half of 1999 revenues of $35 .1 million . Net loss of $(4 .3) million for the firsthalf of the year compares to net income of $1 .4 million for the first half of 1999 . Netloss of $(2.3) million, excluding acquisition-related costs, for the first half of 2000compares to net income of $1 .4 million for the same period of 1999 .

-48-

"I am disappointed that we didn't meet our expectations for the quarter .Although our revenues grew 66% for the first half of this year, compared to the sameperiod of 1999, we still expected better results," said Gary Kennedy, president andCEO of TenFold Corporation . " We increased our expenses in anticipation ofhigher sales, yet experienced longer than expected sales cycles and delays on someexisting projects . We are working to address both the sales and delivery issues .We expect revenues for the next two quarters to be lower than originallyanticipated based on extended sales cycles and recentproject delays. However, weexpect to return to profitability in thefourth quarter of2000. I remain confidentabout our long-termfundamental business prospects . Companies continue to lookto TenFold to replace their outdated systems and deliver new, complex e-businessapplications . "

58. On August 15, 2000, Deutsche Banc Alex . Brown issued a report on TenFold entitle d

"Final F2Q Results Reported," written by W. Christopher Mortenson after discussions with Kennedy

and Hughes and was based on and repeated information provided by them. Kennedy or Hughe s

reviewed this report before it was issued and assured Mortenson it was accurate . It stated:

* TenFold reports disappointing 2Q results, below our original estimates andthe company's 7/10 preview .

* Project completion problems have resulted in increased accounts receivableallowances, revenue recognition reversals and delayed sales cycles .

We are lowering our estimates and maintaining our market performinvestment rating .

* *

After the close on 8/14, TenFold reported results for its 2Q that came inwell below our original estimates and below our revised estimates following the7/10 preview . While these results are disappointing given that the company hadalready postponed its original reporting date from 7/19, we had actually feared evenworse . The company ended up reversing about $4.8 million in revenue andincreasing its bad debt allowances by $4.3 million as well. We estimate that thebulk of these adjustments relate to 5 major projects in its insurance vertical (oneof whom is attempting to cancel its contract with TenFold) along with anincomplete project with an early (non-insurance) customer . Management alsoindicated that it is making a number of organization and procedural changes toresolve outstanding issues and prevent their re-occurrence .

We are also lowering our estimates as follows :

EPS RevenueNew Old New Old

F01 2QA (0.16) (0.02) 26.4 31 . 03Q (0.10) 0.03 30.0 37. 0

-49-

4Q 0.04 0.06 40.0 43 . 0Total (0 .13) 0.14 128.0 142 . 7

F02 Total 0.20 0.26 185 .0 205 . 0

Source: Company data and Deutsche Banc Alex . Brown estimates .

Before the 7/10 preview, we were estimating 2000 revenue of $162 millionand EPS of $0.48 .

During the quarter TenFold encountered significant sales and deliveryissues in its insurance vertical where it is working on completing major products forfive customers . A few days before TenFold was scheduled to announce its resultson 7/19, it received correspondence from one ofthose customers wanting to cancelits contractjust a few weeks before project completion . At that point, TenFolddecided to review all projects to accurately estimate delivery schedules . TenFold isnow addressing these issue by focusing on developing a single product that itbelieves can be used to fulfill the needs of all these customers and expects to deliverthis product in 3Q . . . . Besides the product delivery issues in the insurance vertical,one additional customer, Nielsen Media has filed a complaint against TenFold.As a result of these events and a detailed review of all its contracts, TenFold haschosen to delay revenue recognition of $4.8 million and has established anincreased bad debt allowance of $4.3 million . Due to these adjustments, reportedtotal revenue of $26.4 million came in below the previewed amount of $30 to 32million and the loss per share of $0.16 exceeded the previewed range of $0.01 to0.03 .

Source : Company reports and DB Alex. Brown estimates .

License revenue of $7.6 million was flat y/y, below our revised estimate of$9.0 million and well below our original estimate of $13 .0 million . Total revenue of$26 .4 million was up 38 .5% y/y, but well below our revised estimate of $31 .0 millionand our original estimate of $35 .0 million . The revenue shortfall was due to longerthan expected sales cycles as a number of deals that the company expected to closeat the end of the quarter slipped. In addition , TenFold encountered delays onsome existing projects, primarily in the insurance vertical that led to delays inrevenue recognition of about $4. 8 million and contributed to the shortfall .

59. As a result of TenFold's poor results, its stock dropped below $5 per share but

continued to be inflated due to defendants' concealment of its improper revenue recognition an d

inability to complete its contractual obligations .

60. Defendants' statements issued between June 8, 2000 and the August 15, 2000 wer e

false for the reasons set forth in ¶J25(a)-(j), 29(a)-(d), 38(a)-(b), 45(a)-(f), 50(a) . The statements

-50-

between June 8, 2000 and August 15, 2000 were also false or misleading for the following additional

reasons :

(a) In a May 1, 2000 letter to Nielsen, TenFold refused to commit to a date on

which it would complete the LASER application . TenFold was unwilling to make such a

commitment, even though, over two years earlier, it had committed to use its best efforts to

complete the LASER application within four months and had assured Nielsen on several other

occasions that it would be able to build the promised system .

(b) On May 10, 2000, Nielsen notified TenFold that TenFold was in breach of

the Contract and its amendments and that Nielsen was terminating the Contract, subject to

TenFold's 30 day right to cure .

(c) During the Summer of 2000, TenFold indicated that it was working t o

deliver by September 30, not its required complete performance, but only applications covering

four of Utica's fourteen lines of insurance business . TenFold failed to provide the required

applications and related start-up services by the September 30, 2000 completion due date. Indeed,

it did not deliver completed applicationsfor any of Utica `s fourteen lines of insurance .

61 . On November 14, 2000, TenFold issued a press release entitled, "TenFold Announces

Third Quarter Results," which stated:

SALT LAKE CITY, Utah - November 14, 2000 - TenFold Corporation(Nasdaq: TENF), a leading provider of large-scale e-business applications, todayannounced results for the quarter ended September 30, 2000 .

Third quarter revenues of $18 .9 million were down 19 .5% compared to $23 .5million for the same period of 1999 . A net loss for the third quarter of $(21 .2)million, or $(0 .61) per diluted share, compares to earnings of $2 .5 million, or $0 .07per diluted share, for the same period of 1999. Net loss, excluding acquisition-relatedcosts, for the third quarter of 2000 was $(22 .7) million, or $(0 .65) per diluted share,down from a net income of $2 .5 million, or $0 .07 per diluted share, for the sameperiod of 1999 .

Revenues for the first nine months of 2000 of $76 .9 million increased 31 .4%over the first nine months of 1999 revenues of $58 .5 million. Net loss of $(25 .5)million for the first nine months of the year compares to net income of $3 .9 millionfor the first nine months of 1999. Net loss of $(24 .9) million, excluding

-51-

acquisition-related costs, for the first nine months of 2000 compares to net incomeof $3 .9 million for the same period of 1999 .

Business Outloo k

"Today we announced significant initiatives designed to return us toprofitability and to enhance shareholder value," continued Kennedy . "We're makingevery effort to reduce expenses and to secure additional financing, while continuingto emphasize successful delivery . We are aggressively moving our business towardresalable products by completing projects that will expand our current productoffering, as well as building a pipeline for our existing products . In addition, we willcontinue to expand the market for our Universal Application by licensing it to avariety of third-party developers, systems integrators, and end-user customers . "

In an effort to curtail expenses, TenFold also announced plans to incur arestructuring charge during the three months ended December 31, 2000 . This chargeis part of a plan to focus on returning to profitability by reducing expensescommensurate with our anticipated revenues . The plan includes reducing total costsby approximately 25 percent by reducing headcount globally, consolidating businessunits, and closing duplicative company facilities in Chicago, Dallas, and SanFrancisco . TenFold anticipates annual cost savings associated with these and otheractions to be approximately $3 8 million pre-tax, starting in the first quarter of 2001 .

"Our short-term execution problems do not dissuade us from pursuing ourgoal of establishing technology leadership and delivering breakthrough applicationsfor our market-leading customers in multiple industries," said Gary Kennedy . "Wecontinue to build our vertical software companies as autonomous entities whosecompetitive advantage relies on our patented technology - the Universal Application .In many cases, our customers have nowhere else to turn for complex e-businessapplications . "

About TenFold

TenFold Corporation (Nasdaq : TENF) is a leading provider of large-scalee-business applications for customers in communications, energy, financial services,healthcare, insurance and other industries . Using its patented UniversalApplication(TM), TenFold delivers dynamic packaged applications that meetcustomers' needs in rapidly changing business environments, and that are flexible toadapt to changing needs over time .

62. On November 15, 2000, Deutsche Bane Alex . Brown issued a report on TenFold

entitled "Reports F3Q Results Below Expectations, Announces Restructuring," written by

W. Christopher Mortenson after discussions with Kennedy and Hughes and was based on and

repeated information provided by them . Kennedy or Hughes reviewed this report before it was

issued and assured Mortenson it was accurate . It stated:

-52-

After the close on 11/14, TenFold reported results for its 3Q that came inwell below our and the street's revenue and EPS estimates . While we continue tobelieve that TenFold possesses valuable technology, it continues to struggle with itsexecution especially completing large scale customerprojects . We are maintainingour market perform investment rating until we see more positive trends in thecompany's ability to close business and complete projects .

Due to the difficult and unpredictable situation that TenFold is facing,management is not providing any detailed guidance for future revenue and EPSestimates but expects to return to profitability in 2H01. We are lowering ourestimates as follows:

EPS RevenueNew Old New Old

FO1 3QA (0.65) (0 . 10) 18 .9 30 . 04Q (0.23) 0.04 22 .0 40 . 0Total (0.95) (0 . 13) 98 .9 128 . 0

F02 Total (0 .22) 0.20 120 .0 185 . 0

Source : Company data and Deutsche Banc Alex . Brown estimates .

During the quarter, TenFold continued to encounter significant sales anddelivery issues in its insurance vertical where it is working on completing majorproducts for five customers. In F2Q, TenFold had identified four customers whohad expressed varying levels of dissatisfaction with the progress of their projects .Out of the four, three of the dissatisfied customers, Trumball, Utica and Unitrin,have fled for either formal mediation, arbitration or notified TenFold of theirintent to terminate software and services agreements. The fourth customer hasaccepted the delivered project and has paid TenFold in full for the terminatedcontact. It is possible that his customer might pursue some additional action torecover $10.0 million of total revenue that TenFold has recognized from the $10 .6million contract. In addition, in the current quarter, Southern Energy Companyhas terminated its software license and services agreements with TenFold and isrequesting a return of all fees paid between F2Q99 and F3 Q00. The total revenuerecognized by TenFold from the Southern Company contract is $11 .5 millionwhile its balance sheet has $846,000 in accounts receivable and $449,000 inunbilled accounts receivable for this contract. Asa result of these events, TenFoldhas increased bad debt allowance by an additional $3.2 million to $7,5 million .For 3Q, TenFold reported total revenue of $18 .9 million, below our estimate of $30million and a loss per share of $0.65, well below our estimate of a loss of $0.10 pershare .

TenFold also announced a major restructuring program as part of a plan toimprove operating results and would incur a charge during the December quarter .The company expects to reduce headcount by approximately 200 employees to about550 and close facilities in Chicago, Dallas and San Francisco . The company expects

to save about $38 .0 million annually starting in F 1 Q01 . Management also indicatedthat the company plans to raise additional funds and is pursuing a number of differentoptions .

-53-

License revenue of $4.0 million declined 60 .6% y/y and 46 .8% sequentiallyand came in below our estimate of $7 .0 million . Service revenue of $14 .8 millionwas up 12.4% y/y but declined 20 .9% sequentially and came in below our estimateof $23 .0 million . Total revenue of $18.9 million declined 19 .5% y/y, declined 28 .4%sequentially and came in well below our estimate of $30 .0 million . The revenueshortfall was due to delays in project delivery primarily in the insurance vertical,a decrease in upfront revenue recognition on new contracts and longer thanexpected sales cycles as customers were reluctant to sign new contracts withTenFold.

63. Defendants statements' issued between November 14, 2000 and November 15, 2000

were false for the reasons set forth in ¶125(a)-{j), 29(a)-(d), 3 8(a)-(b), 45(a)-(f), 50(a), 60(a)-(c) . The

statements between November 14, 2000 and November 15, 2000 were also false or misleading for

the following additional reasons :

(a) A meeting was held on October 12, 2000, attended by Utica's Paige,

TenFold's Bernie Mazon and TenFold's Doug Walters, who was the person directly responsible

for the projectfor TenFold. This meeting led to another meeting, held on October 27, 2000, in

which TenFold presented its position, capabilities and suggested plan of action. Paige

participated in that meeting, along with Utica's Brian Lytwynec and Sharon Jachim. TenFold

was represented by Bernie Mazon and Doug Walters . Jeff Walker, TenFold's Chairman,

participated by video conference. TenFold claimed no more than an ability to complete the

Commercial Lines Manager for 2 lines of business by March 2001 . No date was even suggested

for completion of the Commercial Lines Manager application for the other 12 lines of business

the application was to cover, or for the completion of the related FastStart services .

(b) A November 2, 2000 letter from Utica's Jeffrey C . Paige to TenFold's General

Counsel, Kenneth W . Jennings, Jr ., noted TenFold's repeated and knowing failures of timely

performance and stated that "Utica will grant no more extensions of the Agreement. "

(c) A letter from Utica's Jeffrey C. Paige to Bernie Mazon, dated and sent by

facsimile on November 9, 2000, stated that TenFold's "November 9 response confirms that TenFold's

existing and anticipatory material breaches of the Agreement are incurable ." The letter concluded

-54-

that, "[s]uch breaches justify and require immediate termination," and, accordingly , Utica "now mus t

bring the contract to a definitive end . "

64. On January 11, 2001, TenFold issued a press release entitled "TenFold Corporatio n

Announces New Chief Executive Officer," which stated :

SALT LAKE CITY, Jan. 11/FRNewswire/ TenFold Corporation (Nasdaq :TENF) today announced that the TenFold board of directors has accepted theresignation of Gary D. Kennedy as president, chief executive officer anda director,effective immediately . TenFold also today announced that Nancy M. Harvey, whohas been serving as TenFold' s chief operating officer , has been named president,chief executive officer and a director of TenFold, effective immediately .

65 . On March 15, 2001, TenFold issued a press release entitled, "TenFold Announces

Closures and Reduction in Force ; Company Also Anticipates Lower Financial Results," which

stated :

SALT LAKE CITY, Utah-March 15,2001 - TenFold Corporation (Nasdaq :TENF), a provider of large- scale applications and the Universal Application(TM),today announced that it will close its offices in Atlanta, Georgia; Irving, Texas ;Foster City, California; and Raleigh , North Carolina, and reduce its workforce byapproximately 10 percent . TenFold said these changes are being made toconsolidate its workforce in fewer locations, improve operating efficiencies, andreduce operating costs .

TenFold also announced that it anticipates reporting significantly greateroperating losses in the fourth quarter of 2000 than it did in the third quarter of2000. The increased losses result primarily from project renegotiations, projectdelays, restructuring charges, loss accruals, and decreased sales . TenFold expectsto announce its results for the fourth quarter and year 2000 before the end of thismonth, after its independent auditor completes its audit of the company's financialstatements . As part of the year-end audit process, the company's auditors are makingan independent assessment of whether existing cash balances will be sufficient forthe remainder of 2001 .

In addition, TenFold today announced several litigation -related matters,including the resolution of a previously disclosed legal dispute with UnitrinServices Company. The resolution, which is set forth in a confidential settlementagreement, provides for a full release of TenFold and the dismissal of all pendinglitigation . TenFold also reported disputes with three customers : Crawford &Company, one of TenFold 's insurance customers, has canceled its agreement withTenFold and is seeking a refund ofall amounts previously paid to TenFold plusa $2 million penalty under the agreement; Utica National, another insurancecustomer, has filed suit against the company and is seeking a refund under thecompany's guarantee, plus other damages arising out of alleged tortious conduct;and another customer has informed TenFold of its intent to cancel its agreementwith TenFold and to seek a refund under the company's guarantee. TenFolddisputes each of these claims and intends to vigorously defend them. In addition,

-55-

TenFold and Perot Systems Corporation have mutually agreed to end theirstrategic relationship.

66. On March 15, 2001, Deutsche Bane Alex. Brown issued a report on TenFold entitle d

"Announces Office Closures, Workforce Reduction & Continued Operating Losses," written by

W. Christopher Mortenson, after discussions with Hughes and was based on and repeated

information provided by him . Hughes reviewed this report before it was issued and assured

Mortenson it was accurate . It stated:

* TenFold announced that it expects F4Q (Dec.) operating loss to be greaterthan 3Q operating loss of $21 .1 million (includes $1 .15 million for amortization ofgoodwill and acquired intangibles) .

* We believe project completion problems that surfaced in 2Q still persist,and have resulted in project renegotiations, customer disputes and litigations,decreased sales due to difficulty in closing new business and lengthening of salescycles .

*

* TenFold also announced the closure of offices in four cities and workforcereduction of 10% .

* The company has settled its legal dispute with Unitrin Services Companywhile it continues to litigate disputes against Crawford & Company, Utica Nationaland a third customer .

67. Defendants' statements made between January 11, 2001 and March 15, 2001 were

false for reasons set forth in ¶¶25(a)-(j), 29(a)-(d), 38(a)-(b), 45(a)-(f), 50(a), 60(a)-(c), 63(a)-(c) .

REVELATION OF THE TRUTH

68. On April 11, 2001, Tenfold issued a press release entitled , "TenFold Announces

Financial Results for Quarter and Year Ended December 31, 2000," which stated :

SALT LAKE CITY, Utah - April 11, 2001 - TenFold Corporation (Nasdaq:TENF), a provider of large -scale applications and the Universal Application(TM),today announced financial results for the quarter and year ended December 31, 2000.

For the year ended December 31, 2000, revenues were $62 .8 millioncompared to $92.4 million in 1999 . A net loss for 2000 of $(80 . 1) million, or $(2 .29)per diluted share, compares to earnings of $5.9 million, or $0 .16 per diluted share,for 1999 .

Fourth quarter 2000 negative revenues of $14. 1 million compared topositive revenues of $33.9 million for the sameperiod of 1999. A net loss for th e

-56-

fourth quarter of 2000 of $54.6 million , or $1.55 per diluted share, compares toearnings of $1.9 million, or $0.05 per diluted share, for the same period of 1999 .In the fourth quarter of 2000, TenFold recognized a special charge of $4 .8 million,which included restructuring and asset impairment charges for workforce reductions,office closures and idle equipment .

"The disappointing year-end results reflect delivery challenges, a difficultsales environment, and a cost structure that anticipated high growth , "said NancyHarvey, president and CEO of TenFold Corporation since January 11, 2001."Over the last two quarters , we have made significant strides to fundamentallychange our business model , delivery approach, and cost structure. During thisyear, we expect to return to profitability and positive cash flow, and to establish asolid foundation for future growth . "

During thefourth quarter of 2000 and first quarter of 2001 , the companyreduced its workforce by approximately 46 percent and closedseven offices. Withthese restructurings, the company anticipates annualized cost savings ofapproximately $49 million . The company ended the year with $13.9 million incash .

69. On April 11, 2001, subsequent to the release of its fourth quarter 2000 results ,

TenFold held a conference call for analysts, money and portfolio managers, institutional investor s

and large TenFold shareholders to discuss TenFold's fourth quarter results, its business and it s

prospects . During the call Peterson stated :

In the fourth quarter, we recorded negative revenues of $14 million . Four items- three items - contributed to this in a significant way. Those were the conversionof nearly all existingprojects to a very conservative accounting methodology ofzero profit margin accounting; converting certain of our fixed priced projects toa T&M basis; and thirdly, eliminating revenues related to disputed contracts.These one-time adjustments alone total $26 million for the fourth quarter. Andthe impact of these adjustments, as well as the allowances and restructuringcharges that were recorded, total $39 million in the fourth quarter. For the yearwe recorded a net loss of $80 million. That was comprised of a modest profit in Qlof $2 million and losses then of $7 million , $21 million, and finally, $54 millionin Qs 2, 3 and 4. Absent the one-time adjustments, this loss in Q4 would have beenreduced to $16 million. As noted in the 10K, our auditors have issued a goingconcern opinion . . . . And lastly, in Q4 as I mentioned when I went through thefinancial details, we managed our financial risks by adopting the most conservativeproject accounting methodologies and booking appropriate reserves . After the endof the year, we had deferred revenue balances of $35 .9 million. We continued theseefforts in Q 1 and have launched specific initiatives that we believe demonstrate ourability to better focus this Company . They included the following : Number one, weconsolidated all of our operations and centralized our management, effectivelyreversing the decentralization into vertical business groups . Secondly, wecontinued to restructure our businesses - our business operating expenses . We tooka second step in reducing the workforce . We closed four additional and major officesand we implemented stringent expense management plans . Thirdly, we demonstratedour ability to strengthen our project delivery . We provided better oversights in

-57-

leadership, improved project management controls, and now have the ability to leverexperienced personnel across all of our projects . And as a result of this three in thefirst quarter, we announced the implementation of our Wealth Manager Applicationat Abby National Bank, a major mortgage lender in the UK .. . . We will continue,over the course of this year to seek additional capital . And then lastly, in Q l, wecontinued our efforts to resolve our litigation issues and were able to successfullysettle one customer litigation issue with the Unitrend Company .

70. TenFold's Annual Report filed with the SEC on Form 10-K on April 12, 2001 for th e

period ended December 31, 2000, stated :

During the year ended December 31, 2000 we suffered some adverse changesin our business, including but not limited to :

Difficulty completing delivery on a number of projects as a result ofunintentional consequences of our business model, an insufficient numberof experienced project leaders , and rapid decentralizatio n

Reversal of our prior track record of profitable operating performance due tolower revenues than we expected and greater than expected costs from rapiddecentralization

A number ofour customers commencing legal proceedings against u s

We have initiated the actions that we believe are necessary to correct our financialand operating difficulties, including but not limited to :

• Centralizing management of our delivery organization to leverageexperienced management and staff, improve project management controls,and provide centralized oversight of all on-going projects

• Changing our applications development business modelfrom guaranteedfixed price projects to time-and-materials based services

• Focusing near-term sales efforts on existing, successful customerrelationships, and on reselling completed applications

• Consolidating our multiple vertical subsidiaries into one corporateorganization to provide better focus for employees and to solidify our coredelivery and operational infrastructur e

• Restructuring our business to significantly reduce operating costs throughreductions in force and office closure s

On May 26, 2000, the United States Securities and Exchange Commission("SEC") issued a Formal Order Directing Private Investigation . The Ordercontains no specific factual allegations . We understand, however, that the SEC isconducting a non-publicfact-finding inquiry into our revenue recognition decisionson approximately 12 contracts . We have received three document subpoenas fro m

-58-

the SEC and we have complied or are in the process of complying with them. Wehave learned that the SEC has issued subpoenas to our independent auditors and toseveral of our current and former customers . In February 2001, the SEC tooktestimony from our former Chief Financial Officer. In March 2001 the SEC tooktestimony from our Senior Vice President of Applications Products and our SeniorVice President, Sales and Marketing who is also the President of TenFold Insurance,Inc.

During theyear endedDecember 31, 2000, we experiencedseveral difficultquarters. Our guaranteedfixed-price business model and difficulties in deliveringsome projects by the guaranteed date led to several customer disputes andprevented us from collectingfinal payments on severalprojects. We currently haveunresolved disputes with six customers, have been orally informed that anothercustomer intends to cancel its contract with us, and have been notifiedby anothercustomer of an alleged material breach of our contract with that customer .

As we disclosed these customer disputes in our quarterly filings, the salesenvironment became increasingly difficult for us . The substantial operating losseswe incurred for the year ended December 31, 2000 further deteriorated our ability tosell our products and services . These sales challenges occurred at a time whenindustry-wide technology spending appeared to be slowing, making it even moredifficult for us to attract new customers .

In addition to experiencing lower sales, our operating results werenegatively impacted by our operating structure. We conducted most of ourbusiness operations during 2000 through largely autonomous vertical subsidiariesin the communications, energy, financial services, healthcare, and insuranceindustries. This decentralization structure promoted redundant overhead andincreased our operating costs .

We have initiated actions in the fourth quarter of 2000 and the first quarterof 2001, that we believe are necessary to correct our financial and operatingdifficulties, including centralizing management of our delivery organization,changing our business model from fixed-price to time-and-materials, focusing near-term sales efforts on existing, successful customer relationships and applicationsproducts sales opportunities, consolidating our multiple vertical subsidiaries,restructuring our business to significantly reduce operating costs, and raisingadditional capital . Some details of these actions include :

Strengthening Delivery Capabilitie s

Changed Business Model

Beginning in the fourth quarter of 2000, we no longer offer the TenFoldGuarantee, and weprovide applications development and implementation serviceson a time-and-materials basis, rather than on a fixed-price, fixed-time basis .

-59-

We commenced a restructuring of our business in November 2000 througha reduction in force of 159 employees and the closure of redundant offices in SanFrancisco , Califo rnia; Chicago, Illinois ; and Dallas, Texas . A second restructuringin March 2001 further reduced the workforce by 58 employees , and closed offices inAtlanta, Georgia ; Irving , Texas ; Foster City, Califo rnia ; and Raleigh, North Carolina .From November 2000 to April 1, 2001, we have reduced our headcount fromapproximately 744 to 398 , and reduced the number of operating offices from 13 to4, excluding two mall office shares totaling less than 2 ,000 square feet .

As a consequence of our November 2000 restructuring we reduced annualizedoperating costs by approximately $40 million or 26% . We expect the March 2001restructuring to generate additional annualized savings of approximately $9 million .We expect to recognize a restructuring charge in the first quarter of 2001 relating tothe second restructuring of approximately $3 million .

While our financial statements have been prepared under the assumption thatwe will continue as a going concern , the independent auditors ' report on our

financialstatements, prepared by KPMGLLP, includes an explanatory paragraphrelating to their substantial doubt as to our ability to continue as a going concern,based upon our historical operating performance, our financial position atDecember 31, 2000 and our involvement in significant legal proceedings . Webelieve that the strength of our core technologies, product assets, customer base, andthe corrective actions that we are taking, provide a solid foundation for our continuedoperation in 2001 . Additionally, we will continue to seek additional capital tofinance our operations through the remainder of 2001 .

For certain projects, we limit revenue recognition in the period to the amountof direct and indirect project costs incurred in the same period, and postponerecognition of profits until results can be estimated more precisely . Beginning withthe three months ended June 30, 2000 we applied this "zero profit" methodologyto two existingprojects. We added two additional existingprojects and one newproject to the "zero profit" methodology during the three months endedSeptember 30, 2000. At December 31, 2000, we were applying this "zero profit"methodology to all fixed price projects except those relating to our RevenueManager and Long View applications. The total project values for ongoingprojects at December 31, 2000 that we moved to the "zero proft" methodology isapproximately $57.4 million . Revenue recognizedfrom these projects during theyear ended December 31, 2000 was $9.1 million as compared to $4.6 millionduring the year ended December 31, 1999 and none during the year endedDecember 31, 1998.

In early July 2000, as a result of receiving customer correspondence thatraised concerns about the status of a project, we initiated a supplemental reviewof our significant projects in process to reassess the status of each project and toverify the related completion percentage. Upon completion of this review, wereduced revenues on certain projects in process and increased the allowance fordoubtful accounts related to unbilled accounts receivable . We updated this reviewas part of our normal, financial reporting process for the three months ended

-60-

September 30, 2000 and December 31, 2000, and made adjustments, whichresulted in further reductions to revenues and further increases to the allowancefor doubtful accounts . Although we believe that we made all appropriateadjustments to properly reflect the completion percentage and status of contracts inprocess at December 31, 2000, we cannot be certain that similar future adjustmentswill not be required .

Revenues

Total revenues decreased $(29 .6) million, or (32) percent, to $62 .8 million forthe year ended December 31, 2000, as compared to $92 .4 million for the year endedDecember 31, 1999 . The decrease in revenues is primarily due to lower thananticipated sales, project delays and disputes on certain projects, adjustments oncertain fixed price projects to limit revenue recognized to costs incurred, andadjustments required to properly account for events associated with convertingcertain fixedprice contracts to time-and-materials-based contracts .

Quantifiable revenue impacts during the three months ended December 31,2000 were: a) reduction in revenue of $(11 .9) million, due to a change in estimateson certain fixed price projects to limit revenue recognized to costs incurred,b) reduction in revenue of $(7.0) million , resultingfrom costs to convert certainfixed price contracts to time-and-materials-based contracts, and c) reduction inrevenue of $(7.2) million, due to disputes on certain projects .

Our historical guaranteed fixed price, fixed-time contracts have had and maycontinue to have an adverse impact on our financial results .

Prior to 2001, an important element of our strategy was to enter into fixed-price, fixed-time contracts, rather than time-and-materials contracts . Thesecontracts involved risk because in certain instances they required us to absorbpossible cost overruns and, if we failed to meet our performance obligations, mayhave required us to satisfy our performance guarantee. Historically, weguaranteed that we would complete our projects within a fixed time or thecustomer had the option to return the software and receive a refund of any feespaid under the contract. For fixed price contracts, we recognized license feesrelated to the application and the application development service fees over timeas we performed the services, using the percentage-of-completion method ofaccounting. Our failure to accurately estimate the resources required for a projector our failure to complete our contractual obligations in a manner consistent withthe project plan has caused us to have lower margins or to suffer a loss on someprojects, which has negatively impacted our operating results. In specificcircumstances, we were required to commit unanticipated additional resources tocomplete projects. We will likely experience similar situations in the future .Beginning in the fourth quarter of 2000, we no longer offer the TenFoldGuarantee as a standard part of our contracts .

If we are unable to successfully market our services on a time-and-materials basis,our future operating results could suffer.

-61-

An element of our prior strategy was to enter into fixed price, fixed-timecontracts, and to provide the TenFold Guarantee as a standard part of ourcontracts. Beginning in thefourth quarter of 2000, we no longer offerfixed price,fixed-time contracts or the TenFold Guarantee. We now offer our services on atime-and-materials basis. Although we believe that our prior guaranteed fixed-price offering was only one element of what motivated customers to work with us,we do not yet have much experience marketing our services on a time-and-materials basis. If we are unsuccessful marketing our services on a time-and-materials basis, or are forced to reduce our rates for such services, or are requiredto provide significant concessions to convert existing fixed price projects to time-and materials based projects, it may have a material adverse impact on ourbusiness, results of operations, financial position, or liquidity .

TENFOLD ' S FALSE FINANCIALREPORTING DURING THE CLASS PERIO D

71 . In order to inflate the price of TenFold's securities, defendants caused the Compan y

to falsely report its results for at least each quarter of 1999 and the first three quarters of 2000

through the use of improper revenue recognition on as many as 12 contracts and failure to recor d

adequate reserves for uncollectible receivables, thereby materially overstating its net income an d

EPS in at least each quarter of 1999 and the first three quarters of 2000 .

72 . TenFold reported the following results during the Class Period :

QI 99** Q2 99 Q3 99 Q4 99 Q1 00 Q2 00 Q3 00

License Revenues $ 5 .66M $ 7 .51M $10 .26M $23 .66M $ 4 .68M $ 7 .59M $ 4 .04M

Services Revenues $10 .37M $11 .53M $13 .21M $10 .24M $26 .99M $18 .78M $14 .85 M

Net Income $ 0 .13M $ 092M $ 2.5M $ 4 .8M* $ 3 .1M* ($ 6 .48M) ($21 .1 6

M)

Earnings (Loss) Pe r

Share

$ 0 .01 $ 0 .03 S 0.7M $ 0 .13* $ 0 .08* ($ 0 .19) ($0 .61 )

* Excluding acquisition related costs .Including in IPO Prospectus/Registration Statement .

73 . These results, and the representations concerning them, were false and misleadin g

when made, as TenFold's financial statements for 1999 and the first three quarter of 2000 were no t

fair presentations of TenFold's results and were presented in violation of GAAP and SEC rules .

74. GAAP are those principles recognized by the accounting profession as th e

conventions, rules and procedures necessary to define accepted accounting practice at a particula r

-62-

time . SEC Regulation S-X (17 C.F .R. §210.4-01(a)(1)) states that financial statements filed with

the SEC which are not prepared in compliance with GAAP are presumed to be misleading and

inaccurate , despite footnote or other disclosure . Regulation S-X requires that interim financial

statements must also comply with GAAP, with the exception that interim financial statements need

not include disclosure which would be duplicative of disclosures accompanying annual fin ancial

statements . 17 C.F.R. §210.10-01(a) .

75 . TenFold represented that it recognized software license revenue in accordance wit h

AICPA Statement of Position ("SOP") 97-2 . The Company also represented that it recorded revenue

under the percentage of completion for contracts that required service to make the software

functional . According to TenFold's 1999 Form 10-K filed during the Class Period :

The Company derives its revenues from license fees, application development andimplementation services, support, and training services . License revenues consist offees for licensing the Universal Application and license fees for the applications thatthe Company develops for its customers . The Company also derives license revenuesfrom the resale of vertical applications products . Service revenues consist of fees forapplication development and implementation, support and training .

SOP 97-2 generally requires revenue earned on software arrangements involvingmultiple elements such as software products, enhancements, post-contract customersupport, installation and training to be allocated to each element based on the relativefair values of the elements . The fair value of an element must be based on evidencewhich is specific to the vendor . The revenue allocated to software products isgenerally recognized upon delivery of the products unless services provided areconsidered essential to functionality of the software .

For software arrangements that include a service element that is essential to thefunctionality of the software, the Company recognizes license and service fees overtime as services are performed, using the percentage-of-completion method ofaccounting based on costs incurred relative to total estimated costs . Full provisionis made for any anticipated losses in the period such losses are identified . In limitedsituations, the Company also provides application development and implementationservices on a time and materials basis . The Company recognizes revenue on timeand material contracts as services are performed. License fees recognized using thepercentage-of-completion method, for the years ended December 31, 1999, 1998, and1997 were $15 .8 million, $9 .6 million, and $4 .5 million, respectively .

-63-

76. GAAP, as set forth in SOP 97-2, Software Revenue Recognition , states that where

a software arrangement does not require significant production, modification, or customization of

software, revenue is recognized only where all of the following criteria are met : (1) Persuasive

evidence of an arrangement exists ; (2) Delivery has occurred ; (3)The vendor's fee is fixed and

determinable ; and (4) Collectibility is probable . Where a software arrangement requires significant

production, modification, or customization of software, the entire arrangement should be accounted

for in conformity with Accounting Research Bulletin ("ARB") No . 45 and SOP 81-1 .

77. GAAP, as set forth in FASB Statement of Financial Accounting Standards (" SFAS" )

No. 5, Accounting for Contingencies, requires that a loss should be recorded for the contingency

when the loss is probable and the amount can be reasonably estimated . See SFAS No. 5 ¶¶8 and 22 .

78. According to GAAP, as set forth in ARB No . 45, the "percentage -of-completio n

method recognized income as work on a contract progresses ." ARB No. 45, ¶3 .

79. GAAP, as set forth in SOP 81-1, use of the percentage of completion method i s

appropriate only where all of the following conditions exist:

• Contracts executed by the parties normally include provisions that clearly specify theenforceable rights regarding goods or services to be provided and received by theparties, the consideration to be exchanged, and the manner and terms of settlement .

• The buyer can be expected to satisfy his obligations under the contract .

• The contractor can be expected to perform his contractual obligations .

SOP 81-1 .23 .

80. Due to TenFold's inability to complete its contracts and due to the "TenFold

Guarantee," TenFold's recognition of revenue under the percentage of completion on many of it s

contracts was improper as, contrary to SOP 81-1, TenFold (the contractor) could not "be expecte d

to perform" its contractual obligations .

81 . In mid-1998, TenFold began offering the "TenFold Guarantee," a money-back

guarantee for large-scale software applications, wherein, for certain contracts, TenFold guarantee d

to complete projects within a fixed time period or refund the fees paid .

-64-

82. By the beginning of the Class Period, TenFold was already experiencing significant

problems completing its contracts . These problems continued during the Class Period . For example,

on July 7, 1999, Ohio Farmers made a formal demand for the return of $5 .79 million it had paid

TenFold under a contract to deliver integrated computer software . On August 24, 1999, Ohio

Farmers reiterated its demand for the return of the funds . However, TenFold continued to recognize

revenue on contracts where it was not completing the implementation as required by the contracts .

TenFold also failed to reverse revenue or record adequate reserves where the customer was

demanding a refund of revenue that was already recognized .

83 . TenFold's revenue recognition violated GAAP and its stated revenue recognition

policy by recording revenue on sales where it had not completed the proportion of the contract it was

recognizing as revenue . In fact, work was not progressing on the contracts in the amounts TenFold

was recognizing as revenue . Moreover, TenFold was not recording losses for contracts it had

breached . As a result of TenFold's accelerated revenue recognition, TenFold's unbilled receivables

(representing revenue TenFold had recognized, but for which it could not bill its customer) increased

to $10.1 million by March 31, 2000 .

84 . Absent the Company's improper revenue recognition and improper accounting for it s

allowance for doubtful accounts, TenFold would have reported materially lower EPS . In the fourth

quarter of 2000, TenFold actually reported negative revenue, essentially reversing $26 million in

previously reported revenue . Then, on April 12, 2001, TenFold revealed that the SEC is

investigating its revenue recognition decisions on about 12 contracts .

85 . In TenFold's 2000 Form 10-K, filed at the end of the Class Period, the Company

disclosed numerous problematic contracts as well as the amount of revenue TenFold had recognized

on the contracts . Such revenue recognition was improper due to TenFold's inability to, and failure

to, complete the contracts .

The amount this improper revenue recognized included the following :

-65-

• Westfield Companies . TenFold recognized $5 .8 million in revenue in Q1 and Q21999. Westfield now asserts that TenFold failed to deliver on its contractualcommitments and has demanded a refund .

• Nielsen Media Research, Inc . TenFold recognized $4 .5 million in revenue from Q41997 to Q 1 2000, including $1 .7 million in 1999 and $283,000 in Q1 2000 . Nielsennow asserts that TenFold failed to deliver on its contractual commitments .

• Trumbell Services, Inc. TenFold recognized $3 .5 million in revenue from Q2 1999to Q2 2000, including $821,000 in Q4 1999 and $2 .5 million in 1999 . Trumbellasserts that TenFold failed to deliver on contractual commitments and is seeking arefund of at least $2 .8 million in fees to TenFold .

• Unitrin Services Company, Inc . TenFold received fees of $13 .3 million for thePower PAC application which Unitrin is now demanding be refunded .

• Utica Mutual Insurance Company . TenFold recognized $7 .6 million in revenue fromQ4 1998 to Q3 2000, including $5 .3 million in 1999 and $900,000 in the first threequarters of 2000 . Utica claims TenFold breached the contract, breached itswarranties and guarantees and engaged in false advertising .

• Southern Company Energy Marketing L .P. ("SCEM") . TenFold recognized $11 .5million in revenue from Q2 1999 to Q3 2000, including $6 .8 million in 1999 and$4.5 million in the first three quarters of 2000 . SCEM claims TenFold breached itsSoftware Licenses and Service Agreement .

• Crawford & Company . TenFold recognized $2 .3 million in revenue in the first threequarters of 2000 and $1 .8 million in 1999 . Crawford claims TenFold breached itsSoftware Licenses and Service Agreements .

• An additional unnamed customer. TenFold recognized $974,000 in 1999 and $9 .6million in the first three quarters of 2000 . The customer seeks to terminate thecontract with TenFold .

• A second unnamed customer . TenFold recognized $1 .3 million in revenue in 2000 .The customer claims TenFold has breached the agreement .

86. The above instances in which TenFold recognized revenue on contracts it has no w

been accused of breaching demonstrates a pattern of TenFold's inability to complete its contractual

obligations. As such, it was improper for TenFold to recognize revenue on these contracts . TenFold

recognized revenue of $169 million for 1999 and the first three quarters of 2000 . Based on the

above-described contract breaches, TenFold improperly recognized at least $45 million in revenue

or 26% of all the revenue recognized during the Class Period . Based on TenFold's gross margins

of approximately 67% and tax rate of approximately 44%, the $45 million in improper revenue

inflated TenFold's net income by nearly $17 million during the Class Period . The cumulative ne t

-66-

income of $11 .5 million TenFold reported for 1999 and the first quarter 2000 would have been a loss

had TenFold properly reported its revenue .

87. Due to these accounting improprieties, TenFold presented its financial results an d

statements in a manner which violated GAAP, including the following fundamental accounting

principles :

(a) The principle that interim financial reporting should be based upon the sam e

accounting principles and practices used to prepare annual financial statements was violated (AP B

No. 28, ¶10) ;

(b) The principle that financial report ing should provide information that is useful

to present and potential investors and creditors and other users in making rational investment, credi t

and similar decisions was violated (FASB Statement of Concepts No . 1, ¶34) ;

(c) The principle that financial reporting should provide information about th e

economic resources of an enterprise, the claims to those resources, and effects of transactions, events

and circumstances that change resources and claims to those resources was violated (FAS B

Statement of Concepts No . 1, ¶40) ;

(d) The principle that financial reporting should provide information about how

management of an enterprise has discharged its stewardship responsibility to owners (stockholders)

for the use of enterprise resources entrusted to it was violated. To the extent that management offers

securities of the enterprise to the public, it voluntarily accepts wider responsibilities for

accountability to prospective investors and to the public in general (FASB Statement of Concept s

No . 1, ¶50) ;

(e} The principle that financial reporting should provide information about a n

enterprise's financial performance during a period was violated . Investors and creditors often use

information about the past to help in assessing the prospects of an enterprise . Thus, although

investment and credit decisions reflect investors' expectations about future enterprise performance ,

-67-

those expectations are commonly based at least partly on evaluations of past enterprise performance

(FASB Statement of Concepts No . 1, ¶42) ;

(f) The principle that financial reporting should be reliable in that it represent s

what it purports to represent was violated . That information should be reliable as well as relevant

is a notion that is central to accounting (FASB Statement of Concepts No . 2, ¶¶58-59) ;

(g) The principle of completeness, which means that nothing is left out of th e

information that may be necessary to insure that it validly represents underlying events and

conditions was violated (FASB Statement of Concepts No. 2, ¶79) ; and

(h) The principle that conservatism be used as a prudent reaction to uncertaint y

to try to ensure that unce rtainties and risks inherent in business situations are adequately considered

was violated . The best way to avoid injury to investors is to try to ensure that what is reporte d

represents what it purports to represent (FASB Statement of Concepts No . 2, ¶¶95, 97) .

88 . Further, the undisclosed adverse information concealed by defendants during the

Class Period is the type of information which, because of SEC regulations, regulations of the

national stock exchanges and customary business practice, is expected by investors and securities

analysts to be disclosed and is known by corporate officials and their legal and financial advisors to

be the type of information which is expected to be and must be disclosed .

DEFENDANTS KNEW THAT THEIR REPRESENTATIONS WEREFALSE BECAUSE TENFOLD NEVER HAD THE CAPABILITY TO

DELIVER COMPLEX SOFTWARE SOLUTION SON TIME AND ON BUDGET

TenFold Breached ItsContract With Nielsen

89. Nielsen is the leading provider of television audience measurement and relate d

services in the United States and Canada . Nielsen provides television ratings and audience estimate s

for national and local customers, including television networks and affiliates, independent stations ,

syndicators, cable networks, cable systems, advertisers and their agencies . These ratings provide an

-68-

estimate of audience size and composition, allowing television programmers and commercial

advertisers to buy and sell television air time and to make program decisions .

90. Nielsen analyzes raw data using sophisticated computer programs to provide its

customers with statistically meaningful information, such as viewing patterns in local television

markets around the United States. Because of the speed at which the television markets operates,

Nielsen must quickly process the raw data into usable form. Thus, the performance of Nielsen's

computer systems is of the utmost importance .

Nielsen 's Existing "VIP" Computer Syste m

91 . For many years, Nielsen has been using its Viewers in Profile ("VIP") system t o

process local viewer information . The VIP system was written in the 1970s and has been modified

over the years to increase its functionality, including adding support for local cable and Hispanic

services . VIP is a complex and calculation-intensive computer program that uses statistical analysis

and models to produce high quality, non-biased estimates of television audiences . Nielsen uses VIP

to produce approximately 1,200 reports a year .

92. Although VIP had performed mission critical tasks admirably over the years, by th e

mid-1990s, Nielsen thought it needed a more modern computer system that would allow greater

flexibility and use more modern technology . In addition, Nielsen recognized in the mid-1990s that

the VIP system had a Year 2000 problem, which would cause it to malfunction after December 31,

1999 unless it was fixed . Because of these issues, Nielsen decided that it was appropriate to look

into either modifying or replacing its VIP system .

Nielsen Defines Its Requirements for a New Syste m

93 . In 1995, Nielsen began to define the requirements for a new computer system, which

it initially called the Local Information Processing System ("LIPS") . Nielsen then proceeded to

spend two full years defining the requirements for LIPS, including the complex calculations the

system would have to perform . Nielsen also selected an underlying system architecture for LIPS .

-69-

94. By mid-1997, Nielsen was ready to proceed to the next stage in the development

process - determining the best, most efficient and quickest way to develop and implement the system

that it had been working to define . Nielsen wanted to implement its new system in the minimum

amount of time possible and utilizing the industry's best practices and thus set out to hire an outside

consulting firm . It was at that time that Nielsen learned of TenFold.

TenFold Makes Numerous Representations to Induce Nielsen to Hire TenFol d

95 . In discussions with Nielsen, TenFold represented that it had a breakthrough

application development technology and approach that allowed it to design, build, and test large,

complex, mission-critical applications, like Nielsen's VIP replacement, at a fraction of the cost and

time it would have taken its competitors . TenFold emphasized this in a September 17, 1997

executive briefing for Nielsen, during which it claimed to be able to "[b]uild sophisticated

applications orders of magnitude faster than anyone else . "

96. TenFold claimed that it could achieve these advantages because of its Universal

Application . TenFold said that its Universal Application allowed it to reuse components and

develop applications faster than had been previously possible . According to TenFold, "70180% of

common components are pre-built . "

97. TenFold also expressed its willingness to commit to build and implement this new

system for a fixed price and in a fixed time . In its September 17, 1997 executive briefing, TenFold

stated that it would "[c]ommit to a fixed price, fixed schedule after developing initial 3 week

Executive Overview . "

98 . TenFold, as well as one other company, bid on developing Nielsen's new compute r

system. What convinced Nielsen to hire TenFold was TenFold's claim that its special expertise and

development environment would allow it to implement the new system in less than a year . This

was far less time than the other bidder said it would take . Because Nielsen was anxious to derive

the benefits of the new system as quickly as was reasonably feasible and because of the approaching

Year 2000 problem, Nielsen selected TenFold to develop its new computer system .

-70-

TenFold Works With Nielsen to Further Specify the System

99. Starting in the Fall of 1997, TenFold and Nielsen personnel worked together to

determine the requirements for the new application, now called LASER . LASER was to be a new-

generation local market television audience metrics application. LASER was to allow Nielsen to

manage its products, to gather and refine data, to complete audience estimates, to process orders and

to manage process schedules and workflow. LASER also was to interface with other existing

Nielsen applications, to gather input data and to feed data to downstream processes . And, LASER

was supposed to improve upon Nielsen's existing VIP computer system by allowing Nielsen to

change the rules and parameters that guide its processing without reprogramming .

100 . In late 1997, TenFold worked with Nielsen personnel to produce an "Executive

Overview" of the LASER application . This Executive Overview described the high-level

requirements of the system. Following the completion of the Executive Overview and continuing

into 1998, TenFold and Nielsen produced a first draft of the LASER "Concepts Manual ." The

Concepts Manual described more detailed requirements of the LASER application . After reviewing

the Concepts Manual, Nielsen expressed concern to TenFold that the Concepts Manual did not

contain sufficient detail to allow TenFold to develop the system, but TenFold assured Nielsen that

its methodology, the "TenFold Way," would address these issues and not impair the LASER project .

101 . During this same period, TenFold and Nielsen also produced the Database Design

Manual, regression test scenarios and test data . These documents, the Executive Overview, and the

Concepts Manual collectively described the application that TenFold was to build for Nielsen.

TenFold Agrees to a Fixed Price for a Fully Tested System Meeting Nielsen's Need s

102. In March 1998, after TenFold produced the Executive Overview and the LASER

Concepts Manual, TenFold and Nielsen entered into a "Master Software License and Services

Agreement" (the "Contract") . The Contract required TenFold to produce the LASER application for

a fixed amount of money and in a set amount of time .

-71-

103 . In total, Nielsen agreed to pay TenFold a fixed price of $6,050,000 to develop, test,

and implement the LASER application. Some of these payments were to be made on designated

dates and other payments were to be made only on the completion of certain project milestones .

104. For its part, TenFold agreed through Exhibit B of the Contract, entitled Fixed Pric e

Design and Development Services, to " [b]uild the LASER application described and specified in the

LASER Executive Overview ." More specifically, TenFold agreed to "[c]omplete the LASER

application, including all features specified in the LASER Executive Overview" and "all features

described in the LASER Concepts Manual . "

105 . The Contract also required TenFold to develop certain "C++ calculation engines . "

Through Exhibit D of the Contract, entitled Development of C++ Calculation Engines , TenFold

noted that "[a] critical component of the LASER business cycle is to impute , weigh[t], and aggregate

viewer diary, set meter , and audience estimate data. . . . These complex, time-critical engines must

be written in a procedural l anguage to meet these criteria, and you requested C++ . We will assume

the responsibility for this and get it done within the scheduled time frame at a cost of $750,000 . "

106. In order to satisfy TenFold's contractual obligations , the system developed by TenFold

needed to pass a number of tests . The first specified test is referred to as "benchmark testing ."

Exhibit C of the contract, entitled Benchmark Goals and Testing, requires that the benchmark test

"[d]emonstrate excellent, scalable performance . . . [and] confirm LASER design strategy ." Exhibit

C of the contract further specifies that the LASER application must meet Nielsen's performance

requirements by "complet[ing] a market-close cycle in three (3) hours . A market-close cycle is all

processing necessary to turn diary and meter sample data into audience estimate output and distribute

that output." In addition to a successful benchmark test, the system was required to satisfy an

Application Acceptance Test and a Production Acceptance Test . To date, TenFold has satisfied none

of these tests .

107 . TenFold agreed to "use its reasonable efforts" to deliver the completed LASER

applicationfor benchmark testing by July 1998. This meant that the system was to be completed

-72-

and delivered for testing four months after the Contract was executed . The system remained

incomplete after twenty-three additional months .

108 . Through the Contract, TenFold warranted that the LASER application "will materially

conform to the specifications agreed upon by the parties and contained in the Documentation that

is delivered with the Programs . . . [and that] the Programs have been developed in a workmanlike

manner ." Twenty-three months after the completed system was to be delivered, TenFold failed to

demonstrate that the system it delivered satisfies the agreed-upon specifications .

109. The Contract provides that TenFold may terminate the Contract if it "materially fail s

to meet the first benchmark performance requirements scheduled for testing in February 1998 ." In

the case of such a termination, TenFold is required to return all of Nielsen's payments in excess of

$1,225,000 . Even though TenFold failed to meet the February 1998 performance benchmark and

has still failed to satisfy the required benchmark testing, TenFold has chosen not to terminate the

Contract .

110 . The Contract also gives Nielsen the right to terminate the Contract in the event of a

material breach by TenFold . Before terminating for material breach, however, Nielsen must give

TenFold written notice and thirty additional days to cure the breach . Nielsen gave TenFold notice

of breach on May 10, 2000, and then terminated the Contract on June 14, 2000 as a result of

TenFold's failure to cure its breaches .

The First Amendment

111 . After it signed the Contract, TenFold started to have trouble designing the LASER

application, and the scheduled date for completing the project started to slip. For example, the

Contract specifies that TenFold would run its first benchmark test in February 1998 . TenFold did

not even try to run this test until April or May of 1998, and when the test was finally run, it was a

complete failure .

112 . Notwithstanding this failure, TenFold chose not to terminate the Contract, as the

Contract permitted it to do. Had it terminated the Contract, TenFold would have had to return all

-73-

moneys paid by Nielsen in excess of $1,225,000 . Instead of choosing this course, TenFold opted to

plow ahead and insisted on further payments, including the time-based payments specified in the

Contract. Nielsen resisted, pointing out that TenFold had failed to make progress on the LASER

application and would not complete the project by July 1998 as it had originally agreed to do .

113 . In an attempt to resolve this dispute over payments, Nielsen and TenFold agreed t o

amend the Contract, entering into "Amendment Number One to the Master Software License and

Services Agreement" ("First Amendment") on June 30, 1998 . The First Amendment modified the

payment schedule in the Contract .

The Schedule Slips Again

114. Although the LASER application was originally to be completed by July 1998, by the

time of the First Amendment, it was clear that TenFold would not be able to complete the LASER

application by the date specified. Accordingly, shortly after signing the First Amendment, the parties

changed the delivery date for the system from July 1998 to January 1999 .

115, In July 1998, TenFold claimed to have attempted to run another benchmark test .

TenFold reported to Nielsen that this test showed that certain essential functions worked . However,

TenFold would not allow Nielsen to audit its results and TenFold's explanation of what it tested did

not match the resulting state of the database. In one case, TenFold claimed to have tested a module

that had not yet even been built .

116. By October 1998, it became clear that TenFold would be unable to meet even the ne w

January 1999 completion date . Concerned about TenFold's ability to meet Nielsen's performance

criteria, Nielsen asked TenFold through an October 28, 1998 letter to re-examine whether it could

deliver the LASER application and the feasibility of using TenFold's technology for the LASER

project. Essentially, Nielsen wanted TenFold to make a good faith determination of whether it could

deliver the LASER application and whether the application would meet the required benchmarks .

Nielsen also asked TenFold to consider terminating the Contract under paragraph 3 .3, the provision

that allows TenFold to terminate the Contract if TenFold materially fails to meet the first benchmar k

-74-

performance requirements, which would have required TenFold to remit all payments back to

Nielsen except for $1,225,000 .

117. TenFold did not respond to Nielsen's October 28, 1998 letter until December 10,

1998, at which point it indicated that it was unwilling to terminate the Contract and refund Nielsen's

payments . TenFold acknowledged that it would fail to meet the original delivery date, which was

five months earlier, and admitted that it also would fail to meet the revised January 6, 1999 deadline

for delivering the LASER application. TenFold tried to excuse its delay by claiming that Nielsen

was uncertain about its functional requirements, notwithstanding the fact that Nielsen had finished

defining its functional requirements during the earlier LIPS project and had worked with TenFold

for over a year on requirements . More significantly, however, TenFold assured Nielsen that it was

"confident that its technology and methodology will lead to successful development of the LASER

application, ultimately meeting all of Nielsen's requirements and expectations . "

118 . Due to the delay, in May 1998, Nielsen personnel and outside contractors started a

remediation effort to make the VIP system Year 2000 compatible . This was a cost that Nielsen had

specifically wanted to avoid when it chose to hire TenFold to build a replacement system . When

TenFold fell behind schedule, however, Nielsen had no choice but to protect its business and

mitigate its damages by making costly changes to the VIP system . All in all, it took Nielsen and its

outside contractor until May 1999 to make the VIP system Year 2000 compatible . This remediation

effort cost Nielsen approximately $355,000 .

119 . Although it originally said in the Contract that it expected to complete the entir e

LASER system by July 1998, TenFold did not complete its first post-contract attempt at the

Concepts Manual - which is supposed to define the functionality TenFold is to implement in the

system - until early 1999 . Further, TenFold was expected to modify the Concepts Manual to

describe the system as built and to deliver that Manual with the final delivery of the software .

TenFold did not deliver a final Concepts Manual with the final software and has not delivered this

manual to date .

-75-

120. Although TenFold continued to add detail to the Concepts Manual, Nielsen's business

needs never changed during the course of TenFold's work on the LASER system .

The Second Amendment

121 . By the Summer of 1999, TenFold had received all its time-based payments under th e

Contract and First Amendment and was receiving no more money from Nielsen . Although it still

had not produced a working application, TenFold was still working on the LASER project and told

Nielsen that it needed cash flow to fund its effort . TenFold wanted the $795,000 that was to be due

upon successful completion of the performance test, even though it had not successfully passed that

milestone.

122. Concerned about TenFold's ability to meet the performance test criteria for th e

software it was developing, but dependent on TenFold to complete the project, Nielsen agreed to

"Amendment Number Two to Master Software License and Services Agreement" (the "Second

Amendment"), which was effective June 30, 1999 . The Second Amendment rescheduled Nielsen's

$750,000 payment to TenFold, originally due upon successful completion of the February 27, 1998

benchmark test . Rather than paying this money after successful completion of the benchmark,

Nielsen agreed to pay TenFold upon the completion of milestones short of a successful benchmark .

Because the first three of these new milestones had already been completed when the parties signed

the Second Amendment, Nielsen immediately paid TenFold $500,000, over half the money that

would have been paid upon successful completion of the benchmark test under the prior agreement .

123 . The parties also agreed in the Second Amendment to define commercially reasonable

performance criteria for the LASER application . These performance criteria were accepted in

writing in late September 1999 . These criteria were to be used for "demonstrating the satisfactory

performance of the LASER application" as required by the Contract .

124. The agreement on the performance criteria satisfied another milestone in the Second

Amendment and required Nielsen to pay TenFold an additional $150,000 . At this point, Nielsen had

paid TenFold most of the money originally due upon a successful completion of the performanc e

-76-

benchmark -- $650,000 of $795,000, even though TenFold still had not completed the application

or benchmark tested it . Further, Nielsen had paid TenFold $4,467,500 of the $6,050,000 due under

the Contract, even though the LASER application was not nearing completion .

Nielsen Becomes Increasingly Concerned That TenFold Cannot Complete the Projec t

125 . When TenFold began to deliver to Nielsen partial releases of its code in late 1999,

it became apparent that the LASER application contained several defects in high-priority areas .

Moreover, the code that was delivered could not be successfully tested by Nielsen . In many cases,

the software did not even have the ability to load data, preventing Nielsen from conducting its

testing .

126. Concerned about this code, Nielsen requested, in late 1999, a meeting with senio r

TenFold executives to discuss the status of the LASER project . On January 31, 2000, the parties met

and TenFold assured Nielsen that it could complete the promised system . TenFold further assured

Nielsen that the problem was not one of proj ect scope but one of implementation . TenFold promised

that key TenFold resources would be made available and that TenFold would provide a detailed

project plan, which would include a completion date for the project, within 30 days of the meeting .

Nielsen never received such a plan .

127 . On January 3, 2000, Nielsen received TenFold's 'final" release of the LASER

application code. Nielsen immediately began its application acceptance test efforts. None of these

tests were successful. For example, the test of one specific software function, which should have

executed in minutes, started on March 30 and ran into April 1, 2000, taking 38 hours . This one

software function is only one of many that must be performed to complete a 10-15 market close . A

market close is all the processing necessary to turn diary and meter sample data into audience

estimate output and to distribute that output . Exhibit C to the original Contract, as clarified in the

September 1999 performance criteria, requires the LASER application to be able to successfully

complete a market close for all markets in three hours . Nielsen's old VIP system has met this

production standard for years .

-77-

128 . Shortly after this test was attempted, in an April 13, 2000 letter, Nielsen stressed to

TenFold the need to complete the LASER application promptly and reminded TenFold that the

LASER application must meet mutually agreed performance benchmarks . Instead of informing

Nielsen of when it expected to produce the completed system, TenFold suggested in its April 24,

2000 response that it wanted to convene yet another project review team to confirm the technical

feasibility of the LASER application, to estimate the remaining time needed to complete the project,

to review actions needed by TenFold, and to review actions needed by Nielsen . TenFold wanted to

perform this review in spite of working on the LASER application, at that time, for approximately

two and a half years .

129. As recently as a May 1, 2000 letter indicates, TenFold refused to commit to a date on

which it would complete the LASER application . TenFold was unwilling to make such a

commitment, even though, over two years earlier, it had committed to use its best efforts to complete

the LASER application within four months and had assured Nielsen on several other occasions that

it would be able to build the promised system . TenFold also remained unwilling to admit its

problems, terminate the Contract under paragraph 3 .3 and refund all of Nielsen's payments except

$1,225,000 .

Nielsen 's Termination of Contract

130 . On May 10, 2000, Nielsen notified TenFold that TenFold was in breach of the

Contract andits amendments and that Nielsen was terminating the Contract , subject to TenFold's

30 day right to cure .

131 . On June 9, 2000, TenFold responded to Nielsen's May 10, 2000 letter, not by

contending it was not in breach, but by proposing a further modification to the parties' agreement .

TenFold wanted even more money to "complete" the LASER application -an additional S1,500,000

plus an unspecified amount for changes TenFold would need to make to its Universal Application.

As a concession to Nielsen, TenFold offered to forfeit all unpaid amounts if it could not deliver the

LASER application in eight months and to accept a penalty for late delivery . However, at the sam e

-78-

time, TenFold wanted to fundamentally alter what it needed to do to "complete" the LASER

application . In particular, TenFold wanted to eliminate the contractual requirement that it implement

a "production ready" system, and it wanted to relax the detailed performance criteria agreed to by

the parties on September 29, 1999 . Because Nielsen was unwilling to pay TenFold any additional

money - especially when TenFold would not promise to produce a production ready system that

meets Nielsen's requirements - and did not want to devote additional internal resources towards an

effort that showed no signs of success - Nielsen rejected TenFold's proposal on June 14, 2000 and

terminated the contract .

Existing Defects in LASER

132. The LASER system, as presently constituted, is woefully inadequate . It is

functionally incomplete as it does not address, much less satisfy, the functional requirements

described in the Executive Overview, Concepts Manual, Database Design Manual, regression test

scenarios and test data. And, it does not come close to satisfying the performance criteria set forth

in Nielsen's September 1999 agreement with TenFold .

133 . Moreover, the software written by TenFold contains several significant design or

architectural problems . For example, the database underlying the LASER system does not provide

for adequate data integrity . This means that relationships between data elements in the database can

be lost in the course of normal operation of the system . Because the relationship between data

elements is often as important as the data itself, the system did not satisfy Nielsen's operational

needs .

134 . Another architecture issue involves data segmentation. Nielsen requested in 1998 that

TenFold segment the database because the database would be too large to handle as a single unit .

TenFold first told Nielsen that segmenting the database was Nielsen's problem . Next, Nielsen

managed to get TenFold to agree to add segmentation to its Universal Application development

environment, although TenFold never explained how it would accomplish this . TenFold claims to

have added segmentation to its Universal Application, but Nielsen is concerned that TenFold' s

-79-

segmentation scheme will not yield reasonable performance . Of course, TenFold has been unable,

to date, to test this performance .

135 . Finally, when TenFold delivered its final version of the software, even portions of its

Universal Application failed . For example, memory failures repeatedly caused application modules

to abort .

TenFold's Failure to Develop the System in a Workmanlike Manne r

136. Many of the problems in TenFold's development of the LASER application were

caused by the failure of its methodology, the "TenFold Way." TenFold tries to develop an

application interactively while having its customer "graze" the developing application to test it . This

methodology did not work for the LASER project because "grazing" tested only the transactional

logic of the screens, not the underlying programs that do the actual calculations . Early on, Nielsen

expressed concern that "grazing" would not adequately test the underlying calculation engines .

Though TenFold initially disagreed, it finally admitted that Nielsen was correct . By using this

methodology when it knew or should have known that important parts of the system would not be

subject to "grazing," TenFold failed to develop the LASER application in a workmanlike manner .

137 . Moreover, during TenFold's work on the LASER application, it repeatedly moved

personnel on and off the LASER project, often moving them to work for other customers . For

example, from November 1997, when it started to work on the LASER application, until the present,

TenFold has assigned eight different executive officers to the LASER project . TenFold has also

assigned six project leaders to the project . Other key TenFold personnel, after working on the

LASER application and gaining relevant expertise, were moved to other TenFold customers,

impeding the successful and timely development of the LASER application .

138. Nielsen, by contrast, has maintained a single person as the point person for TenFold

since 1997. Twelve other Nielsen personnel have also worked in key positions on the LASER

project since its inception .

-80-

TenFold Breached Its ContractWith Ohio Farmer s

139. The Ohio Farmers Insurance Company, a regional insurance organization providing

property and casualty insurance to individuals and commercial clients, sought to develop a

comprehensive, fully integrated computer software application capable of providing interactive

graphical user interface to enable its employees and insurance agents to perform all phases of policy

management, including product identification, underwriting, rating, issuance and endorsements . The

software envisioned by Ohio Farmers would provide a competitive advantage to the company by

attracting increased underwriting activity (due to ease of use), increasing administrative efficiencies,

and significantly reducing transaction times .

140. To obtain the envisioned software, Ohio Farmers communicated with various

vendors, including TenFold, who then aggressively solicited Ohio Farmers to provide development,

training and implementation services .

141 . During its negotiations with Ohio Farmers, TenFold represented to Ohio Farmers tha t

it possessed significant experience in the creation, design, engineering and development of complex,

integrated computer software, and had the personnel and technological expertise and capabilities to

develop the type of software that Ohio Farmers wanted . Specifically, TenFold's motto was "Do or

Die." It represented that it could "deliver large-scale software applications on time, on budget, and

on target - or we return your money . Do or Die ." TenFold further represented that it could deliver

complex computer software applications in "short time frames for a fixed price ." TenFold claimed

that its "revolutionary approach and technology allow it to build sophisticated applications

dramatically faster than ever before ." The "TenFold Way," it claimed, enabled it to "identify

requirements [and] design" and "show clean, visible results within weeks and commit to specific

milestones and delivery dates with every project . "

142. TenFold also represented that its "Universal Application," that is, the software

application and technology that it had already designed and that would provide the basis for the

specific application it would develop for Ohio Farmers under the proposed contract, was "pre-buil t

-81-

with complex problems already solved ." TenFold represented it had already developed, in its

Universal Application, the technology necessary to perform certain time-relational functions

necessary to meet Ohio Farmer's needs . A time-relational function is, in essence, the ability to

perform date-specific queries regarding coverage and the like under various policies . TenFold also

specifically represented that it could develop and deliver a fully tested and complete software

application containing numerous functionalities, including those described above, within six months

of commencement of the project .

143 . Relying upon the representations made by TenFold, Ohio Farmers decided to engag e

TenFold for a proof of concept project : to develop a computer software application for use with a

single product (the Business Owners Policy) in a single state (Michigan) within a specified time

frame (approximately six months) . Once TenFold proved itself capable of timely producing the

desired software on this limited scale, then Ohio Farmers hoped to follow with further computer

software development for its other products and markets .

144 . On December 9, 1998, TenFold formally proposed its plan to develop the proof of

concept product . The products were to be called the "BOP Commercial Policy Manager"' (the

"application") . The contract, which incorporated the descriptions contained in TenFold's proposal,

was executed on February 18, 1999 .

145 . TenFold ultimately agreed to a two-phase process . The first phase, referred to as the

"Build," was the development stage . It commenced on December 7, 1998 and was to be completed

by May 31, 1999 . The second phase, referred to as "FastStart," was the implementation stage, the

development of which was to commence on March 15, 1999 and conclude on May 31, 1999

(simultaneously with conclusion of the Build), followed by a "go-live" date of June 28, 1999 . The

total "fixed-cost" price of the Build was to be $8,133,334 . Ohio Farmers ultimately paid TenFold

a total of $5,794,038 .26 during the course of TenFold's attempted performance under the contract .

146. As part of the development process used by TenFold, TenFold agreed to support three

complete "grazing cycles" for development of the BOP Commercial Policy Manager. A "graze, "

-82-

referred to a process through which Ohio Farmers' personnel were to review and test the software

and provide comments and feedback on the capabilities, functionalities, and presentation of the

application. One of the important purposes of the "grazing cycle" was to add the necessary "look and

feel" characteristics to the application . TenFold was to take the criticisms, ideas, and suggestions

made by Ohio Farmers (the "graze comments"), and enter them into an "incident log," and produce

a regular report to Ohio Farmers to track TenFold's timely resolution of the graze comments . The

graze comments were then supposed to be incorporated into the software . TenFold assured Ohio

Farmers that these "grazing cycles" would produce the software that Ohio Farmers wanted . Final

delivery of the BOP Commercial Policy Manager was supposed to occur only after completion of

all Acceptance Tests ("ATs") satisfactory to Ohio Farmers, and the satisfactory treatment of all

grazing comments .

147. Development of the Build was supposed to occur on a dedicated "Certified Platform "

provided and maintained by TenFold . The Certified Platform was supposed to be the combination

of computer hardware version, operating system version, communications system version,

windowing management system version, and database system version described in the contract, and

on which TenFold was supposed to develop and test the BOP Commercial Policy Manager and

provide support services . Ohio Farmers agreed to pay TenFold a fee of $13,500 per month for the

development environment and the Certified Platform . In fact, TenFold did not build or maintain the

dedicated, Certified Platform during the performance of the project, as it was required to do under

the contract . Notwithstanding its willful failure to build and maintain the Certified Platform as

required by the contract, TenFold nonetheless accepted more than $50,000 .00 in payments from

Ohio Farmers for the Certified Platform during months when it did not exist .

148 . The second phase of the project, the implementation phase known as FastStart, was

to commence during and proceed concurrently with the Build phase, and to conclude with a fully

operational BOP Commercial Policy Manager on June 28, 1999 . Through FastStart, TenFold was

supposed to help Ohio Farmers deploy the BOP Commercial Policy Manager developed during th e

-83-

Build phase . TenFold was to implement data conversion, conduct user training, and provide

technical and applications support, integration testing, and production implementation strategies .

Specifically, TenFold was required to commence FastStart on March 15, 1999, and was to publish

its project plan not later than March 22, 1999 . TenFold's project plan was to include discussion of,

and time frames for, the conversion of file formats, conversion defaults, and algorithms ; data

mapping definitions and algorithms ; incoming data file formats, import defaults and algorithms ; and

outgoing data file formats, export defaults and algorithms. FastStart was also supposed to include

Build training and education for Ohio Farmers' personnel to train employees and agents in the

program operations .

149. In addition, TenFold was to take data extracted from Ohio Farmers' current systems ,

and systematically input the data into the BOP Commercial Policy Manager . Where necessary,

TenFold was to assist in determining appropriate corrective actions when data did not pass the BOP

Commercial Policy validation . TenFold also committed to assist Ohio Farmers' completion of data

mapping, and was to complete outgoing data flow imports, and commence production of conversion

data error reports .

150. During the project, however, it became apparent that TenFold was not able and in fac t

did not live up to its contractual obligations during the Build and FastStart phases . Specifically,

TenFold agreed to provide adequate and competent staffing to complete all phases of the project .

The contract required Ohio Farmers to provide two of its information services ("IS") employees to

work with TenFold staff members to learn all aspects of the development of the system for the

express purpose of assuring the transfer of technology necessary for Ohio Farmers to maintain the

application following completion of the Build . TenFold represented that dedication of IS employees

was the "optimal strategy for transferring knowledge from TenFold" to Ohio Farmers . But TenFold

did not provide the promised staff members necessary to provide thorough and adequate training to

Ohio Farmers' IS employees, and was not able to provide the assistance necessary to accomplish th e

-84-

promised transfer of knowledge . Indeed, TenFold even asked Ohio Farmers' IS employees to assist

in performing TenFold's obligations, especially as it relates to reports .

151 . The staffing problems went well beyond the failure to train Ohio Farmers' IS

employees. For example, TenFold experienced significant difficulty and delay in designing the

database for the computer system . TenFold represented that its database designer was to work with

Ohio Farmers' database administrator to design the database elements of the Commercial Policy

Manager. But TenFold failed to provide a full-time, dedicated database designer . In fact, TenFold

changed database designers several times during the unsuccessful Build phase . Moreover, TenFold

assigned multiple duties to one of its database designers, thus diverting his full attention from the

database development portion of the Build phase .

152 . TenFold's failure to provide consistent, competent database designers caused it s

failure to design an acceptable database structure to support the computer system it was obligated

to deliver under the terms of the contract . TenFold's failure to design the database was also the result

of its unilateral decision to change the scope and direction of the project . TenFold diverted its

resources from Ohio Farmers' project to develop a system that was intended for use by other

insurance companies. Specifically, when Ohio Farmers was preparing to participate in the first graze

in March 1999, TenFold advised that Ohio Farmers would graze the same application with another

insurance company for whom TenFold was providing similar services . TenFold directed both

companies to do an initial graze on the same application, and advised that separation of the

application would occur in later grazes .

153 . After the first graze, Ohio Farmers was advised for the first time that TenFold wa s

developing a computer application known as LOBB . TenFold claimed that LOBB would enable

Ohio Farmers to develop functionality more quickly than without LOBB, and that after the software

was fully developed, policy transactions could be effected more quickly and efficiently with LOBB

than without it . TenFold also represented that future projects could be developed more quickly if

they were based on the LOBB .

- 85 -

154. LOBB was never discussed during contract negotiations with TenFold, and Ohio

Farmers' contract with TenFold did not include the cost of a new license for LOBB . On May 12,

1999, TenFold provided its first explanation of the LOBB to Ohio Farmers . TenFold confirmed that

the LOBB would require its database structure to conform to the LOBB functions and structure . In

fact, TenFold confirmed that the LOBB would prevent Ohio Farmers from using its own database

for BOP Commercial Policy Manager or any future products . TenFold also confirmed that a

significant number of the "look and feel" requirements that were essential to creating the desired

graphical user interface could not be met with the LOBB . Thus, the very functionalities and

appearance that Ohio Farmers bargained for could not be accomplished with LOBB .

155 . Ohio Farmers did not agree to incorporate or accept the LOBB or otherwise depart

from the BOP Commercial Policy Manager promised in its contract with TenFold . Nonetheless,

significant time was lost on Ohio Farmers' project due to TenFold's activity on LOBB . By diverting

its resources and attention to the development of the LOBB to the exclusion of the BOP Commercial

Policy Manager, TenFold lost critical time in the development of the BOP Commercial Policy

Manager which rendered timely completion of the project impossible . In departing from its original

commitment to develop a product unique to Ohio Farmers, TenFold instead was devoting its

resources to the development of other technology not related to Ohio Farmers' project.

156 . TenFold's process also involved the creation of tests which were supposed to prov e

the functionality of the BOP Commercial Policy Manager . There were two components of TenFold's

tests - the ATs and the AutoTest . TenFold represented that the ATs and the AutoTest were

fundamental parts of its testing strategy and quality control, and were the most efficient and reliable

way to maintain high quality both during and after development and while enhancing an application .

The ATs were supposed to illustrate and verify all of the various functions that were to be built into

the software . The ATs were to have confirmed the structure, content, and reliability of each

function. The AutoTest was supposed to verify, on a daily basis, that as development continued, th e

-86-

application still passed all prior ATs . During the Requirements Phase, TenFold agreed to perform

approximately 189 separate ATs for the development of the BOP Commercial Policy Manager .

157. TenFold failed to meet its contractual obligation to perform and verify ATs .

Specifically, the ATs were designed to confirm that the individual functions of the BOP Commercial

Policy performed in conformity with Ohio Farmers' requirements, as agreed to by TenFold in the

contract. Pursuant to the terms of the contract, TenFold was required to deliver successful ATs as

to each individual function required by the TenFold Commercial Policy Manager Acceptance Tests

Book .

158 . TenFold specifically represented that Acceptance Testing was essential to

development productivity and applications quality because :

(a) They illustrate all the functionalities that must be built into the Commercial

Policy Manager ;

(b) The ATs contain test cases to demonstrate correct application behavior by

verifying all of its functionality ;

(c) The ATs show how to use the BOP Commercial Policy Manager and how the

BOP Commercial Policy Manager reacts to different data and transaction sequences ; and

(d) ATs re-test the BOP Commercial Policy Manager so that subsequent changes

do not inadvertently introduce unexpected, changed behavior in various test cases .

159. Each time an AT is tested, its AutoTest Report is compared to the AutoTest Reports

from its prior execution and analyzed to verify that changes work as intended, and to detect

unintended effects of changes. Thus, the ATs were supposed to execute all capabilities and

functionalities of the BOP Commercial Policy Manager, and no progress could be made on further

development of the BOP Commercial Policy Manager absent the systematic and successful

completion of all ATs .

160. The parties subsequently learned that database changes would often adversely affect

functionality developed under a prior AT even though the test results indicated that that particula r

-87-

AT was performing properly . To ensure that the ATs had any credibility, the ATs had to be

manually retested whenever related functions were developed later . However, by May of 1999, it

became clear that TenFold did not intend to permit Ohio Farmers to retest ATs, and was either

unwilling or unable to successfully run all of the ATs already written .

161 . TenFold represented that its complete test suite would be and was run nightly, an d

that it would and did verify that each day's work did not affect the work which came before .

However, TenFold was not running the complete test suite on a nightly basis as required by the

contract . In fact, in an effort to produce a so-called successful AT, TenFold manually entered data

into fields (called "hard coding"), and kept no record of such activity for future corroboration or

correction .

162. TenFold failed to deliver successful ATs of all of the functions it was obligated to

design . For instance , at the second graze, of the 60 ATs reviewed , 15 had significant problems . At

a mini-graze held on or about May 12, 1999, only 2 of 14 ATs were complete and functional . There

were serious problems with the remaining 12 ATs. Moreover, some ATs that had been successfully

completed were invalidated by subsequent tasks , thus requiring retest of all prior ATs whenever new

functionality was added to the application . TenFold directed Ohio Farmers to focus on approving

additional ATs and did not include in its process a method or time allowance for validating prior

ATs. Further hampering TenFold' s ability to perform successful ATs was the fact that the Universal

Application was unstable and unable to perform the required tasks .

163 . Due to TenFold's continued and unremedied failures under the contract , TenFold di d

not and has not met the performance requirements and deadlines required by the contract . Under

paragraph 3 .2 of the contract (original paragraph 3 .3), Ohio Farmers could terminate the contract if

TenFold materially breached the contract and failed to correct such breach within 30 days following

written notice specifying the breach . In compliance with this provision , on May 21, 1999, Ohio

Farmers sent a letter to TenFold identifying specific breaches of the contract . Ohio Farmers' letter

of May 21, 1999 constituted the notice required by paragraph 3 .2. The letter stated :

_88-

May 21, 1999via email & certified overnight mail

Mr. Bernie MazonTenFold Corporation135 National Business Parkway, Suite 210Annapolis Junction, MD 2070 1bmazon c@ l Ofold .com

Re : Project Concerns: BOP Commercial Policy Manager

Dear Bernie ,

Thank you for talking with us on Tuesday, May 18, 1999 . We are concerned thatTenFold may be unable to meet its commitment to complete and provide a fullytested BOP Commercial Policy Manager within the time allowed by the contract . Tofurther our discussions concerning problems with the project, we compiled this listof issues and are requesting that TenFold respond in writing to each of them . Yourpersonal attention to finding solutions to these problems would be appreciated as wemove forward with our joint development of this product .

1) TenFold is not providing staffing adequate in number and expertise .Examples include, but are not limited to, the following :a) Bob Stegmaier and Todd Arndt, the Westfield developers assigned to

the project for the main purpose of knowledge transfer, are working12 hours or more a day, and, as beginners, are being assigned asignificant number of complex tasks without being providedmentoring support .

b) TenFold has changed database managers twice on the project .c) The FastStart team consists of only two TenFold resources . As you

heard your own FastStart project manager, Cindy Burke, state onMay 17, 1999, she is not fully staffed ,

d) Jim Cushman, TenFold executive sponsor, has been assigned tasks onthe integrated project plan .

e) It seems you have diverted resources from our project to work ondevelopment of other components .

2) We are conce rned that TenFold, without complete disclosure of the facts toWestfield , has changed the nature and direction of the project.a) TenFold elected to wait for Line of Business Builder in order to "take

the benefits of Line of Business Builder " We have yet to receive aconvincing , written explanation that the Line of Business Builderprovides benefits to Westfield's BOP Commercial Policy Manager,what TenFold's direction is regarding Line ofBusiness Builder, andthat strategy 's impact on current and future open database design.

b) Furthermore , we are concerned that TenFold has delayed thedevelopment of Our application while TenFold waited for delivery ofLine of Business Builder. During this time period , development ofEnterPolicies and Quick Quotes could have continued but did not .Also, a significant number of our grazing comments have not beenaddressed .

-89-

c) Additionally, we are aware of a number of 'workarounds' due tolimited database and component functionality . We would like a listof these situations including an explanation for their existence andaction plan for their eventual removal .

3) TenFold 's status reports are not serving any genuine purpose and do notdemonstrate TenFold 's control over the development process nor your abilityto deliver a quality product on schedule . Additionally, the status repo rts donot reflect the dependencies between the Build and FastStart phases and anumber of development commitments for individual components . Examplesinclude but are not limited to the following :a) Project scope changes have not been reflected in a formal change

process (such as a revised Executive Ove rv iew or project changeorder) .

b) According to the contract, we were to receive the FastSta rt projectplan on March 22. We received the first draft on March 30 . AtWestfield 's insistence, an integrated project plan was received onMay 19, 1999 . You told us on May 18, 1999, that before we receivedthe plan, all your project m anagers , including project managers of theindividual components and Jeff Walker , would sign off on the pl an .Our review of this project plan indicates that it is neither completenor accurate . Problems include, but are not limited to :i) SPUD (standard productivity unit per day - described by you

on May 18, 1999 , as an eight hour day ) counts areunderestimated or missing . Some examples follow :(1) Testing and validating rules task originally was three

weeks in duration with at least six full time resources .The integrated project plan indicates five SPUDstotal .

(2) The same SPUD count is applied for implementing 40guidelines as for implementing 325 guidelines .

(3) A number of acceptance tests indicate that they areready for review and/or completed when they have yetto be approved and may need to be altered . Thesetasks erroneously indicate 0 SPUDs remaining .

(4) Exportfor 5. 3 (80 record types) is estimated at twoSPUDs and was originally estimated at 15 SPUDSwith the entire TenFold FastStart team assigned a sresources .

(5) The task to run nightly test suite and controldifferences is estimated at 0 .2 and 0 . 1 SPUDsrespectively . The suite has not been runningsuccessfully and, for the last three weeks, has takensigni ficantly more time than two hours per day toinvestigate the problems . Additionally , 0.1 is too lowfor four full time resources (i .e ., the entire team).

(6) All architect rule set tasks are missing SPUD counts .(7) BOP QUOTE indicates one SPUD. Two SPUDs have

already been used for this activity and the developerindicates more than 0.25 SPUDs are remaining .

(8) Each acceptance test should have several t asks (e.g .,in process , build , ready for review, refine , approve) .

-90-

SPUD count indicates effort for the initial build effortonly .

ii) Daily Sync, Documents sent/received, Download controlflle,Customer number exception and Initial load sync reports arelisted as "complex" tasks in Build plan and "moderate" inFastStart phase .

iii) Estimated start task dates, actual start task dates and actualend dates have been removed from the FastStart plan andwere never in the Build plan ; therefore, we are unable todetermine when to start a task .

iv) Many tasks are missing dependencies and some tasks arescheduled prior to their dependency's due date . We havelisted only a few :(1) TimeRelation and Out of Sequence endorsements

(components) do not have delivery dates ; however thefollowing Build tasks are dependent on thesecomponents and do have scheduled due dates :

Due Date(a) PowerScoring Enhancement 6/30/1999(b) Agency06 5/27/1999(c) Agency23 5/27/1999(d) PERF05 5/18/1999(e) Policyl5 5/18/1999(f) Policyl8 5/27/1999(g) Policy39 5/27/1999(h) Policy42 5/27/1999(i) Renew04 5/27/1999(j) Renewl0 through Renew] 5 5/27/1999(2) Base Configuration Tasks (due 6/15/1999 t o

6/18/1999) are indicated as dependent onpublication of the Reference Manual (due6/23/1999) .

(3) The comments shown for Training for rulesimplementation state "PowerScoringenhancements must be completed forWestfield FastStart project", yet nodependency is shown.

(4) Rule Testing does not show dependency onRule implementation .

(5) Integration Testing does not show any dependencies,yet a number of tasks must be completed beforetesting can begin .

(6) Implementation and testing of rules does notshow dependency on PowerScoringenhancements.

v) There are a number of project tasks missing, such as but notlimited to:(1) Steps necessary to install of any releases of

component ware, UA and the product (from Dallas) .(2) Real-data grazes .(3) Implementation of agency completeness and

correctness rules .

-91-

(4) Certification of Windows 95 .(5) Difference reconciliation during FastStart .(6) Capturing of context - sensitivity requirements .

vi) The plan does not display the impact of a missed developmentcommitment delay on the project . Although TenFold expectsthese commitments to be met, we have no confidence in thesepublished delivery dates using past performance as ameasurement. Each individual component developmentcommitment should, therefore, be detailed in a separateproject plan to support the published delivery date .

c) We disagree with your strategy to move certain Build elements to theFastStart effort .

4) TenFold is also behind schedule on a number of its obligations to complet ea fully tested BOP Commercial Policy Manager. Some of these lat eobligations are as follows :a) The database design is seriously behind schedule . This has been

ongoing since Februa ry and these issues have been documented .Currently , unresolved issues include , but are not limited to :i) Resolution on consolidation of our database design with Line

of Business Builder .ii) Receipt of complete and current CPM and LOBB database

change documentation .iii) Final disposition of statistical and accounting fields fo r

completion of import/export templating .iv) Final disposition of form variable text fields for completion

of import/export templating .v) Confirmation of FastStart database requests made since

April 15, 1999 .vi) Confirmation of TenFold's commitment to fully suppor t

future database changes ,vii) Confirmation of TenFold 's commitment to resolve any furthe r

database issues .viii ) Recommendation to revisit all approved acceptance tests t o

determine database impact .b) Grazing comments that we requested at the first and second grazings

have not been completed .c) We specifically stated that the graze agenda was to include onl y

completed and functional Acceptance Tests (ATs) ; this was ignored .i) At the second grazing , 60 ATs were reviewed, 15 of which

had significant problems .ii) At the mini -graze held on May 12, 1999 , TL Treisch and

Mark Kidd reviewed 14 ATs ; only two were complete andfunctional . There were serious problems with the other 1 2ATs.

d) Releases of componentware , UA and the product (Dallas to Chicago )are poorly executed and result in rework, lost productivity and limitedenvironment functionality . This negatively impacts the delivery o fBOP Commercial Policy Manager.

e) The completion of the BOP Commercial Policy M anager isdependent on several TenFold development commitments that ar eimpacting the delivery date of May 31, 1999 . We have not received

-92-

written explanation to either suppo rt provided delivery dates or de fineefforts of these commitments and others .i) TimeRelation (TR), previously scheduled for delivery on

May 20, 1999, now has no target delivery date . 36 ATs aredependent upon this component .

ii) PowerScoring enhancementfor ride effective dates , scheduledfor implementation on June 30 , 1999, is dependent on TR .We have not received a wri tten explanation of howPowerScoring can be implemented without TR, ifPowerSco ring is dependent on TR . This component enablesus to attach effective and expiration dates to guidelines . Anumber of our ATs use guidelines with effective andexpiration dates .

iii) OutOfSequence endorsement processing affects at least oneAT and does not have a scheduled delivery date .

iv) Power WorkFlow and PowerScoring certified releaseimplementations are currently listed with "HOPE" installdates , but no wri tten explanation has been provided to supportthe dates of May 16, 1999 and May 21, 1999 respectively . Anumber of WorkFlow acceptance tests cannot reach a state of"ready for review " without these ce rtified releases .

v) Power WorkFlow enhancement to handle messageprecedencing and duplicate message processing has animplementation date of May 31, 1999 but no wri ttendocumentation has been received to suppo rt this commitment .There are at least two ATs affected by this enhancement.

5) Initial FastStart targets have been missed .a) The project plan specified publication of the Reference Manual on

June 8, 1999; the revised project plan now targets this task forJune 23, 1999 .

b) Westfield has repeatedly requested the schedule for delivery ofnecessary enhancements to PowerScoring since April 19, 1999, andhas yet to receive it .

c) Detailed functionality requirements for processing statisticalinformation on endorsements, out of sequence endorsements, and useof dates within rating were sent to TenFold on April 14, 1999 . Thesewere sent again on May 4, 1999 and we are still without a response-confirming TenFold's ability to meet these requirements .

6) TenFold has not provided the server and client hardware, software, andnetworking environment infrastructure necessary to develop BOPCommercial Policy Manager at its own facilities, and has not certified thatBOP Commercial Policy Manager passes the acceptance tests on the CertifiedPlatform. We were told that the server was finally received by TenFold onMay 14,1999. On May 19, 1999, we were told complications had beendetected; however, no written documentation has been received as to theseverity of the problem(s) and their impact on the schedule .a) TenFold is contractually obligated to provide the certified

development environment set forth in the contract . Westfield haspaid for this environment since February 8, 1999 ; however the agreedupon development environment has not yet been established .

-93-

i) Section VI of Exhibit C (Fixed Price Design andDevelopment Services) identified the Certi fied Platform (IBMRS-6000 , AIX 4 . 3 .2, Oracle 8 . 0.5, Windows 95/98 ; WindowsNT 4.0 ; browser; TCP/IP over Ethernet or Token Ring) . Alsostated is that since the development will occur in TenFold'soffices, TenFold will provide the Certified Platform inaccordance with the terms and conditions set forth inExhibit F .

ii) Exhibit F states that for a monthly fee of $13 ,500 per month,Tenfold will provide the development environment set fo rthin Section VI of Exhibit C . To date Westfield has paidTenFold fees of $50,625 for a development environment thathas not yet been established .

b) TenFold addressed this issue only after TL Treisch brought it to theattention of Jeff Newlin on April 14 , 1999. Several conversationsbetween TL Treisch and Jim Cushman between the dates of April 20,1999, and May 12, 1999 , occurred before we received informationthat TenFold had ordered the server required for the ce rtifiedplatform . The current project plan indicates the certified environmentwill be established on June 7 , 1999, thus four months late .

c) The current project plan does not indicate when UniversalApplication and Commercial Policy Manager will be certified forWindows 95 .

As well as addressing the issues identified in this letter, we believe it isTenFold's responsibility to :1) Continue work on our project as we work out these issues .2) Review and properly estimate the work efforts for each task with supporting

evidence .2) Use a consistent estimating method between Build, FastStart and component

development projects .3) Include start and end dates to build the plan so comparisons can be made

between planned and actual events .4) Review all tasks and establish meaningful dependencies between all tasks

and/or deliverables .5) Review the projects as a whole and identify all tasks TenFold is responsible

for, not just specific tasks falling under Matt Hawkins and Cindy Burke'sdirect supervision .

6) Relate the project plan in a format where impacts of missed and late activitiescan be effectively identified, measured, and mitigated .

7) Adequately staff the project as follows:a) Add sufficient, experienced resources to the build team to ensure the

quality of the deliverable ;b) Ensure that the Westfield resources assigned to the project are

receiving the benefit of knowledge transfer as per our contract .c) Immediately assign a full-time, experienced database resource to be

shared by the Build and FastStart teams .d) Assign sufficient, experienced resources to the FastStart team based

on your own project manager's direction .8) Correct the issue related to our payment of fees for the development

environment. Specifically reimburse Westfield for the fees paid when thecertified development environment was not in place .

-94-

On May 19th, we discussed moving the development site from Chicago to WestfieldCenter . You seemed agreeable to this. It is our opinion that better control over theproject could be maintained by doing so and we have the required platform . Wewould like to exercise this option as quickly as possible and begin dialog on thisissue immediately .

The issues identified in this letter have caused us to believe that TenFold may beunable to meet the contractual time requirements of the project. We are alsoquestioning whether TenFold can build Commercial Policy Manager at all . We haveno intention of approving or signing off on anything less than a fully functional andcomplete product that meets our requirements as described in the ExecutiveOverview and other requirements documentation . For these reasons we are askingfor your written responses to this letter along with a revised, complete project planby Thursday, May 27, 1999. We feel it is your responsibility to prove to us that youhave the capability and capacity to complete this project as agreed. We look forwardto receiving your response to these issues so that we can get this project back on trackquickly .

Respectfully .

James R. ChapmanVice President, Systems Transformation

attachment (integrated project plan submitted by TenFold to Westfield on May 19,1999)

cc :TenFold Corporatio n

Gary Kennedy Jeff Walker Kenneth Jennings Jim Cushma n

j enncdy_@1Ofold.cam jwalkerr 1Ofold .rom lciennings a,1Ofold .com icushmanal0fold .com

164 . In further compliance with paragraph 3.2, Ohio Farmers entered into extensiv e

discussions with TenFold to afford TenFold the opportunity to cure the various breaches described

in Ohio Farmers' letter of May 21, 1999 . During the month of June 1999, the parties met on several

occasions to discuss TenFold's non-performance . Ohio Farmers specifically advised TenFold that it

failed :

(a) To properly staff the project;

(b) To identify and properly schedule development tasks in an orderly sequenc e

(dependencies) ;

(c) To provide the technology promised for the project ;

-95-

(d) To provide proper database design and to coordinate changes to the database ;

(e) To provide a stable environment that would enable Ohio Farmers to conduc t

credible Acceptance Testing ;

(f) To coordinate the Build with FastStart ;

(g) To meet any of the completion dates or revised dates for the various

components of the contract ; and

(h) To provide a meaningful completion date by which to produce the promised

product .

165. On June 29,1999, Ohio Farmers advised TenFold (pursuant to Amendment No . 1 and

paragraph 6 .4 of the contract) that it was suspending further payments on the project until such time

as TenFold delivered the Build in accordance with Ohio Farmers' requirements .

166 . As a result of the June 1999 meetings, TenFold offered a revised project plan to mee t

its contractual obligations. On June 30, 1999, TenFold presented Ohio Farmers with a revised project

plan that recited a delivery date for the Build of October 8, 1999, and a "go-live" date of December

1999. However, this date was well beyond the "guaranteed-refund" date allowed by Section V of

Amendment No. 1 to the contract, which provided a money-back guarantee if TenFold did not deliver

the Build by August 31, 1999 . It was clear that as of June 30, 1999, TenFold was unable to comply

with its obligations under the contract or under the "guaranteed-refund ."

167. On July 7, 1999, Ohio Farmers sent a letter to TenFold advising it that, due to it s

admitted inability to deliver a completed BOP Commercial Policy Manager by August 31, 1999, i t

was formally terminating the contract . Ohio Farmers made a demand for return of the $5,794,038 .26

it had paid to date under the contract .

168. By letter dated July 14, 1999, TenFold requested a meeting with Ohio Farmers t o

discuss once again how the parties might "determine the next steps required as we work together

toward a final resolution ." By letter dated July 15, 1999, Ohio Farmers again reiterated, by way o f

illustration and not limitation, the various breaches of the contract that gave rise to its decision t o

-96-

terminate the contract . In its letter, Ohio Farmers reaffirmed its notice letter of May 21, 1999, and

reaffirmed that TenFold had failed to cure its various breaches within thirty days of the May 21 letter .

Ohio Farmers further advised TenFold of its desire to mediate the dispute pursuant to paragraph 6 .4

of the contract .

169. By letter dated July 16, 1999, TenFold disputed Ohio Farmers' termination, an d

insisted that it was entitled to an additional thirty days to cure its breaches . It promised to cure its

breaches by delivering a fully operational BOP Commercial Policy Manager "in compliance with the

agreement and in satisfaction of [Ohio Farmers'] business needs that were the basis for the

agreement." TenFold further represented that, if it were unable to cure its breach within thirty days

of the July 15, 1999 letter of Ohio Farmers, it would consent to refer the matter to mediation . By

letter dated July 28, 1999, TenFold promised that it would deliver, within one week of the letter, "the

completed application, including the time relational functionality, and the successful execution of all

acceptance tests . We will also be able to show the results of our work on grazing comments that you

provided to us prior to your July 7th letter . "

170. Ohio Farmers agreed to permit TenFold to provide a comprehensive demonstratio n

of the BOP Commercial Policy Manager at its offices in Westfield Center, Ohio on August 12 and

13, 1999 that had been developed subsequent to termination of the contract . By letter dated August 6,

1999, TenFold described the demonstration of the BOP Commercial Policy Manager it planned to

present to Ohio Farmers . TenFold also confirmed that it planned to present a completed product for

review and testing by Ohio Farmers . TenFold's so-called completed BOP Commercial Policy

Manager failed to perform in every material respect . At the presentation on August 12, 1999, the

BOP Commercial Policy Manager was unable to perform most of the ATs chosen by TenFold for the

demonstration, and critical functions of the application remained out of compliance with Ohio

Farmers' requirements and contractual specifications .

-97-

171 . On August 24, 1999, Ohio Farmers reaffirmed to TenFold its decision not to proceed

further with the project, and again demanded return of all funds expended by Ohio Farmers under the

contract, which total $5,794,038 .26 .

TenFold Breached Its Contract With Utica

172 . At the time TenFold and Utica were establishing their relationship in 1998, and at al l

relevant times thereafter, TenFold consistently represented to Utica, that TenFold had the

commitment, capability and the capacity to provide computer applications and serves rapidly, for a

fixed price, on time, on budget and on target . In particular, TenFold sought to distinguish itself as

providing uniquely reliable performance deadlines . For example, during a pre-Agreement "Utica

National EO Planning Meeting" held on September 1, 1998, TenFold represented that the "TenFold

Way Re-engineers Application Development" so that the more than three years required under the

"Standard Approach" is reduced to one-half year under the "TenFold Approach ."

173 . A letter from TenFold Regional Sales Director David A . Craig to Utica's Chief

Information Officer, Jeff Paige, dated September 28, 1998, represented the following :

TenFold is uniquely qualified to provide Utica National with a next-generation,enterprise-level commercial policy management application because we :

• Deliver application software an order of magnitude faster than traditionalmethods do - Utica National can begin to realize the business benefits of yournew state-of-the-art small commercial policy management application muchsooner than any available alternative .

• Share the risk and incentive through a fixed price contract and money-backguarantee - We partner with our customers to reduce their risk .

• Deliver high quality application software - We reuse business componentssuch as PowerWorkflow, PowerRating, PowerBilling, et cetera . We test thesecomponents and run them in other customer production environments .

• Deliver increased application software flexibility - The combination of theUniversal Application and the TenFold Way to build applications providesyou with the ability to dynamically change to business influences (newproducts, reorganizations, et cetera) .

• Provide administrative and claims application experience - We are deliveringmultiple property and casualty administrative applications (including claims)to major P&C insurers. We are also delivering an enterprise claimsmanagement application to Crawford & Company, the world's largest TPA .

_98-

174. TenFold's "Application Development Proposal to Utica National Insurance Company

Commercial Lines Manager," dated September 28, 1998, represented the following :

TenFold Corporation is a fast-growing software company that builds large-scale,mission-critical applications in extremely short time frames for a fixed price andfixed schedule . TenFold reduces risks by quickly and reliably meeting businessrequirements without budget or timing risks . TenFold's revolutionary applications-development strategy delivers solutions that both precisely meet customer needs andprovide significantly better return on investment than other alternatives .

175 . The same September 28, 1998 TenFold proposal described TenFold 's "Universal

Application" as follows :

• Project management and technology• Optional services to put your new application into production• Complete product documentation• License to TenFold technology so customers can maintain and support their

applications• World-class technical and applications support

The TenFold Guarantee

We deliver you application on time, on budget, and on target - or we return yourmoney. Period .

176 . The Software License and Services Agreement ("Agreement") was signed by TenFol d

and Utica on December 4, 1998, and provides in section 1 .3 that the "'Effective Date' shall b e

11/2/98, "

177 . As described in the "Commercial Lines Manager Executive Overview ," dated

December 4, 1998, that then formed part (Exhibit I) of the Agreement and was prepared by TenFold :

Utica has hired Tenfold to design and develop a complete, fully-tested commerciallines policy-management system that adds considerable, needed functionality, andreplaces the existing Utica systems .

Commercial Lines Manager is a new-generation, policy-management system offeringtightly integrated, real-time rating and underwriting capabilities . Commercial LinesManager provides transactions so that knowledgeable users define products,underwriting and rating rules, and line-of-business-specific, class-specific, andstate/country specific workflows . Commercial Lines Manager includes paperlessprocessing of policy applications, on-line rating, automatic issue of new and renewalpolicies, underwriting workflow, automated policy renewal and workflow, and muchmore .

-99-

Commercial Lines Manager is a client-server application with a graphical userinterface, electronic interfaces with other applications, transaction processing, arelational database, and on-line analytical capabilities to let you identify cost-savingpatterns and trends .

Commercial Lines Manager is a flexible, dynamic, cost-effective, timely solution forpolicy management .

178 . Thus, the Agreement provided for a completion time frame under which "TenFold

deliverers completed, fully tested Commercial Lines Manager" by "August 31, 1999" (Exhibit B,

Section I) and provided for a FastStart Application License and Services "project completion date"

of "December 31, 1999" (Exhibit I, Section I) . The contract recognized that timely performance was

important, and included a "guarantee" triggered if "TenFold fails to deliver the completed, fully tested

Commercial Lines Manager within 105 days of the completion date ."

179 . Exhibit B, entitled "Fixed Price Design and Development Services," as effective on

November 2, 1998, provided expressly that "TenFold guarantees its fixed price design and

development services" in specified ways, including that if "Tenfold fails to deliver the completed,

fully tested Commercial lines Manager within" a specified time frame, Utica may terminate the

Agreement and "may receive a refund of all fees paid to date under Section IV of this Exhibit plus

an additional amount equal to 50% of the total fees set forth in Section IV below, as liquidated

damages . "

180. Exhibit I, entitled "Fixed Price FastStart Application License and Services," as

effective March 2, 1999, provided expressly that "TenFold guarantees its fixed price FastStart

services" in specified ways, including that if "TenFold fails to complete the FastStart services within

90 days of the scheduled completion date set forth" in the Exhibit, then Utica may terminate the

Exhibit and "receive a refund of all fees paid to date under" the exhibit .

181 . Utica made the expenditures that were required to be made under the terms of the

Agreement . Monetary expenditures by Utica in accordance with the terms of the Agreement included

a variety of TenFold charges specified under the several exhibits that form parts of the Agreement .

These charges included but were not limited to the following :

- 100 -

Exhibit Description

A License fee

B Universal ApplicationLicense and fixed priceservices

F Development Environmentlease fee

I FastStart license andservices fee

J FastStart Environment leasefee

J FastStart Application SiteLicense

B, C, I TenFold travel and livingexpenses

Amount or Rate

$3,400,000, 12/9 8

$3,437,500 between 11/2/98and 8/1/99

$15,000/month beginning2/1/9 9

$1,963,875 between 3/2/99and 11/1/99

$3,000 per month, beginning5/1/99

$500,000, due 3/26/99

reimburse actual cost s

182. Contrary to the above time frame commitment and Agreement obligation, TenFold

did not deliver the "completed, fully tested Commercial Lines Manager " by August 31, 1999, or

any time thereafter .

183 . Negotiations following this August 31, 1999 material breach of the Agreement

produced a written amendment to the Agreement signed by both parties that extended "to January 31,

2000" the "TenFold guarantee" refund trigger date applicable in the event "TenFold fails to deliver

the completed fully tested Commercial Lines Manager within 105 days following the completion due

date." This amendment was contained in a letter agreement addressed to Jeffrey C . Paige, Utica's

Senior Vice President and CIO, from Kenneth W . Jennings, Jr., then TenFold's General Counsel, that

was signed by Paige, for Utica, on November 12, 1999 .

184. As the January 31, 2000 amended guarantee trigger date approached without deliver y

by TenFold, the parties again entered a written amendment to the Agreement (letter agreement

addressed to Jeffrey C . Paige from TenFold's Kenneth W. Jennings, Jr . dated January 20, 2000, signed

by Paige, for Utica, on January 21, 2000) . This amendment extended the TenFold guarantee trigger

date "to February 29, 2000 ."

-101-

185 . As the extended February 29, 2000 guarantee trigger date approached and it was clear

that TenFold would not timely deliver the applications required by the Agreement, the parties entere d

"Amendment No. One to Master Software License and Services Agreement" (effective March 14 ,

2000) . Section II of that Amendment No . One, captioned "Statement of Intent," provides :

The parties have entered into this Amendment No . One for the purpose of amendingcertain terms and conditions of the Agreement including the Fixed Price Design andDevelopment Services Exhibit (Exhibit B - "build initiative") and the Fixed PriceFastStart Application License and Services Exhibit (Exhibit I - "FastStart initiative")and entering into an Alliance Agreement under which the parties will jointlyparticipate in distribution of TenFold insurance applications to third parties .

186. The combination of the "existing building and FastStart initiatives for CLM into a

single restructured work effort with unified Acceptance Tests and a single payment due upon

completion of the combined work effort" is addressed by Section III of Amendment No . One, and

provides that, inter alia, "The parties agree to combine the existing TenFold Guarantees for Fixed

Price Design and Development and FastStart services into a single, fully guaranteed project, with a

completion date of September 30, 2000." Thus, the thrice-extended completion date for the

Commercial Lines Manager was a full thirteen months later than the originally promised

August 31, 1999 delivery date .

187. Under the terms of the Agreement, as amended, Utica was required to make a numbe r

of payments to TenFold, as further detailed below, and was required to make available a group of

Utica employees to perform functions needed to advance the project . Utica made all the required

payments and committed appropriate numbers of qualified employees to the fulfillment of Utica's

project related functions .

188 . During the Summer of 2000, TenFold indicated that it was working to deliver b y

September 30, not its required complete performance, but only applications covering four of

Utica's fourteen lines of insurance business . By letter of August 1, 2000 from Utica's Senior Vice

President, Jeffrey C . Paige, to Bernie Mazon, President of TenFold's insurance industry-related

subsidiary, Utica made express that, "While Utica has supported this approach, in no way should it

be construed that this constitutes any change or amendment to our existing contract . That contract ,

- 102 -

among other things, establishes September 30, 2000 as the completion date for the combined build

and FastStart initiatives. These initiatives cover fourteen (14) lines of business . "

189 . Ten Foldfailed to provide the required applications and related start-up services by

the September 30, 2000 completion due date . Indeed, it did not deliver completed applications for

any of Utica'sfourteen lines of insurance .

190 . The failure by TenFold to deliver the Commercial Lines Manager application by

September 30, 2000 was, from Utica's point of view, a disastrous TenFold failure to perform.

Utica paid TenFold over $10,000,000 and Utica had expended many more millions of dollars of its

own personnel and monetary resources in support of the project, but found itself with no application

to replace its increasingly outmoded system for managing Utica's commercial lines . Utica officials

demanded to know what, if anything, TenFold could and would do to cure this central failure to

meet TenFold 's obligations under the Agreemen t. A meeting was held on October 12, 2000,

attended by Utica's Paige, TenFold's Bernie Mazon and TenFold 's Doug Walters, who was the

person directly responsiblefor the project for TenFold. This meeting led to another meeting, held

on October 27, 2000, in which TenFold presented its position , capabilities and suggested plan of

action . Paige participated in that meeting , along with Utica's Brian Lytwynec and Sharon Jachim.

TenFold was represented by Bernie Mazon and Doug Walters. Jeff Walker, TenFold's Chairman,

participated by video conference. TenFold claimed no more than an ability to complete the

Commercial Lines Manager for two lines of business by March 2001. No date was even suggested

for completion of the Commercial Lines Manager application for the other twelve lines of business

the application was to cover , or for the completion of the related FastStart services . At the

conclusion of the meeting, Mazon requested that Utica continue with TenFold . Paige and the other

Utica participants in the October 27, 2000 meeting with TenFold representatives found TenFold's

position and proposed remedial plan to be completely unsatisfactory and unacceptable .

191 . In a November 2, 2000 letter from Utica's Jeffrey C . Paige to TenFold's General

Counsel, Kenneth W. Jennings, Jr., Utica noted TenFold's repeated and knowing failures of timel y

-103-

performance and reported Utica's determination that "Utica will grant no more extensions of the

Agreement ." That letter observed that any further attempted performance "seems futile and a waste"

but provided one final opportunity to "explain and provide whatever assurances you can offer that

TenFold can and will provide complete performance of its obligations under the Agreement without

material delay ." TenFold was asked to respond by the "close of business on November 9, 2000 . "

192. Finally, by letter from TenFold's Bernie Mazon to Utica's Jeffrey C . Paige, dated

November 9, 2000 and delivered by facsimile, TenFold represented only that "TenFold can deliver

the Business Owner Policy and Commercial Auto Lines into Model Office by March 1, 2001 ." No

performance completion dates were offered for the applications covering the remaining 12 lines of

business insurance covered by the amended Agreement . There was no claim that TenFold could cure

its breaches within a reasonable time .

193 . By letter from Utica's Jeffrey C . Paige to Bernie Mazon dated and sent by facsimil e

on November 9, 2000, Utica expressed its judgment that TenFold's "November 9 response confirms

that TenFold's existing and anticipatory material breaches of the Agreement are incurable ." The letter

concluded that, "[s]uch breaches justify and require immediate termination," and, accordingly, Utica

"now must bring the contract to a definitive end . "

CLASS ACTION ALLEGATIONS

194. This proposed class action on behalf of those who purchased or otherwise acquired

TenFold stock between May 21, 1999 and April 12, 2001 excluding defendants (the "Class") .

Excluded from the Class are officers and directors of the Company, as well as their families and

families of the defendants . Class members are so numerous that joinder of them is impracticable .

195 . Common questions of law and fact predominate and include whether defendants :

(i) violated the Securities Act and the Exchange Act ; (ii) omitted and/or misrepresented material facts,

(iii) knew that their statements were false ; and (iv) artificially inflated TenFold's stock price and the

extent of and appropriate measure of damages .

-104-

196 . Plaintiffs' claims are typical of those of the Class . Prosecution of individual actions

would create a risk of inconsistent adjudications . Plaintiff will adequately protect the interests of the

Class. A class action is superior to other available methods for the fair and efficient adjudication of

this controversy .

FIRST CLAIM FOR RELIEF(For Violation of §11 of the Securities Act

Against All Defendants )

197. Plaintiffs repeat and reallege ¶¶1-196 .

198. This claim is brought pursuant to § 11 of the Securities Act, 15 U.S.C . §77k, on behalf

of the Class, against all defendants and is based upon defendants' negligence or theories of stric t

liability .

199 . The Registration Statement and Prospectus for the May 21, 1999 IPO was inaccurate

and misleading, contained untrue statements of material facts, omitted other facts necessary to mak e

the statements made not misleading and failed to adequately disclose material facts, as is describe d

above.

200. In fact, TenFold's IPO , Registration Statement and Prospectus were materially fals e

and misleading as TenFold was unable to complete its contractual obligations to its customers

including Westfield Companies, Nielsen Media Research , Inc., Utica Mutual Insurance and Crawford

and Company . TenFold's first quarter 1999 financial results included revenue TenFold had

recognized despite its failure to fulfill its contractual obligations such that its financial statements

were presented in violation of GAAP as described in ¶¶71-88 .

201 . TenFold is the issuer of the stock sold via the Registration Statement . As issuer of the

shares, TenFold is strictly liable to plaintiffs and the Class for the material statements and omission s

herein .

202. Defendants Kennedy, Hughes, Walker and Felton signed the Registration Statemen t

filed with the SEC . Kennedy, Hughes, Walker and Felton did not make a reasonable investigation

- 105 -

or possess reasonable grounds for the belief that the statements contained in the Registration

Statement were true, did not omit any material fact and were not misleading .

203 . Each of the defendants issued, caused to be issued and participated in the issuance of

materially false and misleading written statements to the investing public, which were contained in

the Registration Statement, which misrepresented or failed to disclose, inter alia, the facts set forth

above . As a direct and proximate result of defendants' acts and omissions in violation of the

Securities Act, the market price of TenFold stock was artificially inflated in the IPO, and plaintiffs

and the Class suffered substantial damage in connection with their purchase of TenFold common

stock. By reasons of the conduct herein alleged, each defendant violated, and/or controlled a person

who violated, § 11 of the Securities Act .

204. At the time they purchased TenFold shares, plaintiffs and other members of the Clas s

were without knowledge of the facts concerning the false or misleading statements or omissions

alleged herein . Less than one year has elapsed from the time that plaintiffs discovered, or reasonably

could have discovered, the facts upon which this complaint is based, to the time that plaintiffs filed

their complaint . Less than three years have elapsed from the time that the securities upon which this

claim is brought have been offered to the public, to the time plaintiffs filed their Complaint .

SECOND CLAIM FOR RELIEF(For Violation of §12(a)(2) of the

Securities Act Against All Defendants)

205 . Plaintiffs repeat and reallege 111-204.

206. This claim is brought by plaintiffs on behalf of themselves and the Class pursuant to

§12(a)(2) of the Securities Act, 15 U.S.C. §771(a)(2), and is based upon defendants ' negligence or

theories of strict liability .

207. The defendants named in this claim were sellers, offerors and/or solicitors of s ales of

the shares offered and sold in connection with the IPO .

208. The actions of solicitation taken by the defendants named in this claim included

participation in the preparation and dissemination of the false and misleading Prospectus . The written

-106-

and oral communications made in connection with the Prospectus contained untrue statements o f

material facts, omitted to state other facts necessary to make the statements made not misleading an d

failed to disclose material facts .

209. TenFold offered for sale and sold the shares purchased by plaintiffs and the Class .

210 . Each defendant named in this claim solicited and/or was a substantial factor in th e

purchase by each member of the Class of TenFold common stock . But for the participation by these

defendants, including the solicitation by these defendants as set forth herein, the IPO could not an d

would not have been accomplished . The defendants named herein participated in the acts detaile d

herein as follows :

(a) They actively and jointly drafted, revised and approved the Prospectus and

other written selling materials by which the IPO was made to the investing public. These written

materials were " selling documents ," calculated by these defendants to create interest in TenFold

common stock and were widely distributed by defendants for that purpose ;

(b) These defendants finalized the Registration Statement and Prospectus an d

caused them to become effective . But for these defendants having drafted, filed and signed the

Registration Statement and Prospectus , the IPO ofTenFold common stock could not have been made;

and

(c) These defendants conceived and planned the IPO and together jointly

orchestrated all activities necessary to effect the sale of these securities to the investing public, b y

issuing the securities, promoting the securities and supervising their distribution and ultimate sale t o

the investing public .

211 . The defendants were obligated to make a reasonable and diligent investigation of th e

written and oral statements made in the Prospectus to insure that such statements were true and tha t

there was no omission to state a material fact required to be stated in order to make the statement s

contained therein not misleading .

- 107 -

212 . Plaintiffs and the other members of the Class purchased or otherwise acquired TenFold

shares pursuant to the defective Registration Statement and Prospectus . Plaintiffs did not know, or

in the exercise of reasonable diligence could not have known, of the untruths and omissions contained

in the Prospectus .

213 . Plaintiffs hereby tender to defendants those securities which plaintiffs and the other

members of the Class continue to own, on behalf of all members of the Class who continue to own

such securities, in return for the consideration paid for those securities together with interest thereon .

214. By reason of the conduct alleged herein, these defendants violated, and/or controlle d

a person who violated , § 12(a)(2) of the Securities Act. As a direct and proximate result of these

violations of § 12(a)(2), plaintiffs and the other members of the Class sustained substantial damage

in connection with the purchase of TenFold stock . On behalf of all members of the Class who still

hold their TenFold shares , plaintiffs seek recessionary damages . Accordingly , plaintiffs , on behalf

of all members of the Class who continue to own such securities, seek to exercise their right to rescind

and recover the consideration paid for their TenFold shares and hereby elect to rescind and tender all

TenFold shares held by members of the Class to the defendants sued herein .

215 . Less than three years has elapsed from the time that the securities upon which this

claim is brought were sold to the public to the time of the filing of this action . Less than one year has

elapsed from the time when plaintiffs discovered , or reasonably could have discovered , the facts upon

which this claim is based to the time of the filing of this action .

THIRD CLAIM FOR RELIE F(For Violation of §15 of the Securities Act

Against All Defendants )

216. Plaintiffs repeat and reallege ¶¶1-215 .

217. This claim is brought pursu ant to § 15 of the Securities Act, 15 U.S.C. §77o, against

all defendants .

218. The defendants, by reason of their stock ownership , management positions and/or

membership or representation on the Comp any 's Board of Directors, were controlling persons of the

- 108 -

Company and had the power and influence , and exercised their power and influence, to cause TenFold

to engage in the violations of law complained of herein . These defendants are therefore liable under

§ 15 of the Securities Act .

FOURTH CLAIM FOR RELIEF(For Violation of §10 (b) of the Exchange Act

and Rule lOb-5 Against All Defendants)

219 . Plaintiffs repeat and reallege ¶¶1-218 .

220. Defendants violated § 10(b) and Rule l Ob-5 by :

(a) Employing devices, schemes and artifices to defraud ;

(b) Making untrue statements of material facts and omitting to state material fact s

necessary in order to make the statements made, in light of the circumstances under which they wer e

made, not misleading ; and

(c) Engaging in acts, practices and a course of business that operated as a fraud

or deceit upon the Class in connection with their purchases of TenFold stock .

221 . Class members were damaged . In reliance on the integrity of the market, they pai d

artificially inflated prices for TenFold stock .

FIFTH CLAIM FOR RELIE F(For Violation of §20(a) of the Exchange Act

Against All Defendants )

222. Plaintiff repeat and reallege ¶¶1-221 .

223. The Individual Defendants acted as controlling persons of TenFold within the meaning

of §20(a) of the Exchange Act, 15 U .S .C . §78t(a) . By reason of their positions as officers and

directors of TenFold, and their ownership of TenFold stock, the Individual Defendants had the power

and authority to cause TenFold to engage in the wrongful conduct complained of herein . TenFold

controlled each of the Individual Defendants and all of its employees . By reason of such conduct, the

Individual Defendants and TenFold are liable pursuant to §20(a) of the Exchange Act.

- 109 -

PRAYER

WHEREFORE, plaintiffs pray for judgment as follows : declaring this action to be a prope r

class action; awarding damages, including interest ; and such other equitable/injunctive relief as th e

Court may deem proper .

JURY DEMAND

Plaintiffs demand a trial by jury .

DATED : May 1, 2001 ANDERSON & KARRENBERGSCOTT A . CALL700 Bank One Tower50 West BroadwaySalt Lake City , UT 84101Telephone : 801/534-1700

Liaison Counsel

MILBERG WEISS BERSHADHYNES & LERACH LLP

WILLIAM S . LERACHEDWARD P . DIETRICHSTEPHEN P . POLAPINK

EDWARD P . IETRICH

600 West Broadway, Suite 180 0San Diego, CA 92101Telephone : 619/231-1058

WOLF HALDENSTEIN ADLERFREEMAN & HERZ, LLP

FRANCIS M. GREGOREKBETSY C. MANIFOLD750 B Street, Suite 2770San Diego, CA 92101Telephone : 619/239-4599

Co-Lead Counsel for Plaintiffs

N :ICASES\TenFold\ConsAm. cpt

-110-

DECLARATION OF SERVICE BY MAI L

I, the undersigned , declare :

That declarant is and was, at all times herein mentioned, a citizen of the United State s

and a resident of the County of San Diego , over the age of 18 years, and not a party to or interest in

the within action ; that declarant's business address is 600 West Broadway, Suite 1800 , San Diego,

California 92101 .

2 . That on May 1, 2001 , declarant served the CONSOLIDATED AMENDED

COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS by depositing a true

copy thereof in a United States mailbox at San Diego, California in a sealed envelope with postag e

thereon fully prepaid and addressed to the parties listed on the attached Service List .

3 . That there is a regular communication by mail between the place of mailing and the

places so addressed .

I declare under penalty of perjury that the foregoing is true and correct . Executed this 1st day

of May, 2001, at San Diego , Califo rn ia .

DEBORAH D . HA)XS

TENFOLD

Service List - 05/01/01

Page 1

COUNSEL FOR PLAINTIFF(S )

Scott A . Cal l* ANDERSON & KARRENBERG700 Bank One Tower50 West BroadwaySalt Lake City, UT 84101

801/534-1700801/364-7697 (fax)

Charles J . PivenLAW OFFICES OF CHARLES J .

PIVEN, P .A .The World Trade Cente r401 East Pratt Street, Suite 2525Baltimore, MD 21202

410/332-003 0410/685-1300 (fax )

Francis M . GregorekBetsy C . Manifol d

**WOLF HALDENSTEIN ADLER FREEMAN& HERZ, LLP

750 B Street, Suite 2770San Diego, CA 92101

619/239-4599619/234-4599 (fax )

Marc S . Henze lLAW OFFICES OF MARC S . HENZEL210 West Washington SquareThird Floo rPhiladelphia, PA 19106-3503

215/625-999 9215/440-9475 (fax )

Mark McNairLAW OFFICES OF MARK MCNAIR1819 Pennsylvania AvenueSuite 105 0Washington, DC 20006

202/872-4717202/847-4718 (fax )

William S . LerachEdward P . DietrichStephen P . PolapinkMILBERG WEISS BERSHAD HYNES &

LERACH LLP

600 West Broadway, Suite 1800

San Diego, CA 92101-5050

619/231-105 8619/231-7423 (fax)

Andrew BarrowayMarc A . Topa zSCHIFFRIN & BARROWAY, LLP

Three Bala Plaza East, Suite 400

Bala Cynwyd, PA 19004

610/667-770 6

610/667-7056 (fax )

Marc H . Edelson

HOFFMAN & EDELSON

45 W . Court Street

Doylestown, PA 1890 1

215/230-8043215/230-8735 (fax )

David R . ScottNeil RothsteinSCOTT & SCOTT, LLC108 Norwich AvenueColchester, CT 06415

860/537-3818860/537-4432 (fax )

Paul J . Gelle rCAULEY, GELLER, BOWMAN &

COATES, LL P

2255 Glades Road, Suite 421ABoca Raton, FL 33431

561/750-300 0561/750-3364 (fax )

Evan J . SmithBRODSKY & SMITH, LLC11 Bala Avenue, SuiteBala Cynwyd, PA 19004

610/668-7987610/660-0450 (fax)

3 9

Jeffrey C . Block

Jennifer L . Finger

BERMAN, DEVALERIO & PEASE LLPOne Liberty SquareBoston, MA 02109

617/542-8300617/542-1194 (fax)

TENFOLD

Service List -- 05/01/01

Page 2

COUNSEL FOR PLAINTIFF(S )

Fred Taylor IsquithGregory Mark Nespol eWOLF HALDENSTEIN ADLER FREEMAN

& HERZ, LL P

270 Madison AvenueNew York, NY 10016

212/545-460 0212/545-4653 (fax )

COUNSEL FOR DEFENDANT S

Michael L . LarsenErik A . Christiansen

* PARSONS BEHLE & LATIMER201 South Main StreetSuite 180 0Salt Lake City, UT 84147

801/532-1234801/536-6111 (fax)

Darryl P . Rains

Jordan Eth

* MORRISON & FOERSTER LLP425 Market Stree tSan Francisco, CA 94105-2482415/268-700 0415/268-7522 (fax )

* Served via overnight mail

** Served via hand delivery .