April 28, 2004

The May Report: 4/28/2004: A very quick report: update on Efoora machinations;
what happened to some Divine entities; UL internal memo and the management team
at Profind, a Midwest Venture presenter

Editor and publisher: Ron May, ron@themayreport.com, ronaldmay@aol.com,
773-525-3944.

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___________________
TABLE OF CONTENTS

The Scoop section:

— UL Change process: an internal memo
— Midwest Venture presenter: Check out management team at Profind.com
— Briefly noted, by Ron May
— Efoora update, by Ron May

1. READER COMMENTS AND RESPONSES
1a. Efoora mail (2 messages)
1b. Miscellaneous mail (2 messages)

2. OTHER (Events)
2a. Thursday, May 6: GrowingCo. com
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The Scoop section:
_________
UL Change process: an internal memo

Date: Wed, 28 Apr 2004 06:04:03 -0700 (PDT)
From: Name withheld upon request.
Subject: UL Change Process
To: ron@themayreport.com, miker@themayreport.com

Ron,

Too much change at UL? It seems that Loring Knoblauch still believes that we
at UL are still a “family.” Please withhold my name.

Thank you.

Loring Knoblauch/NBK/ULI

04/01/2004 04:51 PM

To: US.Staff

Subject: Change Process

I have given a lot of thought to the change process underway at UL and have
consulted with many of you around the company. While a lot has been
accomplished in the last three years, we are coming now to the core of the
change process. Change is never easy and indeed it has been, and continues to
be, a stressful time for all of us at UL. The course of treatment we select is
vitally important to the long-term health of this company, but that does not
mean it is either easy or pleasant.

I believe we need to accelerate the pace of change. While most employees are
energized by change, at least in the early days, as time goes on, protracted
change can be exhausting and draining. And, I am increasingly concerned about
improving both the quality and the consistency of our work. So, I asked the
Board for their agreement on a plan to accelerate both the Operations
Optimization (O.O.)/Model Certification rollout and to move up in time the last
bits of restructuring that lay ahead. To do so will require spending more
dollars in 2004. To make this possible, we need to go on a “war footing”
elsewhere and aggressively control costs. Cost control will be the order of the
day and absolutely everything will be looked at. The good news is that the pace
of change will be very significantly accelerated (we will roll out the Model
Certification Process to all U.S. Divisions in 2004) so that when 2005 comes,
it will be clear to all that the worst is behind us and we will see a lot of
visible and encouraging progress. The bad news is that the next nine months
(the rest of 2004) will be tough. Important programs will be put on hold. The
organizations not yet touched by restructuring will go through that in 2004.
There will be downsizing, delayering and more change. Most of the changes will
be in the United States. The Model Certification rollout outside the U.S. will
take place in 2005, and we think the changes outside the U.S. will be more
modest.

Rumors are very damaging to companies, and UL has more than its share. Most of
the time they are utterly without foundation. So, to make sure you all know
precisely what is happening, I will tell you that our plans for the remainder
of 2004 include a reduction in staff of roughly 300 people across all of UL. I
have promised to be open and direct even when the news is not what you want to
hear, and I will continue to do so.

Companies are like families, and that is even more true at UL. The next nine
months will not be easy. Management’s popularity will continue to decrease.
Over the last three years, I have come to love this company very much. It
troubles me deeply to inflict pain on UL and so many of its employees, and
these decisions have been difficult to make. But, I know it is the right thing
to do and the company will emerge better, stronger and healthier. The only way
we can get through all of this essential change is to all pull together. My
mission is to be sure that in treating the patient, we do no harm, preserve all
of what has made UL a great company, and make it even better, even stronger. I
hope you will join me in hunkering down and working our way through the last
big push. Obviously, change will go on in 2005 and, indeed, on an ongoing
basis. But, by early next year, we will have crested the summit of the hill we
have been climbing and will be heading down the other side. Thanks in advance
for your understanding, patience, support and fortitude.

The companion announcement on the 401(K) match reinstatement may seem to fly in
the face of this period of severe austerity that we must go through. But I
believe strongly that UL must become an Employer of Choice. We have a wonderful
group of passionate and caring employees at UL. We need your help and must do
all we can for you in return. I fought long and hard for this reinstatement,
not simply because I wanted to please our U.S. employees, but because I felt it
was the right thing to do. However, we will have to work all the harder
elsewhere to get our costs down, and keep them down, so we can afford to
accelerate change.

LWK:edw
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__________________
Midwest Venture presenter: Check out management team at Profind.com

Date: Tue, 27 Apr 2004 18:32:55 -0700 (PDT)
From: Rhonda Sweeney
Subject: Midwest Venture Presenters
To: ron@themayreport.com

Ron,

I was looking up the presenting companies that Krauss
mentionsin his article. www.profind.com takes you to
peoplefilter.com. Check out the mgmt team.

www.peoplefilter.com/company/people.asp

Is mypoints still around? I should reactivate my
points account! Also, could you add this email
address to your newsletter list?

Linda Mourri
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___________________
Briefly noted, by Ron May

* There is just too much for me to get out and have time to shower and shave
before the VC conference reception, so let me make this very quick. I have had
a few conversations with a few people about where some people ended up after
Divine. The big story that seems to be emerging is that “there is not a single
product that is not still actively being sold and supported with customers
today, just with different entities,” one source told me. The “greenfields”
were gone when divine interVentures became Divine. But the products still
exist, although under different names.

The untold story, one person told me, is that “a lot of the those businesses
were within days of being out of business and are strong entities elsewhere.
Like the Content Server business, that company Open Market, was within weeks of
being out of business when Divine bought it. Divine actually floated [them] —
I mean that company was gone; now it’s part of FatWire and that company is
strong,” he said.

Catherine Wolanick went to Sovereign Software, which actually owns some Divine
assets.

Melita is now merged with Concerto Software. This was originally called eShare.
In the interest of full disclosure, Concerto is an advertiser with TMR.

Jeff Schultz is with Abridean and he was originally with OpinionWare at Divine
before he became the CMO. Ted Collins was the founder of OpinionWare and I
don’t know where he ended up.

Some parts of Parlano still exist. One Parlano person, Andy Carra, ended up at
CME. Others went to Bank of America.

Data Return was the hosting company/managed services company funded by Divine
and that was spun back out. Sonny Vanderback (spelling?) headed that up.

FatWire owns Content Server.

Flip owns Silk Road and has those assets.

There is a company called Mxxxx, something, that owns a lot of the European
distributors.

Flip is still focusing on collaboration and blogging. They have taken some of
the assets of Divine and introduced a new product that does blogging for the
enterprise. One person who is still there is Chauncey Kupferschmidt who does
sales and marketing.

Sorry about the incomplete or incorrect spelling here.

* I heard that the Hastert reception, the so-called make-up lunch for the
Coalition, only drew about fifty people. I will confirm that with Maxson when I
see him tonight. If that is so, they got fewer people than The May Report’s
event.

* Mark Glennon told me that there are many sponsors that have had input into
this year’s conference. But that has not stopped Glennon from talking to the
Sun-Times and now an interview with Steve Lundin, his old drinking buddy from
Holleb and Coff, a law firm that is no longer. But Glennon does not seem to
have lost his appetite for taking the spotlight, even though there are at least
twenty sponsors and supposedly at least a half dozen people who have had a
significant hand in putting this together.

Lundin tells me that his June event is one-third filled up already within a few
hours of his first mailing today and he is toying with the idea of a special
evening marketing event on July 12th and/or 13th, which would coincide with a
national advertising conference here. He is in talks with other organizations
to make it a multi-organizational event.

* I have not had time to review the tape, but according to Dick Reck, the
reason marchFIRST got its name, an idea developed in the offices of KPMG, he
explained, is that by delaying the merger date of Whittman-Hart and U.S.
Web/cks for a few hours from Feb. 28 to March 1, 2000, they saved $6.5MM in
taxes. So, the idea was originally a tax scheme.

* Good news. Mike Freud just called and Field Harbor Parking just sold three
spaces through The May Report ad!! That is in addition to the five or six they
sold in our last campaign. These spaces appear to be going fast.
____________________
Efoora update, by Ron May

The best description I have heard about Efoora is that it is analogous to being
on life support right now. We have the status quo with a fair amount of
movement below the surface. Saying that it is on life support means not that it
is near death, even though they have less than $1MM in cash, but rather that
nothing is moving. No medication, there is no new money being raised, deals
with major companies are on hold, and they are just sitting there.

Let’s get to the specifics:

1. Craig Rappin tells me that the Sig deal may happen as early as this week.
The terms have been revised, according to Rappin, and a new proposal has been
submitted based on the work of Efoora’s lawyer on this, Mitch Roth of Much
Shelist. Dan Caravette says flatly that he believes that the Sig deal would
kill the company. “It’s a poison pill,” he said to me this morning on the
phone. The original problem with the Sig deal was that it would allow Sig to
control the firm for $5MM because it essentially makes him a creditor who can
gain control if the firm defaults. Dan has not seen the terms, and other key
investors have yet to see the terms, according to my sources. Other sources
like one of the people who attended my TMR event last week believe that the Sig
deal is viable and feel that the terms are now acceptable. Supposedly, Grosky
has said that he will not go along with the Sig deal unless the major investors
agree to it, but he refuses to put that promise in writing, my sources
indicate.

2. The company is supposedly close to hiring a CEO. They have a candidate that
they like through a headhunter and they are talking about having this person on
board within three weeks. Craig Rappin told me Sunday night that Grosky has
been having Kiam and Jerry Hansberger do some of the interviewing and Grosky
himself has been doing much of it, but that Tom Brown, the outside consultant
who is supposed to be running things, has not been involved much.

3. Dan Caravette doubts that a new CEO will actually materialize. He said that
nothing Grosky says can really be believed and predicts that three weeks from
now, there will be some excuse about why the new guy could not come on board.
One of the issues that has supposedly been dealt with is legal liability for
the new CEO. The candidate is fully aware of the problems he may be facing,
according to Grosky, as Dan explained it to me, and he has no issue with the
legal liability problem. The formation of a shareholder committee also depends
on insurance, commonly called D&O insurance. Insurance is a key issue that has
held up the formation of a shareholder committee.

4. According to Rappin, Grosky has no intention of leaving. He has a new
employment contract drafted by the lawyer at Saul Ewing, Tim Hoeffner, and
Rappin told me that the contract gives Grosky a percentage, I believe 10%, of
profits. Furthermore, Rappin believes that Hoeffner approaches criminal
liability for his conduct in representing the firm. The idea that Saul Ewing is
representing the shareholders is a charade, Rappin and other key investors have
told me.

5. Grosky is hanging on to the possibility that he will step aside as CEO, but
remain as Chairman and have a position with Prion Developmental Labs. Grosky
does not want to sit at home, Caravette told me, and he does not want to vacate
the premises, I have heard from others.

6. Rappin made it clear to me that he does not want a management role in the
company in the future, either directly or through Sig. He resents that he has
been sidelined when his “crimes” are no greater than Grosky’s, he says. He has
repeatedly said that he ran the firm and built the business while Grosky
engaged in all the shenanigans in raising money. Caravette reminded me that
Rappin stole from the firm, the original $350K was taken by Rappin, not
borrowed. Then, when it was discovered, Grosky helped Rappin cover it up by
turning it into a loan.

But Rappin made it clear to me that all the turncoats in the company who never
called him to say “Hi” or tell him how they still supported him would be gone
if he, Rappin, ever came back to power. Then he backed off of that statement
and said that they would not be promoted. Translation: they would be fired. By
the way, several people seem to think that the person who gave Wolinsky info.
on Rappin was Brian Borkin, a guy who had some real estate dealings with Craig.

7. Grosky maintains falsely, Caravette points out, that the company owes him
$1.5MM. Caravette explained to me why this is false, but it was a bit
complicated. Apparently, Grosky was selling his own stock because the firm
supposedly could not sell it directly. The money was treated as a loan to the
company. The problem with that is that it converted Grosky from shareholder to
creditor which would put Grosky at the head of the line in the event of a
bankruptcy, Caravette explained. Grosky was, after all, a bankruptcy lawyer, so
he should know how to play that game, Caravette and I agreed.

8. Going to the authorities at this time would be a mistake, Caravette
believes. He explained to me that it could shut down the sale of stock and the
ability of the firm to raise money.

9. The best approach, and the one Caravette and others have chosen, is to force
a shareholder meeting. They have envelopes prepared to go out soon. Meanwhile,
Caravette and others are continuing the process of politicking and educating
investors on why Grosky must go. There are several groups of key investors: in
Philadelphia, California and, I believe, Florida. Dan is planning to meet with
the Philly investors either this weekend or next and wants to set up a meeting
with those investors and Grosky. He is also working the California investors
who are in many instances doctors.

The Philly investors control about 20% of the shares collectively. According to
Dan, they vacillate on the issue of Grosky’s departure. They generally
recognize that David should step down as CEO, but sometimes they shift back and
forth and show hesitation. Grosky has convinced some of them that he wants to
leave but that he needs to insure that the right person is put in as CEO first.
There appear to be doubts about whether Kiam is the right person to be an
interim CEO. Kiam is generally recognized as person of high integrity and the
people who visited me at the TMR event felt that his business acumen is as
great or greater than Grosky’s is, but some have questioned his ability to cut
deals. My information is that Mort threatened to quit if Kiam becomes CEO.

10. There is a tendency for investors to believe what Grosky tells them, and
Grosky is good at representing himself as a victim who is trying sincerely to
do the right thing, Dan explained. He added that Grosky is good at schmoozing
investors who don’t know a lot of intimate detail and that he is good at what
one might call sincere b.s.

An example is the issue of the return of the 37 million shares. Have the shares
actually been returned? Grosky is saying that he has returned them, but Dan has
yet to see documentation of it. Craig Rappin is equally cagey on the subject.
Craig said to me that the shares are in the hands of his lawyer, but that does
not mean they have actually been returned. Grosky has an incredible ability to
tap dance around key issues, Dan told me.

11. We discussed the sale of stock to unsophisticated investors like Lynn
Vanzant in Tennessee. Dan explained to me that most investors these days are
unsophisticated and they don’t do the kind of research they did thirty or forty
years ago. He said that the key thing is whether the person selling the stock
is lying to them. I raised the issue of whether Grosky had been the one to
promise the 15% interest to Vanzant or whether it was the finder, Lonnie Layne,
who made the promises. Dan said that it makes no difference, if Grosky confirms
the commitments made by a finder when the shareholder calls him, and that is
something that Grosky does not seem to understand, Dan told me. It really does
not matter if Grosky said it first or confirmed it later, and Dan pointed out
that many things are stated in black and white in the business plans and PPMs
that they send out. Apparently some document says that they will go public in
2005, but you can’t tell a prospective investor that the stock will be $50 a
share, Dan told me. His view is that investors should know what they are
getting into, although many Efoora investors are under the impression that
their 100,000 shares will be worth a million dollars.

12. Dan told me that according to Mort Alzana, the person behind the
development of the HIV-1 lateral flow test, the approval could come as early as
June. He told me that Fran White, the consultant who has been shepherding the
process with the FDA, needed a kick in the you-know-what. He said that she had
not shown the initiative that was needed to get the approval through. Dan has
mixed feelings about the approval because he believes that it might entrench
Grosky even further and make it harder to get him out.

13. I have observed that many of the Grosky supporters are people who have a
large number of shares, but they were given those shares by Grosky for bringing
in other investors. Al Soboj is one such person. And there are others. I will
use first names: Allan, Terry, etc. Grosky was in effect paying commissions to
people for bringing in other investors and he paid the commissions in stock and
he probably violated every SEC regulation in doing so since those commissions
exceeded the amount allowed by law.

A number of people feel that they “owe” loyalty to David Grosky because he
helped them out in a moment of need. He helped their brother-in-law or
whomever. So, there is a great deal of personal loyalty to Grosky, their
leader, and it has not escaped my attention that the whole thing bears a
resemblance to a cult with Grosky as the cult leader.

Grosky is also a master at appearing to be moving in a certain direction. The
wheels are moving, but they are often standing in place even though they are
spinning. My information is that in the last week, a key investor whom I will
refer to only as Allen, has shifted back into the Grosky camp.

14. Lastly, I have been challenged on my terminological inexactitude. I said
that Efoora was a ponzi scheme a few weeks back. That is not true since a ponzi
scheme involves replacing old money with new money. I said it was a scam and
that too is not really accurate. There have been irregularities in the sale of
stock, but it is not swamp land in Florida. There is a company, there is what
appears to be legitimate IP.

I think that pretty much sums up where things stand at the moment.

One investor told me that choosing between Grosky and Rappin is like deciding
whether you want esophogial or pancreatic cancer. The same investor told me
that the top three reasons that Grosky has to go are, just like in real estate
they say three things matter — location, location, location — the top three
reasons are: he can’t be CEO, he can’t be CEO, he can’t be CEO. All the
nonsense in selling stock and theft of stock aside, the big problem with Grosky
is that he could never take the firm to the next level and could never attract
legitimate venture money. That leaves the firm in the weak position of
accepting a bad deal from a guy like Sig who has been described to me as a
classic vulture capitalist. The big problem with the Sig deal is that it would
extinguish the rights of the shareholders, I have been told by people who feel
they understand the deal well enough to draw that conclusion.
+++++++++++++++++++
Here is a letter I received earlier today from Craig Rappin. I called him
because it surprised me that with such glowing comments made about him from
Mort, the putative author of the letter, Rappin would view Mort as an enemy.
But Rappin told me that Mort has been a turncoat. Craig believes that the
letter was never actually sent. Mort gave him a copy of it. Nonetheless, Mort
was a big supporter of Craig’s but has been one of those turncoats that Craig
was telling me about. Craig understands that the power has shifted. Other
turncoats, Craig says, are Tom Harr and Kiam. Craig has set up his own website
that will be operating in the next 48 hours called www.efoorainvestor.com, so
he says watch for it. He has many documents that he is posting on the site,
including letters from Grosky. Note the date of the letter from Mort. It was a
week before the Wolinsky article that torpedoed Rappin. So, Mort must have
known that something was up.

From: “Craig Rappin”
To:
Cc: “‘Jerry Hansberger’” ,