<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 26, 1999
REGISTRATION NO. 333-85079
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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COLLEGELINK.COM INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7373 16-0961436
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
RICHARD A. FISHER
CHAIRMAN
COLLEGELINK.COM INCORPORATED
55 HAMMARLUND WAY
MIDDLETOWN, RHODE ISLAND 02842
(401) 845-8800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
<TABLE>
<S> <C>
ROBERT L. BIRNBAUM, ESQ. GENE A. BLUMENREICH, ESQ.
DAVID A. BROADWIN, ESQ. NUTTER, MCCLENNEN & FISH, LLP
FOLEY, HOAG & ELIOT LLP ONE INTERNATIONAL PLACE
ONE POST OFFICE SQUARE BOSTON, MASSACHUSETTS 02110
BOSTON, MASSACHUSETTS 02109 (617) 439-2000
(617) 832-1000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
UNDERWRITERS MAY NOT CONFIRM SALES OF THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED NOVEMBER 26, 1999
PROSPECTUS
[COLLEGELINK.COM LOGO]
3,000,000 Shares
Common Stock
------------------------------
We are offering 3,000,000 shares of our common stock.
Our common stock currently trades on the OTC Electronic Bulletin Board
under the symbol "CLNK." Prior to November 26, 1999, our common stock traded on
the OTC Electronic Bulletin Board under the symbol "CYTA." We have applied to
have our common stock quoted on the Nasdaq National Market System under the
symbol "CLNK." No assurance can be given that our common stock will be approved
for listing on the Nasdaq National Market System.
On November 22, 1999, the last reported sale price of our common stock on
the OTC Bulletin Board was $9.875.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- --------
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds, before expenses, to CollegeLink.com............... $ $
</TABLE>
We have granted the underwriters a 45-day option to purchase up to an
additional 450,000 shares of common stock to cover over-allotments.
------------------------------
CRUTTENDEN ROTH INCORPORATED
PENNSYLVANIA MERCHANT GROUP
The date of this Prospectus is , 1999
<PAGE> 3
[INSIDE FRONT COVER]
YOU SHOULD ONLY RELY ON THE INFORMATION IN THIS PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT CONTAINED
IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES
OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS
PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE
OF OUR COMMON STOCK. IN THIS PROSPECTUS, "COLLEGELINK," "WE," "US" AND "OUR"
REFER TO COLLEGELINK.COM INCORPORATED AND ITS SUBSIDIARIES AND PREDECESSORS, AND
REFERENCES TO "COLLEGELINK.COM" REFER ONLY TO COLLEGELINK.COM INCORPORATED, IN
EACH CASE UNLESS THE CONTEXT OTHERWISE REQUIRES.
------------------------
DEALER PROSPECTUS DELIVERY OBLIGATION
Until , all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
------------------------
We own or have rights to trademarks or trade names that we use in
conjunction with the sale of our products and services. CollegeLink(R) is a
registered trademark owned by us. CollegeLink.com(TM) is a trademark owned by
us. Making College Count(R) is a registered trademark owned by Student Success,
Inc. This prospectus also refers to trademarks and trade names of other
companies.
<PAGE> 4
[INSIDE SPREAD]
[A two page spread containing the names of colleges and universities listed
alphabetically.]
<PAGE> 5
PROSPECTUS SUMMARY
This summary does not include all of the information that may be important
to you. You should read the following summary together with the more detailed
information, including our consolidated financial statements and related notes,
appearing elsewhere in this prospectus. Unless otherwise indicated, all
information in this prospectus assumes the underwriters will not exercise their
over-allotment option.
On November 16, 1999, we changed our name to CollegeLink.com Incorporated
from Cytation.com Incorporated and changed our state of incorporation to
Delaware from New York.
COLLEGELINK.COM INCORPORATED
OUR COMPANY
We provide college bound students and their families with a range of
solutions to the challenges of the college admission process, from college
selection to submission of college, financial aid, and scholarship applications.
We have recently entered into an agreement to acquire a related business,
Student Success, Inc., and a letter of intent to acquire another related
business, Online Scouting Network, Inc.
We have developed an Internet hub with a college application, financial aid
and scholarship service. We expect that nearly all applications will be
submitted by computer within the next several years because of increasing
student computer literacy and the significant financial and administrative
benefits to colleges and universities of receiving applications electronically.
In addition, through the Making College Count(R) and Making High School
Count(TM) programs, we help prepare students for success in college.
We also continuously obtain demographic and other information which can be
used by students, their families, colleges and other service providers to assist
in the college admissions process and enhance the entire college experience. Due
to the volume of college bound students who visit our Internet hub, we are
developing an attractive e-commerce location for students and their families.
CollegeLink.com. Through CollegeLink.com, and its relationships with more
than 900 colleges and universities, we are a leading provider of computer-based
college applications and admissions services to college bound students and their
families.
Student Success. Student Success is a leading provider of onsite high
school and college preparatory programs for students and their families under
its Making College Count(R) and Making High School Count(TM) trademarks. Through
this channel, we intend to continue to expand our presence and awareness of our
services with high school students. Student Success presented its seminars to
more than 225,000 students at more than 900 high schools and junior colleges
nationwide last year. These programs were sponsored by eight major consumer
products companies.
Online Scouting Network. Online Scouting Network is a leading provider of
online recruiting services offering student athletes greater visibility to more
than 3,000 college and university professionals. For the school year ended June
1999, more than 25,000 high school students from over 600 high schools
nationwide were registered with Online Scouting Network.
OUR RELATIONSHIPS
We have entered into agreements and developed relationships with more than
900 colleges and universities that accept applications in their respective
formats through CollegeLink(R). A complete list of these colleges and
universities is included in this prospectus.
We have an agreement with PNC Bank, N.A., one of the largest student loan
providers in the United States, to provide certain financial products and
services to college bound students and their families through our
CollegeLink.com Internet hub. PNC Investment Corp., an affiliate of PNC Bank,
has made a $4,000,000 investment in our company.
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We have an exclusive agreement with The College Board(R) to provide
electronic college applications through The College Board's ExPAN(R) guidance
software. The College Board(R) is a membership organization of colleges and
secondary schools and is the provider of the SAT(R) and the AP(R) Exams.
We also have co-marketing relationships with Student Advantage, Inc. and
FastWeb.com L.L.C. and are negotiating similar relationships with other
Web-based businesses including The FamilyEducation Company. We are continually
seeking appropriate relationships to expand our service and product offerings.
OUR MARKET
There are about 14.8 million high school students in the United States.
According to the U.S. census bureau, this number will increase to 15.7 million
over the next 5 years. Each year about 3.2 million students enter colleges and
universities for the first time. Of these about 2.2 million apply as first time
freshman to undergraduate colleges and universities. The remaining students
apply to continuing education programs of various sorts.
Each year about 2.2 million applicants submit more than seven million
applications for undergraduate admission to nearly 3,400 U.S. colleges and
universities. Over 50% of these students apply for some form of financial aid.
According to the Department of Education, it is expected that the total number
of college bound students will continue to increase each year for the
foreseeable future. Based on industry statistics, we believe colleges spend
about $3 billion annually to recruit and enroll students.
OUR STRATEGY
Our strategy is to build upon the thousands of relationships we have
developed with high school guidance counselors and college admissions
professionals through one-on-one marketing efforts. We plan to build our brand,
reach increasing numbers of high school and college students, and drive traffic
to our Internet hub. Our objectives are to:
Expand our market leadership position. We intend to leverage our
relationships with more than 3,000 high schools and more than 900 colleges and
universities to establish new affiliations, attract additional students to our
website, and create a premier Internet hub for college bound students. We plan
to continue to add high schools, colleges and universities through on campus
direct sales calls by sales personnel, corporate sponsorships, direct mailings,
targeted periodical advertising, online and broadcast advertising, partnerships
and various promotional campaigns.
Expand existing brand awareness. We intend to build upon our established
brands and our relationships with PNC Bank, N.A., The College Board(R), Student
Advantage, Inc., FastWeb.com L.L.C., The FamilyEducation Company and others to
establish CollegeLink.com as a leading Internet hub and e-commerce site.
Capitalize on our strong high school presence. Each year, The College
Board(R) distributes our CollegeLink(R) software with its ExPAN(R) guidance
software to about 2,000 high schools nationwide. Last school year, Making
College Count(R) presented at more than 900 high schools and junior colleges and
Online Scouting Network registered athletes from about 600 high schools. We
intend to grow our presence in the high school market through expansion of these
programs.
Develop strategic web partnerships. We have initiated a web partnership
program to co-brand our products and services on targeted high school and
college-related high traffic web sites and add content to our Internet hub.
Overcome resistance to online applications. We believe many college bound
students and their families perceive that colleges and universities prefer
applications that are submitted on the institution's specific format.
CollegeLink(R) software is the only program currently available that permits
students to enter general information only once and still deliver to each
institution an application in that institution's
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<PAGE> 7
own format. We believe this feature gives us a significant competitive advantage
and we intend to promote it to increase use of our services.
Our executive offices are located at 55 Hammarlund Way, Middletown, Rhode
Island 02482 and our telephone number is (401) 845-8800. Our web site is located
at www.collegelink.com. Information contained on our web site is not part of
this prospectus.
THE OFFERING
Common stock offered by
CollegeLink......................... 3,000,000 shares
Common stock to be outstanding after
the offering(1)..................... 12,875,840 shares
Use of proceeds..................... We intend to use our net proceeds for
the acquisitions of Student Success and
Online Scouting Network, general
corporate purposes, including working
capital, expansion of our sales and
marketing programs and in acquisitions
of and investments in complementary
businesses. See "Use of Proceeds."
Over-the-Counter Electronic Bulletin
Board Symbol........................ CLNK (Prior to November 26, 1999, our
common stock traded on the
Over-the-Counter Electronic Bulletin
Board under the symbol "CYTA.")
Proposed Nasdaq National Market
symbol(2)........................... CLNK
- ---------------
(1) The number of shares of common stock to be outstanding after the offering
excludes (a) 450,000 shares of the underwriters' over-allotment option, (b)
300,000 shares of common stock reserved for issuance upon exercise of the
representatives' warrants, (c) options outstanding at November 17 to
purchase 1,861,185 shares of common stock, and 2,105,065 shares reserved for
future grants under our option plans at November 17, (d) 1,140,000 shares of
common stock issuable upon conversion of 1,140,000 shares of Series A
Convertible Preferred Stock outstanding at November 17, (e) 550,369 shares
of common stock issuable upon conversion of 279,771 shares of Series B
Convertible Preferred Stock outstanding at November 17 (assuming the maximum
number of shares of common stock issuable upon such conversion), (f)
1,000,000 shares of common stock issuable upon conversion of 1,000,000
shares of Series C Convertible Preferred Stock outstanding at November 17,
and (g) warrants to purchase 940,283 shares of common stock outstanding at
November 17.
(2) We have applied to have our shares of common stock approved for quotation on
the Nasdaq National Market System under the symbol "CLNK." No assurance can
be given that our common stock will be approved for listing on the Nasdaq
National Market System.
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SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table summarizes our financial data. The data presented in
this table is derived from the "Selected Financial Data" and the financial
statements and related notes which are included elsewhere in this prospectus.
You should read those sections for a further explanation of the financial data
summarized here. The pro forma financial data presented in the table gives
effect to the proposed issuance of common stock to the stockholders of Student
Success and Online Scouting Network. The pro forma as adjusted financial data
also gives effect to this offering.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30, 1999
------------------------------- ----------------------
PRO FORMA
ACQUISITIONS PRO FORMA
1998 1999 1999 ACTUAL ACQUISITIONS
------ ------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT
Revenues.................................. $1,243 $ 562 $ 1,840 $ 266 $ 678
Expenses.................................. 1,873 3,148 7,962 1,627 2,412
------ ------- ------- ------- -------
Net Loss.................................. $ (630) $(2,586) $(6,123) $(1,361) (1,734)
====== ======= ======= ======= =======
Weighted Average Primary Shares........... 3,499 6,531 7,865 9,495 10,378
====== ======= ======= ======= =======
Net Loss Per Share........................ $(0.18) $ (0.40) $ (0.78) $ (0.14) $ (0.17)
====== ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, SEPTEMBER 30, 1999
------------------------------ ------------------------------------
PRO FORMA
ACQUISITIONS PRO FORMA PRO FORMA
1998 1999 1999 ACTUAL ACQUISITIONS AS ADJUSTED
------ ------ ------------ ------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
Current Assets............................ $ 131 $1,557 $ 2,249 $ 4,639 $ 1,836
Total Assets.............................. 358 1,807 21,619 13,181 21,212
Shareholders' Equity (Deficit)............ (69) 1,377 19,232 12,202 19,052
Shares Outstanding........................ 3,482 9,152 10,378 9,846 10,413
</TABLE>
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RISK FACTORS
You should carefully consider the following risk factors in evaluating our
business before purchasing any of our common stock. If any of the following
events actually occurs, our business, financial condition or results of
operations would likely suffer. In this case, the market price of our common
stock could decline, and you could lose all or part of your investment in our
common stock.
RISKS RELATING TO OUR BUSINESS
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED OPERATING
HISTORY AS AN INTERNET COMPANY.
One of our predecessor entities established the CollegeLink business in
1991. While we previously sold CollegeLink(R) as a computer-based service, we
are converting this business to an Internet-based service. Accordingly, the
CollegeLink business in its current form has only a very limited operating
history on which you can base your evaluation of this business. As a result, you
will find it difficult to predict our future revenues or results. In addition,
you must consider our prospects in light of the risks and uncertainties
encountered by companies in an early stage of development in a new and rapidly
evolving market such as the market for Internet-based services.
WE HAVE NEVER BEEN PROFITABLE AND MAY NOT BE PROFITABLE IN THE FUTURE.
Each of our predecessors has incurred significant losses in every fiscal
period since inception. Since our recent mergers with each of these
corporations, we have continued to incur losses in the CollegeLink.com business
and our other businesses. We incurred net losses of $630,332 in fiscal 1998,
$2,586,425 in fiscal 1999 and $1,361,141 for the quarter ended September 30,
1999. As of June 30, 1999, we had a pro forma net loss of $6,154,936. We expect
to continue to experience losses at least for the foreseeable future, and we
cannot be certain when we will become profitable, if at all. Our failure to
achieve and maintain profitability could adversely affect the market price of
our common stock.
WE FACE COMPETITION FROM COMPANIES OPERATING BUSINESSES SIMILAR TO OURS, AND OUR
FAILURE TO COMPETE SUCCESSFULLY WITH OUR CURRENT OR FUTURE COMPETITORS COULD
MATERIALLY ADVERSELY AFFECT OUR BUSINESS.
The market in which CollegeLink(R) operates is very competitive. We face
direct competition from a number of sources, the most significant of which are
Apply!, Embark.com (formerly CollegeEdge), CollegeNet, CollegeQuest and XAP.
Apply!, owned by The Princeton Review, provides a CD-based college application
product to students, primarily through a high school distribution scheme.
Embark.com, CollegeNet, CollegeQuest and XAP are Internet companies which allow
students to complete and submit college applications electronically. Our
CollegeLink(R) service also faces competition from traditional print media
companies such as The Princeton Review, Petersons, a subsidiary of Thorne
Publishing, and Kaplan Educational Centers, which provide offline information
and resources such as self help guides on college admission and selection, and
from software companies already providing packaged software to educational
institutions and professionals. Some of these companies have already moved to
provide these resources on the Internet. We also face competition from
educational not-for-profit and membership organizations such as ACT and The
College Board(R) which already provide significant online information and other
resources to students. The College Board(R) has recently announced plans to
provide a broad range of college admissions, test preparation and related
services on the Internet.
Student Success faces competition from a variety of sources including other
providers of self-help and educational programs such as Kaplan, Barrons,
Princeton Review, Houghton Mifflin and Learning Forum. The market in which
Online Scouting Network operates is also competitive. We are aware of three
significant competitors in its market: Athletes Online, All-statersports.com and
Recruit. These companies provide online college athletic recruitment information
and services. While we have established relationships with more than 900
colleges and universities and will have significant exposure to large numbers of
high school students and their families through our acquisitions of Student
Success and Online Scouting Network, we expect that these factors will not
prevent additional competitors from entering the
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markets in which we operate with competing products and services. Our current or
future competitors may have greater resources, including contacts in the
educational industry, than we currently have at our disposal. Our competitors
may be more able to react more quickly to changes in technology in our industry
and/or to expend greater time and funds than we can to develop and promote their
products or services. Increased competition could result in pricing pressures,
reduced margins or the failure of our products and services to achieve or
maintain market acceptance. If we cannot compete effectively with current or
future competitors, our business, operating results and financial condition
could be materially adversely affected.
STUDENTS MAY BE RELUCTANT TO SUBMIT COMPUTER-BASED APPLICATIONS AND ANY
DIFFICULTY CONVINCING STUDENTS TO USE OUR SERVICE COULD MATERIALLY ADVERSELY
AFFECT OUR BUSINESS AND OPERATING RESULTS.
College bound students may not feel comfortable using our products.
Students may feel that applications submitted electronically will not receive
the same treatment as traditional applications, they may feel insecure about
relying on an intermediary for submitting applications, or they may be unwilling
to pay the additional fees we charge for processing applications. Any of these
factors could inhibit development of a market for CollegeLink(R). If we have
difficulty developing a viable market for CollegeLink(R), our business and
operating results could be materially adversely affected.
COLLEGES AND UNIVERSITIES MAY BE UNWILLING TO DESIGNATE COLLEGELINK(R) AS A
PREFERRED OR EVEN AN ACCEPTABLE ONLINE FILING SERVICE.
Various colleges and universities may not wish to establish a special
relationship with any particular online application service or they may not be
willing to accept online filing from any service. The adoption of such a policy
by a significant number of these institutions could have a material adverse
effect on our results of operations and financial condition.
FAILURE TO ESTABLISH RELATIONSHIPS WITH FURTHER COLLEGES AND UNIVERSITIES OR TO
MAINTAIN OUR EXISTING RELATIONSHIPS MAY AFFECT OUR ABILITY TO COMPETE IN OUR
MARKET.
We believe our ability to successfully compete in the online college
application market is dependent upon our ability to enter into new relationships
with colleges not currently accepting CollegeLink(R) applications and to
maintain our existing relationships with a large number of colleges and
universities. If we are unable to continue to enter into new relationships with
colleges and universities not currently accepting CollegeLink(R) applications,
the growth of our business could be inhibited. Our failure to maintain our
existing relationships with colleges and universities for any reason could cause
us to lose existing and potential customers. A loss of customers or restrictions
on our ability to grow our business could have a material adverse effect on our
results of operations and financial condition.
OUR FAILURE TO MANAGE OUR EXPANDING OPERATIONS SUCCESSFULLY COULD ADVERSELY
AFFECT OUR BUSINESS.
If we are to be successful, we must expand our operations. We have
experienced significant growth in our expenses and employee base as a result of
acquisitions. This growth creates new and increased management and training
responsibilities for our employees. This growth also increases the demands on
our internal systems, procedures and controls, and on our managerial,
administrative, financial, marketing and other resources. We depend heavily upon
the managerial, operational and administrative skills of our officers to manage
this growth. Nonetheless, new responsibilities and demands may adversely affect
the overall quality of our work. Any failure on our part to improve our internal
systems, procedures and controls, to attract, train, motivate, supervise and
retain additional professional, managerial, administrative, financial, marketing
and other personnel, or otherwise to manage growth successfully could have a
material adverse effect on our business, financial condition and results of
operations.
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WE MAY HAVE DIFFICULTY INTEGRATING THE BUSINESSES OF ECI, STUDENT SUCCESS AND
OTHER BUSINESSES WHICH WE EXPECT TO ACQUIRE.
On August 10, 1999, we acquired ECI, Inc., now renamed CollegeLink
Corporation. CollegeLink Corporation provides online college admission,
scholarship and financial aid application services. On October 20, 1999, we
signed an agreement to acquire Student Success, Inc. Student Success offers
onsite high school and college preparatory programs for students and their
families under its Making College Count(R) and Making High School Count(TM)
trademarks. On August 18, 1999, we signed a letter of intent to acquire Online
Scouting Network, Inc., an Internet-based company that operates the Online
Scouting Network and provides student-athlete recruiting services at its web
site, http://www.osn.com. Both of our pending acquisitions are subject, among
other things, to certain usual and customary closing conditions. No assurance
can be given to you that we will complete these acquisitions.
We cannot assure you that we will be able to absorb and effectively manage
the acquisition of ECI and, assuming their completion, the acquisitions of
Student Success and Online Scouting Network. There can be no assurance that we
will be able to develop, market and sell our CollegeLink(R) products and
services and the products and services of Student Success and Online Scouting
Network successfully. The difficulty and management distraction inherent in
integrating each acquired business, the substantial charges expected to be
incurred in connection with each acquisition, including costs of integrating
each business and transaction expenses arising from each acquisition, the risks
of entering markets in which we have no or limited direct prior experience, the
potential loss of key employees of each acquired company and the risk that the
benefits sought in each acquisition will not be fully achieved, could have a
material adverse effect on our business, operating results and financial
condition.
WE ARE DEPENDENT UPON CERTAIN KEY PERSONNEL WHOSE SERVICES COULD BE DIFFICULT TO
REPLACE.
Our future success depends to a significant degree on the skills,
experience and efforts of our key executive officers and key marketing and
management personnel such as our Chairman, Richard Fisher, and Thomas Burgess,
who has run the operations of CollegeLink Corporation since January 1999, all of
whom currently devote their full time to our business and would be difficult to
replace if they left our employment. While we have employment agreements with
the foregoing individuals, such agreements do not guarantee their continued
employment with us. While we also have noncompetition agreements with these
individuals, there is no assurance that the noncompetition agreements will be
enforceable. The loss of the services of any of the foregoing individuals could
have a material adverse effect on our business, operating results and financial
condition. We do not currently maintain a key person life insurance policy
covering any of our officers.
OUR INABILITY TO HIRE AND RETAIN SKILLED PERSONNEL COULD HARM OUR BUSINESS.
Qualified personnel are in great demand throughout the software and
Internet start-up industries. Our success depends in large part upon our ability
to attract, train, motivate and retain highly skilled sales and marketing
personnel, web designers, software engineers and other senior personnel. Our
inability to attract and retain the highly trained technical personnel that are
integral to our direct sales, product development, service and support teams may
limit the rate at which we can generate sales and develop new products and
services or product and service enhancements. This could have a material adverse
effect on our business, operating results and financial condition.
SEASONAL FACTORS MAY CAUSE OUR OPERATING RESULTS TO FLUCTUATE AND WE MAY NOT BE
ABLE TO GENERATE SUFFICIENT REVENUE IN CERTAIN PERIODS TO OFFSET EXPENSES IN
THOSE PERIODS.
Because our CollegeLink business derives a substantial portion of its
revenues from the college application process which occurs in the fall, winter,
and early spring, revenue from our CollegeLink(R) products and services has
historically been much lower during the late spring and summer months, and we
expect this trend to continue. In addition, revenues for student loan
applications are also seasonal. We expect most of these revenues to be received
between July and December. This seasonality of the
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CollegeLink business may cause our revenue and operating results to fluctuate
significantly in the future and to be difficult to predict. In such an event,
the price of our common stock could decline.
IF OUR ONLINE SERVERS BECAME UNAVAILABLE, WE COULD LOSE CUSTOMERS.
We could lose existing or potential customers for our online CollegeLink(R)
business if they do not have ready access to our online servers, or if our
online servers and computer systems do not perform reliably and to our
customers' satisfaction. Network interruptions or other computer system
shortcomings, such as inadequate capacity, could reduce customer satisfaction
with our services or prevent customers from accessing our services and seriously
damage our reputation.
As the number of students and colleges and universities using
CollegeLink(R) online increases, we will need to expand and upgrade the
technology underlying our CollegeLink(R) services. We may be unable to predict
accurately changes in the volume of user traffic and therefore may be unable to
expand and upgrade our systems and infrastructure in time to avoid system
interruptions. System interruptions will affect the quality of our services we
provide to our existing customers and may cause us to lose customers. In
addition, we may need to divert significant resources to expand and upgrade our
existing systems and infrastructure to meet any increase in user demand. This
could have a material adverse effect on our business, results of operations and
financial condition.
Although we are planning to provide a redundant server capability in
another geographic area, all of our computer and communications equipment is
currently located in Newport, Rhode Island. This equipment is vulnerable to
interruption or damage from fire, flood, power loss, telecommunications failure
and earthquake. Some of the components of our computer and communication systems
do not have immediate automatic backup equipment. The failure of any of these
components could result in down time for our server and could seriously harm our
business. Our property damage and business interruption insurance may not
protect us from any loss that we may suffer.
Our computer and communications systems are also vulnerable to computer
viruses, physical or electronic break-in and other disruptions. These problems
could lead to interruptions, delays, loss of data or the ineffective operation
of our server. Any of these outcomes could seriously harm our business.
WE COULD LOSE REVENUE AND INCUR SIGNIFICANT COSTS IF OUR SYSTEMS OR MATERIAL
THIRD-PARTY SYSTEMS ARE NOT YEAR 2000 COMPLIANT.
Many currently installed computer systems and software products accept only
two digits to identify the year in any date. Thus, the year 2000 will appear as
"00," which a system or software might consider to be the year 1900 rather than
the year 2000. This error could result in system failures, delays or
miscalculations that disrupt our operations. The failure of our internal
systems, the systems of any companies we acquire, or any material third-party
systems, to be year 2000 compliant could result in significant liabilities and
could seriously harm our business.
We have conducted a review of our business systems, including our computer
systems. We have taken steps to remedy potential problems, but have not yet
developed a comprehensive year 2000 contingency plan. There can be no assurance
that we have identified all year 2000 problems in our computer systems before
they occur or that we will be able to remedy any problems that are discovered.
We have also asked many of our customers, vendors and resellers about their
progress in identifying and addressing problems that their computer systems may
face in correctly interrelating and processing date information as the year 2000
approaches and is reached. We have received responses from several of these
parties, but there can be no assurance that we will identify all such year 2000
problems in the computer systems of our customers, vendors or resellers before
they occur or that we will be able to remedy any problems that are discovered.
Our efforts to identify and address year 2000 problems, and the expenses we
may incur as a result of such problems, could have a material adverse effect on
our business, financial condition and results of operations. We expect that
costs to address the year 2000 issue, directly or indirectly, will total about
10
<PAGE> 13
$15,000, the majority of which was spent in fiscal 1998 and 1999, with the
remainder being spent during fiscal 2000. To date, we have incurred expenses of
about $12,000 related to the assessment of and preliminary efforts in dealing
with the year 2000 issue. We cannot assure you that these costs will not be
significantly higher.
In addition, the revenue stream and financial stability of existing
customers may be adversely impacted by year 2000 problems, which could cause
fluctuations in our revenue. If we fail to identify and remedy year 2000
problems, we could also be at a competitive disadvantage relative to companies
that have corrected such problems. It is also possible that concerns over year
2000 problems could cause potential customers for our products and services to
lose confidence in computer-based solutions to college applications needs. Any
of these outcomes could have significant adverse effects on our business,
financial condition and results of operations.
WE MAY BE UNABLE TO PROTECT ADEQUATELY OUR INTELLECTUAL PROPERTY RIGHTS, AND
ASSERTING OUR INTELLECTUAL PROPERTY RIGHTS MAY SUBJECT US TO LITIGATION WHICH
COULD HARM OUR OPERATING RESULTS.
The unauthorized reproduction or other misappropriation of our proprietary
technology or use of our other intellectual property rights could enable third
parties to benefit from our technology and other intellectual property rights
without paying us for it. This could have a material adverse effect on our
business, operating results and financial condition.
Although we have taken steps to protect our proprietary technology and
other intellectual property, they may be inadequate. We do not know whether we
will be able to defend our proprietary rights because the validity,
enforceability and scope of protection of proprietary rights in Internet-related
industries are uncertain and still evolving. Moreover, the laws of some foreign
countries are uncertain and may not protect intellectual property rights to the
same extent as the laws of the United States.
If we resort to legal proceedings to enforce our intellectual property
rights, the proceedings could be burdensome and expensive and could involve a
high degree of risk.
WE MAY FACE INTELLECTUAL PROPERTY INFRINGEMENT AND OTHER CLAIMS FROM THIRD
PARTIES IN CONNECTION WITH THE USE OF OUR TECHNOLOGY WHICH COULD REQUIRE US TO
INCUR SUBSTANTIAL COSTS AND DIVERT OUR RESOURCES FROM OUR BUSINESS.
Although we attempt to avoid infringing known proprietary rights of third
parties, we are subject to the risk of claims alleging infringement of third
party proprietary rights. If we were to discover that any of our products
violated third party proprietary rights, there can be no assurance that we would
be able to obtain licenses on commercially reasonable terms to continue offering
the product without substantial reengineering or that any effort to undertake
such reengineering would be successful. We do not conduct comprehensive patent
searches to determine whether the technology used in our products infringes
patents held by third parties. In addition, product development is inherently
uncertain in a rapidly evolving technological environment in which there may be
numerous patent applications pending, many of which are confidential when filed,
with regard to similar technologies.
Any claim of infringement could cause us to incur substantial costs
defending against the claim, even if the claim is invalid, and could distract
our management from our business for periods of time. Furthermore, a party
making such a claim could secure a judgment that requires us to pay substantial
damages. A judgment could also include an injunction or other court order that
could prevent us from selling our products or services. Any of these events
could have a material adverse effect on our business, operating results and
financial condition.
11
<PAGE> 14
RISKS RELATING TO OUR INDUSTRY
WE DEPEND ON THE CONTINUED GROWTH OF THE INTERNET AND ANY DECREASE IN CONSUMER
USE OF THE INTERNET OR THE GROWTH OF THE INTERNET COULD HARM OUR BUSINESS.
Our ability to generate revenues is substantially dependent upon continued
growth in the acceptance and use of the Internet and the infrastructure for
providing Internet access and carrying Internet traffic. We cannot be certain
that the necessary infrastructure or complementary products or services will be
developed or that the Internet will prove to be a viable commercial marketplace.
To the extent that the Internet continues to experience significant growth in
the level of use and the number of users, there can be no assurance that the
infrastructure will continue to be able to support the demands placed upon it by
such potential growth. In addition, delays in the development or adoption of new
standards or protocols required to handle increased levels of Internet activity,
increased governmental regulation or taxation of Internet commerce may restrict
the growth of the Internet. If the necessary infrastructure or complementary
products and services are not developed or if the Internet does not become a
viable commercial marketplace, it would have a material adverse effect on our
business, operating results and financial condition.
OUR BUSINESS MAY BE HARMED BY THE SECURITY RISKS RELATED TO INTERNET COMMERCE.
A significant barrier to submission of personal data in college
applications over the Internet is the secure transmission of confidential
information over public networks. Internet companies rely on encryption and
authentication technology to provide the security and authentication necessary
to effect secure transmission of confidential information. There can be no
assurance that advances in computer capabilities, new discoveries in the field
of cryptography or other developments will not result in a compromise or breach
of the algorithms used by companies to protect consumer transaction data. If any
such compromise of this security were to occur, it could have a material adverse
effect on our potential clients, business, prospects, financial condition and
results of operations. A party who is able to circumvent security measures could
misappropriate proprietary information or cause interruptions in operations. We
may be required to expend significant capital and other resources to protect
against such security breaches or to alleviate problems caused by such breaches.
Concerns over the security of transactions conducted on the Internet and
the privacy of users may also hinder the growth of online services generally. To
the extent that our activities or third-party contractors involve the storage
and transmission of proprietary information, such as credit card numbers, or
personal data information, security breaches could damage our reputation and
expose us to a risk of loss or litigation and possible liability. We cannot be
sure that our security measures will not prevent security breaches or that
failure to prevent such security breaches will not have a material adverse
effect on our business.
RISKS RELATING TO THIS OFFERING
OUR OFFERING HAS NOT BEEN "APPROVED" BY THE SECURITIES AND EXCHANGE COMMISSION.
On October 29, 1999, Mr. High, our former President, granted an interview
to StockHouse.com, a Canadian Internet provider of stock market information.
This interview was posted on the StockHouse.com website from October 29, 1999
through November 11, 1999. In the first paragraph of this interview, the
interviewer wrote, "with an approved . . . filing with the US Securities and
Exchange Commission . . ." NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR
ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THIS OFFERING OR
DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
12
<PAGE> 15
INACCURATE STATEMENTS MADE IN AN INTERVIEW BY MR. HIGH, OUR FORMER PRESIDENT,
CONCERNING OUR BUSINESS COULD MISLEAD INVESTORS.
On October 29, 1999, Mr. High granted an interview to StockHouse.com, a
Canadian Internet provider of stock market information. This interview was
posted on the StockHouse.com website from October 29, 1999 through November 11,
1999 and contained a number of statements, attributed to Mr. High, which are not
accurate or with which we do not agree. You should not rely upon the statements
made by Mr. High in this interview in making a decision to invest in our
company. You should rely exclusively on the information provided in this
prospectus.
Mr. High said that $15 per share was a "realistic" stock price and that a
$150,000,000 market capitalization for our company was "still too cheap." These
statements reflect Mr. High's personal views. We believe that per share price
and market capitalization are sensitive to many factors including, among others,
our performance, general market conditions, general economic conditions, and the
performance of our competitors. We do not know what share price is realistic or
what share price will be realistic at the time of the offering.
The interviewer describes Online Scouting Network, Inc. as having "the
nation's largest database of high school athletic talent." We do not know
whether or not Online Scouting Network has the nation's largest database of
highschool athletic talent. We have recently entered into a letter of intent to
acquire Online Scouting Network, Inc. We are currently negotiating a definitive
agreement with Online Scouting Network. We can provide no assurance that we will
be able to complete the proposed acquisition. Furthermore, it is our policy not
to comment on the status of ongoing negotiations.
Mr. High said that we were "the only one that is on America Online." While
our software is available through America Online, we do not have a sole or
exclusive arrangement with America Online. Although we are pleased to have this
relationship with America Online, we do not believe it is material to our
business.
Mr. High said that we would be profitable in 24 months and that our
revenues would triple from the year 2000 to the year 2001. These statements
reflect Mr. High's personal views and do not reflect our views. We do not have
projections that we consider sufficiently reliable for public disclosure
concerning when we expect to achieve profitability or what our revenue growth
will be. We believe that profitability and revenue growth are sensitive to many
factors including, among others, acceptance of our products and services,
execution of our business plan, performance of our competitors, general market
conditions, and general economic conditions. We do not know when, or if, we will
be profitable or at what rate revenues will grow.
Mr. High said that our ultimate goal is to have every college in the world
using CollegeLink(R) within the next "couple of years." He also said that we are
going to dominate our market and that we are the biggest in our industry. These
statements reflect Mr. High's personal views and do not reflect our view.
Although we intend to increase the number of colleges that accept applications
using CollegeLink, we do not believe that every college in the world will be
using CollegeLink(R) within the next two years. Although we believe that we have
more relationships with colleges and high schools than any of our competitors,
we do not believe that we, or indeed any company, dominate this market at this
time. We believe we are the largest participant in this market because more
colleges accept applications on our CollegeLink(R) software than on the software
of any of our competitors. Other measures of size could yield different results.
Forward looking statements are necessarily speculative in nature, and it
can be expected that actual results will vary from Mr. High's statements. We
have a very limited operating history as an Internet company. Furthermore,
Internet companies and their stocks are highly dynamic and their performance is
subject to many uncertainties. Within the context of Internet companies
generally, our market is just beginning to develop. This makes it particularly
hard to make predictions about future performance. Neither we nor any of the
underwriters in this offering have confirmed, endorsed or adopted any of the
statements that were not made by us for utilization by, or distribution to,
prospective purchasers in this offering. To the extent any such statements are
inconsistent with, or conflict with, the information
13
<PAGE> 16
contained in this prospectus, or relate to information not contained in this
prospectus, they are disclaimed by us and the underwriters. Accordingly, you
should not rely on any such statements not made by us.
MR. HIGH HAS RESIGNED AS CHIEF EXECUTIVE OFFICER.
On November 16, 1999, Mr. High resigned his position as Chief Executive
Officer of our company. We are in discussions with Mr. High concerning what his
future role might be.
OUR EXISTING PRINCIPAL SHAREHOLDERS WILL CONTINUE TO EXERCISE SIGNIFICANT
CONTROL OF COLLEGELINK.
Of our outstanding 9,875,840 shares of common stock, our principal
shareholders, officers and directors beneficially own 5,234,837 shares or about
53 percent of our common stock prior to this offering and following this
offering will own about 41 percent of our common stock. In addition, our
officers and directors have currently exercisable options to purchase 402,369
shares of our common stock. As a result, they may have the ability to control
and direct our affairs and business. Such concentration of ownership may also
have the effect of delaying, deferring or preventing a change in control in
CollegeLink.
THERE HAS BEEN LITTLE PREVIOUS PUBLIC MARKET FOR OUR STOCK, AND IF SUCH A MARKET
DOES DEVELOP, OUR STOCK PRICE COULD POTENTIALLY BE VOLATILE.
Although our common stock is quoted on the Over-the-Counter Electronic
Bulletin Board, there has been little public market for the common stock, and
there can be no assurance that an active trading market will develop or be
sustained. At a future date, provided a public market for the stock does
develop, the market price of the shares of common stock is likely to be highly
volatile and may be significantly affected by factors such as fluctuations in
our operating results, announcements of technological innovations or new
products and/or services by us or our competitors, governmental regulatory
action, developments with respect to proprietary rights and general market
conditions.
WE WILL HAVE BROAD DISCRETION IN USING THE PROCEEDS OF THIS OFFERING.
We intend to use all of our proceeds from this offering for the acquisition
of Student Success and Online Scouting Network, working capital and general
corporate purposes, including other potential acquisitions. Accordingly, we will
have broad discretion in using our proceeds. You will not have the opportunity
to evaluate the economic, financial or other information that we will use to
determine how to use our proceeds.
FUTURE SALES OF COMMON STOCK BY EXISTING SECURITY HOLDERS COULD DEPRESS THE
MARKET PRICE FOR THE COMMON STOCK.
Sales of substantial amounts of the common stock in the public market, or
the prospect of such sales, could depress the prevailing market price of the
common stock and our ability to raise equity capital in the future. Upon
completion of this offering, we will have outstanding 12,875,840 shares of
common stock, warrants and options to purchase 2,471,988 shares and 2,690,369
shares issuable upon conversion of our preferred stock (assuming the maximum
number of shares to be issued upon conversion). Of these shares, 8,871,746
shares of common stock and 5,162,357 shares issuable upon exercise of warrants
and options and conversion of our preferred stock (assuming the maximum number
of shares to be issued upon conversion) will be restricted shares under the
Securities Act of 1933, as amended. The common stock in this offering will be
immediately eligible for sale in the public market without restriction on the
date of the prospectus. Taking into account the lock-up agreements which certain
of our shareholders have signed and the restrictions of Rules 144, 144(k) and
701 promulgated under the Securities Act, 7,081,028 of the restricted shares
will be available for sale in the public market beginning March 5, 2000, and all
of the restricted shares will be available for sale in the public market by
.
14
<PAGE> 17
YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION OF YOUR INVESTMENT.
If you buy the common stock you will incur immediate and substantial
dilution of about $-- per share, or --% of your investment in the common stock
(at a public offering price of $-- per share), in that the net tangible book
value of the common stock after this offering will be about $-- per share of
common stock.
ISSUANCE OF PREFERRED STOCK MAY ADVERSELY AFFECT HOLDERS OF COMMON STOCK OR
DELAY OR PREVENT CORPORATE TAKE-OVER.
Our certificate of incorporation provides that we may issue preferred stock
from time to time in one or more series. Our Board of Directors is authorized to
determine the rights (including voting rights), preferences, privileges and
restrictions granted to and imposed upon any wholly unissued series of preferred
stock and the designation of any such shares, without any vote or action by our
shareholders. The Board of Directors may authorize and issue preferred stock
with voting power or other rights that could adversely affect the voting power
or other rights of the holders of common stock. In addition, the issuance of
preferred stock could have the effect of delaying, deferring or preventing a
change in control, because the terms of preferred stock that might be issued
could potentially prohibit the consummation of any merger, reorganization, sale
of substantially all of its assets, liquidation or other extraordinary corporate
transaction without the approval of the holders of the outstanding shares of the
preferred stock.
OUR CHARTER, BY-LAWS AND DELAWARE LAW MAY DETER TAKE-OVERS.
Our certificate of incorporation, by-laws and Delaware law contain
provisions that could have anti-takeover effects and that could discourage,
delay or prevent a change in control of CollegeLink or an acquisition of
CollegeLink at a price that many stockholders may find attractive. These
provisions may also discourage proxy contests and make it more difficult for our
stockholders to take some corporate actions, including the election of
directors. The existence of these provisions could limit the price that
investors might be willing to pay in the future for shares of our common stock.
FORWARD-LOOKING STATEMENTS
Statements in this prospectus that are not purely historical, such as
statements regarding our expectations, beliefs, intentions, plans and strategies
regarding the future, are forward-looking statements. These statements are only
predictions, and they involve risks, uncertainties and assumptions that could
cause our actual results to differ materially from the results we express in the
forward-looking statements, including those risks and uncertainties discussed
under "Risk Factors." This section includes important factors that could cause
or contribute to these differences. We cannot guarantee the results expressed in
any forward-looking statement. We have based all forward-looking statements on
information available to us on the date of this prospectus and we have no
obligation to update any forward-looking statement.
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<PAGE> 18
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 3,000,000 shares of
common stock we are offering, after deducting the estimated underwriting
discount and estimated offering expenses payable by us and assuming a public
offering price of $10.00 per share, will be about $26.9 million, or about $31.1
million if the underwriters exercise their over-allotment option in full.
We intend to use the net proceeds from the offering for the acquisitions of
Student Success and Online Scouting Network, general corporate purposes,
including working capital, expansion of our sales and marketing programs and in
acquisitions of and investments in complementary businesses. Accordingly, we
will have broad discretion in the application of the net proceeds. We have
recently signed a definitive agreement to acquire Student Success and a letter
of intent to acquire Online Scouting Network. Pending the foregoing uses, we
intend to invest the net proceeds from the offering in investment-grade,
interest-bearing instruments. While the net proceeds are so invested, the
interest earned by us on such proceeds will be limited by available market
rates.
PRICE RANGE OF COMMON STOCK
Our common stock has been publicly traded on the Over-the-Counter
Electronic Bulletin Board under the symbol CYTA since March 18, 1999. From
November 26, 1999, our common stock will be traded on the Over-the-Counter
Electronic Bulletin Board under the symbol "CLNK." The following table sets
forth, for the periods indicated, the high and low closing sales prices per
share for the common stock as quoted on the Over-the-Counter Electronic Bulletin
Board.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
-----------------
HIGH LOW
------- ------
<S> <C> <C>
FISCAL 1999:
Third Quarter ending March 31, 1999 (commencing March 18,
1999)..................................................... $ 7.500 $5.375
Fourth Quarter ending June 30, 1999......................... $ 9.906 $6.125
FISCAL 2000:
First Quarter ending September 30, 1999..................... $ 6.875 $4.188
Second Quarter ending December 31, 1999 (through November
22, 1999)................................................. $12.500 $5.000
</TABLE>
On November 22, 1999, the closing price of our common stock as quoted on
the Over-the-Counter Electronic Bulletin Board was $9.875. On that date, we had
about 1,400 holders of record of the common stock. This number does not include
stockholders for whom shares were held in a "nominee" or "street" name.
DIVIDEND POLICY
We have never declared or paid any dividends on our common stock. We
currently intend to retain any future earnings to finance operations and
expansion of our business and therefore do not anticipate paying any cash
dividends in the foreseeable future. The payment of future dividends, if any,
will depend, among other things, on our results of operations, cash flows and
financial condition and on such other factors as our Board of Directors may, in
its discretion, consider relevant.
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<PAGE> 19
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 1999,
on an actual basis, on a pro forma basis as if the acquisitions of Student
Success and Online Scouting Network had occurred as of September 30, 1999, and
as adjusted to reflect the completion of the foregoing acquisitions and the sale
by us of 3,000,000 shares of common stock in this offering (at an offering price
of $ -- per share and after deducting estimated underwriting discounts and
commissions and offering expenses payable by us) and the application of the
estimated net proceeds from this offering. You should read the following in
conjunction with the more detailed financial statements and related notes
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
----------------------------------------------
PRO FORMA PRO FORMA AS
ACTUAL ACQUISITIONS(1) ADJUSTED
----------- --------------- ------------
<S> <C> <C> <C>
STOCKHOLDERS' EQUITY:
Series A Convertible Preferred Stock, $4.00 stated
value, par value $0.01 per share; 2,500,000
shares authorized, and 890,000 shares issued and
outstanding..................................... $ 3,534,980 $ 3,534,980
Series B Convertible Preferred Stock, $7.625
stated value, par value $0.01 per share; 300,000
shares authorized, and 279,771 shares issued and
outstanding..................................... 4,175,000 4,175,000
Series C Convertible Preferred Stock $4.00 stated
value, par value $0.01 per share; 1,000,000
shares authorized, and 1,000,000 shares issued
and outstanding................................. 4,000,000 4,000,000
Common Stock, par value $0.001 per share;
100,000,000 shares authorized and 9,846,340
shares issued and outstanding, actual;
10,378,000 shares issued and outstanding, pro
forma; shares issued and outstanding, pro
forma as adjusted(2)............................ 9,846 10,378
Additional paid-in capital........................ 6,035,664 11,704,492
Retained earnings (accumulated deficit)........... (5,553,359) (5,553,359)
----------- -----------
Total stockholders' equity.............. 12,202,131 17,871,491
----------- -----------
Total capitalization.................... $12,202,131 $17,871,491
=========== ===========
</TABLE>
- ---------------
(1) This amount gives effect to the 225,000 shares of common stock proposed to
be issued to the stockholders of Online Scouting Network, but does not give
effect to an indeterminate number of shares proposed to be issued to
stockholders of Student Success, in connection with the acquisition of these
companies. For the purposes of this table we have assumed a $10.00 per share
price.
(2) Does not give effect to an aggregate of up to 7,787,422 shares of common
stock as follows: (a) 450,000 shares issuable upon exercise of the
underwriters' over-allotment option; (b) 300,000 shares of common stock
reserved for issuance upon exercise of the representatives' warrants, (c)
1,716,185 shares of common stock reserved for issuance upon the exercise of
options outstanding, and 2,125,065 shares of common stock reserved for
future grants under our option plans, (d) 755,803 shares of common stock
reserved for issuance upon exercise of outstanding warrants, (e) 890,000
shares of common stock issuable upon conversion of 890,000 shares of Series
A Convertible Preferred Stock outstanding, (f) 550,369 shares of common
stock issuable upon conversion of 279,771 shares of Series B Convertible
Preferred Stock outstanding (assuming the maximum number of shares of common
stock issuable upon such conversion), and (g) 1,000,000 shares of common
stock issuable upon conversion of 1,000,000 shares of Series C Convertible
Preferred Stock outstanding. See "Underwriting," "Certain Relationships and
Related Transactions" and "Management -- Benefit Plans." In September 1999,
no options to purchase shares of our common stock were exercised.
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<PAGE> 20
DILUTION
The pro forma net tangible book value of our common stock as of September
30, 1999 was approximately $ --, or $ -- per share of common stock. Pro forma
net tangible book value per share represents the amount of our total tangible
assets less total liabilities, divided by -- shares of common stock outstanding
as of September 30, 1999 after giving effect to the proposed issuance of common
stock to the stockholders of Student Success and Online Scouting Network in
connection with our acquisition of those companies.
Pro forma net tangible book value dilution per share represents the
difference between the amount per share paid by new investors who purchase
shares of common stock in this offering and the pro forma net tangible book
value per share of common stock immediately after completion of this offering
and after the issuance of common stock to the stockholders of Student Success
and Online Scouting Network in connection with our acquisition of those
companies. After giving effect to the sale of 3,000,000 shares of common stock
in this offering at an offering price of $ -- per share, after deduction of
estimated underwriting discounts and commissions and offering expenses, the pro
forma net tangible book value of the Company at September 30, 1999 would have
been $ -- or $ -- per share.
This represents an immediate increase in pro forma net tangible book value
of $ -- per share to existing shareholders, and an immediate dilution in net pro
forma tangible book value of $ -- per share to new investors in this offering,
as illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed offering price per share(1)............................... $ --
Net tangible book value per share at September 30, 1999... $ --
Increase per share attributable to new investors.......... $ --
----
Pro forma net tangible book value per share after this
offering(2)..................................................... $ --
----
Dilution per share to new investors(3)............................ $ --
====
</TABLE>
- ---------------
(1) Before deduction of estimated underwriting discounts and commissions and
offering expenses to be paid by us.
(2) Does not give effect to an aggregate of up to 7,787,422 shares of common
stock as follows: (a) 450,000 shares issuable upon exercise of the
underwriters' over-allotment option; (b) 300,000 shares of common stock
reserved for issuance upon exercise of the representatives' warrants, (c)
1,716,185 shares of common stock reserved for issuance upon the exercise of
options outstanding, and 2,125,065 shares of common stock reserved for
future grants under our option plans at September 30, 1999, (d) 755,803
shares of common stock reserved for issuance upon exercise of outstanding
warrants, (e) 890,000 shares of common stock issuable upon conversion of
890,000 shares of Series A Convertible Preferred Stock outstanding at
September 30, 1999, (f) 550,369 shares of common stock issuable upon
conversion of 279,771 shares of Series B Convertible Preferred Stock
outstanding at September 30, 1999 (assuming the maximum number of shares of
common stock issuable upon such conversion), and (g) 1,000,000 shares of
common stock issuable upon conversion of 1,000,000 shares of Series C
Convertible Preferred Stock outstanding at September 30, 1999. See
"Underwriting," "Certain Relationships and Related Transactions" and
"Management -- Benefit Plans."
(3) Represents dilution of about --% to purchasers of the shares of common stock
in this offering.
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<PAGE> 21
The following table summarizes as of September 30, 1999, on a pro forma
basis to reflect the same adjustments described above, the number of shares of
common stock sold by us, the total consideration paid and the average price per
share paid by (i) the existing holders of common stock and (ii) the new
investors in the offering, assuming the sale of 3,000,000 shares of common stock
by us at an offering price of $ -- per share. The calculations are based upon
total consideration given by new and existing shareholders, before any deduction
of estimated underwriting discounts and commissions and offering expenses.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
------ ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders............... % $ % $
New Investors....................... % $ $
------ ----- -------- -----
Total(1).................. 100.0% $ 100.0%
====== ===== ======== =====
</TABLE>
- ---------------
(1) The foregoing table does not give effect to the items described in footnotes
(1) and (2) to the previous dilution table.
19
<PAGE> 22
SELECTED FINANCIAL DATA
You should read the following information in conjunction with our financial
statements and related notes and the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section appearing elsewhere in
this prospectus. The following selected financial data for the period from our
inception (January 29, 1996) through June 30, 1996 and as of June 30, 1997, 1998
and 1999 and for each of the three years in the period ended June 30, 1999 are
derived from our financial statements included in this prospectus, which have
been audited by Radin, Glass & Co., LLP, independent accountants. The pro forma
net loss per common share data for the year ended June 30, 1999 gives effect to
the conversion of all series of preferred stock outstanding as of June 30, 1999
into common stock. The following selected data for the three months ended
September 30, 1999 and as of September 30, 1999 are derived from our unaudited
financial statements also included in this prospectus. The pro forma net loss
per common share gives effect to the conversion of all series of preferred stock
outstanding as of September 30, 1999 into common stock. The historical results
are not necessarily indicative of results to be expected for future periods.
<TABLE>
<CAPTION>
PERIOD FROM THREE
INCEPTION MONTHS
(JANUARY 29, YEAR ENDED JUNE 30, ENDED
1996) TO JUNE 30, ------------------------------------- SEPTEMBER 30,
1996 1997 1998 1999 1999
----------------- ---------- ---------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Revenue:
CollegeLink revenues............. $ -- $ -- $ -- $ -- $ 125,680
Development of proprietary
technology..................... -- -- 500,000 -- --
Online training service
revenues....................... -- -- -- 162,884 77,499
Web site hosting................. 6,921 82,971 210,700 235,522 56,252
Other revenues................... 36,744 376,754 533,183 163,515 6,654
---------- ---------- ---------- ----------- -----------
43,665 459,725 1,243,883 561,921 266,085
---------- ---------- ---------- ----------- -----------
OPERATING EXPENSES:
Payroll, payroll taxes and
related benefits............... 37,177 589,356 1,018,786 1,173,439 628,661
Investor relations............... -- -- -- 376,824 147,725
Depreciation and amortization.... -- 66,949 93,554 131,545 111,591
Advertising...................... 6,678 127,155 13,268 49,428 3,777
Other general and administrative
expenses....................... 61,772 558,978 741,028 1,375,057 735,472
---------- ---------- ---------- ----------- -----------
Total Costs and Expenses......... 105,627 1,342,438 1,866,636 3,106,293 1,627,226
---------- ---------- ---------- ----------- -----------
Loss From Operations............... (61,962) (882,713) (622,753) (2,544,372) (1,361,141)
Interest Expense................... -- 5,786 7,579 42,053 --
---------- ---------- ---------- ----------- -----------
Net Loss........................... $ (61,962) $ (888,499) $ (630,332) $(2,586,425) $(1,361,141)
========== ========== ========== =========== ===========
Net Loss Per Common Share.......... $ (0.06) $ (0.29) $ (0.18) $ (0.40) $ (0.14)
========== ========== ========== =========== ===========
Weighted Average Primary Number of
Shares Outstanding............... 1,076,452 3,033,036 3,499,857 6,531,153 9,495,324
========== ========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, AT
----------------------------------------------------- SEPTEMBER 30,
1996 1997 1998 1999 1999
------------- ---------- ---------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital (Deficit)............. $ (78,273) $ (168,485) $ (286,580) $ 1,126,168 3,669,717
Total Assets.......................... 44,057 373,576 358,189 1,806,996 13,181,622
Long-Term Liabilities................. 15,914 13,086 9,580 -- 10,171
Stockholders' Equity (Deficit)........ (24,607) 78,089 (69,321) 1,376,652 12,202,131
</TABLE>
20
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with "Selected Financial
Data" and CollegeLink's financial statements and related notes appearing
elsewhere in this prospectus.
CORPORATE BACKGROUND
On February 2, 1999, the Board of Directors of an inactive public company
voted to change the name of that company to Cytation.com Incorporated. On
February 8, 1999, the Board of Cytation.com Incorporated voted to effect a
one-for-two reverse stock split which became effective on February 25, 1999. On
March 5, 1999, Cytation Corporation, a Rhode Island corporation (formerly known
as Web Services International, Inc.) and the provider of a browser-based online
training system, was merged into Cytation.com Incorporated. In the merger, each
share of Cytation Corporation was converted into 5.765 shares of common stock of
Cytation.com Incorporated. A total of 7,081,028 shares of Cytation.com
Incorporated were issued as a result of this merger.
Although Cytation.com Incorporated was the surviving entity from the merger
of March 5, 1999, in accordance with applicable SEC accounting requirements, we
are considered the successor to Cytation Corporation which was the disappearing
entity in the March 5, 1999 merger.
On August 10, 1999, Cytation.com Incorporated acquired ECI, Inc., a
Massachusetts corporation and provider of online college application services.
ECI was merged into Cytation.com Incorporated's wholly owned subsidiary,
CollegeLink.com Incorporated. CollegeLink.com Incorporated became a wholly owned
subsidiary of Cytation.com Incorporated. On November 1, 1999, CollegeLink.com
Incorporated changed its name to CollegeLink Corporation.
On November 16, 1999, Cytation.com Incorporated was merged into
CollegeLink.com Incorporated, a Delaware corporation and a wholly owned
subsidiary of Cytation.com Incorporated which was organized on November 1, 1999.
The surviving corporation is CollegeLink.com Incorporated.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
PRO FORMA
INCLUDING THREE MONTHS ENDED
YEAR ENDED JUNE 30, ACQUISITIONS SEPTEMBER 30,
--------------------------------------- YEAR ENDED -----------------------
JUNE 30,
1997 1998 1999 1999 1998 1999
----------- ----------- ----------- ------------ --------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net revenue:
CollegeLink revenues........... $ -- $ -- $ -- $ -- $ -- $ 125,680
Development of proprietary
technology................. -- 500,000 -- -- -- --
Online training service
revenues................... -- -- 162,884 -- 32,000 77,499
Website hosting.............. 82,971 210,700 235,522 -- 49,467 56,252
Other revenues............... 376,754 533,183 163,515 -- 137,958 6,654
Revenues related to
acquisitions............... -- -- -- 1,839,840 -- --
----------- ----------- ----------- ----------- --------- -----------
459,725 $ 1,243,883 $ 561,921 $ 1,839,840 $ 219,425 $ 266,085
----------- ----------- ----------- ----------- --------- -----------
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
PRO FORMA
INCLUDING THREE MONTHS ENDED
YEAR ENDED JUNE 30, ACQUISITIONS SEPTEMBER 30,
--------------------------------------- YEAR ENDED -----------------------
JUNE 30,
1997 1998 1999 1999 1998 1999
----------- ----------- ----------- ------------ --------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Operating expenses:
Payroll, payroll taxes and
related benefits........... $ 589,356 $ 1,018,786 $ 1,173,439 $ 1,967,153 $ 209,461 $ 628,662
Cost of sales................ -- -- -- 618,068 -- --
Depreciation and
amortization............... 66,949 93,554 131,545 241,153 26,071 19,601
Advertising.................. 127,155 13,268 49,428 121,801 1,931 3,777
Other general and
administrative expenses.... 558,978 741,028 1,751,881 2,450,123 221,232 883,137
Amortization of goodwill..... -- -- -- 1,919,454 -- 91,990
----------- ----------- ----------- ----------- --------- -----------
Total operating expenses..... $(1,342,438) $(1,866,636) $(3,106,293) $(7,699,974) 458,695 1,627,226
----------- ----------- ----------- ----------- --------- -----------
Interest Expense............... 5,786 7,579 42,053 294,803 293 --
Net income (loss).............. $ (888,499) $ (630,332) $(2,586,425) $(6,154,936) $(239,563) $(1,361,141)
=========== =========== =========== =========== ========= ===========
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998
Revenues for the three months ended September 30, 1999 include, for the
first time, the operations of CollegeLink Corporation which was acquired on
August 10, 1999. The acquisition was treated as a purchase with the results of
operations of CollegeLink Corporation included in consolidated operations from
that date. Other revenues declined, reflecting our decision to focus primarily
on the CollegeLink business.
Payroll expenses have increased as a result of personnel additions as well
as salary increases for present personnel. Other general and administrative
expenses increased both for software development to support the CollegeLink
operations, costs of supporting the expanded operations and costs related to the
business which we intend not to emphasize in the future. Goodwill amortization
results from the acquisition of CollegeLink Corporation.
FISCAL YEAR ENDED JUNE 30, 1999 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1998
Net Revenue. Net revenue shows the significance of the shift in our
business focus over the past year. In the first part of 1998 and in prior years
our principal business was the development and sales of other services related
to the hosting of web content, which accounted for approximately $743,883 of our
revenue. During the latter half of fiscal year 1998, we began development of an
online training management system. The $500,000 of revenue for development of
proprietary technology was the result of a joint venture with EER Systems Inc.,
a Washington, D.C. systems integrator ("EER"). This joint venture ultimately
resulted in EER acquiring in excess of 10% of our shares. While we maintain web
hosting services for certain clients, we no longer provide website development
services. A significant portion of our fiscal year 1999 revenue was derived from
the online training services.
We expect future revenue will derive from the operations of CollegeLink.com
and the continued development of the CollegeLink(R) Internet-based college
admission service and Internet hub.
Operating Expenses. Operating expenditures for the year ended June 30,
1999 were 68% greater than the previous year. This increase is attributable to
the fact that we changed our principal business during the year. In addition, a
significant amount of increased cost was related to software development of our
online training management system. Another reason for the increase in operating
expenses was the merger completed on March 5, 1999 with Cytation Corporation. A
major portion of the increase in operating expenses resulted from increased
legal, professional and investor relations services required to complete the
merger. Operating expenses are expected to increase substantially in the future
as we increase our marketing effort, and as sales increase, as we believe will
occur.
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<PAGE> 25
FISCAL YEAR ENDED JUNE 30, 1998 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1997
In April 1997 we sold the assets related to our Internet service provider
("ISP") business. Final consideration from that sale was received in November
1998. In fiscal 1998, we discontinued our website development business. During
the quarter ended June 30, 1999, we did not receive any revenue from website
development or operations as an ISP, nor did we have any expenses associated
with those former components of our business. No future operations as an ISP or
website developer are contemplated. In the fiscal year ended June 30, 1997, 37%
of revenue was derived from subscriber access (internet dial-up service), 24% of
revenue was derived from website origination and a development, 18% of revenue
was derived from website hosting and 21% of revenue was derived from other
services.
PRO FORMA ACQUISITIONS
Revenues Related to Acquisitions. Pro forma net revenue of the combined
companies for the fiscal year ended June 30, 1999 was $1,839,840. Of this amount
$561,921, $104,073, $98,178, and $1,075,668 were attributable to CollegeLink,
ECI, Online Scouting Network and Student Success, respectively. ECI's revenues
were derived from its online college applications business. Student Success'
revenues were derived from its Making College Count(R) and Making High School
Count(TM) programs. OSN's revenues were derived from registration fees of high
school student athletes. We expect that our future revenues will be derived from
these businesses.
Operating Expenses. Operating expenses of the combined companies were
$7,699,974. Of the $1,919,454 attributable to amortization of goodwill,
$916,862, $747,632, and $254,959 were attributable to the acquisitions of ECI,
Student Success and OSN, respectively. Payroll expenses for ECI, Student Success
and OSN were $400,248, $384,205 and $9,261, respectively. Other general and
administrative expenses for ECI, Student Success and OSN were $574,768, $220,377
and $532,672, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have funded operations primarily through cash from
operations and equity and debt investment.
Preferred Stock. We received $3,100,000 through a private placement of
preferred stock to The Provident Life and Accident Insurance Company and one
other accredited investor. The Purchase Agreement with The Provident Life and
Accident Insurance Company was signed April 2, 1999, and the transaction closed
shortly thereafter. After the end of the fiscal year, we received $460,000
through the private placement of additional shares of preferred stock to five
accredited investors. We also received $4,000,000 through the private placement
of preferred stock to PNC Investment Corp. on September 30, 1999.
Common Stock. We received $195,000 in January 1999 from the sale of shares
of common stock.
Debt Financing. We issued a note payable to EER for $300,000 in July 1998.
We received $300,000 from EER and a total of $70,000 from various individuals in
debt instrument financing during the quarter ended March 31, 1999. These debt
financings were repaid with the proceeds of the sale of preferred stock to The
Provident Life and Accident Insurance Company described above. We had two
short-term debt instruments representing a total of $50,000 outstanding at July
30, 1998. We repaid these debt instruments in the year ended June 30, 1999.
Sufficiency of Cash Flows. We believe that current cash balances and any
cash generated from operations will be sufficient to meet our cash needs for
working capital and capital expenditures for at least the next twelve months. A
portion of our cash may be used to acquire or invest in complementary businesses
or products or to obtain the right to use complementary technologies. From time
to time, in the ordinary course of business, we evaluate potential acquisitions
of such businesses, products or technologies.
Net cash used in operating activities was $2,110,144 for the fiscal year
ended June 30, 1999 and $277,177 for the fiscal year ended June 30, 1998. Net
cash used in investing activities was $9,534 and
23
<PAGE> 26
$78,551 for the fiscal year ended June 30, 1999 and June 30, 1998, respectively.
Financing activities provided $3,434,416 for the year ending June 30, 1999
compared to $399,662 for the year ending June 30, 1998. As of June 30, 1999, we
had working capital of $1,371,100 compared to $46,362 as of June 30, 1998.
RECENT ACCOUNTING PRONOUNCEMENTS
In March, 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1, "Accounting for the Cost of
Computer Software Developed or Obtained for Internal Use." This statement is
effective for financial statements for years beginning after December 15, 1998.
This statement provides guidance with respect to accounting for computer
software developed or obtained for internal use, including the requirement to
capitalize specified costs and the amortization of such costs. We adopted this
standard and its adoption had no material effect on our results of operations,
financial position or cash flows.
In April 1998, the AICPA issued Statement of Position 98-5, "Reporting on
the Costs of Start-Up Activities." This statement, which is effective for fiscal
years beginning after December 15, 1998, provides guidance on the financial
reporting of start-up costs and organization costs. It requires costs of
start-up activities and organization costs to be expensed as incurred. The
adoption of this standard had no effect on our results of operations, financial
position or cash flows.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivatives and Hedging
Activities," which establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other contracts, and
for hedging activities. This statement is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. We do not expect the adoption of
this statement to have an impact on its results of operations, financial
position or cash flows.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of our computer
programs that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities. We have recognized the Year 2000 problem
and have taken steps to mitigate the situation. Our in-house information
technology system consists primarily of hardware and software purchased from
outside parties, and software developed in-house using third party development
languages and platforms. We have completed vendor-provided upgrades of
vendor-developed software. Although the upgrades are claimed by the vendors to
be Year 2000 compliant, we are testing the hardware and software for Year 2000
compliance and will install vendor-provided software patches if necessary. We
are also testing the internally developed software which is included in the
services sold to customers.
We expect that costs to address the Year 2000 issue, directly or
indirectly, will total approximately $15,000, the majority of which was spent in
fiscal 1998 and 1999, with the remainder being spent during fiscal 2000. Costs
include salary and related expenses, hardware and software costs, and
miscellaneous expenses. To date, we have incurred expenses of approximately
$12,000 related to the assessment of and preliminary efforts in dealing with the
Year 2000 issue.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
We considered the provisions of Financial Reporting Release No. 48
"Disclosures of Accounting Policies for Derivative Financial Instruments and
Derivative Commodity Instruments, and Disclosures of Quantitative and
Qualitative Information about Market Risk Inherent in Derivative Commodity
Instruments." We have no holdings of derivative financial or commodity
instruments.
We are exposed to financial market risks, including changes in interest
rates. To reduce these risks somewhat, we invest excess cash in money market
accounts. We do not use any financial instruments for speculative or trading
purposes.
24
<PAGE> 27
BUSINESS
OUR COMPANY
We provide college bound students and their families a range of solutions
to the challenges of the college admission process, from college selection to
submission of college, financial aid, and scholarship applications. We have
recently entered into an agreement to acquire Student Success, Inc and a letter
of intent to acquire Online Scouting Network, Inc.
We have developed an Internet hub with a college application, financial aid
and scholarship service. We expect that a large number of applications will be
submitted by computer within the next several years because of increasing
student computer literacy and the significant financial and administrative
benefits to colleges and universities of receiving applications electronically.
In addition, through the Making College Count(R) and Making High School
Count(TM) programs, we help prepare students for success in college.
We continuously obtain demographic and other information which can be used
by students, their families, colleges and other providers of services to assist
in the college admission process and enhance the entire college experience.
Because of the demographic makeup and the volume of the college bound students
who visit CollegeLink.com, we have also developed an attractive e-commerce
location for students and their families.
CollegeLink.com. Through CollegeLink.com, and its relationships with more
than 900 colleges and universities that accept applications in their respective
formats through CollegeLink, we are a leading provider of computer-based college
applications and admissions services to college bound students and their
families.
Student Success. Student Success is a leading provider of onsite high
school and college preparatory programs for students and their families under
its Making College Count(R) and Making High School Count trademarks. Through
this channel, we intend to continue to expand our presence and awareness of our
services with high school students who are most likely to use CollegeLink.
Student Success presented its seminars to more than 225,000 students at more
than 900 high schools and junior colleges nationwide last year. These programs
were sponsored by eight major consumer products companies.
Online Scouting. Online Scouting Network is a leading provider of online
recruiting services offering student athletes greater visibility to more than
3,000 college and university professionals. For the school year ended June 1999,
more than 25,000 high school students from over 600 high schools nationwide were
registered with Online Scouting Network.
We have an agreement with PNC Bank, N.A., one of the largest student loan
providers in the United States, to provide certain financial products and
services to college bound students and their families through our
CollegeLink.com Internet hub. The PNC Bank agreement will terminate on September
29, 2004. However, after September 29, 2001, PNC Bank may elect to terminate the
agreement upon 180 days notice. PNC Investment Corp., an affiliate of PNC Bank,
has made a $4,000,000 investment in our company.
We have an exclusive agreement with The College Board(R) to provide
electronic college applications through The College Board's ExPAN(R) guidance
software. The College Board agreement terminates on June 30, 2000 unless
extended by mutual agreement. The College Board(R) is a membership organization
of colleges and secondary schools and provider of the SAT(R) and the AP(R)
Exams. We are the only third party electronic application provider on The
College Board's website. We understand that The College Board(R) receives about
18 million monthly hits on its website.
We also have co-marketing relationships with Student Advantage, Inc.,
FastWeb.com L.L.C. and are negotiating similar relationships with other
Web-based businesses including The FamilyEducation Company. We are continually
seeking appropriate relationships to expand our service and product offerings.
25
<PAGE> 28
COLLEGELINK.COM
We are developing an Internet hub designed to offer college bound students
and their families a range of services and products to assist throughout the
college admission process.
CollegeLink(R). We have developed proprietary software that permits high
school students to complete and submit college applications online.
CollegeLink(R) guides a student with access to a personal computer through the
entire application process. It permits the student to answer questions, print
and review drafts and ultimately to submit the application electronically or in
hard copy, depending upon the college's preference. Students enter information
only once when using CollegeLink(R)'s application service, then select the
colleges and universities to which they wish to apply, complete college specific
essays and then transmit all their applications electronically. Each college
receives an application that replicates its own form or electronic format.
CollegeLink(R) is the only program that permits students to enter general
information only once and still deliver to each college an application in its
own format. We believe that students and their families prefer our service to
filling out multiple forms or mailing a generic application because they
perceive colleges favor applications submitted on their own formats.
CollegeLink(R) also contains hyperlinks to websites for college admissions tests
and scholarship and financial aid searches. We expect to devote a significant
portion of our resources to the growth in the use of CollegeLink(R) as we expand
our traditional and online marketing programs and as the Internet becomes more
available and accepted by high schools, colleges and their students.
Student Success. On October 20, 1999, we entered into an agreement to
acquire Student Success. Student Success is the leading provider of on-site high
school and college preparatory programs for students and their families under
its Making College Count(R) and Making High School Count(TM) trademarks. Student
Success offers schools and students value added educational and organizational
tools. Student programs include live presentations held in schools during the
school day, as well as direct mail follow-up, websites, email newsletters, and
various other printed materials. Student Success presented its seminars to more
than 225,000 students at more than 900 high schools and junior colleges
nationwide last school year. Products for sale include books, books on tape, and
academic planners.
We expect Student Success to enhance our market position by providing
contact with hundreds of thousands of college bound students through focused
presentations delivered by trained speakers. We believe Student Success has
opened a significant marketing channel to cross-sell the full range of our
CollegeLink(R) and Online Scouting Network products and services. Through this
channel, we intend to expand awareness of our services with high school
students. We believe these programs offer service providers an attractive and
effective way to reach the teen market segment.
Online Scouting Network. On August 18, 1999, we entered into a letter of
intent to acquire Online Scouting Network. Online Scouting Network is a leading
Internet recruiting company that operates the Online Scouting Network ("OSN")
and provides student athletes greater visibility to more than 3,000 college and
university professionals. For the school year ended June 1999, more than 25,000
high school athletes from 600 high schools in 22 sports nationwide were
registered with OSN. OSN provides significant exposure to student athletes and
enhances the recruiting process for college athletic directors and coaches
through its website. OSN has been designed to increase the exposure of about 5
million U.S. high school athletes to colleges and to reduce the time and expense
colleges incur in identifying prospective student athletes.
We believe these acquisitions will enhance our market position by
attracting additional college bound students to our services. We also believe
that there will be substantial efficiencies for our marketing efforts and
expansion of the services we provide to college bound students.
INDUSTRY BACKGROUND
There are about 14.8 million high school students in the United States.
According to the U.S. census bureau, this number will increase to 15.7 million
over the next five years. Each year, about 3.2 million students enter colleges
and universities for the first time. Of these about 2.2 million apply as first
time
26
<PAGE> 29
freshman to undergraduate colleges and universities. The remaining students
apply to continuing education programs of various sorts. Each year about 2.2
million students submit nearly seven million applications for undergraduate
admission to nearly 3,400 U.S. colleges and universities. Over 50% of these
students apply for some form of financial aid. According to the Department of
Education, it is expected that the total number of college bound students will
continue to increase each year for the foreseeable future. Based on industry
statistics, we believe colleges spend approximately $3.0 billion annually to
recruit and enroll students.
MARKETING STRATEGY
Our strategy is to build upon the thousands of relationships we have
developed with high school guidance counselors and college admissions
professionals through one-on-one marketing efforts. We plan to build our brand,
reach increasing numbers of high school and college students, and drive traffic
to our Internet hub. Our objectives are to:
- Expand Our Market Leadership Position. We intend to leverage our
relationships with more than 3,000 high schools and more than 900
colleges and universities to establish new affiliations, attract
additional students to our website and create a premier Internet hub for
college bound students. We believe the number of colleges and
universities accepting our applications is central to students who will
want to apply to many colleges and will appreciate the ability to apply
to all of them from one source. We believe our ability to submit
applications on college specific forms, together with our existing
relationships, will establish us as the standard for the industry and
drive traffic across our Internet hub. We plan to continue to add high
schools, colleges and universities through on campus direct sales calls
by sales personnel, corporate sponsorship direct mailings, targeted
periodical advertising, online and broadcast advertising, partnerships
and various promotional campaigns. We have also established a
telemarketing sales force to provide sales support to existing and
inquiring colleges and universities. Upon completion of the OSN and
Student Success acquisitions, we will have a national direct sales force
calling on high schools.
- Expand Existing Brand Awareness. We intend to build upon our established
brands and our relationships with PNC Bank, N.A. and others to establish
CollegeLink.com as a leading Internet hub and e-commerce site. We plan to
use our market position and existing relationships with these service
providers to reach increasing numbers of college bound students.
- Capitalize on Our Strong High School Presence. For the last two years,
The College Board(R) has distributed our CollegeLink(R) software with its
ExPAN(R)guidance software to about 2,000 high schools nationwide. This
school year, Making College Count(R) expects to present at more than
1,700 high schools and junior colleges, and OSN expects to register
athletes from about 600 high schools. We believe our established presence
in the high school market gives us early access to college bound students
and will continue to solidify our brand in the online education market.
We intend to grow our presence in the high school market through
expansion of these programs. In addition, we intend to grow our presence
in the high school market through online direct marketing and other
multimedia.
- Develop strategic web partnerships. We have initiated a web partnership
program to co-brand our products and services on targeted high school and
college related high traffic web sites and add content to our Internet
hub. In addition to our relationships with PNC Bank, N.A., and The
College Board(R) we have relationships with other Web hubs and portals
with college bound students and parent traffic to create content and
commerce opportunities.
- Overcome resistance to online applications. We believe many college
bound students and their families perceive that colleges and universities
prefer applications that are submitted on the institution's specific
format. CollegeLink(R) software is the only program currently available
that permits students to enter general information only once and still
deliver to each institution an application in that institution's own
format. We believe this feature gives us a significant competitive
advantage, and we intend to promote it to increase use of our services.
We believe that
27
<PAGE> 30
we have addressed equal consideration issues by providing student applications
in each college's own format.
COMPETITIVE ENVIRONMENT
The markets we serve are large and fragmented. We do not believe that any
competitor has achieved dominance in any of the markets we serve. These markets
are highly competitive, constantly evolving, and subject to the effects of
changing technology. We believe the principal competitive factors in the markets
we serve include:
- establishing relationships with colleges and universities
- establishing a significant presence in high schools and colleges
- developing brand awareness
- developing strategic web partnerships to expand service offerings
- overcoming resistance to online applications
- building an effective direct sales force
CollegeLink(R) faces direct competition from a number of companies
including: -- Apply!, Embark.com (formerly CollegeEdge), CollegeNet and XAP. We
also face competition from traditional service providers such as guidance
counselors, self-help guides available in print as well as CD-ROM, for profit
service providers such as Kaplan Educational Centers, and not-for-profit
organizations such as The College Board(R) which has announced plans to provide
a broad range of college admissions, test preparation and related services on
the Internet.
Student Success faces competition from a variety of sources including other
providers of self-help and educational enhancement programs such as Kaplan,
Barrons, Princeton Review, Houghton Mifflin and Learning Forum. OSN faces direct
competition from a variety of companies including: Athletes Online,
Allstatersports.com and Recruit.
We believe CollegeLink.com's relationships with our partners, together with
our strategy of building on our existing leadership position, growing our
brands, and reaching into the high school population, provide a substantial
competitive advantage over our current competition.
Following is a list, as of November 22, 1999, of colleges accepting
applications through our CollegeLink(R) software.
<TABLE>
<S> <C> <C>
Abilene Christian University
Academy of Art College
Adelphi University
Adrian College
Agnes Scott College
Alabama A & M University
Alabama State University
Alaska Pacific University
Albertson College of Idaho
Albertus Magnus College
Albion College
Albright College
Alderson-Broaddus College
Alfred University
Allegheny College
Allen University
Allentown College of St. Francis de
Sales
Alma College
American International College
The American University
Anderson College
Anderson University
Anna Maria College
Antioch College
Aquinas College (Michigan)
Aquinas College -- Milton
Aquinas College -- Newton
Arizona State University
Art Institute of Boston
Ashland University
Assumption College
Atlantic Union College
Auburn University
Auburn University, Montgomery
Augsburg College
Augusta State University
Augustana College (Illinois)
Augustana College (South Dakota)
Aurora University
Austin College
Averett College
Avila College
Babson College
Baker University
Baldwin-Wallace College
Ball State University
Barat College
Barber-Scotia College
Bard College
Barry University
Bartlesville Wesleyan College
Bates College
Bay Path College
Bay State College
Beaver College
Becker College
Belhaven College
Belmont Abbey College
Beloit College
Benedictine University
Bennington College
Bentley College
</TABLE>
28
<PAGE> 31
<TABLE>
<S> <C> <C>
Berea College
Berry College
Bethany College
Bethel College
Bethel College and Seminary
Biola University
Birmingham Southern College
Bloomfield College
Boston University
Bowdoin College
Bowie State University
Bowling Green State University
Bradford College
Bradley University
Brandeis University
Briar Cliff College
Bridgewater State College
Broome Community College
Bryant College
Bryn Mawr College
Buena Vista University
Burdett College
Burlington College
Cabrini College
Caldwell College
Calumet College of St. Joseph
Calvary Bible College
Calvin College
Campbell University
Campbellsville University
Canisius College
Capital University
Cardinal Stritch College
Carleton College
Carlow College
Carnegie Mellon University
Carroll College
Carroll College of Montana
Carson-Newman College
Carthage College
Case Western Reserve University
Castleton State College
Catawba College
The Catholic University of America
Cazenovia College
Cedar Crest College
Centenary College
Centenary College of Louisiana
Central College
Central Connecticut State University
Central Methodist College
Central Michigan University
Central Missouri State University
Central State University
Central Washington University
Centre College
Chapman University
Charleston Southern University
Chatham College
Chestnut Hill College
Chowan College
The Citadel
Claremont McKenna College
Clarion University of Pennsylvania
Clark Atlanta University
Clark University
Clarke College
Clarkson University
Clemson University
Cleveland Institute of Art
Cleveland State University
Coe College
Colby College
Colby-Sawyer College
Colgate University
College of Charleston
College of Mount St. Joseph
The College of New Rochelle
College of Notre Dame
College of Saint Elizabeth
College of Santa Fe
College of St. Benedict
College of St. Joseph
College of St. Scholastica
College of the Atlantic
College of the Holy Cross
College of William & Mary
The College of Wooster
Colorado College
Colorado School of Mines
Colorado Technical University
Columbia College
Columbia College of Missouri
Concordia College
Concordia College -- Moorhead
Concordia University -- St. Paul
Concordia University at Austin
Concordia University Wisconsin
Connecticut College
Converse College
Coppin State College
Cornell College
The Culinary Institute of America
Culver-Stockton College
Cumberland College
Curry College
Daemen College
Dakota Wesleyan University
Dana College
Daniel Webster College
Dartmouth College
David N. Myers College
Davidson College
Dean College
The Defiance College
Delaware State University
Delaware Valley College
Denison University
DePaul University
DePauw University
Dickinson College
Dillard University
Dominican College of Blauvelt
Dominican College of San Rafael
Dordt College
Dowling College
Drake University
Drew University
Drexel University
Drury College
Duke University
Duquesne University
Earlham College
East Coast Aero Tech
East Stroudsburg University
Eastern College
Eastern Connecticut State University
Eastern Mennonite University
Eastern Washington University
Eckerd College
Edgewood College
Edinboro University of Pennsylvania
Edward Waters College
Elizabethtown College
Elmhurst College
Elmira College
Elms College
Elon College
Embry-Riddle Aeronautical University
(Arizona)
Embry-Riddle Aeronautical University
(Florida)
Emerson College
Emmanuel College
Emory & Henry College
Emory University
Endicott College
Erskine College
Eugene Lang College
Eureka College
The Evergreen State College
Fairfield University
Faulkner University
Ferris State University
Ferrum College
Fisk University
Fitchburg State College
Flagler College
Florida A & M University
Florida Atlantic University
Florida Institute of Technology
Florida International University
Florida Memorial College
Florida Southern College
Florida State University
Fontbonne College
Fordham University
Framingham State College
Francis Marion University
Franciscan University of Steubenville
Franklin & Marshall College
Franklin College
Franklin Institute of Boston
Franklin Pierce College
Freed-Hardeman University
Fresno Pacific University
Furman University
Gardner-Webb University
Geneva College
</TABLE>
29
<PAGE> 32
<TABLE>
<S> <C> <C>
George Mason University
George Washington University
Georgetown College
Georgia College & State University
Georgia Institute of Technology
Georgia Southwestern State University
Georgia State University
Georgian Court College
Gettysburg College
Goddard College
Golden Gate University
Goldey-Beacom College
Gonzaga University
Gordon College
Goshen College
Goucher College
Grace College
Graceland College
Grand Valley State University
Grand View College
Green Mountain College
Greensboro College
Greenville College
Grinnell College
Grove City College
Guilford College
Gustavus Adolphus College
Hamilton College
Hamline University
Hampden-Sydney College
Hampshire College
Hanover College
Harding University
Hartwick College
Harvard College
Harvey Mudd College
Hastings College
Haverford College
Hawaii Pacific University
Heidelberg College
Hendrix College
High Point University
Hillsdale College
Hiram College
Hobart and William Smith Colleges
Hofstra University
Hollins University
Holy Family College
Holy Names College
Holyoke Community College
Hood College
Hope College
Hope International University
Howard University
Huntingdon College
Huntington College
Illinois College
Illinois Institute of Technology
Illinois Wesleyan University
Immaculata College
Indiana University Kokomo
Indiana University of Pennsylvania
Indiana University-Purdue Univ. at
Indianapolis
Iona College
Iowa State University
Iowa Wesleyan College
Ithaca College
Jackson State University
Jacksonville State University
Jacksonville University
James Madison University
Jamestown College
Jarvis Christian College
John Brown University
John Carroll University
Johns Hopkins University
Johnson & Wales University
Johnson C. Smith University
Johnson State College
Juniata College
Kalamazoo College
Kansas State University -- Manhattan
Kansas State University -- Salina
Keene State College
Kent State University
Kent State University Ashtabula
Kent State University Geauga
Kent State University Liverpool
Kent State University Salem
Kent State University Stark
Kent State University Trumbull
Kent State University Tuscarawas
Kentucky Wesleyan College
Kenyon College
Kettering University
Keuka College
Keystone College
King's College
Knox College
Kutztown University
Lafayette College
LaGrange College
Lake Erie College
Lake Forest College
Lakeland College
Lander University
LaSalle University
Lasell College
Lawrence University
Lebanon Valley College
Lees-McRae College
Lehigh University
LeMoyne College
LeMoyne-Owen College
Lenoir-Rhyne College
Lesley College
LeTourneau University
Lewis & Clark College
Lewis University
Lewis-Clark State College
Liberty University
Lincoln Memorial University
Lincoln University
Lindenwood University
Linfield College
Lipscomb University
Long Island University, C.W. Post
Campus
Long Island University-Southampton
College
Longwood College
Louisiana Tech University
Lourdes College
Loyola Marymount University
Loyola University Chicago
Loyola University New Orleans
Lubbock Christian University
Luther College
Lycoming College
Lynchburg College
Lyndon State College
Lynn University
Macalester College
MacMurray College
Maharishi University of Management
Maine Maritime Academy
Malone College
Manhattan College
Manhattanville College
Mansfield University
Marian Court College
Marietta College
Marist College
Marlboro College
Marquette University
Mars Hill College
Mary Baldwin College
Mary Washington College
Maryland Institute College of Art
Marymount College
Marymount Manhattan College
Marymount University
Maryville College
Maryville University of St. Louis
Marywood University
Massachusetts Bay Community College
Massachusetts College of Liberal Arts
Massachusetts Institute of Technology
Massachusetts Maritime Academy
Massasoit Community College
Mayville State University
McMurry University
Medaille College
Mercer University
Mercyhurst College
Meredith College
Merrimack College
Messiah College
Miami University
Michigan Technological University
Middle Tennessee State University
Middlebury College
Middlesex Community College
Milligan College
Millikin University
Millsaps College
Milwaukee Institute of Art & Design
</TABLE>
30
<PAGE> 33
<TABLE>
<S> <C> <C>
Milwaukee School of Engineering
Minnesota State University Mankato
Mississippi University for Women
Mitchell College
Monmouth College
Montana State University
Montana State University -- Billings
Montana Tech of the University of
Montana
Moore College of Art and Design
Moravian College
Morehouse College
Morgan State University
Morningside College
Morris Brown College
Mount Ida College
Mount Mercy College
Mount Saint Mary's College (Maryland)
Mount St. Clare College
Mount St. Mary's College, East Los
Angeles
Mount St. Mary's College, West Los
Angeles
Mount Wachusett Community College
Muhlenberg College
Muskingum College
Nazareth College of Rochester
Neumann College
New College of the University of
South Florida
New England College
New Hampshire College
New Jersey Institute of Technology
New Mexico Highlands University
New Mexico Institute of Mining &
Technology
New Mexico State University
New York Institute of Technology
New York University
Newberry College
Newbury College
Niagara University
Nichols College
Norfolk State University
North Carolina Agric. & Tech. State
Univ.
North Carolina State University
North Central College
North Georgia College & State
University
North Shore Community College
Northeast Institute of Industrial
Technology
Northeastern University
Northern Arizona University
Northern Essex Community College
Northern Michigan University
Northland College
Northwest Missouri State University
Northwestern College
Northwood University
Norwich University
Notre Dame College
Notre Dame College of Ohio
Nova Southeastern University
Nyack College
Oakland City University
Oakland University
Oberlin College
Occidental College
Oglethorpe University
Ohio Dominican College
Ohio Northern University
The Ohio State University
Ohio State University, Marion
Ohio University
Ohio University -- Zanesville
Ohio University -- Chillicothe
Ohio University-Eastern
Ohio University -- Lancaster
Ohio University-Southern
Ohio Wesleyan University
Oklahoma Baptist University
Oklahoma Christian University
Old Dominion University
Oral Roberts University
Oregon Institute of Technology
Oregon State University
Ottawa University
Otterbein College
Oxford College of Emory University
Pace University
Pacific Lutheran University
Pacific Union College
Pacific University
Paine College
Palm Beach Atlantic College
Paul Quinn College
Pepperdine University
Philadelphia College of Bible
Philadelphia University
Pine Manor College
Pitzer College
Plymouth State College
Polytechnic University
Pomona College
Presbyterian College
Providence College
Purdue University -- Calumet
Purdue University -- West Lafayette
Queens College
Quincy University
Quinnipiac College
Quinsigamond Community College
Radford University
Randolph-Macon College
Randolph-Macon Woman's College
Reed College
Regis College
Regis University
Rensselaer Polytechnic Institute
Rhodes College
Rice University
Richard Stockton College of New
Jersey
Ringling School of Art and Design
Ripon College
Roanoke College
Robert Morris College
Rochester Institute of Technology
Rockford College
Rockhurst College
Rocky Mountain College
Roger Williams University
Rollins College
Rose-Hulman Institute of Technology
Rosemont College
Roxbury Community College
Russell Sage College
Rutgers -- The State University of
New Jersey
Rutgers School of Business New
Brunswick
Rutgers School of Management --
Newark
Rutgers University -- Camden College
of Arts & Sciences
Rutgers University -- College of
Nursing
Rutgers University -- College of
Pharmacy
Rutgers University -- Cook College
Rutgers University -- Douglass
College
Rutgers University -- Livingston
College
Rutgers University -- Mason Gross
School of Arts
Rutgers University -- Rutgers College
Rutgers University -- School of
Business Camden
Rutgers University -- University
College Camden
Rutgers University -- Newark College
of Arts & Science
Rutgers University -- University
College New Brunswick
Rutgers University -- University
College Newark
Sacred Heart University
Saint Anselm College
Saint John's University
Saint Joseph College (West Hartford,
Connecticut)
Saint Joseph's College (Rensselaer,
Indiana)
Saint Joseph's University
Saint Leo University
Saint Louis University
Saint Martin's College
Saint Mary College
Saint Mary-of-the-Woods College
Saint Mary's College
Saint Mary's College of California
Saint Mary's University of Minnesota
Saint Mary's University of San
Antonio
Saint Peter's College
Salem College
Salisbury State University
Salve Regina University
Santa Clara University
Sarah Lawrence College
Savannah State University
Scripps College
</TABLE>
31
<PAGE> 34
<TABLE>
<S> <C> <C>
Seattle Pacific University
Seattle University
Seton Hill College
Sheldon Jackson College
Shimer College
Shorter College
Siena College
Siena Heights University
Sierra Nevada College
Simmons College
Simon's Rock College of Bard
Simpson College
Skidmore College
Slippery Rock University
Smith College
South Carolina State University
Southern Connecticut State University
Southern Methodist University
Southern Vermont College
Southwest Baptist University
Southwestern University
Spalding University
Spelman College
Spring Hill College
Springfield College
Springfield Technical Community
College
St. Ambrose University
St. Andrews College
St. Bonaventure University
St. Cloud State University
St. Edward's University
St. Francis College
St. John Fisher College
St. John's College (Annapolis)
St. John's College (New Mexico)
St. Lawrence University
St. Mary's College -- Maryland
St. Mary's University
St. Michael's College
St. Norbert College
St. Olaf College
St. Thomas University
State University College at Brockport
State University College at Buffalo
State University College at Cortland
State University College at Fredonia
State University College at Geneseo
State University College at New Paltz
State University College at Old
Westbury
State University College at Oneonta
State University College at Oswego
State University College at
Plattsburgh
State University College at Potsdam
State University College at Purchase
State University of New York at
Albany
State University of New York at
Binghamton
State University of New York at
Buffalo
State University of New York at Stony
Brook
State University of West Georgia
Stephen F. Austin State University
Stephens College
Stetson University
Stevens Institute of Technology
Suffolk University
SUNY Adirondack Community College
SUNY Agriculture and Technology at
Cobleskill
SUNY Agriculture and Technology at
Morrisville
SUNY Cayuga Community College
SUNY Clinton Community College
SUNY College of Ceramics at Alfred
SUNY College of Environmental Science
& Forestry
SUNY College of Technology at Alfred
SUNY College of Technology at Canton
SUNY College of Technology at Delhi
SUNY College of Technology at
Farmingdale
SUNY Columbia-Greene Community
College
SUNY Community College at Erie
(Orchard Park)
SUNY Dutchess Community College
SUNY Erie (Buffalo) Community College
SUNY Erie (Williamsville) Community
College
SUNY Fashion Institute of Technology
SUNY Finger Lakes Community College
SUNY Fulton-Montgomery Community
College
SUNY Genesee Community College
SUNY Health Science Center at
Brooklyn
SUNY Health Science Center at
Syracuse
SUNY Herkimer County Community
College
SUNY Institute of Technology at
Utica/ Rome
SUNY Jamestown Community College
SUNY Jamestown(Olean) Community
College
SUNY Jefferson Community College
SUNY Maritime College
SUNY Mohawk Valley Community College
SUNY Niagara Community College
SUNY Onondaga Community College
SUNY Schenectady County Community
College
SUNY Sullivan Community College
SUNY Tompkins Cortland Community
College
SUNY Ulster County Community College
Susquehanna University
Swarthmore College
Sweet Briar College
Syracuse University
Tabor College
Talladega College
Taylor University
Taylor University, Fort Wayne Campus
TCU
Teikyo Post University
Temple University
Texas Lutheran University
Texas Wesleyan University
Texas Woman's University
Thomas College
Tiffin University
Toccoa Falls College
Trinity College (Connecticut)
Trinity College (Washington, DC)
Trinity University
Tri-State University
Truman State University
Tulane University
Tusculum College
Tuskegee University
Union College (Kentucky)
Union College (New York)
Union University
United States International
University
Unity College
University of Alabama -- Birmingham
University of Alabama -- Huntsville
University of Alabama -- Tuscaloosa
University of Alaska, Fairbanks
University of Arizona
University of Bridgeport
University of Central Florida
The University of Charleston
University of Colorado
University of Colorado -- Boulder
University of Connecticut, Hartford
University of Connecticut, Storrs
University of Connecticut, Torrington
University of Dallas
University of Delaware
University of Denver
University of Detroit Mercy
University of Evansville
The University of Findlay
University of Georgia
University of Great Falls
University of Hartford
University of Houston
University of Illinois -- Urbana
University of Indianapolis
University of Iowa
University of Maine
University of Maine at Fort Kent
University of Maine at Machias
University of Maine at Presque Isle
University of Maine at Augusta
University of Maine at Farmington
University of Maryland -- Baltimore
County
University of Maryland -- Eastern
Shore
University of Maryland -- Germany
University of Maryland -- College
Park
University of Massachusetts at
Amherst
University of Massachusetts at Boston
University of Massachusetts at
Dartmouth
</TABLE>
32
<PAGE> 35
<TABLE>
<S> <C> <C>
University of Massachusetts at Lowell
University of Miami
University of Michigan, Flint
University of Minnesota -- Morris
University of Minnesota -- Crookston
University of Mississippi
University of Missouri -- St. Louis
University of Mobile
University of Montana
University of Montevallo
University of Nevada -- Las Vegas
University of New England
University of New Hampshire
University of New Haven
University of New Mexico
University of New Orleans
University of North Carolina
University of North
Carolina -- Asheville
University of North
Carolina -- Charlotte
University of North Carolina --
Greensboro
University of North Florida
University of Northern Iowa
University of Oregon
University of Pittsburgh
University of Pittsburgh at Bradford
University of Puget Sound
University of Redlands
University of Rhode Island
University of Rio Grande
University of Rochester
University of San Diego
University of San Francisco
The University of Scranton
University of South Carolina
University of South Carolina
Spartanburg
University of South Carolina, Aiken
University of South Florida
University of Southern California
University of Southern Colorado
University of Southern Maine
University of St. Francis
University of St. Thomas
University of Tampa
University of Texas -- Dallas
University of Texas at Arlington
The University of Tulsa
University of the Arts
University of the Incarnate Word
University of the Ozarks
University of the Pacific
University of the Sciences in
Philadelphia
University of Vermont
University of Virginia
University of Washington
University of Wisconsin, Madison
University of Wisconsin, Stout
University of Wyoming
Upper Iowa University
Ursinus College
Ursuline College
Utica College of Syracuse University
Valparaiso University
Vincennes University
Virginia Commonwealth University
Virginia Intermont College
Virginia State University
Viterbo College
Voorhees College
Wabash College
Wagner College
Wake Forest University
Walla Walla College
Walsh University
Warren Wilson College
Wartburg College
Washington & Jefferson College
Washington & Lee University
Washington College
Washington State University
Washington University
Wellesley College
Wells College
Wentworth Institute of Technology
Wesleyan College
Wesleyan University
West Chester University
West Virginia State College
West Virginia University
West Virginia Wesleyan College
Western Connecticut State University
Western Maryland College
Western Montana College
Western New England College
Western State College of Colorado
Western Washington University
Westfield State College
Westmar University
Westminster College (Missouri)
Westminster College (Pennsylvania)
Westmont College
Wheaton College
Wheeling Jesuit University
Wheelock College
Whitman College
Whittier College
Whitworth College
Widener University
Wilberforce University
Willamette University
William Jewell College
William Woods University
Williams College
Wilmington College
Wilson College
Wingate University
Winthrop University
Wittenberg University
Wofford College
The Women's College of Brenau
University
Woodbury University
Worcester Polytechnic Institute
Worcester State College
Xavier University
Yale University
York College of Pennsylvania
</TABLE>
TECHNOLOGY AND INTELLECTUAL PROPERTY
Our technology has been designed with built-in redundancies and a
template-driven automated publishing engine to allow others to reliably and
cost-effectively integrate our content into their websites. Our technology
solution enables us to easily and rapidly permit others to add content to their
website by employing a distributed, scalable architecture adapted specifically
for our Internet-based content services, and has been designed to provide
support across multiple platforms. Our automated publishing engine dynamically
builds a page to conform to the display format and look and feel and navigation
features specific to each website. This feature helps build and maintain brands
by creating the impression to end users that they have not left the website. We
manage access to the content and process user queries from our own web server
until ultimate delivery of our services, serving as a cost-effective, single
source supplier of our services.
We rely primarily on a combination of copyright, trademarks, licenses,
trade secret laws and restrictions on disclosure to protect our intellectual
property and trade secrets. We also enter into confidentiality agreements with
our employees and consultants, and generally control access to and distribution
of our documentation and other proprietary information. Despite these
precautions, it may be
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<PAGE> 36
possible for a third party to copy or otherwise obtain and use our intellectual
property or trade secrets without authorization. In addition, we rely in part on
"shrinkwrap" and "clickwrap" licenses that are not signed by the end user and,
therefore, may be unenforceable under the laws of certain jurisdictions.
We pursue the registration of certain of our trademarks in the United
States, although we have not secured registration of all of our marks. We have
registered a United States trademark for CollegeLink(R). Student Success has
registered a United States trademark for Making College Count(R). We also own
several unregistered copyrights in the CollegeLink(R) software. Student Success
owns several registered copyrights in its Making College Count(R) books and
related program materials. We do not have any patent rights.
We license our CollegeLink(R) software pursuant to a non-exclusive license
agreement which imposes restrictions on our customers" ability to use the
software and related services. We also seek to protect our software,
documentation and other written materials under trade secrets and copyright
laws.
We believe that we own all rights in our intellectual property, and have
not received any notices from any third party claiming ownership in our
intellectual property. We also have not received any notice that our products or
services infringe the intellectual property rights of any other person.
RECENT DEVELOPMENTS
We have recently entered into an agreement to acquire Student Success and a
letter of intent to acquire OSN. Both of our pending acquisitions are subject,
among other things, to certain usual and customary closing conditions. We will
acquire Student Success by merging it into our wholly-owned subsidiary,
CollegeLink Corporation. The aggregate purchase price for the outstanding
capital stock of Student Success is $8,000,000. We have agreed to pay the
purchase price by way of a cash payment of $3,500,000 and the balance of the
purchase price in shares of our common stock valued at the offering price of the
common shares in this offering. We will also assume all of the outstanding
options to purchase common stock of Student Success. In connection with the
acquisition, CollegeLink Corporation, will enter into one-year employment
agreements with Patrick S. O'Brien and Bradford J. Baker, two shareholders of
Student Success. The employment agreements will contain non-competition
covenants preventing Messrs. O'Brien and Baker from competing with our business
for a period of three years following termination of employment. In addition to
the salaries set forth in their respective employment agreements, Messrs.
O'Brien and Baker will each receive options to purchase 200,000 shares of our
common stock at an exercise price equal to the price per share of the stock
included in this offering, subject to certain vesting requirements.
On September 30, 1999, we sold 1,000,000 shares of Series C Convertible
Preferred Stock to PNC Investment Corp. for an aggregate purchase price of
$4,000,000. PNC Investment Corp. is a subsidiary of PNC Bank, N.A. On September
29, 1999, we also entered into a Marketing Services and Administrative Agreement
with PNC Bank, N.A.
On October 26, 1999, we sold 250,000 shares of Series A Convertible
Preferred Stock to an accredited investor for an aggregate purchase price of
$1,000,000.
LEGAL PROCEEDINGS
We are not a party to any lawsuit or proceeding which, in the opinion of
management, is likely to have a material adverse effect on our business.
EMPLOYEES
As of November 17, 1999, we employed 38 persons full-time. None of our
employees is represented by a union and we have never experienced a work
stoppage. Our management considers its relations with our employees to be good.
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<PAGE> 37
FACILITIES
Our headquarters are located in Middletown, Rhode Island, where we occupy
3,200 square feet of space pursuant to a lease which expires in September 2001.
We also conduct operations in Clinton, Massachusetts, where we occupy 4,000
square feet of space as a tenant at will. On September 22, 1999, we signed a
lease for 11,500 square feet in Middletown, Rhode Island, which will house all
of our operations, including CollegeLink.com. We believe that these existing
facilities are adequate to meet our current and foreseeable requirements or that
suitable additional or substitute space will be available on commercially
reasonable terms. We plan to vacate our Clinton, Massachusetts site and to
consolidate our operations in Middletown, Rhode Island by December 15, 1999.
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<PAGE> 38
MANAGEMENT
DIRECTORS AND OFFICERS
Our directors and officers are as follows:
<TABLE>
<CAPTION>
NAME AGE* POSITION
- ---- ---- --------
<S> <C> <C>
Richard A. Fisher......................... 53 Chairman of the Board
Thomas J. Burgess......................... 34 President
Patrick O'Brien........................... 36 Vice President -- Marketing
Bradford J. Baker......................... 35 Vice President -- Sales
Douglas J. Bush III....................... 32 Vice President -- Business Development
Timothy H. Jemison........................ 32 Vice President and Chief Technology
Officer
Edward F. Hayes........................... 52 Vice President -- Finance
Peter J. Barkman.......................... 32 Vice President and National Sales Manager
William Fink.............................. 42 Vice President -- Network Operations
Anne Marie Gleason........................ 43 Vice President -- College Relations
Kevin J. High............................. 34 Director
Jai N. Gupta, Ph.D........................ 52 Director
Jeffrey Cunningham........................ 47 Director
Bert Hensley.............................. 39 Director
Mark Rogers............................... 39 Director
</TABLE>
- ---------------
* As of October 19, 1999.
Our management consists of the following personnel:
RICHARD A. FISHER, CHAIRMAN. Mr. Fisher has been chairman of our board of
directors since February 1999. Mr. Fisher was a co-founder of our predecessor,
where he served as chairman of the board and general counsel from August 1996 to
February 1999. From January 1996 to August 1996, Mr. Fisher provided legal and
other consulting services to a number of start up and early stage companies.
From July 1987 through September 1994, Mr. Fisher was chairman, chief executive
officer and general counsel of, and from October 1994 to December 1995, a
consultant to, Quadrax Corporation, which he co-founded to engage in the
manufacture and sale of advanced composite materials. Mr. Fisher was a tax and
corporate partner in the Boston, Massachusetts law firm of Foley, Hoag and
Eliot, LLP, which is our legal counsel, and Assistant to the Chief Counsel of
the Internal Revenue Service in Washington, DC. Mr. Fisher holds a BA in
Economics from Northwestern University (1968) and a Juris Doctor from the
University of Virginia School of Law (1971).
THOMAS J. BURGESS, PRESIDENT. Mr. Burgess has served as our president
since November 11, 1999. Mr. Burgess has also served as president of our wholly
owned subsidiary, CollegeLink Corporation since August 1999. From January 1999
through August 1999, Mr. Burgess was president of ECI, Inc., CollegeLink
Corporation's predecessor. From February 1998 through January 1999, he served as
chief executive officer of 9th Square, Inc., an Internet e-commerce and
advertising software company. From January 1995 to June 1997, Mr. Burgess served
as chief executive officer of echoMEDIA, Inc., an Internet advertising
technology business which, in December of 1997, merged with Softbank Interactive
Marketing. He also served as a consultant to echoMEDIA from July 1997 to
February 1998. Mr. Burgess has a BA from Providence College (1987).
PATRICK O'BRIEN, VICE PRESIDENT, MARKETING. Mr. O'Brien has served as our
vice president of marketing since November 1999. He is a co-founder of Student
Success and has served as its president since its inception in June 1996. From
October 1993 through June 1996, he served as vice president and general manager
of Union Camp Corporation's Branigar subsidiary, a developer of exclusive golf
communities. From July 1990 to October 1993, Mr. O'Brien was the director of
marketing for Branigar, managing national marketing efforts for two communities,
running an in-house advertising agency, and managing telemarketing and MIS
operations. From 1985 through June 1990, Mr. O'Brien worked in brand
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management and marketing at The Procter & Gamble Company, serving as brand
manager of Crest Toothpaste during this period. He is the author of three teen
"success" books, and has been featured in the New York Times, USA Today, and CBS
News. Mr. O'Brien graduated magna cum laude from Miami University with BS
degrees in Finance and Accounting (1985). If we do not complete our acquisition
of Student Success, Mr. O'Brien may not continue as an officer of CollegeLink.
BRADFORD J. BAKER, VICE PRESIDENT -- SALES. Mr. Baker has served as our
vice president of sales since November 1999. He is a co-founder of Student
Success and has served as its chief operating officer and vice president of
sales since its inception in June 1996. From October 1990 to June 1996, Mr.
Baker served as vice president and general manager of Graphic Management, a
printing communications and graphic arts company. From October 1988 to September
1990, he served as a brand manager at Kraft, launching several new products and
building national distribution for the Tombstone Pizza brand. From June 1986 to
September 1988 he served as an assistant brand manager at The Procter & Gamble
Company helping integrate several acquired brands into that company. Mr. Baker
graduated magna cum laude with a BS degree in Economics from Harvard (1986). If
we do not complete our acquisition of Student Success, Mr. Baker may not
continue as an officer of CollegeLink.
DOUGLAS J. BUSH III, VICE PRESIDENT -- BUSINESS DEVELOPMENT. Mr. Bush has
served as our vice president of business development since September 1999. From
January 1996, he has served as chief financial officer and corporate secretary
for Online Scouting Network, Inc., an Internet-based athletic recruiting service
for high school athletes. From May 1995 to December 1995, Mr. Bush served as
senior consultant for Deloitte & Touche Consulting Group, focusing on business
process reengineering for firms in the financial services sector. From August
1993 through May 1995, Mr. Bush attended the University of Pennsylvania's
Wharton School of Business where he earned his MBA in Finance and Strategic
Management (1995). If we do not complete our acquisition of Online Scouting
Network, Mr. Bush may not continue as an officer of CollegeLink.
TIMOTHY H. JEMISON, VICE PRESIDENT AND CHIEF TECHNOLOGY OFFICER. Mr.
Jemison has served as our vice president of operations since September 1999.
From November 1995 he has served as president and chief executive officer for
Online Scouting Network, Inc., an Internet-based athletic recruiting service for
high school athletes. From November 1992 to October 1995, Mr. Jemison was a
senior sales engineer with Essex Computers, Network Sales Division. Mr. Jemison
holds a BS in Finance from Pennsylvania State University (1989). If we do not
complete our acquisition of Online Scouting Network, Mr. Jemison may not
continue as an officer of CollegeLink.
EDWARD F. HAYES, VICE PRESIDENT -- FINANCE. Mr. Hayes has served as our
vice president -- finance since April 1999. Prior to joining us, from May 1996
to February 1999, he served as chief financial officer and engineering group
manager for Northeast Engineers & Consultants, Inc., a civil engineering firm.
From October 1987 to May 1996, Mr. Hayes was president and co-founder of
Advantage Business Computers, Inc., which provided computer programming and
consulting services, network installation, and training for commercial and
individual clients. He also served twenty-two years in the United States Navy in
fiscal and inventory management and submarine and industrial support positions.
Mr. Hayes has taught for Pennsylvania State University, Chapman College, New
Hampshire College, Salve Regina University, and the US Naval War College in
multiple business and mathematics disciplines. Mr. Hayes holds a BA in
Mathematics from Holy Cross College (1968), an MS in Computer Systems Management
from George Washington University (1974), an MBA from Rensselaer Polytechnic
Institute (1975), and an MA in National Defense Studies from the US Naval War
College (1985).
PETER J. BARKMAN, VICE PRESIDENT AND NATIONAL SALES MANAGER. Mr. Barkman
has served as our vice president of sales and national sales manager since
September 1999. From November 1995, he has served as vice president of sales and
marketing for Online Scouting Network, Inc., an Internet-based athletic
recruiting service for high school athletes. From September 1993 to November
1995, Mr. Barkman was vice president of sales and national sales manager for
Interior Acoustics Inc., which provides acoustical solutions in the workplace.
From September 1990 to September 1993, Mr. Barkman was senior business manager
for College Pro Painters Inc, the largest residential painting company in North
America.
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<PAGE> 40
Mr. Barkman holds a BS in Marketing from St. John's University (1990). If we do
not complete our acquisition of Online Scouting Network, Mr. Barkman may not
continue as an officer of CollegeLink.
WILLIAM FINK, VICE PRESIDENT -- NETWORK OPERATIONS. Mr. Fink has served as
our vice president of network operations since February 1999. From November 1998
to February, 1999, Mr. Fink served as a consultant for the United States Navy
Information Technology Department. Mr. Fink is a co-founder of our predecessor
and served as its chief technical officer from April 1996 through June 1998. Mr.
Fink was in the United States Navy between 1976 and 1996. During his last five
years in the Navy, Mr. Fink was the sole network administrator responsible for
the system design, installations, administration and technical support of a
multi-location, 250 user, wide area/local area Novell Network. Mr. Fink holds an
AS in General Studies from City University, Seattle, Washington (1992). Mr. Fink
is a college instructor of PC networking (PCLAN), advanced MS-DOS, MS Windows
and Windows 95 operating system platforms. Mr. Fink also teaches "Connecting
Businesses to the Internet" for International Learning Tree International, Inc.
ANNE MARIE GLEASON, VICE PRESIDENT, COLLEGE RELATIONS. Ms. Gleason has
served as our vice president, college relations since June 1999. Ms. Gleason
served as vice president of marketing of our predecessor from November 1997 to
June 1999. From April 1988 to November 1997, Ms. Gleason was Area Manager -- New
England for a supplier of technical adhesive machinery. Ms. Gleason has also
held senior sales and marketing positions with Augat, Inc. and Anaconda
Industries. Ms. Gleason holds a BS in Business Management from Providence
College (1977).
KEVIN J. HIGH, DIRECTOR. Mr. High has been one of our directors since
February 1999. Mr. High served as our president from February 1999 until
November 11, 1999 and served as our chief executive officer from November 11,
1999 until his resignation from that position on November 16, 1999. Mr. High was
a co-founder of our predecessor, where he served as vice president from April
1996 to December 1996 and from December 1996 to February 1999 as chief executive
officer. From April 1991 to April 1996, Mr. High served as branch manager of the
Middletown, Rhode Island office of the Corporate Securities Group, Inc. Mr. High
served as a vice president of Shearson Lehman Brothers, a national brokerage
firm, from August 1989 to April 1991.
JAI N. GUPTA, PH.D., DIRECTOR. Dr. Gupta has been one of our directors
since February 1999 and served as a director of our predecessor from June 1998
to February 1999. Dr. Gupta is the founder and president of EER Systems Inc., a
Washington, D.C. based aerospace firm which is a principal shareholder of the
Company. EER Systems, founded in 1979, offers a broad range of systems design,
development and integration capabilities, specializing in aerospace flight,
information and training systems. Dr. Gupta holds a BS in Electrical Engineering
from the Indian Institute of Technology, New Delhi, India; an MS in Electrical
Engineering from the Queen's University, Ontario, Canada (1970); a Ph.D. degree
in Electrical Engineering from Purdue University (1974); and a Masters of
Science in Administration degree from George Washington University (1978).
JEFFREY CUNNINGHAM, DIRECTOR. Mr. Cunningham has been one of our directors
since November 1999. Since December 1998, he has served as president and chief
executive officer of MyWay.com, a majority owned subsidiary of CMGI, Inc.
MyWay.com is a provider of custom Web portal solutions. From June 1980 through
July 1998, Mr. Cunningham served as group publisher and publisher of Forbes
Magazine, publisher of American Heritage Media, and worldwide sales director for
Forbes Inc., the magazine and online publisher. From June 1976 through July
1980, Mr. Cunningham served as Eastern advertising and marketing director for
Business Week, a McGraw-Hill company. Mr. Cunningham holds a BA with honors from
Binghamton University (1974) and a degree in Finance and Accounting management
from the University of Pennsylvania's Wharton School of Business (1992).
BERT HENSLEY, DIRECTOR. Mr. Hensley has been one of our directors since
November 1999. Since August 1997, he has served as the president of Morgan
Samuels Company, an executive search firm. From February 1993 to August 1997,
Mr. Hensley was a vice president and partner at Korn/Ferry International, an
executive search firm, where he led the industrial practice for that firm's Los
Angeles office. From February 1991 to February 1993, he was a general partner of
Meridian Strategies, Inc., a strategic
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consulting and venture management firm. While at Meridian, he served a broad
range of clients on engagements involving corporate strategy, mergers,
acquisitions and divestitures, organization analysis and design, and process and
systems improvement. From February 1990 to February 1991, Mr. Hensley was a
building and project manager at LaSalle Partners, a real estate management and
advisory firm. From September 1988 to February 1990, he was an associate brand
manager for Kraft-General Foods. From May 1983 to August 1988, Mr. Hensley
served in the United States Army Aviation Branch, where he held various
leadership and staff positions, including pilot, aviation detachment commander,
battalion adjutant and brigade war plans officer. Mr. Hensley holds a JD from
Loyola Law School (1993), a MS in Business Administration from Boston University
(1987), and a BS in Engineering, with a concentration in International
Relations, from West Point (1983).
MARK ROGERS, DIRECTOR. Mr. Rogers has been one of our directors since
February 1999 and served as a director of our predecessor from April 1998 to
February 1999. Since 1989, Mr. Rogers has been a principal in NFT Ventures,
including acting as interim chief executive officer and chief financial officer
as well as managing the venture capital fund. Mr. Rogers serves as an advisor to
several computer software companies in California, Utah and Texas and is a
director of several other high-tech companies. Mr. Rogers holds a BBA from Pace
University (1981).
Our board of directors is divided into three classes, labeled Class I,
Class II and Class III, with the term of one of the three classes of directors
expiring each year at our annual meeting or special meeting held in lieu of our
annual meeting. Our Class I directors are Jai N. Gupta and Bert Hensley, who
will serve until our next annual meeting or until their successors are elected
and qualified, the Class II directors are Mark Rogers and Jeffrey Cunningham,
who will serve until our 2001 annual meeting or until their successors are
elected and qualified, and the Class III directors are Kevin J. High and Richard
A. Fisher, who will serve until our 2002 annual meeting or until their
successors are qualified. The number of directors has been fixed at six, and
there are currently no vacancies on the board of directors.
The holder of Series C Convertible Preferred Stock has the right to appoint
one director but has not yet appointed anyone. The holder of Series C
Convertible Preferred Stock has appointed an observer to the board of directors.
Our executive officers are appointed by and serve at the discretion of the
board of directors. There are no family relationships among any of our executive
officers or directors.
BOARD COMMITTEES
We established an audit committee and a compensation committee in May 1999.
The audit committee consists of Dr. Gupta and Mr. Rogers. The audit committee
reviews our internal accounting procedures and consults with and reviews the
services provided by our independent accountants. The compensation committee
consists of Mr. Hensley and Mr. Rogers. The compensation committee reviews and
recommends to the board of directors the compensation and benefits of all our
officers and directors, including stock compensation and loans, and establishes
and reviews general policies relating to the compensation and benefits of our
employees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to establishing the compensation committee, the board of directors as
a whole performed the functions delegated to the compensation committee. No
member of the board of directors or the compensation committee serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of our board of directors
or compensation committee.
DIRECTOR COMPENSATION
Outside directors who are not principals or shareholders which own more
than 10% of our common stock receive an annual option to purchase 10,000 shares
of our common stock. The price is determined as
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the closing bid price of the stock on the date of our annual meeting. As of June
30, 1999, we had 20,000 of such options outstanding. These outstanding options
have an exercise price of $6.00 per share. Further, each director entitled to a
grant of options receives compensation of $1,000 for each meeting attended. All
directors receive reimbursement for out-of-pocket expenses incurred in attending
meetings of the board.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our certificate of incorporation provides that our directors shall not be
personally liable to us or to our stockholders for monetary damages for breach
of fiduciary duty as a director, except to the extent that the elimination or
limitation of such liability is not permitted by the Delaware General
Corporation Law. Our certificate of incorporation further provides for the
indemnification of our directors and officers to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law (and includes provisions
authorizing the advancement of expenses incurred in connection with certain
applicable proceedings). A principal effect of these provisions is to limit or
eliminate the potential liability of our directors for monetary damages arising
from breaches of their duty of care, subject to certain exceptions.
Our certificate of incorporation provides that the foregoing rights of
indemnification and advancement of expenses shall not be deemed exclusive of any
other rights to which our directors and officers may be entitled under any law
(common or statutory), agreement, vote of stockholders or disinterested
directors or otherwise.
At present, there is no pending litigation or proceeding involving any
director or officer as to which indemnification will be required or permitted
under our certificate of incorporation, by-laws, or an indemnification
agreement. We are not aware of any threatened litigation or proceeding that may
result in a claim for such indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by us of expenses incurred or paid by any of our directors, officers or
controlling persons in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered, we will, unless in the opinion of our counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by us is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued for
our chief executive officer and our four other most highly compensated executive
officers who were employed by us at June 30, 1999, excluding officers paid less
than $100,000 annually (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------------------------
NAME AND FISCAL YEAR OTHER ANNUAL SECURITIES ALL OTHER
PRINCIPAL POSITION ENDED SALARY COMPENSATION UNDERLYING OPTIONS COMPENSATION
- ------------------ ------------- -------- ------------ ------------------ ------------
<S> <C> <C> <C> <C> <C>
Richard A. Fisher......... June 30, 1999 $105,093 -- 414,412 --
Chairman June 30, 1998 60,622 -- -- --
June 30, 1997 27,404 -- -- --
Kevin J. High............. June 30, 1999 $126,040 -- 414,412 --
President June 30, 1998 90,865 -- -- --
June 30, 1997 54,928 -- -- --
</TABLE>
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OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth grants of stock options to each of the Named
Executive Officers during the fiscal year ended June 30, 1999. No stock
appreciation rights were granted during the fiscal year ended June 30, 1999.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------------------- ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM (2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR(1) PER SHARE DATE 5%($) 10%($)
- ---- ---------- -------------- --------- ----------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Fisher..... 14,412 1.24 2.50 June 30, 2008 22,659 57,423
400,000 34.30 4.00 February 11, 2004 442,051 976,816
Kevin J. High......... 14,412 1.24 2.50 June 30, 2008 22,659 57,423
400,000 34.30 4.00 February 11, 2004 442,051 976,816
</TABLE>
- ---------------
(1) Based on an aggregate of 1,161,185 shares subject to options granted to
employees during fiscal 1999.
(2) These amounts represent hypothetical gains that could be achieved for the
option if exercised at the end of the option term. These gains are based on
assumed rates of stock appreciation of 5% and 10% compounded annually from
the date the option was granted to its expiration date and are not presented
to forecast possible future appreciation, if any, in the price of our common
stock. The gains shown are net of the option exercise price, but do not
include deductions for taxes or other expenses associated with the exercise
of the option or the sale of the underlying shares. The actual gains, if
any, on the exercise of the option will depend on the future performance of
our common stock, the optionee's continued employment through the vesting
period applicable to the option and the date on which the option is
exercised.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information regarding stock options
exercised by Named Executive Officers in the fiscal year ended June 30, 1999,
and exercisable and unexercisable stock options held as of June 30, 1999 by each
of the Named Executive Officers. The value of unexercised in-the-money options
has been calculated by determining the difference between the exercise price per
share payable upon exercise of such options and the closing market price on June
30, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT YEAR-END AT FISCAL YEAR-END
ACQUIRED VALUE --------------------------- ---------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Fisher.......... -- -- 136,936 277,476 219,366 449,770
Kevin J. High.............. -- -- 136,936 277,476 219,366 449,770
</TABLE>
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with Mr. Fisher, our chairman,
and Mr. High, one of our directors. Each employment agreement provides for three
years of employment commencing February 11, 1999 at an annual salary of
$175,000. The salary levels have been increased (with effect from January 1,
2000) to $200,000 based on our obtaining in excess of $7,000,000 of new equity
capital since commencement of these employment agreements. Pursuant to these
agreements, Mr. Fisher and Mr. High has each received an option to purchase up
to 400,000 shares of common stock at an exercise price of $4.00 per share. These
options vest in equal monthly installments over 24 months commencing on the date
of grant. In addition, on September 1, 1999, Messrs. Fisher and High were each
granted an option to purchase 100,000 shares of common stock at $5.00 per share.
These options vest in full on September 1, 2001.
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If either Mr. Fisher or Mr. High is terminated by us without cause or
terminates his employment agreement for good reason, such employee will receive
from us his then applicable base salary and continuation of benefits until the
later of the expiration of the term of his employment agreement or two years
after the date of termination. In addition, all outstanding options held by such
employee shall become immediately exercisable in full.
The employment agreements also provide that we will provide a life
insurance policy and a monthly automobile allowance for these employees.
We have also entered into an employment agreement with our president, Mr.
Burgess. Mr. Burgess' employment agreement provides for one year of employment
commencing July 1, 1999 at an annual salary of $140,000. Pursuant to his
employment agreement, Mr. Burgess has received an option to purchase 300,000
shares of common stock at an exercise price of $6.125. The option vests as to
100,000 shares on June 30, 2000. The balance of the option shares vest in equal
monthly installments over the two year period commencing July 31, 2000 and
ending June 30, 2002, provided that Mr. Burgess continues his employment with
us. If Mr. Burgess is terminated for any reason other than cause, his option
will immediately become exercisable in full. In addition, Mr. Burgess'
employment agreement provides that we will issue 5,000 shares of common stock to
him on January 1, 2000.
BENEFIT PLANS
We maintain a 401(k) plan, qualified under Section 401(k) of the Internal
Revenue Code of 1986, as amended. All of our employees who are at least 21 years
of age are eligible to make salary reduction contributions pursuant to the
401(k) plan. A participant may contribute a maximum of 15% of his or her pre-tax
salary, commissions and bonuses through payroll deductions (up to the
statutorily prescribed annual limit of $10,000 in 1998) to the 401(k) plan.
1996 Stock Plan.
Our predecessor adopted our 1996 stock plan on December 16, 1996. The 1996
plan authorizes the grant of incentive stock options in accordance with section
422 of the Internal Revenue Code of 1996 and non-qualified options. We have
reserved a total of 1,441,250 shares of common stock for issuance under the 1996
plan. No incentive stock option may be granted under the 1996 plan after
December 16, 2006. In certain situations, including changes in our capital
structure due to a stock dividend, stock split, recapitalization,
reorganization, merger, consolidation, combination or the like, the board of
directors may, in order to prevent changes in the existing rights of
optionholders, adjust the number and class of shares available for option grants
under the 1996 plan or revise the terms of outstanding options under the 1996
plan. However, the board shall not make any adjustment that would disqualify an
incentive stock option or that would change the minimum number of shares
issuable upon exercise of an option.
Our officers and other key employees are eligible to receive incentive
stock options under the 1996 plan. They, together with other persons who are not
employees of our company but who may provide services to us, are also eligible
to receive non-qualified options. Options may be granted in combination with or
in place of awards granted under any other employee plan maintained by us. The
aggregate fair market value of common stock with respect to which incentive
stock options are exercisable for the first time by any employee during any
calendar year may not exceed $100,000.
The term of any incentive stock option granted under the 1996 plan may not
exceed ten years or, in case of an optionee holding 10% of our shares, five
years from the date of the grant. The 1996 plan imposes certain restrictions on
exercisability of options in the event of termination of the optionees'
employment with our company.
Our board of directors administers the 1996 plan. The board of directors
has the authority at any time to suspend, terminate or amend the 1996 plan, to
grant options under the 1996 plan, to determine the terms of each option, to
designate options as incentive stock options or non-qualified options, to
prescribe, amend and rescind rules and regulations relating to the 1996 plan,
and to make all such other determinations in connection with the administration
of the 1996 plan. All actions taken and
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determinations made by the board of directors will be final and binding upon us,
the optionees and all other interested persons.
The terms and conditions of option agreements may vary. Under the 1996 plan
the exercise price of incentive stock options may not be less than 100%, or, in
case of an optionee who owns stock possessing more than 10% of the total
combined voting power of our capital stock, 110%, of the fair market value of
our common stock on the date the option is granted.
As of the date of this prospectus, options to acquire 241,185 shares of
common stock have been granted under the 1996 plan. The board of directors does
not intend to issue any further options under the 1996 plan.
1999 Stock Option Plan.
Our board of directors adopted our 1999 stock option plan on May 7, 1999
and our stockholders approved the 1999 plan on November 11, 1999. Only our
officers and key employees may participate in the 1999 plan. The 1999 plan
authorizes the grant of incentive stock options and non-qualified stock options.
We have reserved a total of 1,550,000 shares of common stock for issuance upon
exercise of outstanding options under the 1999 executive plan, subject to
adjustment in the event of any stock dividend, stock split, recapitalization,
reorganization, or certain defined changes of control. The number of shares with
respect to which options may be granted to any participant under the 1999 plan
may not exceed 750,000 shares in any calendar year.
Our board of directors administers the 1999 plan. The board has the
authority to adopt, amend and repeal the administrative rules, guidelines and
practices relating to the 1999 plan and to interpret its provisions. The board
may delegate authority under the 1999 plan to one or more committees of the
board and, subject to certain limitations, to one or more of our executive
officers. Subject to certain limitations contained in the 1999 plan, the board
of directors, the compensation committee or any other committee or any executive
officer to whom the board delegates authority, as the case may be, selects the
recipients of options and determines the number of shares of common stock
covered by options, the dates upon which such options become exercisable, the
exercise price and duration of options, and all other terms and conditions of
option grants.
Options under the 1999 plan may be granted at an exercise price which may
be less than, equal to or greater than the fair market value of our common stock
on the date of the grant. The exercise price of options may be paid in cash, by
check, by a "cashless exercise" through a broker, by surrender to us of common
shares, or by any combination of the foregoing permitted forms of payment. Under
present law, incentive stock options and options intended to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue Code
of 1986 may not be granted with an exercise price less than the fair market
value of the common stock on the date of the grant (or less than 110% of the
fair market value in the case of incentive stock options granted to optionees
holding more than 10% of the combined voting power of our capital stock).
In the event of certain defined change in control events, all outstanding
options under the 1999 plan shall accelerate and become immediately exercisable
for a period of fifteen days (or such period as the board may prescribe)
immediately prior to the scheduled consummation of the change of control. Upon
consummation of the change of control, the 1999 plan and all outstanding and
unexercised options shall terminate as of the effective date of the change in
control unless the 1999 plan is continued after the change in control and such
options are assumed by the surviving entity.
No incentive stock option may be granted under the 1999 plan after August
31, 2009, but the vesting and effectiveness of options previously granted may
extend beyond that date. Our board of directors may at any time amend, suspend
or terminate the 1999 plan.
As of the date of this prospectus, options to acquire 625,000 shares of our
common stock have been granted under the 1999 plan.
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<PAGE> 46
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have in the past borrowed money from certain of our officers. Such loans
have since been repaid in full. In no case did the amount borrowed exceed
$60,000.
During fiscal 1998, we entered into a joint venture agreement with EER
Systems to develop an online training service. During fiscal 1999, we have also
borrowed a total of $300,000 from EER Systems, one of our stockholders. One of
our current directors, Dr. Jai Gupta, is the president of EER Systems. These
loans have since been repaid in full.
We have entered into an agreement to acquire Student Success. Messrs.
Patrick O'Brien and Bradford Baker, current officers of CollegeLink, are
stockholders and officers of Student Success.
We have entered into a letter of intent to acquire Online Scouting Network.
Messrs. Timothy Jemison, Douglas Bush III and Peter Barkman, current officers of
CollegeLink, are stockholders and officers of Online Scouting Network.
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<PAGE> 47
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of our outstanding
common stock on November 22, 1999 by
- each of our directors and executive officers,
- all of our directors and executive officers as a group,
- each shareholder who was known by us to be the beneficial owner of more
than five percent (5%) of our outstanding shares.
Unless otherwise noted below, the address of each person listed on the
table is c/o CollegeLink.com Incorporated, 55 Hammerlund Way, Middletown, Rhode
Island 02842.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING AFTER THE OFFERING
-------------------------------- -----------------------------
NAME OF BENEFICIAL OWNER NUMBER OF SHARES(1) PERCENTAGE NUMBER OF SHARES PERCENTAGE
- ------------------------ ------------------- ---------- ---------------- ----------
<S> <C> <C> <C> <C>
Kevin J. High(2)......................... 1,243,564 14.33 1,243,564 11.04
Richard A. Fisher(3)..................... 981,479 9.74 981,479 7.51
William Fink............................. 671,636 6.8 671,636 5.22
Ann Marie Gleason........................ 319,958 3.24 319,958 2.48
Mark Rogers.............................. 161,420 1.63 161,420 1.25
Thomas J. Burgess(4)..................... 92,889 * 92,889 *
Jai N. Gupta(5).......................... 43,238 * 43,238 *
Jeffrey Cunningham....................... -- -- --
Bert Hensley............................. -- -- --
Edward F. Hayes.......................... -- -- --
Patrick S. O'Brien....................... -- -- --
Bradford J. Baker........................ -- -- --
Timothy H. Jemison....................... -- -- --
Douglas J. Bush III...................... -- -- --
Peter J. Barkman......................... -- -- --
EER Systems(6)........................... 1,500,345 15.19 1,500,345 11.65
All Directors and Officers as a Group.... 3,764,184 36.14 3,764,184 27.98
</TABLE>
- ---------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the SEC.
400,000 shares of common stock issuable by us pursuant to options which may
be exercised within 60 days after November 22, 1999 and not subject to
repurchase by us are deemed to be beneficially owned and outstanding for
purposes of calculating the number of shares and the percentage
beneficially owned by a person or entity.
Except as otherwise indicated, each stockholder named in the table has sole
voting and investment power with respect to the shares set forth opposite
such stockholder's name. For purposes of calculating the percentage
beneficially owned, the number of shares deemed outstanding before the
offering includes: (a) 9,875,840 shares of common stock outstanding as of
November 22, 1999; (b) 2,690,369 shares of common stock issuable upon the
conversion of preferred stock (assuming the maximum number of shares to be
issued upon conversion); and (c) the presently exercisable options and
presently exercisable warrants held by that person.
(2) Includes 1,043,564 shares of common stock and 200,000 shares of common
stock issuable pursuant to currently exercisable options.
(3) Includes 781,479 shares of common stock held by Karen B. Fisher, the wife
of Richard A. Fisher, and 200,000 shares of common stock issuable pursuant
to currently exercisable options granted to Richard A. Fisher.
(4) Includes 92,889 shares of common stock. Includes 27,760 shares of common
stock issuable upon conversion of Series B Preferred Stock.
(5) Dr. Gupta is the president of EER Systems, which currently owns 1,500,345
shares of our common stock. Dr. Gupta disclaims beneficial ownership of the
EER Systems shares.
(6) The address for EER Systems is 10289 Aerospace Road, Seabrook, Maryland
20706.
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<PAGE> 48
DESCRIPTION OF CAPITAL STOCK
As of the date hereof, our authorized share capital consists of 100,000,000
shares of common stock, par value $0.001 per share (the "Common Shares"), of
which 9,875,840 Common Shares are issued and outstanding, and 10,000,000 shares
of preferred stock, $.01 par value, of which (a) 2,500,000 shares have been
designated Series A (the "Series A Shares") of which 1,140,000 Series A Shares
are issued and outstanding, (b) 300,000 shares have been designated Series B
(the "Series B Shares") of which 279,771 Series B Shares are issued and
outstanding and (c) 1,000,000 shares have been designated Series C (the "Series
C Shares") of which 1,000,000 Series C Shares are issued and outstanding, and
(d) 6,200,000 shares are undesignated and available for issuance. The following
is a summary of the principal attributes of our share capital.
COMMON SHARES
The rights, privileges, restrictions and conditions attached to the Common
Shares are as follows:
Voting
Holders of Common Shares are entitled to receive notice of and to attend
and vote at all meetings of our shareholders, except meetings of holders of
another class of shares. Each Common Share entitles the holder thereof to one
vote.
Dividends
Subject to the preferences accorded to holders of Series A Shares, Series C
Shares and any other of our shares ranking senior to the Common Shares from time
to time with respect to the payment of dividends, holders of Common Shares are
entitled to receive, if, as and when declared by the Board of Directors, such
dividends as may be declared thereon by the Board of Directors from time to
time.
Liquidation, Dissolution or Winding-Up
In the event of our voluntary or involuntary liquidation, dissolution or
winding-up, or any other distribution of our assets among our shareholders for
the purpose of winding-up our affairs (such event referred to herein as a
"Distribution"), holders of Common Shares are entitled, subject to the
preferences accorded to holders of the Series A Shares, Series C Shares and any
other of our shares ranking senior to the Common Shares from time to time with
respect to payment on a Distribution, to receive amount equal to that
distributed to the holders of Series A Shares and Series C Shares per share of
common stock held, if sufficient assets are available, and to share equally, pro
rata, in our remaining property.
The Common Shares have no preemptive, redemption, conversion or
subscription rights.
UNDESIGNATED PREFERRED STOCK
Our board of directors is authorized to provide for the issuance of
preferred stock in one or more series, and in connection with the creation of
any such series, to establish the number of shares to be included in each series
and to fix the voting powers, preferences, qualifications and special or
relative rights or privileges of each series all to the full extent permitted by
the Delaware General Corporation Law. The board of directors is authorized to
issue preferred stock with voting, conversion and other rights and preferences
that could adversely affect the voting power or other rights of the holders of
Common Shares.
As indicated above, 1,140,000 Series A Shares, 279,771 Series B Shares, and
1,000,000 Series C Shares have been issued. The issuance of additional preferred
stock or of rights to purchase preferred stock could have the effect of making
it more difficult for a third party to acquire, or of discouraging a third party
from attempting to acquire, a majority of our outstanding voting stock.
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<PAGE> 49
SERIES A SHARES
Voting
Each Series A Share entitles the holder thereof to one vote for each Common
Share into which such Series A Share is then convertible.
Liquidation
In the event of a Distribution, holders of Series A Shares are entitled, in
priority to holders of Common Shares and the other holders of Preferred Stock to
receive a liquidation payment of $4.00, plus any accrued and unpaid
distributions declared thereon per Series A Share held. After such distribution,
holders of Common Shares shall receive the identical amount per share, if
available, and any remaining assets shall be distributed ratably among holders
of Common Shares and Preferred Shares.
Dividends
The holders of the Series A Shares are entitled to receive, out of funds at
the time legally available for payment of dividends in the State of Delaware, a
cumulative dividend at the rate of six percent (6%) of the stated value per
share per annum, payable quarterly in equal installments on the first days of
each successive quarter each year, if, as and when determined by the board of
directors, before any dividend shall be set apart or paid on any other capital
stock for such year.
Conversion
Each Series A Share is convertible, at the option of the holder thereof,
into one Common Share. The conversion ratio will be automatically adjusted to
account for any stock dividend, stock split, combination of shares,
reclassification or other similar event with respect to the Common Shares. In
addition, we may require mandatory conversion of all, but not less than all, of
the Series A Shares on or after the first anniversary of the initial purchase
and sale of the Series A Shares provided that: (a) the average closing bid price
of the Common Shares on the Over-the-Counter Bulletin Board or the Nasdaq Stock
Market or other principal market for the Common Shares, as applicable, for the
20 consecutive trading days immediately preceding the date of the required
conversion has exceeded $6.00 per share, or (b) we are reorganized in a
transaction involving the exchange of our Common Shares for shares of a publicly
traded U.S. corporation.
SERIES B SHARES
Voting
Except as otherwise required by law or as set forth in our certificate of
incorporation, the holders of Series B Shares are not entitled to vote on any
matter or to notice of any meeting of the stockholders.
Liquidation
The holders of Series B Shares are not entitled to any preferential payment
or distribution in the event of any Distribution, but shall share ratably on an
as-converted basis assuming automatic conversion in any distribution of our
assets to all the holders of Common Stock and the other holders of Preferred
Stock.
Dividends
The holders of Series B Shares are not entitled to receive any dividends.
Conversion
On August 10, 2000 all outstanding Series B Shares shall automatically be
converted into a number of Common Shares determined by dividing $15.00 (as
adjusted to account for any stock dividend, stock
47
<PAGE> 50
split, combination of shares, reclassification or other similar event with
respect to the Series B Shares) by the greater of $7.625 and the average of the
closing bid price per share for the 20 consecutive trading days immediately
prior to August 10, 2000 and multiplying the result by the number of outstanding
Series B Shares. Prior to August 10, 2000, each Series B Share is convertible at
the option of the holder thereof into such number of Common Share as is
determined by dividing $15.00 by the average of the closing bid price per share
for the 10 consecutive trading days immediately prior to the date of conversion,
provided, however, that no Series B Share is convertible on any day on which
such average would not exceed $15.00 (as adjusted to account for any stock
dividend, stock split, combination of shares, reclassification or other similar
event with respect to the Common Shares).
SERIES C SHARES
Voting
Except as required by applicable law, the holders of Series C Shares are
not entitled to vote on any matter, provided, however, that if there are at
least 500,000 shares of Series C Preferred Stock outstanding (such number being
subject to proportional adjustment for any subdivisions, splits or reverse
splits of the Series C Shares), the holders of Series C Shares voting as a
separate class are entitled to elect one director to the board of directors or
appoint one observer to the board of directors.
Liquidation
In the event of a Distribution, holders of Series C Shares shall be
entitled, subject to the prior rights of the Series A Shares but in priority to
holders of Common Shares and Series B Shares, to receive a liquidation payment
of $4.00, plus any accrued and unpaid distributions whether or not earned or
declared, without interest, per Series C Share held. After such distribution,
holders of Common Shares shall receive the identical amount, if available, and
any remaining assets shall be distributed ratably among the holders of Common
Shares and Preferred Shares.
Dividends
The holders of the Series C Shares are entitled to receive, out of funds at
the time legally available for payment of dividends in the State of Delaware, a
cumulative dividend at the rate of six percent (6%) of the stated value of such
shares per share per annum. Such dividends shall be payable quarterly in arrears
on the last day of March, June, September and December, if, as and when
determined by the board of directors.
Conversion
Each Series C Share is convertible, at the option of the holder thereof,
into one Common Share. The conversion ratio will be automatically adjusted to
account for any stock dividend, stock split, combination of shares,
reclassification or other similar event with respect to the Common Shares. In
addition, we may require mandatory conversion of all, but not less than all, of
the Series C Shares on or after the first anniversary of the initial purchase
and sale of the Series C Shares provided that: (a) the average closing bid price
of the Common Shares on the Over-the-Counter Bulletin Board or the Nasdaq Stock
Market, as applicable, for the 20 consecutive trading days immediately preceding
the date of the required conversion has exceeded $6.00 per share, and (b) we
elected to mandatorily convert all other series of preferred stock. In no event,
however, shall PNC Bank Corp. or any subsidiary thereof (collectively, "PNC") be
required or allowed to convert any Series C Shares if doing so would cause PNC
to hold five percent (5%) or more of our issued and outstanding Common Shares
and any of our shares of voting preferred stock, unless PNC has provided us with
a written opinion of counsel that this greater percentage of beneficial
ownership is permitted by all applicable laws and regulations.
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<PAGE> 51
WARRANTS
We have outstanding warrants to purchase an aggregate of 755,803 shares of
common stock at a weighted average exercise price of $2.18 per share. The
warrants are currently exercisable in whole or in part, at any time or from time
to time until December 31, 2004. The warrants contain certain protections
against dilution resulting from stock splits, stock dividends and similar
events.
REGISTRATION RIGHTS
We sold 890,000 Series A Shares to The Provident Life and Accident
Insurance Company ("Provident") and six individual accredited investors
commencing on April 2, 1999, pursuant to a Series A Convertible Preferred Stock
Purchase Agreement (the "Series A Agreement"). The Series A Agreement provided
that we would include all of the Common Shares into which the Series A Shares
purchased thereunder are convertible in the first registration statement we file
under the Securities Act of 1933, and that we would bear all expenses of such
registration, other than underwriting discounts and commissions. Provident and
each of the other investors in the Series A Shares has indicated that they will
agree not to, directly or indirectly, sell or otherwise dispose of their shares
for a period of 215 days after the date of this prospectus and to delay the
filing of a registration statement for the resale of Common Shares issuable upon
conversion of their Series A Shares.
In connection with the issuance and sale of Series A Shares as described
above, we issued to Brennan Dyer & Company, LLC ("Brennan Dyer") 432,375 Common
Shares as consideration for advisory services pursuant to an agreement between
us and Brennan Dyer, dated November 16, 1998. In connection with this issuance,
we agreed to include these shares in a registration statement filed for sale of
Common Shares by us. Brennan Dyer has indicated that it will agree not to,
directly or indirectly, sell or otherwise dispose of its shares for a period of
215 days after the date of this prospectus and to delay the filing of a
registration statement for the resale of its Common Shares.
In connection with the merger of ECI into us, holders of the common stock
of ECI received a total of 550,809 Common Shares (the "ECI Common Shares") and
234,771 shares of our Series B Preferred Shares (the "ECI Preferred Shares").
Pursuant to a Registration Rights Agreement executed on August 10, 1999 in
connection with the ECI merger, we agreed to register at our expense the ECI
Common Shares and the Common Shares issuable upon conversion of the ECI
Preferred Shares on a registration statement on Form S-3 and to keep such
registration statement effective until August 10, 2000, subject to the condition
that any registration of such shares may be delayed, if in our reasonable
judgment, such delay is desirable to permit the consummation by it of a
financing including a public offering by it. Each holder of the ECI Common
Shares and ECI Preferred Shares also agreed, in such Registration Rights
Agreement, to sign any lock-up agreement with respect to all its ECI Common
Shares which an underwriter for a public offering of our stock may require such
holder and our senior management to sign.
In connection with the ECI merger, we, ECI and USA Group Noel-Levitz, Inc.
("USA Group") entered into a letter agreement in settlement of certain claims
USA Group may have made (the "Letter Agreement"). Pursuant to the Letter
Agreement, we issued to USA Group 108,196 Common Shares (the "USA Group Common
Shares") and 45,000 Preferred Shares (the "USA Group Preferred Shares"). In
connection with the Letter Agreement, the Company and USA Group entered into a
Registration Rights Agreement, dated as of August 10, 1999. Pursuant to this
Agreement, if we propose to register any of our securities under the Securities
Act for our own account on a form that would also permit the registration of the
USA Group Common Shares or of the Common Shares issuable upon conversion of the
USA Group Preferred Shares, USA Group is entitled to notice of such registration
and to have the USA Group Common Shares and the Common Shares issuable upon
conversion of the USA Group Preferred Shares included in such registration,
subject to the right of the underwriters (in the event of a registration
pursuant to an underwritten offering of common stock) to limit the number of
shares included in such registration.
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<PAGE> 52
On September 30, 1999, we sold 1,000,000 shares of Series C Convertible
Preferred Stock to PNC Investment Corp. pursuant to a Stock Purchase Agreement
(the "Series C Agreement"). The Series C Agreement provides that we shall
include all of the Common Shares into which the Series C Shares are convertible
in a registration statement on Form S-3 promptly after we become eligible to
file such a registration statement with the SEC.
On October 26, 1999, we sold 250,000 shares of Series A Convertible
Preferred Stock to an accredited investor pursuant to a Series A Convertible
Stock Purchase Agreement. The Stock Purchase Agreement provides that we shall
include all of the Common Shares into which the investor may convert its Series
A Shares in our first registration statement under the Securities Act filed 215
days after the effective date of this offering.
POSSIBLE AMENDMENTS TO OUR CERTIFICATE OF INCORPORATION
On November 11, 1999, our stockholders approved four alternative amendments
to our certificate of incorporation providing for a one for two consolidation of
Common Shares, a two for three consolidation of Common Shares, a three for four
consolidation of Common Shares and a four for five consolidation of Common
Shares, respectively, and authorized our board of directors to file one such
amendment on or before March 15, 2000. The purpose of this action was, among
other things, to permit our board of directors to adjust, if necessary, our
capitalization to facilitate a public offering. In light of this offering, our
board of directors has irrevocably decided that it will not file any such
amendment after the closure of this offering.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE
OF INCORPORATION AND BY-LAWS
A number of provisions of Delaware law, our certificate of incorporation
and our by-laws could make more difficult any attempt to acquire us by means of
a tender offer, a proxy contest or otherwise and the removal of incumbent
officers and directors. These provisions are intended to discourage certain
types of coercive takeover and inadequate takeover bid, even though such a
transaction may offer our shareholders the opportunity to sell their stock at a
price above the prevailing market price. This also encourages persons seeking to
acquire control of us to negotiate with us first.
Delaware Law
We are subject to Section 203 of the Delaware General Corporation Law
which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that such stockholder became an
interested stockholder.
Section 203 does not apply if:
- prior to such date, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder;
- upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned by persons who are
directors and also officers and by employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer; or
- on or subsequent to such date, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not be written consent, by the
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<PAGE> 53
affirmative vote of at least two-thirds of the outstanding voting stock
which is not owned by the interested stockholder.
The application of Section 203 may limit the ability of stockholders to
approve a transaction that they may deem to be in their best interests.
Section 203 defines "business combination" to include:
- any merger or consolidation involving the corporation and the interested
stockholder;
- any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation to or with the interested stockholder;
- subject to certain exceptions, any transaction which results in the
issuance or transfer by the corporation of any stock of the corporation
to he interested stockholder; or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an "interested stockholder" as any entity
or person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person associated with, affiliated with or
controlling or controlled by such entity or person.
Our Certificate of Incorporation and By-Laws
Our certificate of incorporation and by-laws provide that, unless otherwise
prescribed by law or our certificate of incorporation, only a majority of the
board, the chairman of the board or our president is able to call a special
meeting of our stockholders. The certificate of incorporation and the by-laws
also provide that, unless otherwise prescribed by law or the certificate of
incorporation, stockholder action may be taken only at a duly called and
convened annual or special meeting of our stockholders and may not be taken by
written consent. These provisions, taken together, prevent our stockholders from
forcing consideration by the stockholders of stockholder proposals over the
opposition of our board, except at an annual meeting.
Our by-laws also establish an advance notice procedure for our stockholders
to make nominations of candidates for election as director, or to bring other
business before an annual meeting of our stockholders. Under this notice
procedure, notice of stockholder nominations or proposals to be made at an
annual or special meeting in lieu of an annual meeting generally must be
received by us not less than 60 days nor more than 90 days prior to the
scheduled date of the meeting. However, if less than 70 days notice or prior
public disclosure of the date of the meeting is given, then notice must be
received not later than the 10th day following the earlier of the day such
notice was mailed or the day such public disclosure was made. Notice of
stockholder nominations or proposals to be made at a special meeting (other than
a special meeting in lieu of an annual meeting), must be received not later than
the 10th day following the earlier of the day such notice was mailed or the day
such public disclosure was made. These notices must contain certain prescribed
information.
The foregoing notice procedure affords our board an opportunity to consider
the qualifications of proposed director nominees or the merit of stockholder
proposals, and, to the extent deemed appropriate by the board, to inform our
stockholders about such matters. The notice procedure also provides a more
orderly procedure for conducting annual meetings of our stockholders. The
by-laws do not give the board any power to approve or disapprove stockholder
nominations for the election of directors or proposals for action. However, the
notice procedure may prevent a contest for the election of directors or the
consideration of stockholder proposals. This could deter a third party from
conducting a solicitation of proxies to elect its own slate of directors or to
approve its own proposal if the proper advance notice procedures are not
followed, without regard to whether consideration of such nominees or proposals
might be harmful or beneficial to us and our stockholders.
Under our certificate of incorporation 82,052,258 shares of common stock
and 7,309,631 shares of preferred stock remain authorized and not reserved for
any purpose and are available for issuance.
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<PAGE> 54
Although these shares were authorized to allow the board, without further
stockholder approval, to issue additional shares of our capital stock to raise
capital or to effect potential acquisitions in the future, the authorization of
such additional shares could incidentally have an anti-takeover effect, in that
such shares could potentially be issued in such manner as to hamper the efforts
of persons who might attempt to gain control of CollegeLink. Also, our
certificate of incorporation specifically provides that our board of directors
has the authority to create the special terms and conditions of the preferred
stock which it issues. The board is authorized to establish the number of shares
of preferred stock to be issued in any series it decides to issue, and to fix
the voting powers, designations, preferences and relative, participating,
optional or other special rights of the preferred stock, including voting rights
and conversion rights, and the qualifications, limitations and restrictions
thereon. Accordingly, it is possible for the board to seek to authorize the
issuance of a series of preferred stock with rights and preferences that could
affect an attempt to acquire control of CollegeLink. For example, such
additional authorized shares could potentially be issued to dilute the stock
ownership of persons seeking to obtain control of CollegeLink, or shares of
preferred stock with favorable voting rights, such as the right to elect certain
additional directors, or to provide the holders of other special rights could be
created and issued to parties that support our management.
Our certificate of incorporation divides our board of directors into three
classes, labeled Class I, Class II and Class III, each containing, insofar as
possible, an equal number of directors, with the term of one of the three
classes expiring each year at our annual meeting or special meeting in lieu of
such annual meeting. Our certificate of incorporation further provides that any
vacancy on the board of directors resulting from an increase in the number of
directors may be filled by the affirmative vote of a majority of the directors
then in office, and any other vacancy on the board of directors may be filled by
the affirmative vote of a majority of the directors then in office, although
less than a quorum, or by a sole remaining director. Any director elected to
fill a vacancy not resulting from an increase in the number of directors would
serve for a term equivalent to the remaining unserved portion of the term of
such newly elected director's predecessor.
Under Delaware law, the holders of a majority of a corporation's
outstanding shares may remove directors with or without cause unless such power
of removal is limited by the corporation's certificate of incorporation. Our
certificate of incorporation contains no provision limiting such power. Such law
also provides that if a corporation's certificate of incorporation provides for
classification of directors, directors may be removed only for cause unless
otherwise set forth in the certificate of incorporation. Cause is not defined
under Delaware law for this purpose. Our certificate of incorporation provides
that incumbent directors may be removed by a majority of our stockholders only
for "cause." "Cause" for this purpose is defined as (a) willful and continued
material failure, refusal or inability to perform one's duties to us or the
willful engaging in gross misconduct materially and demonstrably damaging to us;
or (b) conviction for any crime involving moral turpitude or any other illegal
act that materially and adversely reflects upon our business, affairs or
reputation or on one's ability to perform one's duties to us.
The foregoing provisions of our certificate of incorporation will restrict
the ability of our stockholders to change the composition of our board of
directors by extending the time required to elect a majority of directors from
one to two years, under most circumstances. Thus, the existence of a classified
board may have an anti-takeover effect because a person who has gained voting
control of CollegeLink will be unable to gain immediate control of our board of
directors unless the stockholder can obtain sufficient votes to amend our
certificate of incorporation pursuant to the supermajority requirements for such
an amendment set forth in our certificate of incorporation.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is American
Securities Transfer & Trust Incorporated. Its address is 12039 West Alameda
Parkway, Lakewood, Colorado 80228 and its telephone number at this location is
(303) 986-5400.
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<PAGE> 55
UNDERWRITING
Under the terms and subject to the conditions set forth in an underwriting
agreement dated , 1999, the underwriters named below, for whom
Cruttenden Roth Incorporated and Pennsylvania Merchant Group are acting as
representatives, have severally agreed to purchase from us, and we have agreed
to sell to the underwriters, the number of shares of common stock set forth
below opposite each underwriter's name, at the public offering price per share
less the underwriting discounts and commissions set forth on the cover page of
this prospectus.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- ------------ ---------
<S> <C>
Cruttenden Roth Incorporated................................
Pennsylvania Merchant Group.................................
---------
Total............................................. 3,000,000
=========
</TABLE>
The underwriting agreement sets forth that the obligations of the several
underwriters to pay for and accept delivery of the shares and provides that the
several underwriters will purchase all of the shares, if any of the shares are
purchased.
The representatives have advised us that the underwriters initially propose
to offer the shares of common stock directly to the public at the initial public
offering price per share set forth on the cover page of this prospectus and to
certain dealers at such price less a concession not in excess of $ per
share. The underwriters may allow, and these dealers may reallow, a concession
not in excess of $ per share to other dealers. After this offering, the
public offering price, concession and re-allowance may be changed.
We have granted to the underwriters an option, exercisable during the
45-day period after the date of this prospectus, to purchase up to an aggregate
of 450,000 additional shares of common stock at the public offering price per
share less the underwriting discounts and commissions set forth on the cover
page of this prospectus. The underwriters may exercise this option only to cover
over-allotments, if any, made in connection with the sale of the shares of
common stock offered hereby. To the extent that the underwriters exercise this
option, each underwriter will be obligated, subject to certain conditions, to
purchase the number of additional shares of common stock proportionate to the
underwriters' initial commitment reflected in the preceding table.
We entered into a consulting agreement with the representatives pursuant
which we have agreed to pay the representatives an amount equal to 1.5% of the
aggregate price of the shares of common stock offered hereby including the
shares of common stock underlying the over allotment option, if and to the
extent it is exercised as set forth on the cover of this prospectus.
We and the underwriters have agreed to indemnify each other against, or to
contribute to losses arising out of, untrue statements of omissions of material
facts contained in this prospectus and the registration statement of which it is
a part in connection with this offering. We and the underwriters are each aware
that, in the opinion of the SEC, such indemnification is against public policy
as expressed in the Securities Act of 1933 and is therefore unenforceable.
The representatives, on behalf of the underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position. Stabilizing transactions permit bids
to purchase shares so long as the stabilizing bids do not exceed a specified
maximum. Syndicate covering transactions involve purchases of shares in the open
market after the distribution has been completed in order to cover syndicate
short positions. Penalty bids permit the representatives, on behalf of the
underwriters, to reclaim a selling concession from a syndicate member when the
shares originally sold by the syndicate member are
53
<PAGE> 56
purchased in a syndicate covering transaction to cover syndicate short
positions. Such over-allotment, stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the common stock to be
higher than it would otherwise be in the absence of such transactions. These
transactions may be effected on the Nasdaq National Market or otherwise and, if
commenced, may be discontinued at any time.
We have agreed not to and we believe that each of our directors, officers,
employees, stockholders, option holders and warrant holders will agree not to,
directly or indirectly, offer for sale, contract to sell, sell, grant any other
person the right to acquire or otherwise dispose of (or enter into any
transaction or arrangement which is designed to, or could be expected to, result
in the disposition at any time in the future of) any shares of common stock for
a period of 180 days after the date of this prospectus, without the consent of
the representatives. We believe that each of our directors, officers, employees,
stockholders, option holders and warrant holders will agree not to exercise any
registration rights relating to any shares of common stock for a period of 180
days after the date of this prospectus, without the consent of the
representatives. We have agreed not to file with the SEC a registration
statement relating to any securities, for a period of 180 days after the date of
this prospectus, without the consent of the representatives.
Application will be made for quotation of the common stock on the Nasdaq
National Market System under the symbol "CLNK."
In connection with this offering, we have agreed to sell the
representatives' warrants to the representatives for a nominal price. The
representatives' warrants entitle the representatives to purchase shares in an
amount equal to 10% of the total number of shares sold in this offering
(excluding shares subject to the underwriters' over-allotment option). The
shares issuable upon exercise of the representatives' warrants will be in all
respects identical to the shares offered to you. The representatives' warrants
will be limited to a term of five years from the date of this prospectus and
will be exercisable for a four-year period commencing 12 months after the date
of this prospectus, at a per share exercise price equal to 120% of the initial
public offering price per share set forth on the cover page of this prospectus.
The representatives' warrants may not be sold, assigned, transferred, pledged or
hypothecated except to the underwriters' officers and employees. Pursuant to the
terms of the underwriting agreement, we have agreed to register the securities
underlying the representatives' warrants in this offering. For the term of the
representatives' warrants, the holders thereof are given the opportunity to
profit from a rise in the market price of the common stock, which may result in
a dilution of the interest of other shareholders. As a result, we may find it
more difficult to raise additional equity capital if it should be needed for our
business while the representatives' warrants are outstanding. The holders of the
representatives' warrants might be expected to exercise them at a time when we
would, in all likelihood, be able to obtain additional equity capital on terms
more favorable to us than those provided by the representatives' warrants. Any
profit realized on the sale of the shares issuable upon the exercise of the
representatives' warrants may be deemed additional underwriting compensation.
The preceding description includes a summary of the principal terms of the
underwriting agreement and the representatives' warrant agreements and does not
purport to be complete. The underwriting agreement and the form of
representatives' warrant agreement are filed as exhibits to the registration
statement of which this prospectus forms a part and should be referenced for the
complete contents of these documents. Each statement is qualified in all
respects by reference to these documents.
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for us by
Foley, Hoag & Eliot LLP, Boston, Massachusetts. Legal matters will be passed
upon for the underwriters by Nutter, McClennen & Fish, LLP, Boston
Massachusetts.
54
<PAGE> 57
EXPERTS
Radin Glass & Co., LLP, independent accountants, have audited our
consolidated financial statements at June 30, 1998 and 1999 and for each of the
three years in the period ended June 30, 1999, as set forth in their report. We
have included financial statements in this prospectus and elsewhere in the
registration statement in reliance on the report of Radin, Glass & Co., LLP
given on their authority as experts in accounting and auditing.
Radin Glass & Co., LLP, independent accountants, have audited the financial
statements of Online Network, L.L.C., T/A Online Scouting Network at September
30, 1998 and 1997, and for each of the two years in the period ended September
30, 1998, as set forth in their report. We have included financial statements in
this prospectus and elsewhere in the registration statement in reliance on the
report of Radin, Glass & Co., LLP given on their authority as experts in
accounting and auditing.
Paolilli & Jarek, LLC, independent accountants, have audited the financial
statements of ECI, Inc. at December 31, 1998, 1997 and 1996, and for each of the
three years in the period ended December 31, 1998, as set forth in their report.
We have included financial statements in this prospectus and elsewhere in the
registration statement in reliance on the report of Paolilli & Jarek, LLC, given
on their authority as experts in accounting and auditing.
Schenck & Associates SC, independent accountants, have audited the
financial statements of Student Success (a Division of Graphic Management
Corporation) at December 31, 1998 and 1997, and for each of the two years in the
period ended December 31, 1998, as set forth in their report. We have included
financial statements in this prospectus and elsewhere in the registration
statement in reliance on the report of Schenck & Associates SC, given on their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the SEC for our
common stock offered hereby. This prospectus does not contain all of the
information set forth in the registration statement. You should refer to the
registration statement and its exhibits for additional information. Whenever we
make reference in this prospectus to any of our contracts, agreements or other
documents, the references are not necessarily complete and you should refer to
the exhibits attached to the registration statement for the copies of the actual
contract, agreement or other document.
You can read our SEC filings, including the registration statement, over
the Internet at the SEC's Web site at http://www.sec.gov. You may also read and
copy any document we file with the SEC at its public reference facilities at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549;
Suite 1400, 500 West Madison Street, Chicago, Illinois 60661 and 7 World Trade
Center, Thirteenth Floor, New York, New York 10048. You may also obtain copies
of the documents at prescribed rates by writing to the Public Reference Section
of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference facilities.
We are subject to the reporting requirements of Section 15(d) of the
Securities Exchange Act of 1934. We are current in the filing of all required
reports with the SEC.
55
<PAGE> 58
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56
<PAGE> 59
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COLLEGELINK.COM INCORPORATED
Report of Independent Auditor............................... F-2
Balance Sheets as of June 30, 1999 and 1998................. F-3
Statements of Operations for the years ended June 30, 1999,
1998 and 1997............................................. F-4
Statement of Changes in Shareholders' Equity (Deficit)...... F-5
Statements of Cash Flows for the years ended June 30, 1999,
1998 and 1997............................................. F-6
Notes to Financial Statements............................... F-7
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES PRO FORMA
Pro Forma Balance Sheet as of June 30, 1999 (Unaudited)..... F-15
Pro Forma Statement of Operations for the year ended June
30, 1999 (Unaudited)...................................... F-16
Notes to the Pro-Forma Financial Statements................. F-17
ECI, INC
Report of Independent Auditor............................... F-19
Balance Sheets as of December 31, 1998 and 1997............. F-20
Statements of Operations for the years ended December 31,
1998, 1997 and 1996....................................... F-21
Statement of Changes in Stockholders' Deficit............... F-22
Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996....................................... F-23
Notes to Financial Statements............................... F-24
Unaudited Balance Sheet as of June 30, 1999 and Balance
Sheet as of December 31, 1998............................. F-29
Unaudited Statement of Operations for the six months ended
June 30, 1999............................................. F-30
Unaudited Statement of Cash Flows for the six months ended
June 30, 1999............................................. F-31
Notes to Unaudited Financial Statements..................... F-32
ONLINE SCOUTING NETWORK, L.L.C.
Report of Independent Auditor............................... F-33
Balance Sheets as of September 30, 1998 and 1997............ F-34
Statements of Operations for the years ended September 30,
1998 and 1997............................................. F-35
Statements of Cash Flows for the years ended September 30,
1998 and 1997............................................. F-36
Notes to Financial Statements............................... F-37
Unaudited Balance Sheet as of June 30, 1999................. F-41
Unaudited Statement of Operations for the nine months ended
June 30, 1999............................................. F-42
Unaudited Statement of Cash Flows for the nine months ended
June 30, 1999............................................. F-43
Notes to Unaudited Financial Statements..................... F-44
STUDENT SUCCESS (A DIVISION OF GRAPHIC MANAGEMENT
CORPORATION)
Report of Independent Auditor............................... F-45
Balance Sheets as of December 31, 1998 and 1997............. F-46
Statement of Income and Changes in Division Equity for the
years ended December 31, 1998 and 1997.................... F-47
Statements of Cash Flows for the years ended December 31,
1998 and 1997............................................. F-48
Notes to Financial Statements............................... F-49
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES
Balance Sheets as of September 30, 1999 and June 30, 1999
(Unaudited)............................................... F-51
Statements of Operations for the three months ended
September 30, 1999 and 1998 (Unaudited)................... F-52
Statement of Changes in Shareholders' Equity (Deficit)
(Unaudited)............................................... F-53
Statements of Cash Flows for the three months ended
September 30, 1999 and 1998 (Unaudited)................... F-54
Notes to Financial Statements (Unaudited)................... F-55
STUDENT SUCCESS, INC.
Balance Sheet as of September 30, 1999 (Unaudited).......... F-57
Statement of Operations for the nine months ended September
30, 1999 (Unaudited)...................................... F-58
Statement of Changes in Shareholders' Equity (Unaudited).... F-59
Statement of Cash Flows for the nine months ended September
30, 1999 (Unaudited)...................................... F-60
Notes to Financial Statements (Unaudited)................... F-61
</TABLE>
F-1
<PAGE> 60
INDEPENDENT AUDITOR'S REPORT
Shareholders and Directors
Collegelink.com Incorporated
We have audited the accompanying balance sheets of Collegelink.com
Incorporated as of June 30, 1999 and 1998, and the related statements of
operations, shareholders' equity (deficit) and cash flows for each of the three
years ended June 30, 1999, 1998 and 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Collegelink.com Incorporated
as of June 30, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years ended June 30, 1999, 1998 and 1997 in
conformity with generally accepted accounting principles.
Radin, Glass & Co., LLP
Certified Public Accountants
New York, New York
September 3, 1999, except
for Note 1, which is
dated November 19, 1999.
F-2
<PAGE> 61
COLLEGELINK.COM INCORPORATED
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 1,371,100 $ 46,362
Accounts receivable, net of allowance for doubtful
accounts of $10,000 and $4,200......................... 100,163 72,113
Prepaid expenses and other assets......................... 85,249 12,878
----------- -----------
TOTAL CURRENT ASSETS.............................. 1,556,512 131,353
FURNITURE AND EQUIPMENT, net of accumulated depreciation.... 250,484 190,553
SOFTWARE DEVELOPMENT, net of accumulated amortization of $0
and $36,287, respectively................................. -- 36,283
----------- -----------
$ 1,806,996 $ 358,189
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable.......................................... $ 278,372 $ 35,988
Accrued payroll........................................... 84,725 216,709
Accrued expenses.......................................... 32,247 48,567
Unearned revenue.......................................... 35,000 57,126
Note payable shareholder.................................. -- 45,000
Shareholder advance payable............................... -- 13,071
Current portion of capital lease obligation............... -- 1,469
----------- -----------
TOTAL CURRENT LIABILITIES......................... 430,344 417,930
CAPITAL LEASE OBLIGATION.................................... -- 9,580
COMMITMENTS AND CONTINGENCIES............................... -- --
SHAREHOLDERS' DEFICIT:
Preferred stock, $1,000 stated value, $.001 par value,
authorized 1,000 shares, issued and outstanding 543
shares................................................. -- 542,500
Preferred stock, $0.01 par value, authorized 7,500,000.... -- --
Series A Convertible Preferred Stock, $4.00 stated value,
$.01 par value, authorized 2,500,000 shares, issued and
outstanding 775,000 shares............................. 3,100,000 --
Common stock, $.001 par value, authorized 100,000,000 and
5,765,000 shares, issued and outstanding 9,152,211 and
3,482,556 shares....................................... 9,152 604
Additional paid-in capital................................ 2,459,718 993,368
Accumulated deficit....................................... (4,192,218) (1,605,793)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT).............. 1,376,652 (69,321)
----------- -----------
$ 1,806,996 $ 358,189
=========== ===========
</TABLE>
See notes to financial statements
F-3
<PAGE> 62
COLLEGELINK.COM INCORPORATED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------
1999 1998 1997
----------- ---------- ----------
<S> <C> <C> <C>
NET REVENUES:
Development of proprietary technology............... $ -- $ 500,000 $ --
Online training service revenues.................... 162,884 -- --
Web site hosting.................................... 235,522 210,700 82,971
Other revenues...................................... 163,515 533,183 376,754
----------- ---------- ----------
561,921 1,243,883 459,725
----------- ---------- ----------
EXPENSES:
Payroll, payroll taxes and related benefits......... 1,173,439 1,018,786 589,356
Depreciation and amortization....................... 131,545 93,554 66,949
Advertising......................................... 49,428 13,268 127,155
Other general and administrative expenses........... 1,751,881 741,028 558,978
----------- ---------- ----------
3,106,293 1,866,636 1,342,438
LOSS FROM OPERATIONS.................................. (2,544,372) (622,753) (882,713)
INTEREST EXPENSE...................................... 42,053 7,579 5,786
----------- ---------- ----------
NET LOSS.............................................. $(2,586,425) $ (630,332) $ (888,499)
=========== ========== ==========
NET LOSS PER SHARE.................................... $ (0.40) $ (0.18) $ (0.29)
=========== ========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES USED IN
COMPUTATION......................................... 6,531,153 3,499,857 3,033,036
=========== ========== ==========
</TABLE>
See notes to financial statements
F-4
<PAGE> 63
COLLEGELINK.COM INCORPORATED
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
TOTAL
PREFERRED STOCK COMMON STOCK ADDITIONAL SHAREHOLDERS'
-------------------- ------------------ PAID-IN EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) (DEFICIT)
------- ---------- --------- ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance -- June 30, 1996...... -- $ -- 2,338,866 $2,338 $ 39,974 $ (61,962) $ (19,650)
Issuance of shares with
debt.......................... -- -- 36,994 37 2,082 -- 2,119
Issuance of shares for
compensation.............. -- -- 9,512 10 12,365 -- 12,375
Issuance of shares to
founder................... -- -- 422,684 423 (350) (25,000) (24,927)
Issuance of warrants for
compensation.............. -- -- -- -- 14,931 -- 14,931
Sale of common shares, less
expenses.................. -- -- 674,499 674 874,253 -- 874,927
Preferred issued............ 105 105,000 -- -- (4,945) -- 100,055
Net loss for the period..... -- -- -- -- -- (888,499) (888,499)
------- ---------- --------- ------ ---------- ----------- -----------
Balance -- June 30, 1997...... 105 105,000 3,482,556 3,483 938,310 (975,461) 71,332
Preferred issued............ 438 437,500 -- -- -- -- 437,500
Issuance of options for
services.................. -- -- -- -- 52,180 -- 52,180
Net loss for the period..... -- -- -- -- -- (630,332) (630,332)
------- ---------- --------- ------ ---------- ----------- -----------
Balance -- June 30, 1998...... 543 542,500 3,482,556 3,483 990,490 (1,605,793) (69,320)
Preferred conversion........ (543) (542,500) 453,976 454 542,046 -- --
Issuance of shares for
assets.................... -- -- 1,345,350 1,345 145,954 -- 147,299
Issuance of shares for
compensation.............. -- -- 1,372,070 1,372 1,008 -- 2,380
Issuance of shares for
services.................. -- -- 559,438 559 376,391 -- 376,950
Sale of common shares, less
expenses.................. -- -- 374,725 375 194,625 -- 195,000
Effect of merger
transaction............... -- -- 1,204,096 1,204 1,029 -- 2,233
Issuance of shares with
debt...................... -- -- 360,000 360 250,660 -- 251,020
Preferred issued-Series A... 775,000 3,100,000 -- -- -- -- 3,100,000
Dividends................... -- -- -- -- (42,485) -- (42,485)
Net loss for the period..... -- -- -- -- -- (2,586,425) (2,586,425)
------- ---------- --------- ------ ---------- ----------- -----------
Balance -- June 30, 1999...... 775,000 $3,100,000 9,152,211 $9,152 $2,459,718 $(4,192,218) $ 1,376,652
======= ========== ========= ====== ========== =========== ===========
</TABLE>
See notes to financial statements
F-5
<PAGE> 64
COLLEGELINK.COM INCORPORATED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------
1999 1998 1997
----------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(2,586,425) $(630,332) $(888,499)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization........................... 131,545 93,554 66,949
Write off of accounts receivables....................... 89,800 -- --
Net loss on equipment disposal.......................... 1,231 8,061 3,033
Issuance of shares, options and warrants as compensation
and services.......................................... 384,308 52,180 27,106
Increase (decrease) to cash attributable to changes in
assets and liabilities:
Accounts receivable..................................... (117,850) (34,121) (37,992)
Due from sale of "dial-up" access service............... -- 69,810 (69,810)
Prepaid expenses and other assets....................... (72,372) (6,190) 13,518
Increase in other assets................................ -- -- (3,000)
Accounts payable........................................ 242,384 (15,874) 49,863
Accrued expenses........................................ (16,320) 23,615 24,952
Accrued payroll......................................... (131,984) 131,941 84,768
Unearned revenues....................................... (22,126) 30,180 26,946
----------- --------- ---------
NET CASH USED IN OPERATING ACTIVITIES................... (2,097,809) (277,176) (702,166)
----------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment....................... (26,520) (80,216) (216,795)
Proceeds from equipment disposals......................... 9,600 1,665 29,155
Proceeds from rent deposit................................ 5,050 -- --
Capitalization of software development costs.............. -- (72,570)
----------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES................. (11,870) (78,551) (260,210)
----------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred shares................ 3,100,000 437,500 --
Proceeds/payments from issuance of debt................... 66,021 -- 114,306
Proceeds from issuance of common shares................... 195,000 -- 874,500
Issuance of shares to founder............................. -- -- (25,000)
Issuance of common stock with debt........................ 185,000 -- --
Payments of dividends..................................... (42,485) -- --
Note payable to shareholder............................... (45,000) -- --
Shareholder advances payable.............................. (13,071) (34,973) --
Principal payments on capital lease obligations........... (11,049) (2,865) (2,141)
----------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES............. 3,434,416 399,662 961,665
----------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 1,324,737 43,935 (711)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 46,362 2,428 3,139
----------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 1,371,100 $ 46,362 $ 2,428
=========== ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest................................................ $ 32,979 $ 7,579 $ 5,786
=========== ========= =========
Taxes................................................... $ 996 $ -- $ --
=========== ========= =========
Noncash
Issuance of stock for debt.............................. $ 66,021 $ -- $ --
=========== ========= =========
Issuance of common stock for assets..................... $ 2,299 $ -- $ --
=========== ========= =========
Preferred stock conversion to common stock.............. $ 542,500 $ -- $ --
=========== ========= =========
Stock issued for services............................... $ 384,308 $ -- $ --
=========== ========= =========
Stock issued for assets................................. $ 147,299 $ -- $ --
=========== ========= =========
</TABLE>
See notes to financial statements
F-6
<PAGE> 65
COLLEGELINK.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS
CollegeLink.com Incorporated, a Delaware corporation ("CollegeLink.com"),
is the surviving corporation in a merger on November 16, 1999 between
Cytation.com Incorporated, a New York corporation and CollegeLink.com
Incorporated. Cytation.com Incorporated was the surviving corporation in a
merger on March 5, 1999 with Cytation Corporation, a Rhode Island corporation
which was previously known as Web Services International, Inc. (Cytation
Corporation, together with Web Services International, Inc. are herein
collectively referred to as "WSI") (Note 7). Cytation.com Incorporated was
previously known as Stylex Homes, Inc. ("Stylex"). Although Stylex was
incorporated in 1969, it did not conduct any business after 1992.
CollegeLink.com is a reporting company under the Securities Exchange Act of
1934.
WSI was incorporated under the laws of the State of Rhode Island in January
1996 to market and host various forms of content on the World Wide Web and to
provide dial-up access to the Internet. Through the end of 1997, WSI marketed
the design, origination and hosting of Web sites and Web content to small and
medium size businesses. WSI also provided various consulting services to
customers in connection with the development and sale of Web content. In
December 1997, WSI entered into a joint venture and related contract for the
development of online training systems. At the time, WSI discontinued its Web
content sale and development business (except for work in process and Web
hosting) and focused its operations on the development of its online training
system which generated some revenue for the balance of the fiscal year ended
June 30, 1999. As a result of the acquisition of ECI, Inc. in August 1999,
CollegeLink.com, through its CollegeLink Corporation subsidiary, is now engaged
in providing online college application and related services to high school
students and their parents (Note 12).
CollegeLink.com, together with WSI, is hereinafter referred to as the
"Company". All references to share issuances are after the recapitalization
transaction in which each share of WSI was converted into 5.765 shares of
CollegeLink.com (Note 7).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation -- The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make significant estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reported period. Actual results
could differ from those estimates.
b. Furniture and Equipment -- Furniture and equipment are stated at cost
and depreciated using the straight-line method over the estimated useful lives
of the assets ranging from three to seven years for equipment, auto and
furniture.
Leasehold improvements are amortized over the term of the lease or the
estimated life of the improvement, whichever is shorter. Whenever assets are
sold or retired, their cost and related accumulated depreciation are removed
from the appropriate accounts. Any gains and losses on dispositions are recorded
in current operations.
c. Software Development Costs -- The Company capitalizes software
development costs in accordance with SFAS 86. The Company did not capitalize any
software development costs during the years ended June 30, 1999 and 1998,
respectively. Software development costs were fully amortized at June 30, 1999.
F-7
<PAGE> 66
COLLEGELINK.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
d. Fair Value of Financial Instruments -- The carrying amounts reported in
the balance sheet for cash, trade receivables, accounts payable and accrued
expenses approximate fair value based on the short-term maturity of these
instruments.
e. Income Taxes -- The Company utilizes the liability method of accounting
for income taxes as set forth in SFAS 109, "Accounting for Income Taxes." Under
the liability method, deferred taxes are determined based on the difference
between the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the differences are expected
to reverse.
f. Revenue Recognition -- Revenues from Web services are recognized as
such services are performed. Revenues from Web site hosting are recognized on a
monthly basis. No revenue from Web design services was recorded for the year
ended June 30, 1999.
g. Employee Stock Options and Shares Issued for Services -- The Company
accounts for employee stock transactions in accordance with APB Opinion No. 25,
"Accounting for Stock Issued to Employees." The Company has adopted the proforma
disclosure requirements of SFAS 123, "Accounting for Stock-Based Compensation."
Accordingly, any excess of fair market value of stock issued to employees over
exercise prices has been recorded as compensation expense and additional paid in
capital.
Shares issued for services of non-employees are recorded at estimated fair
value.
h. Loss Per Share -- The Company has adopted SFAS 128, "Earnings per
Share." Earnings per common share are computed by dividing income available to
common shareholders by the weighted average number of common shares outstanding
during the period. The earnings per common share, assuming dilution, computation
gives effect to all dilutive potential common shares during the period. The
computation assumes that the outstanding stock options and warrants were
exercised and that the proceeds were used to purchase common shares of the
Company. Earnings per share computation for each of the three years ended June
30, 1999, 1998 and 1997 have been restated to reflect this new standard.
i. Accounting for Long-Lived Assets -- The Company reviews long-lived
assets, certain identifiable assets and any goodwill related to those assets for
impairment whenever circumstances and situations change such that there is an
indication that the carrying amounts may not be recoverable. At June 30, 1999
and 1998 respectively, the Company believes that there has been no impairment of
long-lived assets.
j. Advertising Costs -- Advertising costs are expensed as incurred except
for direct response advertising, the costs of which are deferred and amortized
over the period the related sales are recorded. There was no deferral or
amortization for direct response advertising costs for each of the three years
ended June 30, 1999, 1998 and 1997, respectively.
3. CASH AND CASH EQUIVALENTS
The Company classifies as cash and cash equivalents highly liquid
investments with maturities of less than ninety days at June 30, 1999. The
Company did not have cash equivalents at June 30, 1998.
4. JOINT VENTURE AGREEMENT
In December 1997, the Company entered into a joint venture agreement with
EER Systems Inc. ("EER"), a supplier of systems design, development and
integration capabilities specializing in flight, information and training
systems. Cytation Corporation, a Delaware corporation, ("Cytation Delaware") was
incorporated pursuant to the joint venture agreement. Simultaneously, the
Company entered into a development agreement with Cytation Delaware, receiving
$500,000 to develop certain software.
In July 1998 the Company purchased the assets of Cytation Delaware, of
which it was a fifty percent owner, in exchange for equity. (Note 7).
F-8
<PAGE> 67
COLLEGELINK.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. FURNITURE AND EQUIPMENT
Furniture and equipment consist of the following at June 30:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES 1999 1998
------------ -------- --------
<S> <C> <C> <C>
Computer and office equipment...................... 3 $340,798 $177,072
Furniture and fixtures............................. 7 68,542 68,542
Leasehold improvements............................. 5 42,566 42,566
Auto under capital lease obligation................ 5 -- 18,055
-------- --------
451,906 306,235
Less accumulated depreciation...................... 201,422 115,682
-------- --------
$250,484 $190,553
======== ========
</TABLE>
6. SHORT-TERM BORROWINGS
The Company issued a note payable of $300,000 in July 1998 to EER. The
Company repaid the note in May 1999. In addition, the Company issued to EER
175,000 common shares in settlement of a potential claim by EER that it was
entitled to convert the loan into a significantly greater number of common
shares.
The Company received $370,000 from the issuance of six-month 12% debentures
in January and February 1999. This debt financing was repaid with the proceeds
of the sale of preferred stock in April 1999 (Note 7). The Company also issued
185,000 shares of its common stock in connection with the repayment of the
debentures.
The Company had two short-term debt instruments outstanding at June 30,
1998 payable to shareholders totaling approximately $58,000. Both debt
instruments were non-interest bearing and were repaid during the year ended June
30, 1999.
7. EQUITY AND OTHER FINANCING
a. During the years ended June 30, 1997 and 1996, the Company issued
$18,750 and $50,000 of debt with 36,994 and 49,325 shares, respectively. The
amounts allocated to the shares have been recorded as debt discount and were
amortized.
b. In February 1997, the Company completed a sale of 691,800 of its common
shares at $1.30 per share. A portion of these shares was sold over the Internet.
c. During the year ended June 30, 1997, the Company issued $105,000 of
debt units consisting of promissory notes and stock purchase warrants ("Units").
The promissory notes were automatically converted to shares of Series A 10%
Convertible Preferred Stock, $.001 par value per share, with a stated value of
$1,000 ("CPS"). In addition each preferred shareholder received one stock
purchase warrant for each share of common stock received upon conversion of the
CPS. Each warrant entitled the holder to purchase one share of common stock at a
purchase price per share of $1.30 per share.
d. During July through November 1997, the Company issued approximately
$438,000 of additional Units. The promissory notes were automatically
convertible into CPS. In addition, each preferred shareholder received one stock
purchase warrant for each share of common stock received upon conversion of the
CPS. Each warrant entitled the holder to purchase one share of common stock at a
purchase price per share of $1.30. Each share of CPS was subject to mandatory
and automatic conversion into the Company's common shares upon the effective
date of an initial public offering of the Company's common
F-9
<PAGE> 68
COLLEGELINK.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
shares or September 1, 1998, whichever occurred first. All shares of CPS were
automatically converted into the Company's common shares on September 1, 1998.
e. In October 1997, the Company amended its Articles of Incorporation to
change the aggregate number of shares the Company has authority to issue from
1,000,000 to 1,001,000, consisting of 1,000,000 shares of common stock, $.001
par value per share, and 1,000 shares of preferred stock. Thereafter, the board
of directors of the Company authorized the issuance of the CPS, which was issued
to the holders of the Units in cancellation of their promissory notes. In the
year ended June 30, 1999, the Company cancelled the authorization of one
thousand shares of $0.001 par value, preferred stock.
f. In July 1998, the Company issued approximately 1,325,000 shares of its
common stock to acquire the assets of Cytation Delaware (Note 4). The assets
have been recorded at $2,299 which approximates the fair market value of the
shares at the time of the transaction.
g. In July 1998, the Company issued a warrant for services to purchase
5,000 shares of the Company's common stock at an exercise price of $.01 per
share, which approximates fair value at time of issuance.
h. In December 1998, when management believed the fair market value of the
shares was $0.002 per share, management reduced the exercise price of previously
outstanding stock options to $0.002 and all employees exercised such shares for
compensation. Such compensation was recorded at $0.002 per share for 1,372,000
shares.
i. In December 1998, the Company issued approximately 29,000 warrants,
expiring in August 2001, exercisable at $0.52, in connection with a sale of
stock in prior years.
j. In January 1999, the Company received $195,000 from the issuance in a
private placement of approximately 375,000 shares of its common stock.
k. On March 5, 1999 Cytation Corporation was acquired by Cytation.com
Incorporated (later renamed CollegeLink.com Incorporated) through a "reverse
merger" transaction, whereby each outstanding share of Cytation Corporation
(formerly WSI) was converted into 5.765 shares of CollegeLink.com Incorporated.
The merger has been accounted for as a "Recapitalization" as if CollegeLink.com
Incorporated issued additional shares for the $233 of assets of Stylex Homes,
Inc. The number of common share information has been adjusted to reflect the
effects of the merger agreement.
l. In April 1999, the Company received $3,100,000 in exchange for 775,000
6% cumulative preferred stock designated as "Series A Convertible Preferred
Stock" ("Preferred A") from two investors. Preferred A has a stated value of
$4.00 per share, a par value of $.01 per share and dividends payable quarterly.
Any holder of Preferred A may at any time convert Preferred A into Common Stock
of the Company at a ratio of one share of Common Stock for each share of
Preferred A. The Company may require conversion on or after the first
anniversary of the initial purchase if the closing bid price for its common
shares exceeds $6.00 for twenty consecutive trading days.
In the event of any voluntary or involuntary liquidation, dissolution, or
winding up of the affairs of the Company, the holders of the issued and
outstanding Preferred A are entitled to receive $4.00 for each share of
Preferred A, before any distribution of the assets of the Company shall be made
to the holders of any other capital stock.
m. In March 1999, the Company amended its Articles of Incorporation to
change the aggregate number of shares the Company has authority to issue to
110,000,000 shares, consisting of 100,000,000 shares of common stock, par value
$.001 per share and 10,000,000 shares of preferred stock, par value $.01 per
share.
F-10
<PAGE> 69
COLLEGELINK.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
n. During the year the Company agreed to issue 504,000 shares to unrelated
parties for financial services, which shares were recorded at fair market value
at the time of the agreement of $0.002 per share. In April and May 1999, the
Company issued 55,000 shares to unrelated parties for financial services, which
shares were recorded at fair market values from $6.50 per share to $7.50 per
share totaling $376,000 which amount has been included in general and
administrative expenses.
o. In June 1999, the Company issued 20,000 shares of its common stock for
the purchase of computer equipment valued at $145,000.
p. In May 1999, the Company agreed to issue to its outside directors, who
are not principals of shareholders which own more than 10% of the Company,
options to purchase 10,000 shares of the Company's common stock annually, the
first grant to be effective May 7, 1999 and the second and all subsequent grants
to be effective on the day of the Company's annual meeting. As of June 30, 1999
the Company had 20,000 options, exercisable at $6.00 per option, outstanding.
q. For disclosure purposes in accordance with SFAS No. 123, the fair value
of each stock option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for stock options granted during the years ended June 30, 1999,
1998 and 1997, respectively: annual dividends of $0.00, expected volatility of
65% at June 30, 1999 and 20.0% at June 30, 1998 and 1997, risk-free interest
rate of 5.7% and expected life of five years for all grants. The
weighted-average fair value of the stock options granted during the year ended
June 30, 1999 was $1.48, and $0.77 for both years ended June 30, 1998 and 1997,
respectively.
If the Company recognized compensation cost for the employee stock option
plan in accordance with SFAS No. 123, the Company's pro forma net loss and loss
per share would have been approximately, $2,913,000, $672,000 and $902,000,
$0.45, $0.19 and $0.30, in years ended June 30 1999, 1998 and 1997,
respectively.
The following table summarizes the changes in options outstanding and the
related price ranges for shares of the Company's common stock:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES EXERCISE PRICE
---------- --------------
<S> <C> <C>
Outstanding at June 30, 1996............................... -- --
Granted.................................................... 639,915 .43
Exercised................................................ -- --
Expired or cancelled..................................... -- --
---------- ----
Outstanding at June 30, 1997............................... 639,915 .43
Granted.................................................. 861,868 .43
Exercised................................................ -- --
Expired or cancelled..................................... (57,650) .43
---------- ----
Outstanding at June 30, 1998............................... 1,444,133 .43
Granted.................................................. 1,441,186 4.32
Exercised................................................ (1,444,133) .01
Expired or cancelled..................................... -- --
---------- ----
Outstanding at June 30, 1999............................... 1,441,186 4.32
========== ====
</TABLE>
Exercise prices for options outstanding at June 30, 1999 range from $2.00
to $7.00 and the weighted average remaining contractual life is approximately
five years. The number of options exercisable and weighted average exercise
price for options exercisable at June 30, 1999 was 69,430 and $2.83.
F-11
<PAGE> 70
COLLEGELINK.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES
a. In December 1996, the Company issued to a founder of the Company,
422,684 shares of stock and a note for $45,000 for the receipt of certain
assets. The assets received have been recorded at fair value; the excess of the
note issued over the assets received has been recorded as a distribution. The
note was repaid in April 1999.
b. Rent expense under all operating leases was approximately $42,000,
$43,000, and for each of the years ended June 30, 1999, 1998 and 1997,
respectively. The future minimum rental payments to be made under noncancellable
operating leases as of June 30, 1999 are as follows:
<TABLE>
<S> <C>
1999-2000.......................................... $40,560
2000-2001.......................................... 12,510
2001-2002.......................................... 690
2002-2004.......................................... --
</TABLE>
The Company entered into a month to month basis lease agreement commencing
May 1, 1999, for two additional offices at its Aquidneck Avenue location, at a
rate of $450 per month.
c. The Company entered into an agreement on April 19, 1999, with a
California corporation ("the Consultant") in an effort to expand the investor
base and the number of market professionals who are aware of the Company's
activities. The Company paid the Consultant $7,500 per month for three months.
d. Effective February 1999, the Company entered into three-year employment
agreements with two officers who are principal stockholders of the Company.
e. The Company has an agreement with an agency for marketing and public
relations services commencing April 1, 1999, with no expiration date. Either
party may terminate the agreement by notifying the other party within sixty days
prior to the date of termination. The Company has agreed to pay the agency a
monthly rate of $7,000 to compensate the agency for services in the following
areas: strategic counseling, in-house research, advertising and public
relations.
9. CERTAIN OPERATIONS
In April 1997, the Company sold its business of providing "dial-up" access
service to Internet users. The sales price was $30,000 plus fixed and contingent
future revenues based on the number of the Company's former "dial-up" customers
who continue to utilize the service. The Company also received radio-advertising
credits provided by the buyer. In May 1998, the Company began receiving the
contingent monthly revenue payments and received the final payment in November
1998.
In July 1998, the Company ceased its business of Web site development.
Revenue from Web site development earned in year ended June 30, 1999 was
approximately $53,000 and was derived from contracts billed in the year ended
June 30, 1998.
10. OPERATIONS
The Company adopted SFAS No, 131, "Disclosure about Segments of an
Enterprise and Related Information". SFAS establishes annual and interim
reporting standards for an enterprise's operating segments and related
disclosures about its products, services, geographic areas and major customers.
Under SFAS No. 131, the Company's operations are treated as one operating
segment as it only reports profit
F-12
<PAGE> 71
COLLEGELINK.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
and loss information on an aggregate basis to the chief operating decision maker
of the Company. Information about the Company's product sales and major
customers are as follows at June 30:
<TABLE>
<CAPTION>
1999 1998 1997
-------- ---------- --------
<S> <C> <C> <C>
PRODUCT SALES
Development of proprietary technology........... $ -- $ 500,000 $ --
Online training service revenues................ 162,884 -- --
Web site hosting................................ 235,521 210,700 82,971
Web site design and origination................. 52,718 416,574 109,883
Subscriber access............................... 95,923 53,853 172,882
Other........................................... 14,875 62,756 93,989
-------- ---------- --------
Total sales..................................... $561,921 $1,243,883 $459,725
======== ========== ========
</TABLE>
No customer accounted for more than ten percent of the revenues, other than
for online training services (Note 4), of the Company in each of the three years
ended June 30, 1999, 1998 and 1997, respectively.
11. INCOME TAXES
The Company accounts for income taxes under SFAS 109, "Accounting for
Income Taxes" which requires the recognition of deferred tax assets and
liabilities for both the expected impact of differences between the financial
statements and tax basis of assets and liabilities, and for the expected future
tax benefit to be derived from tax loss and tax credit carryforwards. At June
30, 1999, the Company had net operating loss carryforward of approximately
$3,800,000, expiring in 2013 and 2014. SFAS 109 additionally requires the
establishment of a valuation allowance to reflect the likelihood of realization
of deferred tax assets. At June 30, 1999 and 1998, a valuation allowance was
provided against the tax asset.
The components of the net deferred tax asset consist of the following:
<TABLE>
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
Net operating loss carryforward............................. $1,330,000 $420,000
Temporary differences....................................... 4,000 1,000
Valuation allowance......................................... (1,334,000) (421,000)
---------- --------
$ -- $ --
========== ========
</TABLE>
The provision for income taxes differs from the amount computed applying
the statutory federal income tax rate to income before income taxes as follows
at June 30:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Income tax benefit computed at statutory rate... $(905,000) $(221,000) $(311,000)
Tax benefit not recognized...................... 905,000 221,000 311,000
--------- --------- ---------
Provision for income taxes...................... $ -- $ -- $
========= ========= =========
</TABLE>
12. SUBSEQUENT EVENTS
On August 10, 1999, the Company acquired ECI, Inc. through a merger
transaction. ECI is a provider of computer-based college applications and
admissions services.
The acquisition was structured as a merger of ECI with and into the
Company's wholly-owned subsidiary CollegeLink.com Incorporated ("CollegeLink").
As consideration for the merger, the Company issued 550,809 of its common
shares, 234,771 of its Series B Stock and paid $489 in cash. CollegeLink
F-13
<PAGE> 72
COLLEGELINK.COM INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
also assumed approximately $778,000 of ECI liabilities in connection with the
merger and settled a claim against ECI in exchange for 108,196 shares of the
Company's common stock and 45,000 shares of the Company's Series B Stock. The
Company reserved 550,369 shares of its common stock for the conversion of the
above Series B Stock.
The Company adopted a 401K plan commencing in July 1999.
The Company entered into a five-year lease agreement expiring November 30,
2004. Rental expense for the entire five-year period totals approximately
$641,000.
The Company entered into agreements for directors and officers liability
insurance.
F-14
<PAGE> 73
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
COLLEGELINK.COM INCORPORATED AND
SUBSIDIARIES PRO FORMA BALANCE SHEET
(UNAUDITED)
THE FOLLOWING PRO FORMA BALANCE SHEET OF COLLEGELINK, ECI, OSN AND SSI AT
JUNE 30, 1999 IS BASED UPON HISTORICAL FINANCIAL DATA OF COLLEGELINK, ECI, OSN
AND SSI
GIVING EFFECT TO THE PROPOSED TRANSACTIONS
<TABLE>
<CAPTION>
COLLEGELINK
COLLEGELINK ECI OSN SSI PRO FORMA
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1999 1999 1999 DEBIT CREDIT 1999
----------- ----------- ----------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents...... $ 1,371,100 $ 2,258 $ 2,410 $40,859 $4,435,000(7) $ $ 1,901,627
450,000(6D)
3,500,000(8A)
Accounts receivable.......... 100,163 -- -- 88,237 53,500(5C) 134,900
Prepaid expenses and other
assets..................... 85,249 111,760 9,341 6,208 212,558
----------- ----------- ----------- -------- -----------
TOTAL CURRENT ASSETS... 1,556,512 114,018 11,751 135,304 2,249,085
GOODWILL....................... -- -- -- -- 8,228,280(5A) 18,873,297
50,000(5B)
2,499,592(6A)
50,000(6B)
7,995,505(8A)
50,000(8B)
FURNITURE AND EQUIPMENT, net... 250,484 56,877 65,439 27,632 400,432
SOFTWARE DEVELOPMENT, net...... -- -- 54,428 -- 54,428
OTHER ASSETS................... 41,695 41,695
----------- ----------- ----------- -------- -----------
$ 1,806,996 $ 170,895 $ 131,618 $204,631 $21,618,937
=========== =========== =========== ======== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued
liabilities................ $ 395,344 $ 1,035,499 $ 814,514 $125,136 $ 53,500(5C) $ 50,000(5B) $ 1,809,589
207,404(5E) 50,000(6B)
450,000(6A) 50,000(8B)
Unearned revenue............. 35,000 -- 87,748 75,000 197,748
Loan and notes payable....... -- 1,002,578 67,250 -- 1,002,578(5A) 67,250
----------- ----------- ----------- -------- -----------
TOTAL CURRENT
LIABILITIES.......... 430,344 2,038,077 969,512 200,136 2,074,587
LONG-TERM DEBT................. -- 912,188 311,698 -- 912,188(5A) 311,698
COMMITMENTS AND
CONTINGENCIES................ -- -- -- -- --
SHAREHOLDERS' DEFICIT:
Preferred shares............. 3,100,000 -- -- -- 4,175,000(5A) 11,710,000
4,435,000(7)
1,350,000(6A)
4,500,000(8A)
Paid-in capital.............. 2,468,870 996,797 -- -- 995,542(5A) 3,396,000(5A) 11,714,870
Accumulated equity
(deficit).................. (4,192,218) (3,776,167) (1,149,592) 4,495 3,776,167(5A) (4,192,218)
4,495(8A) 1,149,592(6A)
----------- ----------- ----------- -------- -----------
1,376,652 (2,779,370) (1,149,592) 4,495 19,232,652
----------- ----------- ----------- -------- -----------
$ 1,806,996 $ 170,895 $ 131,618 $204,631 $21,618,937
=========== =========== =========== ======== ===========
Pro forma outstanding common
shares....................... 9,152,211 550,809 225,000 450,000 -- -- 10,378,000
----------- ----------- ----------- -------- -----------
</TABLE>
See "Collegelink.com Incorporated and Subsidiaries' Notes to Pro Forma
Financial Statements assuming the purchase of ECI, OSN and SSI on June 30,
1999."
F-15
<PAGE> 74
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES
PRO FORMA STATEMENT OF OPERATIONS
(UNAUDITED)
THE FOLLOWING PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED
JUNE 30, 1999 OF COLLEGELINK, ECI, OSN AND SSI IS BASED ON HISTORICAL FINANCIAL
DATA OF COLLEGELINK, ECI, OSN AND SSI GIVING EFFECT TO THE PROPOSED TRANSACTIONS
<TABLE>
<CAPTION>
COLLEGELINK ECI OSN SSI COLLEGELINK
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1999 JUNE 30, 1999 JUNE 30,1999 ADJUSTMENTS JUNE 30, 1999
------------- ------------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET REVENUES....................... $ 561,921 $ 104,073 $ 98,178 $1,075,668 $ 1,839,840
EXPENSES:
Payroll, payroll taxes and
related benefits............... 1,173,439 400,248 9,261 384,205 1,967,153
Cost of sales.................... -- -- -- 618,068 618,068
Depreciation and amortization.... 131,545 30,842 73,541 5,225 241,153
Advertising...................... 49,428 50,236 20,809 1,328 121,801
Other general and administrative
and interest expenses.......... 1,793,933 580,166 532,672 220,377 3,127,148
Amortization of goodwill......... -- -- -- 827,907(5D) 1,887,416
254,959(6C)
804,550(8C)
----------- ---------- --------- ---------- -----------
3,147,346 1,061,492 636,283 1,229,203 7,962,739
----------- ---------- --------- ---------- -----------
NET LOSS........................... $(2,586,425) $ (957,419) $(538,105) $ (153,535) $ 6,122,899
=========== ========== ========= ========== ===========
NET LOSS PER SHARE................. $ (0.78)
===========
WEIGHTED AVERAGE NUMBER OF SHARES
USED IN COMPUTATION.............. 7,865,158
===========
</TABLE>
See "Collegelink.com Incorporated and Subsidiaries' Notes to Pro Forma
Financial Statements assuming the purchase of ECI, OSN and SSI on July 1, 1998."
F-16
<PAGE> 75
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES
NOTES TO PRO FORMA FINANCIAL STATEMENTS ASSUMING
THE PURCHASE OF ECI, INC., ONLINE SCOUTING NETWORK, INC.,
AND STUDENT SUCCESS, INC.
(UNAUDITED)
1. BUSINESS TRANSACTIONS
The pro forma financial statements include three separate business
acquisition transactions, two of which have not been consummated, as follows:
a. The issuance of 550,809 shares of CollegeLink.com Incorporated
("CollegeLink") Common Stock and 234,771 shares of its Series B Convertible
Preferred Stock ("Series B") pursuant to the merger of ECI, Inc. ("ECI")
with and into CollegeLink's wholly-owned subsidiary CollegeLink Corporation
("CollegeLink Corporation"). As consideration for the acquisition, each of
the issued and outstanding shares of the capital stock of ECI was exchanged
for 1.2453 shares of Cytation Common Stock and .5308 shares of
CollegeLink's Series B. In addition ECI shareholders received cash from
Cytation for any fraction of a share remaining after the conversion which
totaled $488.56.
b. The proposed issuance of 225,000 shares of CollegeLink Common
Stock pursuant to the merger of Online Scouting Network, Inc. ("OSN") with
and into CollegeLink Corporation.
c. The proposed issuance of shares of CollegeLink in the aggregate
dollar amount of $4,500,000, the number of shares to be based on the
offering price in this prospectus, plus $3,500,000 in cash, for the
acquisition of Student Success, Inc. ("SSI")
2. ACCOUNTING POLICY
All acquisitions are being accounted for using the purchase method.
a. The shares issued for the acquisition of ECI are recorded at the
average fair market value on August 10, 1999, the date in which the merger
transaction was consummated. The total dollar basis of the Common Stock and
Series B recorded in the pro forma financial statements at June 30, 1999
was $2,838,732 and $3,500,000.
b. The shares to be issued for the acquisition of OSN are recorded at
the estimated average fair market value at the date at which the merger
transaction is to be consummated. The total dollar basis of the Common
Stock recorded in the pro forma financial statements at June 30, 1999 was
$1,350,000.
c. The acquisition cost of SSI is the shares to be issued recorded at
$4,500,000 plus $3,500,000 of cash.
3. GOODWILL
The financial statements of CollegeLink will include the operations of ECI,
OSN and SSI from the date of each actual acquisition. Based upon preliminary
evaluations, all of the excess of each purchase price over each previously
recorded amounts of ECI, OSN and SSI have been allocated to goodwill and will be
amortized over ten years. Such amortization has been included in the pro forma
financial statements.
4. SETTLEMENT OF CLAIMS
a. CollegeLink also assumed approximately $778,000 of ECI's liabilities in
connection with the merger and settled a claim against ECI in exchange for
108,196 shares of CollegeLink Common Stock and 45,000 shares of Series B. The
shares have been recorded in the pro forma financial statements at their average
fair market value as of August 10, 1999.
F-17
<PAGE> 76
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES
NOTES TO PRO FORMA FINANCIAL STATEMENTS ASSUMING -- (CONTINUED)
b. CollegeLink assumed liabilities of OSN totalling $450,000.
5. ADJUSTMENTS TO PRO FORMA-ECI
Adjustments to the pro forma financial statements are as follows:
A. Issuance of shares of CollegeLink to former ECI shareholders
recorded as indicated in Notes 2 and 4 above.
B. Estimated expenses of the transaction.
C. The elimination of intercompany receivables and payables.
D. Amortization of goodwill as indicated in Note 3 above.
6. ADJUSTMENTS TO PRO FORMA-OSN
Adjustments to the pro forma financial statements are as follows:
A. Issuance of shares of CollegeLink to former OSN members recorded
as indicated in Notes 2 and 4 above.
B. Estimated expenses of the transaction.
C. Amortization of goodwill as indicated in Note 3 above.
7. SUBSEQUENT EVENT
The Company sold Preferred Stock in September 1999 valued at $4,434,980.
8. ADJUSTMENTS TO PRO FORMA-SSI
Adjustments to the pro forma financial statements are as follows:
A. Issuance of CollegeLink shares to former SSI shareholders as
indicated in Note 2 above and payment of $3,500,000.
B. Estimated expenses of the transaction.
C. Amortization of goodwill as indicated in Note 3 above.
9. PRO FORMA COMMON SHARES
Pro forma common shares have been computed based on the CollegeLink.com
shares outstanding, plus common shares issued on the acquisitions, assuming a
$10.00 per share market value.
10. FINANCIAL STATEMENT INFORMATION
These financial statements should be read in conjunction with the
historical financial statements and notes thereto of CollegeLink, ECI, OSN and
SSI included elsewhere herein.
The financial position and results may not be indicative of future
activities of CollegeLink, ECI, OSN and SSI, or the results if the acquisitions
had been made at the dates indicated.
Loss per share is based upon the average shares outstanding for CollegeLink
during the period and the equivalent shares of CollegeLink issued for the ECI
and SSI shares outstanding.
The financial statements of ECI, OSN and SSI have each been restated to a
June 30 year-end.
F-18
<PAGE> 77
INDEPENDENT AUDITORS' REPORT
Board of Directors
ECI, Inc.
Clinton, Massachusetts
We have audited the accompanying balance sheets of ECI, INC., as of
December 31, 1998, 1997 and 1996, and the related statements of operations,
changes in stockholders' deficit, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ECI, Inc. as of December 31,
1998, 1997 and 1996, and the results of its operations, changes in stockholders'
deficit, and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in Note 14, the company has incurred recurring losses and
accumulated deficit of $3,352,932. Liabilities exceed assets by $2,557,135.
These conditions indicate that unless the Company obtains substantial additional
financing resources, the Company may not be able to continue operations. The
accompanying financial statements do not include any adjustments to the
financial statements that might be necessary should the Company be unable to
continue as a going concern.
Paolilli & Jarek, LLC
Certified Public Accountants
Chelmsford, MA
August 10, 1999
F-19
<PAGE> 78
ECI, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 3,439 $ 6,311
Deferred charges.......................................... 101,750 0
----------- -----------
TOTAL CURRENT ASSETS.............................. 105,189 6,311
FIXED ASSETS, NET........................................... 54,384 49,314
OTHER ASSETS................................................ 2,313 2,313
----------- -----------
$ 161,886 $ 57,938
=========== ===========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES:
Capital Lease Obligation -- current maturities............ $ 63,320 $ 34,540
Note payable -- Credit Line............................... 125,000 0
Notes payable -- Investors................................ 477,000 95,000
Notes payable -- Officer.................................. 479,500 410,000
Accounts payable.......................................... 337,208 259,181
Accrued interest.......................................... 126,033 13,142
Accrued expenses.......................................... 167,946 75,000
----------- -----------
TOTAL CURRENT LIABILITIES......................... 1,776,007 886,863
----------- -----------
LONG-TERM DEBT:
Notes payable............................................. 742,878 742,878
Accrued interest.......................................... 167,054 92,959
Capital lease obligation -- net of current portion........ 33,082 31,844
----------- -----------
943,014 867,681
----------- -----------
STOCKHOLDERS' (DEFICIT):
Common stock, $.01 par value; 200,000 authorized 125,483
shares issued and outstanding.......................... 1,255 1,255
Additional paid in capital................................ 794,542 794,542
Accumulated deficit....................................... (3,352,932) (2,492,403)
----------- -----------
(2,557,135) (1,696,606)
----------- -----------
$ 161,886 $ 57,938
=========== ===========
</TABLE>
See notes to financial statements
F-20
<PAGE> 79
ECI, INC.
STATEMENTS OF OPERATIONS
FOR YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
REVENUES................................................ $ 101,949 $ 115,270 $ 88,488
--------- --------- ---------
COSTS AND EXPENSES:
Payroll and related costs............................. 449,210 440,854 408,038
Software development.................................. 51,812 56,000 7,206
Promotional materials................................. 49,686 21,659 105,124
Depreciation and amortization......................... 30,842 23,221 13,136
Other costs........................................... 187,281 387,315 323,305
--------- --------- ---------
Total costs and expenses...................... 768,831 929,049 856,809
--------- --------- ---------
(LOSS) FROM OPERATIONS.................................. (666,882) (813,779) (768,321)
INTEREST EXPENSE........................................ 193,647 101,835 25,247
--------- --------- ---------
NET LOSS................................................ $(860,529) $(915,614) $(793,568)
========= ========= =========
</TABLE>
See notes to financial statements
F-21
<PAGE> 80
ECI, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
COMMON STOCK
------------------- ADDITIONAL TOTAL
NUMBER OF PAR PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES VALUE CAPITAL DEFICIT DEFICIT
--------- ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995....... 125,483 $1,255 $819,638 $ (783,221) $ 37,672
Shareholder distributions........ (25,096) (25,096)
Net Loss......................... (793,568) (793,568)
------- ------ -------- ----------- -----------
Balance, December 31, 1996....... 125,483 1,255 794,542 (1,576,789) (780,992)
Net Loss......................... (915,614) (915,614)
------- ------ -------- ----------- -----------
Balance, December 31, 1997....... 125,483 1,255 794,542 (2,492,403) (1,696,606)
Net Loss......................... (860,529) (860,529)
------- ------ -------- ----------- -----------
Balance, December 31, 1998....... 125,483 $1,255 $794,542 $(3,352,932) $(2,557,135)
======= ====== ======== =========== ===========
</TABLE>
See notes to financial statements
F-22
<PAGE> 81
ECI, INC.
STATEMENTS OF CASH FLOWS
FOR YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS:
Cash received from customers.......................... $ 101,949 $ 96,820 $ 88,488
Cash paid to suppliers and employees.................. (668,766) (634,936) (782,697)
Interest received..................................... -- -- 2,609
Interest paid......................................... (6,661) (17,956) (3,025)
--------- --------- ---------
(573,478) (556,072) (694,625)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment received on contingent installment
agreement.......................................... -- -- 14,800
Acquisition of property and equipment................. (1,583) (2,642) (3,570)
--------- --------- ---------
(1,583) (2,642) 11,230
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of computer equipment............................ -- 18,450 --
Proceeds of debt financing............................ 576,500 547,878 700,000
Payments on capital lease obligation.................. (4,311) (4,573) (8,175)
Distributions to shareholders......................... -- -- (25,096)
--------- --------- ---------
572,189 561,755 666,729
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH......................... (2,872) 3,041 (16,666)
CASH AND CASH EQUIVALENTS -- BEGINNING,................. 6,311 3,270 19,936
--------- --------- ---------
CASH AND CASH EQUIVALENTS -- ENDING,.................... $ 3,439 $ 6,311 $ 3,270
========= ========= =========
Fixed assets acquired using financing lease............. $ 34,329 $ 15,808 $ 63,324
========= ========= =========
RECONCILIATION OF NET LOSS TO CASH FLOWS FROM
OPERATIONS:
NET LOSS:............................................... $(860,529) $(915,614) $(793,568)
--------- --------- ---------
Adjustments to reconcile Net Loss to Cash Flows from
Operations:
Gain on sale of computer equipment.................... -- (18,450) --
Depreciation and amortization......................... 30,842 23,221 13,136
--------- --------- ---------
30,842 4,771 13,136
--------- --------- ---------
(INCREASE) DECREASE IN ASSETS:
Accounts receivable................................ -- -- 2,609
Deferred charges................................... (101,750) 1,058 (1,058)
Other assets....................................... -- -- (2,313)
--------- --------- ---------
101,750 1,058 (762)
--------- --------- ---------
INCREASE (DECREASE) IN LIABILITIES:
Accounts payable................................... 78,027 222,762 36,419
Accrued interest................................... 186,986 83,879 --
Accrued expenses................................... 92,946 47,072 50,150
--------- --------- ---------
357,956 353,713 86,569
--------- --------- ---------
CASH FLOWS FROM OPERATIONS.............................. $(573,478) $(556,072) $(694,625)
========= ========= =========
</TABLE>
See notes to financial statements
F-23
<PAGE> 82
ECI, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
ECI, Inc. (the "Company") was founded in 1991. The Company's primary
product is CollegeLink, a software system which enables students to apply to
their college choices, and enables the college to receive that application
information electronically. In October 1993, the Company sold essentially all of
its assets to Enrollment Technologies, Inc.
In May 1996, the Company bought the business back through an arrangement
wherein Enrollment Technologies, Inc. retained an interest for future
considerations as part of the purchase agreement. Since reacquiring the
business, the Company has encountered difficulty in achieving user acceptance of
its products. On August 10, 1999, CollegeLink.com Incorporated acquired the
Company. Substantially all the outstanding shares of ECI, Inc. were exchanged
for preferred and common shares of CollegeLink.com Incorporated.
Prior to being acquired by CollegeLink.com Incorporated, all notes payable
to investors and an officer were exchanged for common shares of ECI, Inc. Also,
all outstanding stock purchase warrants and vested stock options were exchanged
for common shares of ECI, Inc. at a price of $.01 per share.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less to be cash equivalents.
Income Taxes
The Company, with the consent of its shareholders, has elected under the
Internal Revenue Code to be an S corporation. In lieu of corporation income
taxes, the shareholders of an S corporation are taxed on their proportionate
share of the Company's taxable income. Therefore, no provision or liability for
federal income taxes has been included in these financial statements.
Depreciation
Depreciation is provided for on a straight-line basis using the estimated
useful lives of the related assets. The Company's fixed assets are comprised of
office and computer equipment with estimated useful lives of three years (See
Note 2).
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Advertising Costs
The Company expenses advertising costs as incurred. Expenses for
advertising production costs are expensed at the beginning of each year's
college application season which generally begins in the fall months.
F-24
<PAGE> 83
ECI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
Service revenues are recognized when the students' college application is
processed. The Company requires payment at the time the application is
processed.
Software Costs
The Company defers charging software development costs to expense during
the college application season when the software is utilized. During 1998, the
Company incurred $152,750 for software used during the 1998-1999 college
application season. $51,000 was charged to expense during 1998, and $101,750 of
software development costs will be charged to expense during the latter half of
the college application season (January-April 1999).
NOTE 2. FIXED ASSETS
The Company's fixed assets consisted of:
<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
Capitalized leases of office and computer equipment......... $117,686 $81,774
Computer equipment.......................................... 3,570 3,570
-------- -------
121,256 85,344
Less accumulated depreciation............................... 66,872 36,030
-------- -------
Fixed assets, net........................................... $ 54,384 $49,314
======== =======
</TABLE>
NOTE 3. CAPITAL LEASE OBLIGATIONS
The Company is leasing office and computer equipment with lease terms
through June 2003. The capital lease obligations have been recorded in the
accompanying financial statements at the present value of future minimum lease
payments, discounted at annual interest rates ranging from 10.25% to 67.6%. The
capital leases are secured by the related office and computer equipment, with
original costs totaling $117,686, and net book values of $53,690, $47,430, and
$51,011 at December 31, 1998, 1997 and 1996, respectively.
Future minimum lease payments under this capital lease, as of December 31,
1998, are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING DECEMBER 31,
- --------------------------------
<S> <C>
1999................................................. $ 62,788
2000................................................. 15,898
2001................................................. 9,498
2002................................................. 9,498
2003................................................. 4,479
--------
102,161
Less amount representing interest........................... (5,759)
--------
Present value of minimum lease payments..................... $ 96,402
========
</TABLE>
NOTE 4. NOTE PAYABLE -- CREDIT LINE
This $125,000 note from Fleet National Bank accrues interest, and is
payable monthly, at the Bank's Floating Prime Rate of Interest, which was 7.75%
at December 31, 1998. This note matured on July 2,
F-25
<PAGE> 84
ECI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1999, and is collateralized by the personal guarantee and assets of Theodore G.
Johnson, a director of the Company.
NOTE 5. NOTES PAYABLE -- INVESTORS
These investor notes accrued interest at a 12% annual rate. As discussed in
Note 1, these notes were exchanged for common stock of the Company. These notes
included $215,000 in debt obligations due Theodore G. Johnson, a director of the
Company.
NOTE 6. NOTES PAYABLE -- OFFICER
These 17 notes from Gerald A. Paxton, totaling $479,500, accrue interest at
a 12% annual rate.
NOTE 7. NOTES PAYABLE
On May 16, 1996, the Company entered into a line of credit financing
arrangement provided by USA Group. The credit facility is comprised of two notes
totaling $742,878 as follows:
CREDIT NOTE I
This note bears interest at the Base Rate of NBD Bank, N.A., Indianapolis,
Indiana, plus 100 Basis Point. Principal and accrued interest is payable monthly
over a fifteen-year amortization period beginning January 1, 2001. At December
31, 1998, this note accrued interest at an annual rate of 8.75%
CREDIT NOTE II
This note bears interest at the Base Rate of NBD Bank, N.A., Indianapolis,
Indiana, plus 200 Basis Points. Accrued interest is payable monthly during the
term of this note and the balance. Both principal and accrued interest is due on
December 31, 2000. At December 31, 1998, this note accrued interest at an annual
rate of 9.75%.
These notes are secured by intellectual properties acquired from Enrollment
Technologies, Inc. on May 16, 1996.
Maturities of principal amounts due on these notes are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING DECEMBER 31,
--------------------------------
<S> <C>
1999........................................................ $ 0
2000........................................................ 142,878
2001........................................................ 40,000
2002........................................................ 40,000
2003........................................................ 40,000
Thereafter.................................................. 480,000
--------
$742,878
</TABLE>
NOTE 8. LEASE COMMITMENT
The Company leases an office suite at 55 Green Street, Clinton,
Massachusetts. The lease currently provides for monthly rentals of $2,313, and
may be terminated with 30 days notice. Rent expense for the years ended December
31, 1998, 1997 and 1996, was $27,800, $27,800, and $20,085, respectively.
F-26
<PAGE> 85
ECI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9. STOCK OPTION PLAN
The Company established the 1992 Stock Plan (the "Plan") which provides for
the granting of incentive and non-qualified stock options to employees and other
individuals performing services for the Company. The Board of Directors (the
"Board") is responsible for the administration of the Plan. The Board determines
the term of each option, option price,number of shares for which each option is
granted, whether restrictions will be imposed on the shares subject to options,
and the rate at which each option is exercisable. The exercise price for
incentive stock options granted may not be less than 100% of the fair market
value per share of the underlying common stock on the date granted (110% for
options granted to holders of more than 10% of the voting stock of the Company).
The Board shall determine the exercise price for non-qualified options.
The terms of non-qualified stock options granted under the Plan generally
cannot exceed ten years. The term of incentive stock options granted cannot
exceed ten years (five years for options granted to holders of more than 10% of
the voting stock of the Company).
The Plan allows for issuance of up to 35,000 shares of common stock. At
December 31, 1998, 4,778 shares were available for future grant.
A summary of the option activity under the Plan is as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
---------
<S> <C>
Outstanding at December 31, 1995............................ 0
Granted during 1996......................................... 3,910
Granted during 1997......................................... 15,250
Lapsed during 1997.......................................... (660)
------
Outstanding at December 31, 1997............................ 18,500
Granted during 1998......................................... 11,022
------
Outstanding at December 31, 1998............................ 29,522
======
</TABLE>
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-based Compensation", requires the disclosure of pro forma information on
the fair value of options to purchase stock, and the impact on earnings of any
compensatory value associated with the difference in option grant prices and the
fair value of the optioned stock shares. Management believes that it is
virtually impossible to reasonably estimate the fair values of outstanding
options to purchase common shares at December 31, 1998, and therefore has not
disclosed information about such values, which would otherwise be required by
SFAS No. 123.
NOTE 10. STOCK PURCHASE WARRANTS
The Company granted stock purchase warrants to investors who provided debt
financing described in Note 5. In aggregate, warrants for the purchase of 63,278
shares of the Company's $.01 par value common stock were granted. 611 warrants
were granted for a share price of $20.45. 36,200 warrants were granted for a
share price defined as "50% of the per share price paid by a major investor at
the next equity finance". The remaining 26,467 warrants were granted for a share
price equal to "100% of the per share price paid by a major investor at the next
equity financing".
NOTE 11. LICENSE AGREEMENT
The Company entered into a license agreement effective May 16, 1996, for an
exclusive, royalty bearing, nontransferable license for certain software,
know-how, and trademarks for CollegeLink and
F-27
<PAGE> 86
ECI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
IntroApp intellectual properties. The initial license term expires on December
31, 2000, and the license agreement automatically renews for successive one-year
terms thereafter.
A license fee is payable as follows:
a. For years ending through December 31, 2000, the license fee shall
be equal to the lesser of (i) 9% of the net revenues earned by the Company,
or (ii) the Company's net income for the year.
b. For the years ending December 31, 2001 and thereafter, the license
fee shall be the lesser of the Company's net income, or the applicable
percentage of net revenues as shown in the following table:
<TABLE>
<CAPTION>
YEAR ENDING APPLICABLE
DECEMBER 31, PERCENTAGE
------------ ----------
<S> <C>
2001.............................................. 12%
2002.............................................. 11%
2003.............................................. 10%
2004.............................................. 9%
2005 and thereafter............................... 8%
</TABLE>
On August 10, 1999, this license agreement was terminated in connection
with the merger of the Company into CollegeLink.com Incorporated.
NOTE 12. RETIREMENT PLAN
On July 12, 1996, the Company established a profit sharing plan and trust
in accordance with Section 401(K) of the Internal Revenue Code. Company matching
and non-matching contributions are determined annually by the Company's Board of
Directors. The Company has not elected to make any matching or non-matching
contributions to the plan.
NOTE 13. RELATED PARTY TRANSACTIONS
As discussed in Notes 5 and 6, the Company has debt obligations from two
related parties. Interest charges on those debt instruments totaled $74,261 and
$26,980 for the years ended December 31, 1998 and 1997, respectively.
NOTE 14. GOING CONCERN
The Company has incurred recurring operating losses since inception and has
an accumulated deficit at December 31, 1998 of $3,352,932. Liabilities exceed
assets by $2,557,135. These conditions indicate that unless the Company obtains
substantial additional financing resources, the Company may not be able to
continue operations. The accompanying financial statements do not include any
adjustments to the financial statements that might be necessary should the
Company be unable to continue as a going concern.
F-28
<PAGE> 87
ECI, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 2,258 $ 3,439
Advances.................................................. 108,547 --
----------- -----------
TOTAL CURRENT ASSETS.............................. 110,805 3,439
PROPERTY AND EQUIPMENT, net of accumulated depreciation of
$82,293 and $66,872, respectively......................... 56,876 54,384
SOFTWARE DEVELOPMENT net of accumulated amortization of $0
and $51,000, respectively................................. -- 101,750
OTHER ASSETS................................................ 3,213 2,313
----------- -----------
$ 170,895 $ 161,886
=========== ===========
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
CURRENT LIABILITIES:
Accounts payable.......................................... $ 312,531 $ 337,208
Accrued expenses.......................................... 610,103 167,946
Accrued interest-officer.................................. 94,220 126,033
Leases payable............................................ 33,644 63,320
Notes payable investors................................... 465,286 477,000
Notes payable officer..................................... 482,292 479,500
Long-term debt-current portion............................ 40,000 125,000
----------- -----------
TOTAL CURRENT LIABILITIES......................... 2,038,076 1,776,007
LONG-TERM DEBT, net of current maturities................... 912,188 943,014
SHAREHOLDERS' (DEFICIT):
Common stock, $.01 par value; 200,000 authorized, 125,483
shares issued and outstanding.......................... 1,255 1,255
Additional paid-in capital................................ 995,542 794,542
Accumulated (deficit)..................................... (3,776,167) (3,352,932)
----------- -----------
(2,779,370) (2,557,135)
----------- -----------
$ 170,895 $ 161,886
=========== ===========
</TABLE>
See notes to financial statements.
F-29
<PAGE> 88
ECI, INC.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
REVENUES.................................................... $ 38,302
---------
EXPENSES:
Payroll, payroll taxes and related benefits............... 224,605
Depreciation and amortization............................. 15,421
Other general and administrative expenses................. 239,016
---------
479,041
---------
LOSS FROM OPERATIONS........................................ (440,739)
INTEREST EXPENSE............................................ 107,500
---------
NET LOSS.................................................... $(548,239)
=========
</TABLE>
See notes to financial statements.
F-30
<PAGE> 89
ECI, INC.
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(548,239)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 117,171
Increase (decrease) to cash attributable to changes in
assets and liabilities:
Prepaid expenses and other assets...................... (109,447)
Accounts payable....................................... (87,435)
Accrued expenses....................................... 535,348
---------
NET CASH USED IN OPERATING ACTIVITIES.................. (92,602)
---------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment....................... (17,913)
---------
NET CASH USED IN INVESTING ACTIVITIES.................. (17,913)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipts/payments of long-term debt....................... (82,744)
Receipts/payments of notes payable........................ (8,922)
Increase in additional paid-in capital.................... 201,000
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES.............. 109,334
---------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (1,181)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 3,439
---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 2,258
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest............................................... $ --
=========
</TABLE>
See notes to financial statements.
F-31
<PAGE> 90
ECI, INC
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements include the accounts of ECI, Inc.
("the Company"). Such statements have been prepared by the Company, without
audit, pursuant to the Rules and Regulations of the SEC and reflect all
adjustments (which include only normal recurring adjustments) which are
necessary to present a fair statement of the results for the interim period
reported. Certain footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these financial statements be read in
conjunction with the Company's audited financial statements and notes thereto
for the years ended December 31, 1998, 1997 and 1996.
NOTE 2. BUSINESS
On August 10, 1999, CollegeLink.com Incorporated ("CollegeLink.com")
acquired the Company. Substantially all the outstanding shares of the Company
were exchanged for preferred and common shares of CollegeLink.com.
Prior to being acquired by CollegeLink.com, all notes payable to investors
and an officer were exchanged for common shares of the Company. Also, all
outstanding stock purchase warrants and vested stock options were exchanged for
common shares of the Company at a price of $0.01 per share.
F-32
<PAGE> 91
INDEPENDENT AUDITOR'S REPORT
Managing Members
Online Network, L.L.C.
T/A Online Scouting Network
We have audited the accompanying balance sheets of Online Network, L.L.C.
T/A Online Scouting Network (the "Company") as of September 30, 1998 and 1997,
and the related statements of operations and cash flows for each of the two
years ended September 30, 1998 and 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of September
30, 1998 and 1997, and the results of its operations and its cash flows for each
of the two years ended September 30, 1998 and 1997 in conformity with generally
accepted accounting principles.
Radin, Glass & Co., LLP
Certified Public Accountants
New York, New York
October 1, 1999
F-33
<PAGE> 92
ONLINE NETWORK, L.L.C.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 520 $ 49,276
Accounts receivable....................................... -- 26,025
Prepaid expenses.......................................... -- 29,787
Other assets.............................................. 1,725 8,564
--------- ---------
TOTAL CURRENT ASSETS.............................. 2,245 113,652
PROPERTY AND EQUIPMENT, net of accumulated depreciation..... 94,997 134,409
SOFTWARE DEVELOPMENT, net of accumulated amortization of
$56,754 and $30,532, respectively......................... 74,048 100,270
OTHER ASSETS................................................ 7,920 8,326
--------- ---------
$ 179,210 $ 356,657
========= =========
LIABILITIES AND MEMBERS' (DEFICIT)
CURRENT LIABILITIES:
Accounts payable.......................................... $ 262,313 $ 239,693
Accrued expenses.......................................... 81,406 53,220
Payroll and payroll taxes payable......................... 323,234 140,070
Due to managing members................................... 9,171 5,000
Deferred revenue.......................................... 87,748 102,654
Long-term debt-current portion............................ 111,058 53,967
--------- ---------
TOTAL CURRENT LIABILITIES......................... 874,930 594,604
LONG-TERM DEBT, net of current maturities................... 252,190 269,366
COMMITMENTS AND CONTINGENCIES............................... -- --
MEMBERS' DEFICIT............................................ (947,910) (507,313)
--------- ---------
TOTAL MEMBERS' EQUITY (DEFICIT)................... (947,910) (507,313)
--------- ---------
$ 179,210 $ 356,657
========= =========
</TABLE>
See notes to financial statements
F-34
<PAGE> 93
ONLINE NETWORK, L.L.C.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
REVENUES.................................................... $ 325,134 $ 132,610
GENERAL AND ADMINISTRATIVE EXPENSES......................... 720,671 907,577
--------- ---------
LOSS FROM OPERATIONS........................................ (395,537) (774,967)
INTEREST EXPENSE............................................ 45,060 24,056
--------- ---------
NET LOSS.................................................... (440,597) (799,023)
MEMBERS' (DEFICIT) -- beginning of the year................. (507,313) 291,710
--------- ---------
MEMBERS' (DEFICIT) -- end of year........................... $(947,910) $(507,313)
========= =========
</TABLE>
See notes to financial statements.
F-35
<PAGE> 94
ONLINE NETWORK, L.L.C.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(440,597) $(799,023)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 65,634 64,871
Write off of organization expenses..................... -- 31,710
Increase (decrease) to cash attributable to changes in
assets and liabilities:
Accounts receivable.................................... 26,025 (26,025)
Prepaid expenses....................................... 29,787 (29,787)
Other assets........................................... 7,246 10,939
Accounts payable....................................... 22,618 111,566
Accrued expenses....................................... 28,187 40,469
Accrued payroll and payroll taxes payable.............. 183,164 120,412
Deferred revenues...................................... (14,906) 102,654
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES................ (92,842) (372,214)
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of software development.......................... -- (41,606)
Purchase of equipment..................................... -- (3,876)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES................ -- (45,482)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Due to managing members................................... 4,171 5,000
Members' contributions.................................... -- 90,000
Receipts/payments of debt................................. 39,915 253,250
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES............ 44,086 348,250
--------- ---------
NET DECREASE IN CASH........................................ (48,756) (69,446)
CASH AT BEGINNING OF PERIOD................................. 49,276 118,722
--------- ---------
CASH AT END OF PERIOD....................................... $ 520 $ 49,276
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest............................................... $ 9,343 $ 10,760
========= =========
</TABLE>
See notes to financial statements.
F-36
<PAGE> 95
ONLINE NETWORK, L.L.C.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1998 AND 1997
1. BUSINESS
Online Network, L.L.C. T/A Online Scouting Network (the "Company") was
organized in November 1995 under the laws of Delaware. It was organized to
create the Online Scouting Network, a nationwide online database of high school
student-athletes for use by colleges and universities as an athletic recruiting
tool.
In August 1999, the Company reorganized as a "C" corporation in
contemplation of a private placement of its securities. Since then, the Company
has abandoned the private placement and has presently agreed to be acquired by
another company subject to the execution of definitive agreements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation -- The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make significant estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reported period. Actual results
could differ from those estimates.
b. Property and Equipment -- Property and equipment are stated at cost and
depreciated using the straight-line method over the estimated useful lives of
the assets ranging from three to seven years for equipment, software and
furniture.
c. Software Development Costs -- The Company capitalizes software
development costs in accordance with SFAS 86. The Company capitalized
approximately $42,000 in the year ended September 30, 1997. The Company did not
capitalize any software development costs during the year ended September 30,
1998.
Amortization included in the accompanying financial statements for years
ended September 30, 1998 and 1997 was approximately $26,000 and $25,000
respectively.
d. Value of Financial Instruments -- The carrying amounts reported in the
balance sheet for cash, trade receivables, accounts payable and accrued expenses
approximate fair value based on the short-term maturity of these instruments.
e. Income Taxes -- The results of limited liability company operation are
included on the income tax return of each member. Accordingly, no provision for
income taxes is included in these financial statements.
f. Revenue Recognition -- Revenues consist of yearly contracts which are
being recognized on a straight-line basis over the twelve month period of the
contract.
g. Accounting for Long-Lived Assets -- The Company reviews long-lived
assets, certain identifiable assets and any goodwill related to those assets for
impairment whenever circumstances and situations change such that there is an
indication that the carrying amounts may not be recoverable. At September 30,
1998 and 1997 respectively, the Company believes that there has been no
impairment of long-lived assets.
h. Advertising Costs -- Advertising costs are expensed as incurred.
Advertising expense amounted to approximately $36,000 and $75,000 for the years
ended September 30, 1998 and 1997, respectively.
i. Costs of Start-Up Activities -- The Company has adopted Statement of
Position 98-5, "Reporting on the Costs of Start-Up Activities". This statement
requires costs of start-up activities and organization
F-37
<PAGE> 96
ONLINE NETWORK, L.L.C.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
costs to be expensed as incurred. The Company, since inception, has incurred
start-up costs totaling approximately $38,000. In January 1996 through September
1996 the Company amortized start-up costs using the straight-line method over a
five-year life. In the year ended September 30, 1997, the Company expensed the
remaining balance of approximately $32,000.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at September 30:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Computer and office equipment............................... $162,069 $162,069
Software.................................................... 29,911 29,911
Furniture and fixtures...................................... 7,111 7,111
-------- --------
199,091 199,091
Accumulated depreciation.................................... 104,094 64,682
-------- --------
$ 94,997 $134,409
======== ========
</TABLE>
4. LONG-TERM DEBT
Long-term debt consists of the following at September 30:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Loan payable to bank due in April 1999, payable monthly at
$2,417 plus interest at prime plus 1%, personally
guaranteed by three managing members and collateralized by
all assets of the Company. The loan was called and a
lawsuit filed against the Company in August 1998. The
Company paid the remaining balance in August 1999......... $29,000 $48,333
Note to a vendor, payable in January 2000, interest accrues
semiannually at prime plus 4% and 10% warrant coverage. As
of August 31, 1999, the cash due, including accrued
interest is $43,519 along with warrants on common shares
of the Company's stock of value $19,392................... 38,250 --
Notes payable to members, payable in 48 monthly installments
of $408 including interest at 10% per annum, commencing in
March 2003. Unpaid principal and accrued interest is due
February 2007. Interest is accrued annually on the unpaid
principal balance and may be capitalized as part of the
principal as the date of repayment commences at the option
of the Company............................................ 70,000 60,000
Note payable to a member. Original terms of the note
required monthly installments of $2,125 including interest
at 10%, commencing in April 1997. Unpaid principal and any
accrued interest are due in March 2002. Per verbal
agreement with investor, no payments are being made
because of capital constraints on the Company. Interest is
accrued annually on the unpaid balance.................... 100,000 100,000
Note payable to an individual. Interest is accrued annually
on the unpaid principal balance........................... 50,000 50,000
Note payable to a managing member. Interest is accrued
annually on the unpaid principal balance.................. 45,998 35,000
</TABLE>
F-38
<PAGE> 97
ONLINE NETWORK, L.L.C.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Notes payable to managing members, payable in 48 monthly
installments of $613 including interest at 10%, commencing
in March 2003. Unpaid principal and any accrued interest are
due in February 2007. Interest is accrued annually on the
unpaid principal balance.................................... 30,000 30,000
-------- --------
Total..................................................... 363,248 323,333
Less current maturities................................... 111,058 53,967
-------- --------
Long-term debt, net of current maturities................. $252,190 $269,366
======== ========
</TABLE>
The maturities of long-term debt for the five years after September 30,
1998 are approximately as follows: 1999 -- $111,000; 2000 -- $21,000;
2001 -- $23,000; 2002 -- $12,000; 2003 -- $49,000, and thereafter $147,000.
4. COMMITMENTS AND CONTINGENCIES
a. Rent expense under all operating leases was approximately $15,000 and
$18,000 for the years ended September 30, 1998 and 1997, respectively. The
Company leased office space for $1,463 per month for year ended September 30,
1997 and for the first seven months of the year ended September 30, 1998. The
Company has a verbal agreement to continue to lease this office space on a month
to month basis at $1,500 per month.
b. The Company leases various equipment under a three-year lease expiring
in December 1999. Monthly payments under the current leases for the years ended
September 30, 1998 and 1997 were approximately $1,100, respectively.
c. The Company is a defendant in a lawsuit with a bank for defaulting on
the payments under the terms of a promissory note and a credit card account with
the bank. The suit asks for payment in full of the note and credit card account
plus interest, damages, attorneys' fees and costs of the suit. The three
principal members of the Company guaranteed this note. The total amount of the
claim including damages, attorney fees and costs of the suit are not readily
determinable. The principal balance on the note, accrued interest and the credit
card balance are recorded in the financial statements. The remaining balance of
the note was paid by the Company in August 1999.
d. Three of the managing members had agreements with the Company to
provide managerial services to the Company for a three-year period expiring in
December 1998. Compensation for these services was $48,000 to each member
annually.
e. A managing member, under an agreement dated November 1995, has the
right to acquire an additional 3.6232% interest in ownership of the Company.
This will dilute the percentages owned by the other members. Each percentage
acquired will require the payment of $21,000 to the Company.
f. No member or manager of the Company is liable for any obligation of the
Company or any other member or manager, unless personally guaranteed by the
member or manager through a separate document.
5. OPERATIONS
The Company adopted SFAS No 131, "Disclosure about Segments of an
Enterprise and Related Information." SFAS establishes annual and interim
reporting standards for an enterprise's operating segments and related
disclosures about its products, services, geographic areas and major customers.
Under
F-39
<PAGE> 98
ONLINE NETWORK, L.L.C.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SFAS No. 131, the Company's operations are treated as one operating segment
because it only reports profit and loss information to the chief operating
decision maker of the Company on an aggregate basis. Information about the
Company's sales and major customers are as follows at September 30:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
SALES
Group high school sales..................................... $303,781 $ 82,861
Individual sales.......................................... 19,096 40,394
Other..................................................... 2,257 9,355
-------- --------
Total Sales....................................... $325,134 $132,610
======== ========
</TABLE>
No customer accounted for more than ten percent of the revenues of the
Company in each of the two years ended September 30, 1998 and 1997,
respectively.
6. SUBSEQUENT EVENTS
The Company is in the process of negotiating a merger transaction with
CollegeLink.com Incorporated which is expected to be completed during the
calendar year 1999.
F-40
<PAGE> 99
ONLINE NETWORK, L.L.C.
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1999 1998
----------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 2,410 $ 520
Accounts receivable....................................... -- --
Prepaid expenses.......................................... -- --
Other assets.............................................. 1,725 1,725
----------- ---------
TOTAL CURRENT ASSETS.............................. 4,135 2,245
PROPERTY AND EQUIPMENT...................................... 65,439 94,997
SOFTWARE DEVELOPMENT........................................ 54,428 74,048
OTHER ASSETS................................................ 7,616 7,920
----------- ---------
$ 131,618 $ 179,210
=========== =========
LIABILITIES AND MEMBERS' (DEFICIT)
CURRENT LIABILITIES:
Accounts payable.......................................... $ 291,548 $ 262,313
Accrued expenses.......................................... 82,906 81,406
Payroll and payroll taxes payable......................... 430,889 323,234
Due to managing members................................... 9,171 9,171
Deferred revenue.......................................... 87,748 87,748
Long-term debt-current portion............................ 131,361 111,058
----------- ---------
TOTAL CURRENT LIABILITIES......................... 1,033,623 874,930
LONG-TERM DEBT, net of current maturities................... 247,587 252,190
COMMITMENTS AND CONTINGENCIES............................... --
MEMBERS' (DEFICIT).......................................... (1,149,592) (947,910)
----------- ---------
TOTAL MEMBERS' (DEFICIT).......................... (1,149,592) (947,910)
----------- ---------
$ 131,618 $ 179,210
=========== =========
</TABLE>
See notes to financial statements.
F-41
<PAGE> 100
ONLINE NETWORK, L.L.C.
STATEMENT OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
REVENUES.................................................... $ 71,319
GENERAL AND ADMINISTRATIVE EXPENSES......................... 244,688
---------
LOSS FROM OPERATIONS........................................ (173,369)
INTEREST EXPENSE............................................ 28,313
---------
NET LOSS.................................................... $(201,682)
=========
</TABLE>
See notes to financial statements.
F-42
<PAGE> 101
ONLINE NETWORK, L.L.C.
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(201,682)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 49,482
Increase (decrease) to cash attributable to changes in
assets and liabilities:
Accounts payable....................................... 29,235
Accrued expenses....................................... 1,500
Accrued payroll and payroll taxes payable.............. 107,655
---------
NET CASH USED IN OPERATING ACTIVITIES................ (13,810)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipts/payments of debt................................. 15,700
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES............ 15,700
---------
NET INCREASE IN CASH........................................ 1,890
CASH AT BEGINNING OF PERIOD................................. 520
---------
CASH AT END OF PERIOD....................................... $ 2,410
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest............................................... $ --
=========
</TABLE>
See notes to financial statements.
F-43
<PAGE> 102
ONLINE NETWORK, L.L.C.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements include the accounts of Online
Network, L.L.C. ("the Company"). Such statements have been prepared by the
Company, without audit, pursuant to the Rules and Regulations of the SEC and
reflect all adjustments (which include only normal recurring adjustments) which
are necessary to present a fair statement of the results for the interim period
reported. Certain footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these financial statements be read in
conjunction with the Company's audited financial statements and notes thereto
for the years ended September 30, 1998 and 1997.
NOTE 2. BUSINESS
In August 1999, the Company reorganized as a "C" corporation in
comtemplation of a private placement of its securities. Since then, the Company
has abandoned the private placement and has presently agreed to be acquired by
CollegeLink.com Incorporated subject to the execution of a definitive agreement.
F-44
<PAGE> 103
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Student Success, Inc.
Cincinnati, Ohio
We have audited the accompanying balance sheets of Student Success (a
Division of Graphic Management Corporation) as of December 31, 1998 and 1997,
and the related statements of income and changes in division equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Student Success (a Division
of Graphic Management Corporation) as of December 31, 1998 and 1997, and the
results of its operations and cash flows for the years then ended in conformity
with generally accepted accounting principles.
Schenck & Associates SC
Green Bay, Wisconsin
October 11, 1999
F-45
<PAGE> 104
STUDENT SUCCESS
A DIVISION OF GRAPHIC MANAGEMENT CORPORATION
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 208,343 $ 96,319
Accounts receivable....................................... 102,981 5,024
Prepaid expenses.......................................... 18,372 20,280
--------- ---------
TOTAL CURRENT ASSETS.............................. 329,696 121,623
PROPERTY AND EQUIPMENT
Leasehold improvement..................................... 2,678 --
Office and computer equipment............................. 12,152 --
--------- ---------
14,830 --
--------- ---------
Less accumulated depreciation............................. 247 --
--------- ---------
14,583 --
INTANGIBLE, net of accumulated amortization 1998 $8,638;
1997 $5,308............................................... 41,362 44,695
--------- ---------
$ 385,641 $ 166,318
========= =========
LIABILITIES AND DIVISION EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 27,611 $ --
Deferred revenue.......................................... 200,000 50,000
--------- ---------
TOTAL CURRENT LIABILITIES......................... 227,611 50,000
DIVISION EQUITY
Long-term working capital advanced by parent
corporation............................................ 569,183 367,137
Accumulated losses from operations........................ (411,153) (250,819)
--------- ---------
158,030 116,318
--------- ---------
$ 385,641 $ 166,318
========= =========
</TABLE>
See notes to financial statements.
F-46
<PAGE> 105
STUDENT SUCCESS
A DIVISION OF GRAPHIC MANAGEMENT CORPORATION
STATEMENTS OF INCOME AND CHANGES IN DIVISION EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Revenue..................................................... $ 345,019 $ 76,982
Operating expenses.......................................... 505,353 300,358
--------- ---------
Net loss............................................... (160,334) (223,376)
Long-term working capital advanced by parent company........ 202,046 291,944
Division equity, beginning.................................. 116,318 47,750
--------- ---------
Division equity, ending..................................... $ 158,030 $ 116,318
========= =========
</TABLE>
See notes to financial statements.
F-47
<PAGE> 106
STUDENT SUCCESS
A DIVISION OF GRAPHIC MANAGEMENT CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. $(160,334) $(223,376)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Amortization........................................... 3,333 3,055
Depreciation........................................... 247 --
Deferred revenues...................................... 150,000 50,000
Changes in operating assets and liabilities:
Accounts receivable.................................. (97,957) (5,024)
Prepaid expenses..................................... 1,908 (20,280)
Accounts payable..................................... 27,611 --
--------- ---------
Net cash used in operating activities................ (75,192) (195,625)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment........................ (14,830) --
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term working capital advanced by parent company...... 202,046 291,944
--------- ---------
Increase in cash.................................. 112,024 96,319
Cash:
Beginning................................................. 96,319 --
--------- ---------
Ending.................................................... $ 208,343 $ 96,319
========= =========
</TABLE>
See notes to financial statements.
F-48
<PAGE> 107
STUDENT SUCCESS
A DIVISION OF GRAPHIC MANAGEMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Student Success (d/b/a Making College Count) is a national training and
advisory organization that teaches college-bound students how to succeed in
college and prepare themselves throughout their academic career to maximize
their opportunities upon graduation. A primary source of funding is generated
through corporate sponsorship.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
A summary of the Division's significant accounting policies follows:
Reporting Entity
This entity is a Division of Graphic Management Corporation (GMC). These
financial statements include only the accounts of the Division referred to as
Student Success.
Revenue Recognition
The major source of revenue comes from corporate sponsorships. Under annual
contracts, the sponsors agree to compensate the Division for promotion to
program participants through distributed literature and other means of exposure.
Deferred revenue liability represents amount billed or received for which
programs have yet to be presented.
Property and equipment:
Property and equipment is stated at cost. Depreciation is computed
principally by straight-line methods over the estimated useful lives of the
assets.
Intangible:
Intangible asset consists of rights to the "Making College Count Program."
These rights were acquired in 1996 for $50,000 and are being amortized over 15
years using the straight-line method.
Income taxes:
GMC has elected to be taxed under the provisions of Subchapter S of the
Internal Revenue Code. Accordingly, as a Division of GMC, the financial
statements do not include a provision for income taxes because the Division does
not incur federal or state income taxes. Instead, its earnings and losses are
included in the stockholders' personal income tax returns and are taxed based on
their personal tax strategies.
F-49
<PAGE> 108
STUDENT SUCCESS
A DIVISION OF GRAPHIC MANAGEMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. PROFIT-SHARING PLAN
GMC maintains a qualified 401(k) retirement savings plan that covers
substantially all employees including employees of the Division. The Plan allows
the Division's employees to make voluntary contributions to the Plan. The
Division's contribution to the Plan includes a match of 25% of the first 5% of
employees' elective deferrals, and may include a discretionary contribution as
determined by the Board of Directors. Division contributions to the Plan for
1998 and 1997 were $1,411 and $5,082, respectively.
NOTE 3. TRANSACTIONS WITH PARENT CORPORATION
Certain operating expenses are allocated to the Division from GMC in the
ordinary course of business. Additionally, certain expenses have been absorbed
by GMC which would be ordinary expenses of the Division if it was operating
independently. Such expenses include, but may not be limited to, rent,
utilities, clerical support and certain operating overhead expenses.
NOTE 4. SPONSORSHIP CONTRACTS
As of December 31, 1998, the Division had secured commitments for
approximately $1,250,000 of sponsorship revenue representing eight contracts.
Terms of the promotional agreements limit the number of sponsorship contracts to
eight during the contract period ending August 31, 1999. Through December 31,
1998, no revenues had been recognized under these contracts, as program
presentation commenced in 1999.
NOTE 5. CONCENTRATION OF CREDIT RISK
The Division maintains a bank account at one financial institution. At
December 31, 1998, the Division had approximately $103,000 in its account in
excess of federally insured limits.
NOTE 6. SUBSEQUENT EVENTS
Effective January 1, 1999, the assets of the Division were sold to a newly
created S corporation.
F-50
<PAGE> 109
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1999 1999
------------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 4,303,222 $ 1,371,000
Accounts receivable, net of allowance for doubtful
accounts of $10,000 and $30,000, respectively.......... 218,101 100,163
Prepaid expenses and other assets......................... 117,714 85,349
----------- -----------
TOTAL CURRENT ASSETS................................... 4,639,037 1,556,512
FURNITURE AND EQUIPMENT, net of accumulated depreciation of
$287,896 and $201,422, respectively....................... 291,296 250,484
GOODWILL, net of amortization of $91,990 and $0,
respectively.............................................. 8,187,076 --
OTHER ASSETS................................................ 64,213 --
----------- -----------
$13,181,622 $ 1,806,996
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable.......................................... $ 460,012 $ 278,372
Accrued payroll........................................... 124,119 84,725
Accrued expenses.......................................... 385,189 32,247
Unearned revenue.......................................... -- 35,000
----------- -----------
TOTAL CURRENT LIABILITIES.............................. 969,320 430,344
DEFERRED RENT CREDIT........................................ 10,171
COMMITMENTS AND CONTINGENCIES............................... -- --
SHAREHOLDERS' DEFICIT:
Series A Convertible Preferred Stock, $4.00 stated value,
$0.01 par value, authorized 2,500,000 shares, issued
and outstanding 890,000 and shares 775,000 shares,
respectively........................................... 3,534,980 3,100,000
Series B Convertible Preferred Stock, $7,625 stated value,
$0.01 par value, authorized 300,000 shares, issued and
outstanding 279,771 shares............................. 4,175,000 --
Series C Convertible Preferred Stock, $4.00 stated value,
$0.01 par value, authorized 1,000,000 shares, issued
and outstanding 1,000,000 shares....................... 4,000,000 --
Common stock, $.001 par value, authorized 100,000,000 and
5,765,000 shares, issued and outstanding 9,846,603 and
5,260,736 shares, respectively......................... 9,846 9,152
Additional paid-in capital................................ 6,035,664 2,459,718
Accumulated deficit....................................... (5,553,359) (4,192,218)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT)................... 12,202,131 1,376,652
----------- -----------
$13,181,622 $ 1,806,996
=========== ===========
</TABLE>
See notes to financial statements.
F-51
<PAGE> 110
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1999 1998
----------- -----------
(UNAUDITED)
<S> <C> <C>
NET REVENUES:
CollegeLink revenues...................................... $ 125,680 $ --
Online training service revenues.......................... 77,499 32,000
Web site hosting.......................................... 56,252 49,467
Other revenues............................................ 6,654 137,958
----------- -----------
266,085 219,425
----------- -----------
EXPENSES:
Payroll, payroll taxes and related benefits............... 628,661 209,461
Depreciation and amortization............................. 111,591 26,071
Advertising............................................... 3,777 1,931
Other general and administrative expenses................. 883,197 221,232
----------- -----------
1,627,226 458,695
----------- -----------
LOSS FROM OPERATIONS........................................ (1,361,141) (239,270)
INTEREST EXPENSE............................................ -- 293
NET LOSS.................................................... $(1,361,141) $ (239,563)
=========== ===========
NET LOSS PER SHARE.......................................... $ (0.14) $ (0.05)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES USED IN
COMPUTATION............................................... 9,495,324 4,958,085
=========== ===========
</TABLE>
See notes to financial statements.
F-52
<PAGE> 111
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES
STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
TOTAL
PREFERRED STOCK COMMON STOCK ADDITIONAL STOCKHOLDERS'
----------------------- ------------------ PAID-IN EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) (DEFICIT)
--------- ----------- --------- ------ ---------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance -- June 30, 1999... 775,000 3,100,000 9,152,211 9,152 2,459,718 (4,192,218) 1,376,652
Preferred issued -- Series
A.......................... 115,000 434,980 -- -- -- -- 434,980
Effect of merger
transaction -- Preferred
Series B............... 279,771 4,175,000 659,005 659 3,395,688 -- 7,571,347
Issuance of shares for
services............... -- -- 35,124 35 178,782 -- 178,817
Preferred issued --
Series C............... 1,000,000 4,000,000 -- -- -- -- 4,000,000
Issuance of shares as per
benefit plan........... -- -- 288 -- 1,476 -- 1,476
Net loss for the
period................. -- -- -- -- -- (1,361,141) (1,361,141)
--------- ----------- --------- ------ ---------- ----------- -----------
Balance -- September 30,
1999..................... 2,169,778 $11,709,980 9,846,626 $9,846 $6,035,664 $(5,553,359) $12,202,131
========= =========== ========= ====== ========== =========== ===========
</TABLE>
See notes to financial statements.
F-53
<PAGE> 112
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------------
1999 1998
----------- ---------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(1,361,141) $(239,563)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 111,591 26,071
Issuance of shares for services........................ 178,817 --
Issuance of shares for benefit plan.................... 1,476 --
Deferred rent credit................................... 10,171 --
Increase (decrease) to cash attributable to changes in
assets and liabilities:
Accounts receivable.................................... (117,938) 3,426
Prepaid expenses and other assets...................... (96,578) (1,111)
Accounts payable....................................... 181,640 38,370
Accrued expenses....................................... 352,942 (23,419)
Accrued payroll........................................ 39,394 (96,026)
Unearned revenue....................................... (35,000) (38,563)
----------- ---------
NET CASH USED IN OPERATING ACTIVITIES.................. (734,627) (330,815)
----------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Excess of ECI liabilities assumed over tangible assets
acquired............................................... (766,518) --
Purchase of furniture and equipment....................... (2,706) (4,321)
----------- ---------
NET CASH USED IN INVESTING ACTIVITIES.................. (769,224) (4,321)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred shares................ 4,434,980 --
Shareholder advances payable.............................. -- 293,844
Principal payments on capital lease obligations........... -- (887)
----------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES.............. 4,434,980 292,957
----------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 2,931,129 (42,179)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 1,371,000 46,362
----------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 4,302,130 $ 4,183
=========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest............................................... $ -- $ 293
=========== =========
Taxes.................................................. $ -- $ 996
=========== =========
Noncash:
Stock issued for purchase of ECI....................... $ 7,571,347 $ --
=========== =========
Stock issued for services.............................. $ 178,817 $ --
=========== =========
</TABLE>
See notes to financial statements.
F-54
<PAGE> 113
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Reference is made to the financial statements included in the Company's
Annual Report (Form 10-KSB) filed with the Securities and Exchange Commission
for the year ended June 30, 1999.
The financial statements for the periods ended September 30, 1999 and 1998
are unaudited and include all adjustments which, in the opinion of
management, are necessary to a fair statement of the results of operations
for the periods then ended. All such adjustments are of a normal recurring
nature. The results of the Company's operations for any interim period are
not necessarily indicative of the results of the Company's operations for a
full fiscal year.
2. COMMITMENTS AND CONTINGENCIES
a. The Company entered into a lease agreement in September 1999, expiring
in November 30, 2004. Rental expense for the entire five-year period
totals approximately $641,000. The Company has recorded a deferred rent
credit of approximately $10,000 for the first month of free rent and
will amortize the credit over the lease term.
b. The Company adopted a 401K plan in July 1999.
c. The Company entered into agreements for directors and officers liability
insurance.
3. ACQUISITION TRANSACTIONS
a. On August 10, 1999, the Company acquired ECI, Inc. through a merger
transaction. ECI is an innovator of electronic college applications and
a supplier of products and services to college-bound students, their
parents and colleges.
The acquisition was structured as a merger of ECI with and into the
Company's wholly-owned subsidiary CollegeLink Corporation
("CollegeLink"). As consideration for the merger, the Company issued
550,809 of its common shares, 234,771 of its Series B Stock and paid
$489 in cash. CollegeLink also assumed approximately $778,000 of ECI
liabilities in connection with the merger and settled a claim against
ECI in exchange for 108,196 shares of the Company's common stock and
45,000 share of the Company's Series B stock (see Pro forma in 10-KSB).
b. The Company has entered into letters of intent to buy two companies,
Online Scouting Network, Inc. and Student Success, Inc. for a total of
$9,350,000, payable in cash of $3,500,000 with the balance in common
stock. The acquisitions will be treated as purchases.
4. EQUITY AND FINANCING
a. In September 1999, the Company received $460,000 in exchange for 115,000
shares of 6% cumulative preferred stock designated as "Series A
Convertible Preferred Stock" ("Preferred A") from five accredited
investors. Preferred A has a stated value of $4.00 per share, a par
value of $.01 per share and dividends payable quarterly. Any holder of
Preferred A may at any time convert stock into the common stock of the
Company at a ratio of one share of common stock for each share of
Preferred A. The Company may require conversion on or after the first
anniversary of the initial purchase if the closing bid price for its
common shares exceeds $6.00 for twenty consecutive trading days.
In the event of any voluntary or involuntary liquidation, dissolution,
or winding up of the affairs of the Company, the holders of the issued
and outstanding Preferred A are entitled to receive $4.00 for each share
of Preferred A, before any distribution of the assets of the Company
shall be made to the holders of any capital stock.
F-55
<PAGE> 114
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
b. In September 1999, the Company received $4,000,000 in exchange for
1,000,000 shares of 6% cumulative preferred stock designated as "Series
C Convertible Preferred Stock" ("Preferred C") from PNC Investment Corp.
Preferred C has a stated value of $4.00 per share, a par value of $0.01
per share and dividends payable quarterly.
PNC may at any time convert the Preferred C into common stock of the
Company at a ratio of one share of common stock for each share of
Preferred C, but in no event be entitled to convert any shares of
Preferred C nor shall the Company require conversion of any shares of
Preferred C in excess of that number of shares of Preferred C upon the
conversion of which the sum of (1) the number of shares of common stock
owned by PNC and (2) the number of shares of common stock issuable upon
the conversion of the number of shares of Preferred C would result in
the beneficial ownership of 5% or more of the issued and outstanding
shares of common stock.
The Company may require conversion on or after the first anniversary of
the initial purchase if the closing bid price for its common shares
exceeds $6.00 for twenty consecutive trading days.
In the event of any voluntary or involuntary liquidation, dissolution,
or winding up of the affairs of the Company, the holders of the issued
and outstanding Preferred C are entitled to receive $4.00 for each share
of Preferred C, before any distribution of the assets of the Company
shall be made to the holders of any capital stock, except for holders of
Series A Preferred Stock Convertible Preferred Stock which shall have
the rights and preferences as previously adopted by the Company's Board
of Directors.
F-56
<PAGE> 115
STUDENT SUCCESS, INC.
BALANCE SHEET
SEPTEMBER 30, 1999
(UNAUDITED)
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 39,878
Accounts receivable, net of allowance for doubtful
accounts of $3,212..................................... 231,631
Prepaid expenses and other assets......................... 15,158
--------
TOTAL CURRENT ASSETS.............................. 286,667
PROPERTY AND EQUIPMENT, net of accumulated depreciation of
$3,522.................................................... 68,228
INTANGIBLE, net of amortization of $2,500................... 38,862
OTHER ASSETS................................................ 2,920
--------
$396,677
========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 99,809
Accrued payroll........................................... 5,309
Accrued expenses.......................................... 11,100
Unearned revenue.......................................... 168,750
--------
TOTAL CURRENT LIABILITIES......................... 284,968
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Retained earnings......................................... 111,709
--------
TOTAL SHAREHOLDERS' EQUITY........................ 111,709
--------
$396,677
========
</TABLE>
See notes to financial statements.
F-57
<PAGE> 116
STUDENT SUCCESS, INC.
STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
SALES....................................................... $1,425,027
COST OF SALES............................................... 383,364
----------
GROSS PROFIT................................................ 1,041,663
EXPENSES:
Marketing and selling expenses............................ 192,258
Other general and administrative expenses................. 737,565
----------
929,823
----------
INCOME FROM OPERATIONS...................................... 111,840
OTHER INCOME (EXPENSE)...................................... (131)
----------
NET INCOME.................................................. $ 111,709
==========
</TABLE>
See notes to financial statements.
F-58
<PAGE> 117
STUDENT SUCCESS, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
TOTAL
RETAINED STOCKHOLDERS'
EARNINGS EQUITY
-------- -------------
<S> <C> <C>
Balance -- January 1, 1999.................................. $ -- $ --
Net income for the period................................... 111,709 111,709
-------- --------
Balance -- September 30, 1999............................... $111,709 $111,709
======== ========
</TABLE>
See notes to financial statements.
F-59
<PAGE> 118
STUDENT SUCCESS, INC.
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 111,709
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 6,022
Increase (decrease) to cash attributable to changes in
assets and liabilities:
Accounts receivable.................................... (231,631)
Prepaid expenses and other assets...................... (18,078)
Accounts payable....................................... 99,809
Accrued expenses....................................... 11,100
Accrued payroll........................................ 5,309
Unearned revenue....................................... 168,750
---------
NET CASH PROVIDED BY OPERATING ACTIVITIES.............. 152,990
---------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property and equipment........................ (71,750)
Purchase of intangible asset.............................. (41,362)
---------
NET CASH USED IN INVESTING ACTIVITIES.................. (113,112)
---------
NET INCREASE IN CASH........................................ 39,878
CASH AT BEGINNING OF PERIOD................................. --
---------
CASH AT END OF PERIOD....................................... $ 39,878
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest............................................... $ --
=========
Taxes.................................................. $ --
=========
</TABLE>
See notes to financial statements.
F-60
<PAGE> 119
STUDENT SUCCESS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements include the accounts of Student
Success, Inc. ("the Company"). Such statements have been prepared by the
Company, without audit, pursuant to the Rules and Regulations of the SEC and
reflect all adjustments (which include only normal recurring adjustments) which
are necessary to present a fair statement of the results for the interim period
reported. Certain footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these financial statements be read in
conjunction with the Company's audited financial statements and notes thereto
for the years ended December 31, 1998, and 1997.
F-61
<PAGE> 120
[INSIDE BACK COVER]
[On this page appears a continuation of the alphabetical list of colleges and
universities from the inside spread. The words "www.collegelink.com" appear on
the bottom right corner of this page. The "CollegeLink.com" logo appears over
the list of colleges and universities along the right side of the page running
from the bottom of the page to the top of the page.]
<PAGE> 121
[COLLEGELINK.COM LOGO]
---------------------------
TABLE OF CONTENTS
---------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Forward Looking Statements............ 15
Use of Proceeds....................... 16
Price Range of Common Stock........... 16
Dividend Policy....................... 16
Capitalization........................ 17
Dilution.............................. 18
Selected Financial Data............... 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 21
Business.............................. 25
Management............................ 36
Certain Relationships and Related
Transactions........................ 44
Principal Stockholders................ 45
Description of Capital Stock.......... 46
Underwriting.......................... 53
Legal Matters......................... 54
Experts............................... 55
Where You Can Find More Information... 55
Index to Financial Statements......... F-1
</TABLE>
3,000,000 SHARES
COLLEGELINK.COM
COMMON STOCK
--------------------
PROSPECTUS
--------------------
CRUTTENDEN ROTH INCORPORATED
PENNSYLVANIA MERCHANT GROUP
, 1999
<PAGE> 122
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
issuance and distribution of the securities being registered, other than the
underwriting discount. All amounts shown are estimates except the Securities and
Exchange Commission registration fee, the National Association of Securities
Dealers, Inc. filing fee and the Nasdaq National Market listing fee.
<TABLE>
<CAPTION>
PAYABLE
BY THE
COMPANY
--------
<S> <C>
Securities and Exchange Commission registration fee......... $ 12,812
National Association of Securities Dealers, Inc. filing
fee......................................................... 5,580
Nasdaq National Market listing fee.......................... 75,625
Printing and engraving expenses............................. 100,000
Transfer agent fees......................................... 10,000
Accounting fees and expenses................................ 100,000
Legal fees and expenses..................................... 300,000
Blue Sky fees and expenses (including related legal fees)... 30,000
Miscellaneous............................................... 25,000
--------
Total............................................. $659,017
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law affords a Delaware
corporation the power to indemnify its present and former directors and officers
under certain conditions. Our certificate of incorporation provides that we
shall indemnify each person who at any time is, or shall have been, a director
or officer and was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she
is or was a director or officer, or is or was serving at our request as a
director, officer, trustee of, or in a similar capacity with, another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with any such action,
suit or proceeding and any appeal therefrom, to the maximum extent permitted by
the Delaware General Corporation Law, as the same exists or may hereafter be
amended. Our certificate of incorporation also contains provisions authorizing
the advancement of expenses incurred in connection with certain applicable
proceedings.
No amendment to or termination or repeal of these provisions of our
certificate of incorporation shall deprive a director or officer of the benefit
thereof with respect to any action, transaction or facts occurring prior to such
amendment, termination or repeal. In addition, our certificate of incorporation
provides that the foregoing rights to indemnification or advancement of expenses
shall not be deemed to be exclusive of any other rights to which the director or
officer may be entitled under any law (common or statutory), agreement, vote of
stockholders or disinterested directors, or otherwise.
Section 102(b)(7) of the Delaware General Corporation Law gives a Delaware
corporation the power to adopt a charter provisions eliminating or limiting the
personal liability of directors to the corporation or its stockholders for
breach of fiduciary duty as directors, provided that such provision may not
eliminate or limit the liability of directors for (i) any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) any acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) any payment of a dividend or approval of a stock
purchase that is illegal under Section 174 of the Delaware General Corporation
Law or (iv) any transaction from which the director derived an improper personal
benefit. Our certificate of incorporation provides that to the
II-1
<PAGE> 123
maximum extent permitted by the Delaware General Corporation Law, none of our
directors shall be personally liable to us or to any of our stockholders for
monetary damages arising out of such director's breach of fiduciary duty as a
director of CollegeLink. No amendment to or repeal of these provisions shall
apply to or have any effect on the liability or the alleged liability of any
director with respect to any act or omission of such director occurring prior to
such amendment or repeal. A principal effect of such provisions is to limit or
eliminate the potential liability of our directors for monetary damages arising
from breaches of their duty of care, unless the breach involves one of the four
exceptions described in (i) through (iv) above.
Section 145 of the Delaware General Corporation Law also affords a Delaware
corporation the power to obtain insurance on behalf of its directors and
officers against liabilities incurred by them in those capacities. We maintain
insurance coverage under which our directors and officers are insured, subject
to the limits of the policy, against certain losses, as defined in the policy,
arising from claims made against such directors and officers by reason of any
wrongful acts as defined in the policy, in their respective capacities as
directors or officers.
Reference is also made to section of the Underwriting Agreement, which
provides for the indemnification of our officers, directors and controlling
persons against certain liabilities. The indemnification provisions in our
certificate of incorporation may be sufficiently broad to permit indemnification
of our directors and executive officers for liabilities arising under the
Securities Act of 1933.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following information is furnished with regard to all securities sold
by us within the past three years which were not registered under the Securities
Act.
(a) ISSUANCES OF COMMON STOCK.
In July 1998, we issued approximately 1,325,000 shares of our common stock
to acquire the assets of Cytation Delaware. The assets have been recorded at
$2,299, which approximates the fair market value of the shares at the time of
the transaction.
In July 1998, we issued a warrant for services to purchase 5,000 shares of
our common stock at an exercise price of $.01 per share, which approximates fair
value at time of issuance.
In July 1998, when our management believed the fair market value of our
common stock was $0.002 per share, management reduced the exercise price of
previously outstanding employee stock options to $0.002 and all employees
exercised such shares. The exercise price was paid by us and treated as
compensation. Such compensation was recorded at $0.002 per share for 1,372,000
shares.
In December 1998, we issued approximately 29,000 warrants, expiring in
August 2001, exercisable at $0.52, in connection with a sale of stock in prior
years.
In January 1999, we received $195,000 from the issuance in a private
placement of approximately 65,000 shares of the common stock of Cytation
Corporation, a Rhode Island corporation ("Cytation RI"). On March 5, 1999,
Cytation RI was merged into us (the "Stylex Merger"). Pursuant to the Stylex
Merger, each share of common stock of Cytation RI was automatically changed and
converted into 5.765 shares of our common stock. Also pursuant to the Stylex
Merger, each option to purchase one share of Common Stock of Cytation RI was
automatically converted and changed into an option to purchase 5.765 shares of
our common stock and each warrant to purchase one share of Common Stock of
Cytation RI was automatically converted and changed into an option to purchase
5.765 shares of our common stock.
During fiscal 1999 we agreed to issue 504,000 shares to unrelated parties
for financial services, which shares were recorded at fair market value at the
time of the agreement of $0.002 per share. In April and May 1999, we issued
55,000 shares to unrelated parties for financial services, which shares were
recorded at fair market values from $6.50 per share to $7.50 per share.
II-2
<PAGE> 124
In June 1999, we issued 20,000 shares of our common stock for the purchase
of computer equipment expected to be utilized to develop an expanded application
for our online training software. This equipment was valued at $145,000.
In August 1999, we issued 25,000 shares of common stock to unrelated
parties for financial services, which were recorded at their fair market value
of $7.625.
(b) ISSUANCES OF PREFERRED STOCK.
During July through November 1997, we issued approximately $438,000 of debt
units consisting of promissory notes and stock purchase warrants ("Units"). The
promissory notes were automatically convertible into shares of Series A 10%
convertible preferred stock, $.001 par value with a stated value of $1,000
("CPS"). Each share of CPS was automatically converted into shares of our common
stock on September 1, 1998. In addition, each preferred shareholder received one
stock purchase warrant for each share of common stock received upon conversion
of the CPS. Each warrant entitled the holder to purchase one share of common
stock at a purchase price per share of $1.30 per share.
In October 1997, we amended our certificate of incorporation to change the
aggregate number of shares we have authority to issue from 1,000,000 to
1,001,000, consisting of 1,000,000 shares of common stock, $.001 par value per
share, and 1,000 shares of preferred stock. Thereafter, our board of directors
authorized the issuance of the CPS, which was issued to the holders of the Units
in cancellation of their promissory notes. In year ended June 30, 1999, we
cancelled the authorization of the 1000 shares of .001 par value preferred
stock.
On April 2, 1999, we issued and sold 775,000 shares of Series A Convertible
Preferred Stock for aggregate consideration of $3,100,000.
In September 1999, we issued and sold 115,000 shares of Series A
Convertible Preferred Stock to five accredited investors.
On September 30, 1999, we issued and sold 1,000,000 shares of Series C
Convertible Preferred Stock to PNC Investment Corp. for an aggregate
consideration of $4,000,000.
On October 26, 1999, we issued and sold 250,000 shares of Series A
Convertible Preferred Stock to Bost & Co. for an aggregate consideration of
$1,000,000.
(c) ISSUANCES OF COMMON STOCK AND PREFERRED STOCK IN CONNECTION WITH THE
ECI MERGER.
On August 10, 1999, ECI, Inc. merged (the "ECI Merger") into
CollegeLink.com, Incorporated, a Delaware corporation and our wholly-owned
subsidiary. Pursuant to the ECI Merger, each share of Common Stock of ECI was
automatically changed and converted into 550,809 shares of our common stock and
234,771 shares of our Series B Convertible Preferred Stock.
In connection with the ECI Merger, we, ECI and USA Group Noel-Levitz, Inc.
("USA Group") entered into a letter agreement in settlement of certain claims
made by USA Group. Pursuant to this Letter Agreement, we issued and sold to USA
Group 108,196 shares of our common stock and 45,000 shares of our Series B
Convertible Preferred Stock.
In connection with the ECI Merger, we also issued 9,836 shares of common
stock to Wolf Rock Corporation.
(d) GRANTS OF OUR STOCK OPTIONS.
From December, 1998 through September, 1999, we granted options to purchase
an aggregate of 1,716,185 shares of our common stock, exercisable at a weighted
average exercise price of $4.59 per share.
The issuances described in this Item 15 were made in reliance upon the
exemption from registration set forth in Section 4(2) of the Securities Act
relating to sales by an issuer not involving any public offering. None of the
foregoing transactions involved a distribution or public offering. No
underwriters were engaged in connection with the foregoing issuances of
securities, and no underwriting discounts or commissions were paid.
II-3
<PAGE> 125
ITEM 16. EXHIBITS AND FINANCIAL SCHEDULES.
(a) EXHIBITS
<TABLE>
<C> <S>
*1.1 Underwriting Agreement
*1.2 Form of Representatives' Warrant Agreement
*1.3 Consulting Agreement
2.1 Articles of Merger between the Company and Cytation
Corporation, dated February 11, 1999(1)
2.2 Plan of Merger of the Company and Cytation Corporation dated
February 11, 1999(1)
**2.3 Articles of Merger between CollegeLink.com Incorporated and
ECI, Inc., dated August 10, 1999
**2.4 Certificate of Merger of CollegeLink.com Incorporated and
ECI, Inc., dated August 10, 1999
**2.5 Agreement and Plan of Merger of the Company and ECI, Inc.,
dated August 10, 1999
2.6 Certificate of Ownership and Merger between the Company and
CollegeLink.com Incorporated, dated November 15, 1999
2.7 Agreement and Plan of Merger between the Company and
CollegeLink.com Incorporated, dated November 15, 1999
3.1 Amended and Restated Certificate of Incorporation of the
Company
3.2 By-laws of the Company
4.1 Please see Exhibits 3.1 and 3.2 for provisions of the
Amended and Restated Certificate of Incorporation and
By-laws of the Company defining the rights of holders of the
common stock of the Company
*5.1 Opinion of Foley, Hoag & Eliot LLP
10.1 Series A Convertible Stock Purchase Agreement, dated April
2, 1999, between the Company and Provident Life and Accident
Insurance Company(3)
**10.2 Escrow Agreement by and among the Company, Gerald A. Paxton,
Thomas J. Burgess and Eastern Bank and Trust Company dated
as of August 10, 1999
**10.3 Registration Agreement by and among the Company, Gerald A.
Paxton, Thomas J. Burgess and ECI, Inc. dated as of August
10, 1999
**10.4 Consulting Agreement by and among the Company, Gerald A.
Paxton and CollegeLink.com Incorporated dated as of August
10, 1999
**10.5 Letter Agreement by and among the Company, ECI, Inc. and USA
Group Noel-Levitz, Inc. dated as of July 28, 1999
**10.6 Registration Rights Agreement by and among the Company and
USA Group Noel-Levitz, Inc. dated as of July 28, 1999
**10.7 Lease by and between Victoria S. Tarsagian and Web Services
International, Inc. dated as of July 29, 1996
**10.8 1996 Stock Plan
10.9 1999 Stock Option Plan
**10.10 Stock Purchase Agreement, dated September 30, 1999, between
the Company and PNC Investment Corp.
**10.11 Marketing Services and Administrative Agreement, dated
September 30, 1999, between the Company and PNC Investment
Corp.
**10.12 Employment Agreement, dated February 11, 1999, between the
Company and Richard Fisher
**10.13 Employment Agreement, dated February 11, 1999, between the
Company and Kevin High
**10.14 Agreement, dated June 30, 1999, between the Company and the
College Entrance Examination Board
10.15 Form of Lock-Up Agreement
**10.16 Lease dated September 22, 1999 between the Company and
Midview, LLC
</TABLE>
II-4
<PAGE> 126
<TABLE>
<C> <S>
10.17 Agreement and Plan of Merger dated as of October 20, 1999 by
and among Cytation.com Incorporated, CollegeLink.com,
Incorporated, Student Success, Inc., Bradford J. Baker,
Patrick S. O'Brien and the Patrick S. O'Brien Stock Trust
10.18 Support Agreement dated as of October 20, 1999 by and
between the Company and Bradford J. Baker
10.19 Support Agreement dated as of October 20, 1999 by and
between the Company and Patrick S. O'Brien
10.20 Support Agreement dated as of October 20, 1999 by and
between the Company and the Patrick S. O'Brien Stock Trust
10.21 Noncompetition and Employment Agreement dated as of October
20, 1999 among CollegeLink.com Incorporated, Cytation.com
Incorporated and Bradford J. Baker
10.22 Noncompetition and Employment Agreement dated as of October
20, 1999 among CollegeLink.com Incorporated, Cytation.com
Incorporated and Patrick S. O'Brien
10.23 Series A Convertible Preferred Stock Purchase Agreement,
dated as of October 26, 1999, between the Company and Bost &
Co.
10.24 Partner Contract dated September 8, 1999 between Student
Advantage, Inc. and CollegeLink.com
*10.25 FastWeb CollegeLink Agreement dated November 22, 1999
between FastWeb.com LLC and CollegeLink.com Incorporated
10.26 Employment Agreement, dated as of July 1, 1999, between the
Company and Thomas Burgess
21.1 List of Subsidiaries of the Company
*23.1 Consent of Foley, Hoag & Eliot LLP (included in Exhibit 5.1)
23.2 Consents of Radin, Glass & Co., LLP
23.3 Consent of Paolilli & Jarek, LLC
23.4 Consent of Schenck & Associates SC
24.1 Power of Attorney (contained on the signature page of this
Registration Statement)
27.1 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
(1) Incorporated by reference from the Registrant's Form 8-K, Current Report,
filed March 18, 1999, and later amended on April 2, 1999.
(2) Incorporated by reference from the Registrant's Annual Report on Form 10KSB
(S.E.C. File No. 0-5388) filed December 31, 1998.
(3) Incorporated by reference from the Registrant's Form 8-K, Current Report,
filed April 27, 1999.
(b) FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because they are not applicable or the required
information is shown in the Company's Consolidated Financial Statements or Notes
thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the
II-5
<PAGE> 127
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-6
<PAGE> 128
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE TOWN OF MIDDLETOWN, RHODE ISLAND,
ON THE 26TH DAY OF NOVEMBER, 1999.
CYTATION.COM INCORPORATED
BY: /s/ RICHARD A. FISHER
------------------------------------
RICHARD A. FISHER, CHAIRMAN
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below hereby constitutes and appoints Richard A. Fisher, Edward F. Hayes and
David A. Broadwin, and each of them, his true and lawful attorneys-in-fact and
agents with full power of substitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all pre- or post-effective
amendments to this Registration Statement, any subsequent registration statement
for the same offering which may be filed under Rule 462(b) under the Securities
Act ("a Rule 462(b) Registration Statement") and any and all pre- or
post-effective amendments thereto, and to file the same, with all exhibits
thereto, and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
which they, or any of them, may deem necessary or advisable to be done in
connection with this Registration Statement or any Rule 462(b) Registration
Statement, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or any substitute or substitutes for any or all of them,
may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
* Chairman of the Board (Principal November 26, 1999
- ------------------------------------------ Executive Officer)
Richard A. Fisher
* Vice President -- Finance November 26, 1999
- ------------------------------------------ (Principal Financial and
Edward F. Hayes Accounting Officer)
* Director November 26, 1999
- ------------------------------------------
Kevin J. High
* Director November 26, 1999
- ------------------------------------------
Jai N. Gupta, Ph.D.
* Director November 26, 1999
- ------------------------------------------
Jeffrey Cunningham
</TABLE>
II-7
<PAGE> 129
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
* Director November 26, 1999
- ------------------------------------------
Bert Hensley
* Director November 26, 1999
- ------------------------------------------
Mark Rogers
*By: /s/ EDWARD F. HAYES November 26, 1999
------------------------------------
Attorney-in-fact
</TABLE>
II-8
<PAGE> 130
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
*1.1 Underwriting Agreement
*1.2 Form of Representatives' Warrant Agreement
*1.3 Consulting Agreement
2.1 Articles of Merger between the Company and Cytation
Corporation, dated February 11, 1999(1)
2.2 Plan of Merger of the Company and Cytation Corporation dated
February 11, 1999(1)
**2.3 Articles of Merger between CollegeLink.com Incorporated and
ECI, Inc., dated August 10, 1999
**2.4 Certificate of Merger of CollegeLink.com Incorporated and
ECI, Inc., dated August 10, 1999
**2.5 Agreement and Plan of Merger of the Company and ECI, Inc.,
dated August 10, 1999
2.6 Certificate of Ownership and Merger between the Company and
CollegeLink.com Incorporated, dated November 15, 1999
2.7 Agreement and Plan of Merger between the Company and
CollegeLink.com Incorporated, dated November 15, 1999
3.1 Amended and Restated Certificate of Incorporation of the
Company
3.2 By-laws of the Company
4.1 Please see Exhibits 3.1 and 3.2 for provisions of the
Amended and Restated Certificate of Incorporation and
By-laws of the Company defining the rights of holders of the
common stock of the Company
*5.1 Opinion of Foley, Hoag & Eliot LLP
10.1 Series A Convertible Stock Purchase Agreement, dated April
2, 1999, between the Company and Provident Life and Accident
Insurance Company(3)
**10.2 Escrow Agreement by and among the Company, Gerald A. Paxton,
Thomas J. Burgess and Eastern Bank and Trust Company dated
as of August 10, 1999
**10.3 Registration Agreement by and among the Company, Gerald A.
Paxton, Thomas J. Burgess and ECI, Inc. dated as of August
10, 1999
**10.4 Consulting Agreement by and among the Company, Gerald A.
Paxton and CollegeLink.com Incorporated dated as of August
10, 1999
**10.5 Letter Agreement by and among the Company, ECI, Inc. and USA
Group Noel-Levitz, Inc. dated as of July 28, 1999
**10.6 Registration Rights Agreement by and among the Company and
USA Group Noel-Levitz, Inc. dated as of July 28, 1999
**10.7 Lease by and between Victoria S. Tarsagian and Web Services
International, Inc. dated as of July 29, 1996
**10.8 1996 Stock Plan
10.9 1999 Stock Option Plan
**10.10 Stock Purchase Agreement, dated September 30, 1999, between
the Company and PNC Investment Corp.
**10.11 Marketing Services and Administrative Agreement, dated
September 30, 1999, between the Company and PNC Investment
Corp.
**10.12 Employment Agreement, dated February 11, 1999, between the
Company and Richard Fisher
**10.13 Employment Agreement, dated February 11, 1999, between the
Company and Kevin High
**10.14 Agreement, dated June 30, 1999, between the Company and the
College Entrance Examination Board
10.15 Form of Lock-Up Agreement
**10.16 Lease dated September 22, 1999 between the Company and
Midview, LLC
10.17 Agreement and Plan of Merger dated as of October 20, 1999 by
and among Cytation.com Incorporated, CollegeLink.com,
Incorporated, Student Success, Inc., Bradford J. Baker,
Patrick S. O'Brien and the Patrick S. O'Brien Stock Trust
</TABLE>
<PAGE> 131
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
10.18 Support Agreement dated as of October 20, 1999 by and
between the Company and Bradford J. Baker
10.19 Support Agreement dated as of October 20, 1999 by and
between the Company and Patrick S. O'Brien
10.20 Support Agreement dated as of October 20, 1999 by and
between the Company and the Patrick S. O'Brien Stock Trust
10.21 Noncompetition and Employment Agreement dated as of October
20, 1999 among CollegeLink.com Incorporated, Cytation.com
Incorporated and Bradford J. Baker
10.22 Noncompetition and Employment Agreement dated as of October
20, 1999 among CollegeLink.com Incorporated, Cytation.com
Incorporated and Patrick S. O'Brien
10.23 Series A Convertible Preferred Stock Purchase Agreement,
dated as of October 26, 1999, between the Company and Bost &
Co.
10.24 Partner Contract dated September 8, 1999 between Student
Advantage, Inc. and CollegeLink.com
*10.25 FastWeb CollegeLink Agreement dated November 22, 1999
between FastWeb.com LLC and CollegeLink.com Incorporated
10.26 Employment Agreement, dated as of July 1, 1999, between the
Company and Thomas Burgess
21.1 List of Subsidiaries of the Company
*23.1 Consent of Foley, Hoag & Eliot LLP (included in Exhibit 5.1)
23.2 Consents of Radin, Glass & Co., LLP
23.3 Consent of Paolilli & Jarek, LLC
23.4 Consent of Schenck & Associates SC
24.1 Power of Attorney (contained on the signature page of this
Registration Statement)
27.1 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
(1) Incorporated by reference from the Registrant's Form 8-K, Current Report,
filed March 18, 1999, and later amended on April 2, 1999.
(2) Incorporated by reference from the Registrant's Annual Report on Form 10KSB
(S.E.C. File No. 0-5388) filed December 31, 1998.
(3) Incorporated by reference from the Registrant's Form 8-K, Current Report,
filed April 27, 1999.
<PAGE> 1
Exhibit 2.6
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
CYTATION.COM INCORPORATED
(a New York corporation)
INTO
COLLEGELINK.COM INCORPORATED
(a Delaware corporation)
PURSUANT TO SECTION 253 OF THE
DELAWARE GENERAL CORPORATION LAW
Cytation.com Incorporated, a corporation organized and existing under
the laws of New York, ("Cytation") does hereby certify as follows:
1. That this corporation was incorporated on the 2nd day of April,
1969, pursuant to the New York Business Corporation Law, the provisions of which
permit the merger of a corporation of another state and a corporation organized
and existing under the laws of New York.
2. That this corporation owns all the issued and outstanding capital
stock of CollegeLink.com Incorporated, a corporation incorporated on the 1st day
of November, 1999, pursuant to the Delaware General Corporation Law
("CollegeLink").
3. That the directors of this corporation, by the following resolutions
of its Board of Directors duly adopted at a meeting of the Board of Directors on
November 11, 1999, determined to merge itself into said CollegeLink (the
"Merger"):
RESOLVED: That the Board of directors deems it advisable and in the
best interests of the Corporation for the Corporation to
enter into an Agreement and Plan of Merger, a copy of which
has been presented to and reviewed by the Directors and is
hereby ordered filed with the minutes of this meeting (the
"Merger Agreement"), pursuant to which, among other things,
(i) the Corporation will be merged with and into
CollegeLink.com Incorporated, a Delaware corporation and
wholly owned subsidiary of the Corporation ("CollegeLink"),
with CollegeLink continuing as the surviving
<PAGE> 2
corporation; and (ii) shares of CollegeLink will be issued
to the shareholders of the Corporation upon surrender of
any certificates therefor at the rate of one (1) share of
the common stock of CollegeLink for each share of common
stock of the Corporation, one (1) share of the Series A
Convertible Preferred Stock of CollegeLink for each share
of Series A Convertible Preferred Stock of the Corporation,
one (1) share of the Series B Convertible Preferred Stock
of CollegeLink for each share of Series B Convertible
Preferred Stock of the Corporation, and one (1) share of
the Series C Convertible Preferred Stock of CollegeLink for
each share of Series C Convertible Preferred Stock of the
Corporation;
RESOLVED: That the form, terms and provisions of the Merger
Agreement, and the transactions contemplated thereby, be,
and they hereby are, authorized, adopted and approved; and
that the President and Secretary of the Corporation be, and
they hereby are, authorized to execute and deliver, for and
on behalf of the Corporation and in its name, the Merger
Agreement, with such changes, additions, modifications, and
deletions thereto as the President may approve, such
officers' execution thereof to be conclusive evidence of
such approval and of the authorization thereof by this
Board of Directors;
RESOLVED: That the Merger Agreement be submitted to the stockholders
of the Corporation for their consideration and approval;
RESOLVED: That upon approval of the Merger Agreement by such
stockholders, the Corporation merge with and into
CollegeLink (the "Merger"), effective as of the filing of
the necessary documents with the states of New York and
Delaware, pursuant to Sections 905 and 907 of the New York
Business Corporation Law, Section 253 of the Delaware
General Corporation Law and the Merger Agreement; and
RESOLVED: That officers of the Corporation be, and they hereby are,
without further authorization of the Board of Directors,
severally authorized, for and on behalf of the Corporation
and in its name, to execute and deliver any and all
documents required to consummate the Merger, including, but
not limited to, a Certificate of Ownership and Merger for
filing with the Secretary of State of the State of Delaware
and a Certificate of Merger for filing with the Department
of State of the State of New York, and, in connection
therewith, to take any and all such actions and to execute,
with a corporate seal if deemed desirable, and deliver any
and all other agreements, instruments, documents, opinions,
certificates and/or other writings as the officer so acting
shall deem appropriate and desirable to carry into effect
the foregoing Resolutions or any part or parts thereof; and
that the taking of any such action and the execution of any
such writing shall be conclusive evidence that the action
so taken or the writing or writings so executed were
authorized by this Resolution.
2
<PAGE> 3
4. That the proposed Merger has been adopted, approved, certified,
executed and acknowledged by Cytation in accordance with the laws of the State
of New York, under which Cytation was organized.
IN WITNESS WHEREOF, Cytation has caused this Certificate of Ownership
and Merger to be executed in its name on November 15, 1999.
CYTATION.COM INCORPORATED
By: /s/ Kevin J. High
--------------------------------
Kevin J. High
President
3
<PAGE> 1
Exhibit 2.7
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Plan of Merger") is made and
entered into as of November 15, 1999 by and between Cytation.com Incorporated, a
New York corporation ("Cytation"), having its principal place of business at 55
Hammarlund Way, Newport, Rhode Island 02842, and CollegeLink.com Incorporated, a
Delaware corporation ("CollegeLink"), having its principal place of business at
55 Hammarlund Way, Newport, Rhode Island 02842.
WITNESSETH:
WHEREAS, CollegeLink was incorporated on November 1, 1999, and is a
corporation duly organized and existing under the laws of the State of Delaware;
WHEREAS, Cytation is a corporation duly organized and existing under
the laws of the State of New York;
WHEREAS, on the date of this Plan of Merger, Cytation has authority to
issue 100,000,000 shares of common stock, par value $0.001 per share (the
"Cytation Common Stock"), of which 9,846,340 shares of Cytation Common Stock are
issued and outstanding, and 10,000,000 shares of preferred stock, $.01 par
value, of which (a) 2,500,000 shares have been designated Series A Preferred
Stock (the "Series A Shares") of which 1,140,000 Series A Shares are issued and
outstanding, (b) 300,000 shares have been designated Series B Preferred Stock
(the "Series B Shares") of which 279,771 Series B Shares are issued and
outstanding and (c) 1,000,000 shares have been designated Series C Preferred
Stock (the "Series C Shares") of which 1,000,000 Series C Shares are issued and
outstanding, and (d) 6,200,000 shares are undesignated and available for
issuance.
WHEREAS, on the date of this Plan of Merger, CollegeLink is a
wholly-owned subsidiary of Cytation and has authority to issue 100,000,000
shares of common stock, par value $.001 per share (the "CollegeLink Common
Stock"), of which 100 shares are issued and outstanding and owned by Cytation,
and 10,000,000 shares of preferred stock, $.01 par value, of which (a) 2,500,000
shares have been designated Series A Preferred Stock, (b) 300,000 shares have
been designated Series B Preferred Stock, (c) 1,000,000 shares have been
designated Series C Preferred Stock, and (d) 6,200,000 shares are undesignated
and available for issuance, and of which no shares are issued or outstanding;
and
WHEREAS, the respective Boards of Directors of CollegeLink and Cytation
have approved this Plan of Merger and the Board of Directors of Cytation has
directed that this Plan of Merger be submitted to a vote of its stockholders;
NOW, THEREFORE, in consideration of the mutual agreements and covenants
set forth herein, Cytation and CollegeLink hereby agree to merge as follows:
<PAGE> 2
1. MERGER. Cytation shall be merged with and into CollegeLink,
and CollegeLink shall survive the merger (the "Merger"). The address of the
registered office of CollegeLink in Delaware is 1209 Orange Street, Wilmington,
Delaware.
The Merger shall be effective upon filing of a Certificate of Ownership
and Merger with the Secretary of State of Delaware and a Certificate of Merger
with the New York Department of State (the "Effective Date").
2. SUCCESSION. On the Effective Date, CollegeLink shall succeed
to Cytation in the manner of and as more fully set forth in Section 259 of the
Delaware General Corporation Law. All corporate acts, plans, policies,
agreements, arrangements, approvals and authorizations of Cytation, its
shareholders, Board of Directors and committees thereof, officers and agents
which were valid and effective immediately prior to the Effective Date, shall be
taken for all purposes as the acts, plans, policies, agreements, arrangements,
approvals and authorizations of CollegeLink and shall be as effective and
binding thereon as the same were with respect to Cytation.
3. DIRECTORS AND OFFICERS AND GOVERNING DOCUMENTS. The directors
and officers of CollegeLink shall be the same upon the Effective Date as they
are immediately prior thereto. The Certificate of Incorporation of CollegeLink,
as in effect on the Effective Date, shall continue to be the Certificate of
Incorporation of CollegeLink as the surviving corporation without change or
amendment until further amended in accordance with the provisions thereof and
applicable laws. The By-Laws of CollegeLink, as in effect on the Effective Date,
shall continue to be the By-Laws of CollegeLink as the surviving corporation
without change or amendment until further amended in accordance with the
provisions thereof and applicable laws.
4. FURTHER ASSURANCES. From time to time, as and when required by
CollegeLink or by its successors and assigns, there shall be executed and
delivered on behalf of Cytation such deeds and other instruments, and there
shall be taken or caused to be taken by it such further and other action, as
shall be appropriate or necessary in order to vest, perfect or confirm, of
record or otherwise, in CollegeLink the title to and possession of all the
property, interest, assets, rights, privileges, immunities, powers, franchises
and authority of Cytation, and otherwise to carry out the purposes of this Plan
of Merger, and the officers and directors of CollegeLink are fully authorized to
take any and all such action and to execute and delivery any and all such deeds
and other instruments.
5. CAPITAL STOCK OF CYTATION. Upon the Effective Date, by virtue
of the Merger and without any action on the part of the holder hereof, each
share of Cytation Common Stock outstanding immediately prior thereto shall be
changed and converted into one (1) fully-paid and non-assessable share of
CollegeLink Common Stock; each share of Cytation Series A Preferred Stock
outstanding shall be changed and converted into one (1) fully-paid and
non-assessable share of CollegeLink Series A Preferred Stock; each share of
Cytation Series B Preferred Stock outstanding shall be changed and converted
into one (1) fully-paid and non-assessable share of CollegeLink Series B
Preferred Stock; and each share of Cytation Series C Preferred Stock outstanding
shall be changed and converted into one (1) fully-paid and non-assessable share
of CollegeLink Series C Preferred Stock.
2
<PAGE> 3
6. STOCK CERTIFICATES. On and after the Effective Date, all of
the outstanding certificates which prior to that time represented shares of
Cytation Common Stock shall be deemed for all purposes to evidence ownership of
and to represent the shares of CollegeLink Common Stock into which the shares of
Cytation Common Stock represented by such certificates have been converted as
herein provided; all of the outstanding certificates which prior to that time
represented shares of Cytation Series A Preferred Stock shall be deemed for all
purposes to evidence ownership and to represent the shares of CollegeLink Series
A Preferred Stock into which the shares of Cytation Series A Preferred Stock
represented by such certificates have been converted as herein provided; all of
the outstanding certificates which prior to that time represented shares of
Cytation Series B Preferred Stock shall be deemed for all purposes to evidence
ownership and to represent the shares of CollegeLink Series B Preferred Stock
into which the shares of Cytation Series B Preferred Stock represented by such
certificates have been converted as herein provided; and all of the outstanding
certificates which prior to that time represented shares of Cytation Series C
Preferred Stock shall be deemed for all purposes to evidence ownership and to
represent the shares of CollegeLink Series C Preferred Stock into which the
shares of Cytation Series C Preferred Stock represented by such certificates
have been converted as herein provided. The registered owner on the books and
records of CollegeLink or its transfer agent of any such outstanding stock
certificate shall, until such certificate shall have been surrendered for
transfer or otherwise accounted for to CollegeLink or its transfer agent, have
and be entitled to exercise any voting and other rights with respect to, and to
receive any dividend and other distributions upon the shares of CollegeLink
Common Stock, CollegeLink Series A Preferred Stock, CollegeLink Series B
Preferred Stock, or CollegeLink Series C Preferred Stock as the case may be,
evidenced by such outstanding certificate as above provided.
7. CONTINUATION AND RATIFICATION OF OPTIONS TO PURCHASE COMMON
STOCK. The Cytation.com Incorporated 1999 Stock Option Plan (the "Cytation 1999
Plan") shall continue in effect as the 1999 Stock Option Plan of CollegeLink
(the "CollegeLink 1999 Plan"). Each option to purchase Cytation Common Stock
granted under the Cytation 1999 Plan immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, become an option to purchase, at the same exercise price and on the
same terms, one share of CollegeLink Common Stock under the CollegeLink 1999
Plan. The Web Services International, Inc. 1996 Stock Plan (the "Cytation 1996
Plan") shall continue in effect as the 1996 Stock Option Plan of CollegeLink
(the "CollegeLink 1996 Plan"). Each option to purchase Cytation Common Stock
granted under the Cytation 1996 Plan immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, become an option to purchase, at the same exercise price and on the
same terms, one share of CollegeLink Common Stock under the CollegeLink 1996
Plan.
8. COLLEGELINK COMMON STOCK. Forthwith upon the Effective Date,
the 100 shares of CollegeLink Common Stock presently issued and outstanding in
the name of Cytation shall be cancelled and retired and resume the status of
authorized and unissued shares of CollegeLink Common Stock, and no shares of
CollegeLink Common Stock or other securities of CollegeLink shall be issued in
respect thereof.
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9. EMPLOYEE BENEFIT PLANS. As of the Effective Date, CollegeLink
hereby assumes all obligations of Cytation under any and all employee benefit
plans in effect as of said date or with respect to which employee rights or
accrued benefits are outstanding as of said date including, without limitation,
all issued and outstanding options.
10. COVENANT OF COLLEGELINK. CollegeLink covenants and agrees that
on or before the Effective Date it will qualify to do business as a foreign
corporation in the State of New York.
11. AMENDMENT. Subject to applicable law, at any time before or
after approval and adoption by the stockholders of Cytation, this Plan of Merger
may be amended, supplemented or modified in any manner.
12. ABANDONMENT. At any time before the Effective Date, this Plan
of Merger may be terminated and the Merger may be abandoned by the Board of
Directors of either Cytation or CollegeLink, or both, notwithstanding approval
of this Plan of Merger by the stockholders of Cytation.
13. COUNTERPARTS. In order to facilitate the filing and recording
of this Plan of Merger, the same may be executed in any number of counterparts,
each of which shall be deemed to be an original and the same agreement.
The remainder of this page is left blank intentionally.
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<PAGE> 5
IN WITNESS WHEREOF, the Plan of Merger, having first been duly approved
by resolutions of the Boards of Directors of CollegeLink and Cytation, is hereby
executed as of the date first above written on behalf of each of said two
corporations by their respective officers thereunto duly authorized.
ATTEST: COLLEGELINK.COM INCORPORATED
a Delaware corporation
/s/ Krista Michael By: /s/ Kevin J. High
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Secretary President
ATTEST: CYTATION.COM INCORPORATED
a New York corporation
/s/ Krista Michael By: /s/ Kevin J. High
- ------------------------------- ----------------------------------
Secretary President
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Exhibit 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
COLLEGELINK.COM INCORPORATED
PURSUANT TO SECTION 242 AND 245 OF THE GENERAL CORPORATION LAW OF THE STATE OF
DELAWARE
CollegeLink.com Incorporated, a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
does hereby certify as follows:
1. The name of the Corporation is CollegeLink.com Incorporated. The
original certificate of incorporation of the Corporation was filed with the
office of the Secretary of State of Delaware on November 1, 1999.
2. This Amended and Restated Certificate of Incorporation was
recommended to the sole stockholder of the Corporation for approval as being
advisable and in the best interests of the Corporation by resolutions adopted by
the Board of Directors at a meeting of the Board of Directors on November 11,
1999.
3. The Amended and Restated Certificate of Incorporation was adopted by
the affirmative vote of the sole stockholder of the Corporation at a special
meeting of the sole stockholder on November 11, 1999.
4. This Amended and Restated Certificate of Incorporation restates,
integrates and amends the certificate of incorporation of the Corporation.
5. The text of the Corporation's certificate of incorporation is
amended and restated in its entirety to read as follows:
FIRST: The name of the corporation is CollegeLink.com Incorporated (the
"Corporation").
SECOND: The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, Wilmington, Delaware, County of New Castle, and
the name of its registered agent at such address is Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of capital stock that the Corporation shall
have the authority to issue shall be 110,000,000 shares, consisting of
100,000,000 shares of
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common stock, $0.001 par value per share ("Common Stock"), and 10,000,000 shares
of preferred stock, $.01 par value per share ("Preferred Stock").
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the Corporation:
A. COMMON STOCK.
1. General. The voting, dividend and liquidation rights of the holders
of the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any Series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of Common Stock will be entitled to one vote per
share on all matters to be voted on by the stockholders of the Corporation.
There shall be no cumulative voting.
3. Dividends. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential liquidation rights of any then
outstanding Preferred Stock.
B. PREFERRED STOCK.
Preferred Stock may be issued from time to time in one or more series,
each of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. No share of
Preferred Stock that is redeemed, purchased or acquired by the Corporation may
be reissued except as otherwise provided herein or by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided herein, in any
such resolution or resolutions, or by law.
Authority is hereby expressly granted to the Board of Directors from
time to time to issue the Preferred Stock in one or more series, and in
connection with the creation of any such series, by resolution or resolutions
providing for the issue of the shares thereof, to determine and fix such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, including, without
limitation thereof, dividend rights, conversion rights, redemption privileges
and liquidation preferences, as
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shall be stated and expressed in such resolutions, all to the full extent now or
hereafter permitted by the General Corporation Law of Delaware. Without limiting
the generality of the foregoing, the resolutions providing for issuance of any
series of Preferred Stock may provide that such series shall be superior or rank
equally or be junior to the Preferred Stock of any other series to the extent
permitted by law. Except as otherwise provided by law or by this Certificate of
Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the issuance of any shares of any series of the
Preferred Stock authorized by and complying with the conditions of the
Certificate of Incorporation, the right to have such vote being expressly waived
by all present and future holders of the capital stock of the Corporation.
C. SERIES A PREFERRED SHARES
1. Designation and Initial Number. Of the 10,000,000 authorized shares
of Preferred Stock two million five hundred thousand (2,500,000) shall be
designated the "Series A Preferred Shares". The Stated Value of the Series A
Preferred Stock shall be $4.00 per share, and the Par Value of the Series A
Preferred Stock shall be $.01 per share.
2. Distributions. The holders of the Series A Preferred Stock shall be
entitled to receive, out of funds at the time legally available for payment of
dividends in the State of Delaware, a cumulative dividend at the rate of six
percent (6%) per share per annum, payable quarterly in equal installments on the
first day of each successive quarter each year, if, as and when determined by
the Board of Directors, before any dividend shall be set apart or paid on any
other capital stock for such year.
3. Conversion. The Series A Preferred Stock shall be convertible into
Common Stock as hereinafter provided and, when so converted, shall be canceled
and retired and shall not be reissued as such:
(a) Any holder of the Series A Preferred Stock may at any time
or from time to time convert such stock into the Common Stock of the Company, on
presentation and surrender to the Company, of the certificates of the Series A
Preferred Stock to be so converted together with the Notice of Conversion
("Conversion Notice").
Conversion shall be deemed to have been effected on
the date the Conversion Notice is given by the Investor to the Company (the
"Conversion Date"). Within 10 business days after receipt of the Conversion
Notice, the Company shall issue and deliver by hand against a signed receipt
therefor or by United States registered mail, return receipt requested, or by
overnight delivery service, to the address designated by the Investor in the
Conversion Notice, a stock certificate or stock certificates of the Company
representing the number of shares of Common Stock to which such Investor is
entitled and a check or cash in payment of all accrued and unpaid dividends.
(b) Each holder of Series A Preferred Stock shall have the
right to convert such Series A Preferred Stock on and subject to the following
terms and conditions:
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(i) The Series A Preferred Stock shall be converted
into Common Stock at the conversion rate, determined as hereinafter provided, in
effect at the time of conversion. Unless such conversion rate shall be adjusted
as hereinafter provided, the conversion rate shall be one (1) share of Common
Stock for each share of Series A Preferred Stock so converted at $4.00 per share
("Conversion Ratio").
(ii) In order to convert Series A Preferred Stock
into Common Stock, the holder thereof shall on any business day surrender to
American Securities Transfer, Inc., whose address is 12039-Z2 West Alameda
Parkway, Lakewood, Colorado 80228 (or any other transfer agent designated by the
Company by written notice to the holders of Series A Preferred Stock), the
certificate or certificates representing such shares, duly endorsed to the
Company or in blank, and give written notice to the Company at said office of
the number of said shares which such holder elects to convert. Conversion of the
Series A Preferred Stock shall be deemed to have been effected on the date a
conversion notice is given by the Investor to the Company, and the person or
persons entitled to receive the Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder or holders of such Common Stock
at such time. As promptly as practicable on or after the date of any conversion,
the Company shall issue and deliver a certificate or certificates representing
the number of shares of Common Stock issuable upon such conversion, together
with cash in lieu of any fraction of a share, to the person or persons entitled
to receive same. In case of the conversion of only a part of the shares of any
holder of Series A Preferred Stock, the Company shall also issue and deliver to
such holder a new certificate of Series A Preferred Stock representing the
number of shares of such Series A Preferred Stock not converted by such holder.
(c) The Company may require mandatory conversion of all, but
not less than all, of the Series A Preferred Stock on or after the first
anniversary of the initial purchase and sale of the Series A Preferred Stock
("the Mandatory Conversion Date"), provided that:
(i) The average closing bid price of the Company on
the Over-the-Counter Bulletin Board or the Nasdaq Stock Market or other
principal trading market for the Common Stock, as applicable, for the twenty
(20) consecutive trading days immediately preceding the Mandatory Conversion
Date has exceeded $6.00 per share, or;
(ii) If there is a reorganization of the Company
involving an exchange of Company's Common Stock for shares of a United States
domiciled corporation the shares of which are trading on a national exchange or
on the Nasdaq Stock Market.
Conversion of the Series A Preferred Shares to Common
Stock pursuant to this paragraph 3(c) shall be deemed to have occurred on the
Mandatory Conversion Date whether or not an Investor delivers to the Company its
certificate or
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certificates for the Series A Preferred Stock.
(d) The Conversion Ratio shall be subject to adjustment as
follows:
(i) In case issued and outstanding shares of Common
Stock shall be subdivided or split up into a greater number of shares of the
Common Stock, the Conversion Ratio in effect at the opening of business on the
business day immediately preceding the date fixed for the determination of the
stockholders whose shares of Common Stock shall be subdivided or split up (the
"Split Record Date") shall be proportionately increased, and in case issued and
outstanding shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the Conversion Ratio in effect at the opening of
business on the business day immediately preceding the date fixed for the
determination of the stockholders whose shares of Common Stock shall be combined
(the "Combination Record Date") shall be proportionately decreased, such
increase or decrease, as the case may be, becoming effective immediately after
the opening of business on the business day immediately after the Split Record
Date or the Combination Record Date, as the case may be.
(ii) In case of any capital reorganization, any
reclassification of the stock of the Company (other than as a result of a stock
dividend or subdivision, split up or combination of shares), or the merger of
the Company with or into another person or entity (other than a merger in which
the Company is the continuing corporation and which does not result in any
change in the Common Stock) or of the sale, exchange, lease, transfer or other
disposition of all or substantially all of the properties and assets of the
Company as an entirety or the participation by the Company in a share exchange
as the corporation the stock of which is to be acquired, the Series A Preferred
Stock shall (effective on the opening of business on the date after the
effective date of such reorganization, reclassification, merger, sale or
exchange, lease, transfer or other disposition or share exchange) be convertible
into the kind and number of shares of stock or other securities or property of
the Company or of the corporation resulting from surviving such merger or to
which such properties and assets shall have been sold, exchanged, leased,
transferred or otherwise disposed or which was the corporation whose securities
were exchanged for those of the Company to which the holder of the number of
shares of Common Stock deliverable (at the close of business on the date
immediately preceding the effective date of such reorganization,
reclassification, merger, sale, exchange, lease, transfer or other disposition
or share exchange) upon conversion of Series A Preferred Stock would have been
entitled upon such reorganization, reclassification, merger, sale, exchange,
lease, transfer or other disposition or share exchange. The provisions of this
subparagraph 3(b)(ii) shall similarly apply to successive reorganizations,
reclassifications, mergers, sales, exchanges, leases, transfers or other
dispositions or other share exchanges.
(iii) Whenever the Conversion Ratio shall be adjusted
as provided herein, the Company shall prepare and send to the holders of the
Series A Preferred Stock a statement, signed by the chief financial officer of
the Company, showing in detail the facts requiring such adjustment and the
Conversion Ratio that shall
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be in effect after such adjustment.
(iv) In the event the Company shall propose to take
any action of the types described in paragraph 3 hereof, the Company shall give
notice to the holder of Series A Preferred Stock, which notice shall specify the
record date, if any, with respect to any such action and the date on which such
action is to take place. Such notice shall be given on or prior to the earlier
of 30 days prior to the record date or the date which such action shall be
taken. Such notice shall also set forth such facts with respect thereto as shall
be reasonably necessary to indicate the effect of such action (to the extent
such effect may be known at the date of such notice) on the Conversion Ratio and
the number, kind or class of shares or other securities or property which shall
be deliverable or purchasable upon the occurrence of such action or deliverable
upon conversion of the Series A Preferred Stock. Failure to give notice in
accordance with this paragraph 3(d)(iv) shall not render such action ultra
vires, illegal or invalid.
(e) No adjustment of the conversion rate shall be made in any
of the following cases:
(i) upon the grant or exercise of stock options
hereafter granted, or under any employee stock option plan now or hereafter
authorized, to the extent that the aggregate of the number of shares which may
be purchased under such options and the number of shares issued under such
employee stock purchase plan is less than or equal to ten percent (10%) of the
number of shares of Common Stock outstanding on January 1 of the year of the
grant or exercise;
(ii) shares of Common Stock issued upon the
conversion of Series A Preferred Stock;
(iii) shares issued in connection with the
acquisition by the Company or by any subsidiary of the Company of 80% or more of
the assets of another corporation, and shares issued in connection with the
acquisition by the Company or by any subsidiary of the Company of 80% or more of
the voting shares of another corporation (including shares issued in connection
with such acquisition of voting shares of such other corporation subsequent to
the acquisition of an aggregate of 80% of such voting shares), shares issued in
a merger of the Company or a subsidiary of the Company with another corporation
in which the Company or the Company's subsidiary is the surviving corporation,
and shares issued upon the conversion of other securities issued in connection
with any such acquisition or in any such merger;
(iv) shares issued by way of dividend or other
distribution on Common Stock excluded from the calculation of the adjustment
under this paragraph 3(e)(iv) or on Common Stock resulting from any subdivision
or combination of Common Stock so excluded; or
(v) shares issued pursuant to all stock options and
warrants outstanding on April 5, 1999, which date represents the date of the
filing of a Certificate
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of Amendment to the Certificate of Incorporation of Cytation.com Incorporated, a
predecessor company, with the Secretary of State of the State of New York,
creating a class of Series A Preferred Stock of Cytation.com Incorporated.
(f) Whenever the conversion rate is adjusted as herein
provided, the Company shall prepare a certificate signed by the Treasurer of the
Company setting forth the adjusted conversion rate and showing in reasonable
detail the facts upon which such adjustment is based. As promptly as
practicable, the Company shall cause a copy of such certificate to be mailed to
each holder of record of issued and outstanding Series A Preferred Stock at the
address of such holder appearing on the Company's books.
(g) The Company shall pay all taxes that may be payable in
respect of the issue or delivery of Common Stock on conversion of Series A
Preferred Stock pursuant hereto, but shall not pay any tax which may be payable
with respect to income or gains of the holder of any Series A Preferred Stock or
Common Stock or any tax which may be payable in respect of any transfer involved
in the issue and delivery of the Common Stock in a name other than that in which
the Series A Preferred Stock so converted was registered, and no such issue or
delivery shall be made unless and until the person requesting such issue has
paid to the Company the amount of any such tax, or has established, to the
satisfaction of the Company, that such tax has been paid.
(h) Upon conversion of any shares of Series A Preferred Stock,
the holders of the shares of Series A Preferred Stock so converted shall not be
entitled to receive any dividends declared with respect to such shares of Series
A Preferred Stock unless such dividends shall have been declared by the Board of
Directors and the record date for such dividends shall have been on or before
the date such shares shall have been converted. No payment or adjustment shall
be made on account of dividends declared and payable to holders of Common Stock
of record on a date prior to the date of conversion.
(i) No fractional shares or scrip representing fractional
shares shall be issued upon the conversion of any shares of Series A Preferred
Stock. If more than one share of Series A Preferred Stock shall be surrendered
for conversion at one time by the same holder, the number of full shares
issuable upon conversion thereof shall be computed on the basis of the aggregate
number of such shares so surrendered. If the conversion of any share of Series A
Preferred Stock results in a fraction, an amount equal to such fraction
multiplied by the current market of the Common Stock on the day of conversion
shall be paid to such holder in cash by the Company.
(j) The Company shall at all times reserve and keep available,
free from preemptive rights, out of its authorized Common Stock, for the purpose
of effecting the conversion of the issued and outstanding Series A Preferred
Stock, the full number of shares of Common Stock then deliverable in the event
and upon the conversion of all of the Series A Preferred Stock then issued and
outstanding.
4. Liquidation or Dissolution. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the affairs of the
Company, the holders of the
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issued and outstanding Series A Preferred Stock shall be entitled to receive for
each share of Series A Preferred Stock, before any distribution of the assets of
the Company shall be made to the holders of any other capital stock, a dollar
amount equal to the Stated Value thereof plus all accrued and unpaid
distributions declared thereon, without interest. After such payment shall have
been made in full to the holders of the issued and outstanding Series A
Preferred Stock, or funds necessary for such payment shall have been set aside
in trust for the account of the holders of the issued and outstanding Series A
Preferred Stock so as to be and continue to be available therefor, then, before
any further distribution of the assets of the Company shall be made, a dollar
amount equal to that already distributed to the holders of the Series A
Preferred Stock shall be distributed pro-rata to the holders of the other issued
and outstanding capital stock of the Company, subject to the rights of any other
class of capital stock set forth in the Certificate of Incorporation, as
amended, of the Company. After such payment shall have been made in full to the
holders of such other issued and outstanding capital stock, or funds necessary
for such payment shall have been set aside in trust for the account of the
holders of such other issued and outstanding capital stock so as to be and
continue to be available therefor, the holders of the issued and outstanding
Series A Preferred Stock shall be entitled to participate with the holders of
all other classes of issued and outstanding capital stock in the final
distribution of the remaining assets of the Company, and, subject to any rights
of any other class of capital stock set forth in the Certificate of
Incorporation, as amended, of the Company, the remaining assets of the Company
shall be divided and distributed ratably among the holders of both the Series A
Preferred Stock and the other capital stock then issued and outstanding
according to the proportion by which their respective record ownership of shares
of the Series A Preferred Stock and such capital stock bears to the total number
of shares of the Series A Preferred Stock and such capital stock then issued and
outstanding. If, upon such liquidation, dissolution, or winding up, the assets
of the Company distributable, as aforesaid, among the holders of the Series A
Preferred Stock shall be insufficient to permit the payment to them of said
amount, the entire assets shall be distributed ratably among the holders of the
Series A Preferred Stock. A consolidation or merger of the Company, a share
exchange, a sale, lease, exchange or transfer of all or substantially all of its
assets as an entirety, or any purchase or redemption of stock of the Company of
any class, shall not be regarded as a "liquidation, dissolution, or winding up
of the affairs of the Company" within the meaning of this paragraph 4.
5. Voting Rights. Except as otherwise provided in paragraph 6 below,
each share of Series A Preferred Stock is entitled to one vote, voting together
with the holders of shares of Common Stock and not as a class, on each matter
submitted to a vote at a meeting of stockholders of the Company.
6. Changes In Terms of Series A Preferred Stock. The terms of the
Series A Preferred Stock may not be amended, altered or repealed, and no class
of capital stock or securities convertible into capital stock shall be
authorized which has superior rights to the Series A Preferred Stock as to
distributions, liquidation or vote, without the consent of the holders of at
least two-thirds of the outstanding shares of Series A Preferred Stock.
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7. No Implied Limitations. Except as otherwise provided by express
provisions of this Certificate, nothing herein shall limit, by inference or
otherwise, the discretionary right of the Board of Directors to classify and
reclassify and issue any shares of Series A Preferred Stock and to fix or alter
all terms thereof to the full extent provided in the Certificate of
Incorporation, as amended, of the Company.
8. General Provisions. In addition to the above provisions with respect
to the Series A Preferred Stock, such Series A Preferred Stock shall be subject
to, and entitled to the benefits of the provisions set forth in this Certificate
of Incorporation with respect to Preferred Stock generally.
9. Notices. All notices required or permitted to be given by the
Company with respect to the Series A Preferred Stock shall be in writing, and if
delivered by first class United States mail, postage prepaid, or by overnight
delivery service, to the holders of the Series A Preferred Stock at their last
addresses as they shall appear upon the books of the Company, shall be
conclusively presumed to have been duly given, whether or not the stockholder
actually receives such notice; provided, however, that failure to duly give such
notice by mail, or any defect in such notice, to the holders of any stock
designated for redemption, shall not affect the validity of the proceedings for
the redemption of any other shares of Preferred Stock.
D. SERIES B PREFERRED SHARES
1. Designation. Of the 10,000,000 shares of authorized Preferred Stock,
300,000 shall be designated and known as "Series B Preferred Stock".
2. Conversion. The holders of Series B Preferred Stock shall have
conversion rights as follows:
(a) Definitions. For the purposes of this Section 2, the
following definitions shall apply:
"Automatic Conversion Date" means the first anniversary of the
Original Issue Date.
"Automatic Conversion Date Price" means the average of the
closing bid price per share of the Common Stock (as quoted on
the Nasdaq OTC Bulletin Board, or the Nasdaq Stock Market, as
the case may be) for the 20 consecutive trading days
immediately preceding the Automatic Conversion Date.
"Closing Date Price" means $7.625.
"Common Stock" means the common stock, $.001 par value per
share, of the Corporation.
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"Optional Conversion Date Price" means, with respect to a
given date, the average of the closing bid price per share of
the Common Stock (as quoted on the Nasdaq OTC Bulletin Board,
or the Nasdaq Stock Market, as the case may be) for the 10
consecutive trading days immediately preceding such date.
"Original Issue Date" of the Company's Series B Preferred
Stock means August 10, 1999, the first date on which a share
of Series B Preferred Stock of Cytation.com Incorporated, a
predecessor company, was issued in New York.
"Series B Conversion Price" is the price at which shares of
Common Stock shall be deliverable upon conversion of Series B
Preferred Stock without the payment of any additional
consideration by the holder thereof.
"Transfer Agent" means American Securities Transfer, Inc.,
whose address is 12039-Z2 West Alameda Parkway, Lakewood,
Colorado 80228, and any successor transfer agent appointed by
the Corporation.
(b) Right to Convert; Conversion Price. Subject to the terms
and conditions of this Section 2, each share of Series B Preferred Stock shall
be convertible, without the payment of any additional consideration by the
holder thereof at the office of the Transfer Agent, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing
$15.00 (which amount shall be subject to equitable adjustment whenever there
shall occur a stock dividend, stock split, combination of shares,
reclassification or other similar event with respect to the Series B Preferred
Stock) by the Series B Conversion Price, determined as hereinafter provided, in
effect at the time of conversion.
(c) Automatic Conversion.
(i) Timing and Price. Each share of Series B
Preferred Stock shall automatically be converted into shares of Common Stock on
the Automatic Conversion Date. For the purposes of this Section 2(c), the Series
B Conversion Price on the Automatic Conversion Date shall be equal to the
greater of (i) the Closing Date Price (which amount shall be subject to
equitable adjustment whenever there shall occur a stock dividend, stock split,
combination of shares, reclassification or other similar event with respect to
the Common Stock) and (ii) the Automatic Conversion Date Price.
(ii) Mechanics. On the Automatic Conversion Date, the
Series B Preferred Stock shall be converted automatically without any further
action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Transfer Agent; provided, that
the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such
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conversion unless certificates evidencing such shares of the Series B Preferred
Stock being converted are either delivered to the Transfer Agent, or the holder
notifies the Transfer Agent that such certificates have been lost, stolen, or
destroyed and executes an agreement satisfactory to the Corporation to indemnify
the Corporation from any loss incurred by it in connection therewith and, if the
Corporation so elects, provides an appropriate indemnity bond. On the Automatic
Conversion Date, all rights with respect to the Series B Preferred Stock so
converted shall terminate except for the right of the holder thereof, upon
surrender of the holder's certificate or certificates therefor, to receive
certificates for the number of shares of Common Stock into which such Series B
Preferred Stock has been converted. Upon the automatic conversion of the Series
B Preferred Stock, the holders of such Series B Preferred Stock shall surrender
the certificates representing such shares at the office of the Transfer Agent.
If so required by the Transfer Agent, certificates surrendered for conversion
shall be endorsed or accompanied by written instrument or instruments of
transfer, in form satisfactory to the Transfer Agent, duly executed by the
registered holder or by the holder's attorney duly authorized in writing. Upon
surrender of such certificates there shall be issued and delivered to such
holder, promptly at such office and in the holder's name as shown on such
surrendered certificate or certificates, a certificate or certificates for the
number of shares of Common Stock into which the shares of the Series B Preferred
Stock surrendered were convertible on the Automatic Conversion Date. No
fractional share of Common Stock shall be issued upon automatic conversion of
the Series B Preferred Stock. In lieu of any fractional share to which the
holder would otherwise be entitled, the Corporation shall pay cash equal to such
fraction multiplied by the Automatic Conversion Date Price.
(d) Optional Conversions.
(i) Timing and Price. Each share of Series B
Preferred Stock may be converted into shares of Common Stock, at the option of
the holder thereof, at any time (i) after the Original Issue Date, (ii) prior to
the Automatic Conversion Date and (iii) that the Optional Conversion Date Price
is greater than $15.00 (which amount shall be subject to equitable adjustment
whenever there shall occur a stock dividend, stock split, combination of shares,
reclassification or other similar event with respect to the Common Stock). For
the purposes of this Section 2(d), the Series B Conversion Price applicable to
an optional conversion pursuant to this Section 2(d) shall be the Optional
Conversion Date Price on the date of the Conversion Notice (as defined below).
(ii) Mechanics. In order to convert his shares of
Series B Preferred Stock into shares of Common Stock pursuant to this Section
2(d), a holder of Series B Preferred Stock shall surrender the certificate or
certificates therefor at the office of the Transfer Agent, and shall give
written notice (the "Conversion Notice") to the Transfer Agent at such office
that the holder elects to convert the same and shall state therein the holder's
name or the name or names of the holder's nominees in which
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<PAGE> 12
the holder wishes the certificate or certificates for shares of Common Stock to
be issued. On the date of conversion, all rights with respect to the Series B
Preferred Stock so converted shall terminate, except any of the rights of the
holders thereof, upon surrender of their certificate or certificates therefor,
to receive certificates for the number of shares of Common Stock into which such
Series B Preferred Stock has been converted. If so required by the Transfer
Agent, certificates surrendered for conversion shall be endorsed or accompanied
by written instrument or instruments of transfer, in form satisfactory to the
Transfer Agent, duly executed by the registered holder or by the holder's
attorney duly authorized in writing. No fractional share of Common Stock shall
be issued upon optional conversion of the Series B Preferred Stock. In lieu of
any fractional share to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the Optional
Conversion Date Price on the date of the Conversion Notice. The Corporation
shall cause the Transfer Agent, as soon as practicable after surrender of the
certificate or certificates for conversion, issue and deliver at such office to
such holder of Series B Preferred Stock, or to the holder's nominee or nominees,
a certificate or certificates for the number of shares of Common Stock to which
the holder shall be entitled as aforesaid, together with cash in lieu of any
fraction of a share. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of the Conversion Notice,
and the person or persons entitled to receive the shares of Common Stock
issuable upon conversion shall be treated for all purposes as the record holder
or holders of such shares of Common Stock on such date.
(e) Notices. All notices required or permitted to be sent
pursuant to this Section 2 shall be deemed sufficient if contained in a written
instrument and delivered in person or duly sent by first-class mail postage
prepaid or by fax or DHL, Federal Express or other recognized express courier
service, addressed to the intended recipient at the recipient's address as it
appears on the books of the Corporation.
3. Dividends. The holders of shares of Series B Preferred Stock shall
not be entitled to receive any dividends.
4. Liquidation Rights. The holders of shares of Series B Preferred
Stock shall not be entitled to any preferential payment or distribution in the
event of any liquidation, dissolution or winding up of the Corporation, but
shall share ratably on an as-converted basis assuming automatic conversion in
any distribution of the assets of the Corporation to all the holders of Common
Stock.
5. Voting Rights. Except as otherwise required by law or as set forth
in the Certificate of Incorporation of the Corporation, the holders of Series B
Preferred Stock shall not be entitled to vote on any matter or to notice of any
meeting of the stockholders.
6. No Reissuance of Preferred Stock. No share or shares of Series B
Preferred Stock acquired by the Corporation by reason of conversion or otherwise
shall
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be reissued, and all such shares shall be cancelled, retired and eliminated from
the shares which the Corporation shall be authorized to issue.
7. Residual Rights. All rights accruing to the outstanding shares of
the Corporation not expressly provided for to the contrary herein shall be
vested in the Common Stock.
E. SERIES C PREFERRED SHARES
1. Designation, Initial Number and Date of Issue. Of the 10,000,000
shares of authorized Preferred Stock, 1,000,000 shall be designated and known as
the "Series C Preferred Stock" (the "Series C Preferred Stock"). The Stated
Value of the Series C Preferred Stock shall be $4.00 per share, and the Par
Value of the Series C Preferred Stock shall be $.01 per share. September 30,
1999, the date on which the Series C Preferred Stock of Cytation.com
Incorporated, a predecessor company, was issued in New York is referred to
herein as the "Date of Issue" of the Company's Series C Preferred Stock.
2. Distributions. The holders of the Series C Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors of the
Company, out of funds at the time legally available for payment of dividends in
the State of Delaware, a cumulative dividend at an annual rate, based on a year
of 360 days consisting of 12 thirty-day months, equal to 6% applied to the
amount of the Stated Value per share of Series C Preferred Stock. Such dividends
shall be payable in respect of each share of Series C Preferred Stock quarterly,
in arrears, on the last day of March, June, September and December in each year
(each a "Dividend Payment Date"), commencing on the first such date to occur
which is at least thirty days after its Date of Issue. The dividend payable on
the first Dividend Payment Date shall be calculated and based on the period from
the Date of Issue through such Dividend Payment Date. Each period commencing on
the later of the Date of Issue of a share of the Series C Preferred Stock or the
first day after the last preceding Dividend Payment Date and ending on the next
Dividend Payment Date or, in the case of a final dividend, the effective date of
a liquidating distribution or conversion of such shares of Series C Preferred
Stock into Common Stock is referred to herein as a "Dividend Period." If the
date fixed for payment of a final liquidating distribution on any shares of
Series C Preferred Stock or the date on which any shares of Series C Preferred
Stock are converted into Common Stock does not coincide with a Dividend Payment
Date, then subject to the provisions hereof relating to such liquidating
distribution or conversion, the final Dividend Period applicable to such shares
shall be the period from the last Dividend Payment Date prior to the date such
liquidating distribution or conversion occurs through the effective date of such
liquidating distribution or conversion.
3. Conversion. Subject to the limitation set forth in paragraph 3(k)
below, the Series C Preferred Stock shall be convertible into such number of
fully paid, validly issued and nonassessable shares of Common Stock, free and
clear of any liens, claims or encumbrances as hereinafter provided and, when so
converted, shall be canceled and retired and shall not be reissued as such:
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<PAGE> 14
(a) Any holder of the Series C Preferred Stock may at any time
or from time to time convert such stock into the Common Stock of the Company. In
order to convert the Series C Preferred Stock into Common Stock, the holder
thereof on any business day must present and surrender to the Company at its
offices located at 55 Hammarlund Way, Newport, RI 02842 (or such other address
as the Company shall designate) the certificate or certificates of the Series C
Preferred Stock to be converted into Common Stock, duly endorsed to the Company
or in blank, together with a notice of conversion, which shall state therein the
number of shares to be converted and the name or names in which such holder
wishes the certificate or certificates for Common Stock to be issued
("Conversion Notice").
(b) Each holder of Series C Preferred Stock shall have the
right to convert such Series C Preferred Stock on and subject to the following
terms and conditions:
(i) The Series C Preferred Stock shall be converted
into Common Stock at the conversion ratio, determined as hereinafter provided,
in effect at the time of conversion. Unless such conversion ratio shall be
adjusted as hereinafter provided, the conversion ratio shall be one (1) share of
Common Stock for each share of Series C Preferred Stock ("Conversion Ratio").
(ii) The conversion of the Series C Preferred Stock
shall be deemed to have occurred on the date the holder thereof provides and
surrenders, as the case may be, to the Company, pursuant to paragraph 3(a)
hereof, a Conversion Notice and the certificate or certificates representing the
Series C Preferred Stock to be converted into Common Stock, duly endorsed to the
Company or in blank. The person or persons entitled to receive the Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such Common Stock at such time. As promptly as practicable
on or after the date of any conversion, but in no event later than 10 business
days following the receipt by the Company of the Conversion Notice, the Company
shall issue and deliver by hand against a signed receipt therefor or by United
States registered mail, return receipt requested, or by overnight delivery
service, to the address designated by the holder in the Conversion Notice, a
stock certificate or stock certificates of the Company representing the number
of shares of Common Stock to which such holder is entitled, together with check
or cash in lieu of any fraction of a share and in payment of all accrued and
unpaid dividends, to the person or persons entitled to receive same. In case of
the conversion of only a part of the shares of any holder of Series C Preferred
Stock, the Company shall also issue and deliver to such holder a new certificate
of Series C Preferred Stock representing the number of shares of such Series C
Preferred Stock not converted by such holder.
(c) (i) Subject to the limitation set forth in paragraph 3(k)
below, the Company may require mandatory conversion of all, but not less than
all, of the Series C Preferred Stock on or after the first anniversary of the
initial purchase and sale of the Series C Preferred Stock (the "Mandatory
Conversion Date"), provided that (x)
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<PAGE> 15
after the first anniversary of the initial purchase and sale of the Series C
Preferred Stock the average closing bid price of the Company's Common Stock on
the Over-the-Counter Bulletin Board or the Nasdaq Stock Market, as applicable,
for the 20 consecutive trading days immediately preceding the Mandatory
Conversion Date has exceeded $6.00 per share; and (y) the Company elected to
mandatory convert all other series of Preferred Stock.
(ii) Conversion of the Series C Preferred Stock into
Common Stock pursuant to this paragraph 3(c) shall be deemed to have occurred on
the Mandatory Conversion Date whether or not the holder of such stock delivers
to the Company its certificate or certificates for the Series C Preferred Stock.
Anything in this Section 3(c) to the contrary notwithstanding, the Company may
not require the conversion of any shares of Series C Preferred Stock unless,
concurrently with such mandatory conversion, the Company shall also require the
mandatory conversion of the same Pro Rata Proportion (as hereinafter defined) of
shares of the Series A Preferred Stock of the Company. For the purposes of the
preceding sentence "Pro Rata Proportion" shall mean a fraction the numerator of
which shall be the number of shares of Series C Preferred Stock or Series A
Preferred Stock, as the case may be, subject to mandatory conversion and the
denominator of which shall be all outstanding shares of Series C Preferred Stock
or Series A Preferred Stock, as the case may be.
(d) The Conversion Ratio shall be subject to adjustment as
follows:
(i) If the Company subdivides (e.g., stock dividend)
or splits up the issued and outstanding shares of Common Stock into a greater
number of shares of the Common Stock, the Conversion Ratio in effect at the
opening of business on the business day immediately preceding the date fixed for
the determination of the stockholders whose shares of Common Stock shall be
subdivided or split up (the "Split Record Date") shall be proportionately
increased, and in case issued and outstanding shares of Common Stock shall be
combined into a smaller number of shares of Common Stock, the Conversion Ratio
in effect at the opening of business on the business day immediately preceding
the date fixed for the determination of the stockholders whose shares of Common
Stock shall be combined (the "Combination Record Date") shall be proportionately
decreased, such increase or decrease, as the case may be, becoming effective
immediately after the opening of business on the business day immediately after
the Split Record Date or the Combination Record Date, as the case may be.
(ii) In case of any capital reorganization, any
reclassification of the stock of the Company (other than as a result of a stock
dividend or subdivision, split up or combination of shares), or the merger of
the Company with or into another person or entity (other than a merger in which
the Company is the continuing corporation and which does not result in any
change in the Common Stock) or of the sale, exchange, lease, transfer or other
disposition of all or substantially all of the properties and assets of the
Company as an entirety or the participation by the Company in a share exchange
as the corporation the stock of which is to be acquired, the Series C Preferred
Stock shall (effective on the opening of business on the date after the
effective date of such
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<PAGE> 16
reorganization, reclassification, merger, sale or exchange, lease, transfer or
other disposition or share exchange) be convertible into the kind and number of
shares of stock or other securities or property of the Company or of the
surviving corporation resulting from such merger or to which such properties and
assets shall have been sold, exchanged, leased, transferred or otherwise
disposed or which was the corporation whose securities were exchanged for those
of the Company to which the holder of the number of shares of Common Stock
deliverable (at the close of business on the date immediately preceding the
effective date of such reorganization, reclassification, merger, sale, exchange,
lease, transfer or other disposition or share exchange) upon conversion of
Series C Preferred Stock would have been entitled upon such reorganization,
reclassification, merger, sale, exchange, lease, transfer or other disposition
or share exchange. The provisions of this subparagraph 3(b)(ii) shall similarly
apply to successive reorganizations, reclassifications, mergers, sales,
exchanges, leases, transfers or other dispositions or other share exchanges.
(iii) If the Company shall issue to the holders of
its Common Stock rights or warrants to subscribe for or purchase shares of its
Common Stock at a price less than 90% of the Current Market Price (as defined
below in this paragraph) of the Company's Common Stock at the record date fixed
for the determination of the holders of Common Stock entitled to such rights or
warrants, the conversion rate in effect immediately prior to said record date
shall be increased, effective at the opening of business on the next following
full business day, to an amount determined by multiplying such conversion rate
by a fraction the numerator of which is the number of shares of Common Stock of
the Company outstanding immediately prior to said record date plus the number of
additional shares of its Common Stock offered for subscription or purchase and
the denominator of which is said number of shares outstanding immediately prior
to said record date plus the number of shares of Common Stock of the Company
which the aggregate subscription or purchase price of the total number of shares
so offered would purchase at the Current Market Price of the Company's Common
Stock at said record date. The term "Current Market Price" at said record date
shall mean the average of the daily last reported sale prices per share of the
Company's Common Stock on the principal stock exchange on which the Common Stock
is then listed during the 20 consecutive full business days commencing with the
30th full business day before said record date, provided that if there was no
reported sale on any such day or days there shall be substituted the average of
the closing bid and asked quotations on that exchange on that day, and provided
further that if the Common Stock was not listed on any stock exchange on any
such day or days there shall be substituted the average of the lowest bid and
the highest asked quotations in the over-the-counter market on that day.
(iv) Whenever the Conversion Ratio shall be adjusted
as provided herein, the Company shall prepare and send to the holders of the
Series C Preferred Stock a statement, signed by the chief financial officer of
the Company, showing in detail the facts requiring such adjustment and the
Conversion Ratio that shall be in effect after such adjustment.
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<PAGE> 17
(v) In the event the Company shall propose to take
any action of the types described in paragraph 3(d) hereof, the Company shall
give notice to the holder of Series C Preferred Stock, which notice shall
specify the record date, if any, with respect to any such action and the date on
which such action is to take place. Such notice shall be given on or prior to
the earlier of 30 days prior to the record date or the date which such action
shall be taken. Such notice shall also set forth such facts with respect thereto
as shall be reasonably necessary to indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the Conversion
Ratio and the number, kind or class of shares or other securities or property
which shall be deliverable or purchasable upon the occurrence of such action or
deliverable upon conversion of the Series C Preferred Stock. Failure to give
notice in accordance with this paragraph 3(d)(v) shall not render such action
ultra vires, illegal or invalid.
(e) No adjustment of the Conversion Ratio shall be made in any
of the following cases:
(i) the grant or exercise of stock options hereafter
granted, or under any employee stock option plan now or hereafter authorized, to
the extent that the aggregate of the number of shares which may be purchased
under such options and the number of shares issued under such employee stock
option plan is less than or equal to ten percent (10%) of the number of shares
of Common Stock outstanding on January 1 of the year of the grant or exercise;
(ii) the issuance of shares of Common Stock in
connection with the acquisition by the Company or by any subsidiary of the
Company of 80% or more of the assets of another corporation, and shares issued
in connection with the acquisition by the Company or by any subsidiary of the
Company of 80% or more of the voting shares of another corporation (including
shares issued in connection with such acquisition of voting shares of such other
corporation subsequent to the acquisition of an aggregate of 80% of such voting
shares), shares issued in a merger of the Company or a subsidiary of the Company
with another corporation in which the Company or the Company's subsidiary is the
surviving corporation, and shares issued upon the conversion of other securities
issued in connection with any such acquisition or in any such merger;
(iii) the issuance of shares of Common Stock pursuant
to all stock options, warrants and convertible securities outstanding on October
1, 1999, which date represents the date of the filing of a Certificate of
Amendment to the Certificate of Incorporation of Cytation.com Incorporated, a
predecessor company, with the Secretary of State of the State of New York,
creating a class of Series C Preferred Stock of Cytation.com Incorporated.
(iv) sales of Common Stock of the Company for cash in
an underwritten public offering.
(f) Whenever the Conversion Ratio is adjusted as herein
provided, the Company shall prepare a certificate signed by the Treasurer of the
Company setting forth
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the adjusted conversion ratio and showing in reasonable detail the facts upon
which such adjustment is based. As promptly as practicable, the Company shall
cause a copy of such certificate to be mailed to each holder of record of issued
and outstanding Series C Preferred Stock at the address of such holder appearing
on the Company's books.
(g) The Company shall pay all taxes that may be payable in
respect of the issue or delivery of Common Stock on conversion of Series C
Preferred Stock pursuant hereto, but shall not pay any tax which may be payable
with respect to income or gains of the holder of any Series C Preferred Stock or
Common Stock or any tax which may be payable in respect of any transfer involved
in the issue and delivery of the Common Stock in a name other than that in which
the Series C Preferred Stock so converted was registered, and no such issue or
delivery shall be made unless and until the person requesting such issue has
paid to the Company the amount of any such tax, or has established, to the
satisfaction of the Company, that such tax has been paid.
(h) (i) Upon conversion of any shares of Series C Preferred
Stock pursuant to paragraphs 3(a) and (b) hereof, the holders of such shares of
Series C Preferred Stock so converted shall not be entitled to receive any
dividends declared with respect to such shares of Series C Preferred Stock
unless such dividends shall have been declared by the Board of Directors and the
record date for such dividends shall have been on or before the date such shares
shall have been converted. No payment or adjustment shall be made on account of
dividends declared and payable to holders of Common Stock of record on a date
prior to the date of the conversion of shares of Series C Preferred Stock
pursuant to paragraphs 3(a) and 3(b) hereof.
(ii) Upon the mandatory conversion of any shares of Series
C Preferred Stock pursuant to paragraph 3(c) hereof, the holders of such shares
of Series C Preferred Stock so converted shall be entitled to receive a dollar
amount equal to all accrued dividends and unpaid distributions prior to the
Mandatory Conversion Date, whether or not declared thereon.
(i) No fractional shares or scrip representing fractional
shares shall be issued upon the conversion of any shares of Series C Preferred
Stock. If more than one share of Series C Preferred Stock shall be surrendered
for conversion at one time by the same holder, the number of full shares
issuable upon conversion thereof shall be computed on the basis of the aggregate
number of such shares so surrendered. If the conversion of any share of Series C
Preferred Stock results in a fraction, an amount equal to such fraction
multiplied by the current market value of the Common Stock on the day of
conversion shall be paid to such holder in cash by the Company. For purposes of
this paragraph 3(i), "current market value of Common Stock" shall mean the value
of the Common Stock as reflected in the last trade of the Common Stock on the
date of conversion.
(j) The Company shall at all times reserve and keep available,
free from
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<PAGE> 19
preemptive rights, out of its authorized Common Stock, for the purpose of
effecting the conversion of the issued and outstanding Series C Preferred Stock,
the full number of shares of Common Stock then deliverable in the event and upon
the conversion of all of the Series C Preferred Stock then issued and
outstanding.
(k) In no event shall PNC Bank Corp. or any indirect or direct
subsidiary thereof (collectively, "PNC") be entitled to convert any shares of
Series C Preferred Stock nor shall the Company be entitled to require conversion
of any shares of Series C Preferred Stock in excess of that number of shares of
Series C Preferred Stock upon the conversion of which the sum of (1) the number
of shares of Common Stock beneficially owned (as such term is defined for the
purposes of Rule 13(d) promulgated under the Securities Exchange Act of 1934, as
amended) by PNC and (2) the number of shares of Common Stock issuable upon the
conversion of the number of shares of Series C Preferred Stock with respect to
which the determination in this provision is made, would result in the
beneficial ownership by PNC of five percent (5%) or more of the issued and
outstanding shares of Common Stock and any series of voting preferred stock of
the Company unless PNC has provided to the Company a written opinion of counsel
that a greater percentage of beneficial ownership of such capital stock is
permissible pursuant to then applicable laws or regulations.
(l) In no event shall PNC be entitled to sell or otherwise
transfer shares of Series C Preferred Stock and Common Stock to a person
unaffiliated with PNC or Company if immediately after the transfer (1) the
number of shares of Common Stock and any series of voting preferred stock of the
Company and (2) the number of shares of Common Stock issuable upon the
conversion of the shares of Series C Preferred Stock would result in the
beneficial ownership by the acquiring person of five percent (5%) or more of the
issued and outstanding shares of Common Stock and any series of voting preferred
stock of the Company unless (1) pursuant to a widely dispersed public offering,
(2) immediately prior to the transfer the acquiring person would hold, upon
exercise of the conversion rights of any Series C Preferred Stock it held
immediately prior to the transfer, more than 50 percent of the issued and
outstanding Common Stock and any series of voting preferred stock of the Company
or (3) the Company has stated in writing that it has no objection to such
transfer.
4. Liquidation or Dissolution. In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the affairs of the Company, the
holders of the issued and outstanding Series C Preferred Stock shall be entitled
to receive for each share of Series C Preferred Stock, before any distribution
of the assets of the Company shall be made to the holders of any other class of
capital stock, except for holders of the Series A Convertible Preferred Stock
which shall have the rights and preferences set forth above, a dollar amount
equal to the Stated Value thereof plus all accrued and unpaid distributions
whether or not earned or declared thereon, without interest. After payments in
full have been made to all holders of any series of the issued and outstanding
preferred stock of the Company, or funds necessary for such payment shall have
been set aside in trust for the account of the holders of any series of the
issued and outstanding preferred stock of the Company, so as to be and continue
to be available
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<PAGE> 20
therefor, then, before any further distribution of the assets of the Company
shall be made, a dollar amount equal to that already distributed to the holders
of any series of the issued and outstanding preferred stock of the Company shall
be distributed pro-rata to the holders of the other issued and outstanding
classes of capital stock of the Company, subject to the rights of any other
class of capital stock set forth in the Certificate of Incorporation, as
amended, of the Company. After such payment shall have been made in full to the
holders of such other issued and outstanding capital stock, or funds necessary
for such payment shall have been set aside in trust for the account of the
holders of such other issued and outstanding capital stock so as to be and
continue to be available therefor, the holders of the issued and outstanding
Series C Preferred Stock shall be entitled to participate with the holders of
all other classes of issued and outstanding capital stock in the final
distribution of the remaining assets of the Company, and, subject to any rights
of any other class of capital stock set forth in the Certificate of
Incorporation, as amended, of the Company, the remaining assets of the Company
shall be divided and distributed ratably among the holders of both the Series C
Preferred Stock and the other capital stock then issued and outstanding
according to the proportion by which their respective record ownership of shares
of Common Stock Equivalents (as defined below in this paragraph) bears to the
total number of shares of Common Stock Equivalents then issued and outstanding.
"Common Stock Equivalents" shall mean all shares of Common Stock that are
outstanding plus all shares of Common Stock issuable upon conversion of Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock or the Series
C Preferred Stock or any other series of convertible preferred stock of the
Company. If, upon such liquidation, dissolution, or winding up, the assets of
the Company distributable, as aforesaid, among the holders of any series of
preferred stock of the Company shall be insufficient to permit the payment to
them of said amount, the entire assets shall be distributed ratably among the
holders of any series of issued and outstanding preferred stock of the Company.
A consolidation or merger of the Company, a share exchange, a sale, lease,
exchange or transfer of all or substantially all of its assets as an entirety,
or any purchase or redemption of stock of the Company of any class, shall not be
regarded as a "liquidation, dissolution, or winding up of the affairs of the
Company" within the meaning of this paragraph 4.
5. Voting Rights and Board Representation
(a) Except as otherwise required by applicable law, the Series
C Preferred Stock shall not be entitled to vote on any matter.
(b) So long as there are at least 500,000 shares of Series C
Preferred Stock outstanding (which number shall be subject to proportional
adjustment to reflect any subdivisions, splits or reverse stock splits of the
Series C Preferred Stock) the holders of the Series C Preferred Stock voting
separately as a class shall be entitled, as such holders voting separately as a
class may determine, to elect one director to the Board of Directors or to
appoint one observer to the Board of Directors.
6. Changes in Terms of Series C Preferred Stock. The terms of the
Series C Preferred Stock may not be amended, altered or repealed, and no class
of capital stock or
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<PAGE> 21
securities convertible into capital stock shall be authorized, including by way
of a merger, which has superior rights to the Series C Preferred Stock as to
distributions or liquidation, without the consent of the holders of at least
two-thirds of the outstanding shares of Series C Preferred Stock. This Section 6
shall in no way limit the Company's abilities to issue securities which are pari
passu with the Series C Preferred Stock.
7. No Implied Limitations. Except as otherwise provided by express
provisions of this Certificate, nothing herein shall limit, by inference or
otherwise, the discretionary right of the Board of Directors to classify and
reclassify and issue any shares of Series C Preferred Stock and to fix or alter
all terms thereof to the full extent provided in the Certificate of
Incorporation, as amended, of the Company.
8. General Provisions. In addition to the above provisions with respect
to the Series C Preferred Stock, such Series C Preferred Stock shall be subject
to, and entitled to the benefits of, the provisions set forth in the Company's
Certificate of Incorporation, as amended, of the Company with respect to
preferred stock generally but not with respect any series of preferred stock in
particular.
9. Notices. All notices required or permitted to be given by the
Company with respect to the Series C Preferred Stock shall be in writing, and if
delivered by first class United States mail, postage prepaid, or by overnight
delivery service, to the holders of the Series C Preferred Stock at their last
addresses as they shall appear upon the books of the Company, shall be
conclusively presumed to have been duly given, whether or not the stockholder
actually receives such notice; provided, however, that failure to duly give such
notice by mail, or any defect in such notice, to the holders of any stock
designated for redemption, shall not affect the validity of the proceedings for
the redemption of any other shares of Series C Preferred Stock.
FIFTH: In furtherance of and not in limitation of powers conferred by statute,
it is further provided that:
(a) (1) The business and affairs of the Corporation shall be
managed under the direction of a Board of Directors, consisting of not less than
three nor more than twelve Directors, the number of which shall be determined
from time to time by resolution adopted by affirmative of a majority of
Directors then in office. The Directors shall be classified with respect to the
time for which they shall severally hold office by dividing them into three
classes, Class I, Class II and Class III, each consisting as nearly as possible
of one-third of the whole number of the Board of Directors. All Directors shall
hold office until their successors are chosen and qualified, or until their
earlier death, resignation, disqualification or removal. At the first election
of Directors following adoption of this provision by the stockholders of the
Corporation, Class I Directors shall be elected for a term of one year; Class II
Directors shall be elected for a term of two years; and Class III Directors
shall be elected for a term of three years; and at each annual election
thereafter, successors to the Directors whose terms shall expire that year shall
be elected to hold office for a term of three years, so that the term of office
of one class of Directors shall expire in each year. Any vacancy on the Board of
Directors that results
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from an increase in the number of Directors may be filled by the affirmative
vote of a majority of the Directors then in office, and any other vacancy on the
Board of Directors may be filled by the affirmative vote of a majority of the
Directors then in office, although less than a quorum, or by a sole remaining
Director. Any Director elected to fill a vacancy not resulting from an increase
in the number of Directors shall serve for a term equivalent to the remaining
unserved portion of the term of such newly elected Director's predecessor.
Notwithstanding the foregoing, whenever the holders of any one
or more classes or series of preferred stock issued by the Corporation shall
have the right, voting separately by class or series, to elect Directors at an
annual or special meeting of stockholders, the election, term of office, filling
of vacancies and other features of such directorships shall be governed by the
terms of the Certificate of Incorporation applicable thereto, and such Directors
shall not be divided into classes pursuant to this Article FIFTH (a)(1) unless
expressly provided by such terms.
(2) Resignation or Removal of Directors. Any director or the
entire Board of Directors may be removed for "Cause," as hereinafter defined, by
the holders of a majority of the stock issued and outstanding and entitled to
vote at an election of directors; provided, however, that the directors elected
by a particular class of stockholders may be removed only by the vote of the
holders of a majority of the shares of such class. No director may be removed
without "Cause" by vote of the stockholders. Any director may resign at any time
by delivering a resignation in writing to the principal executive officer or the
secretary or to a meeting of the Board of Directors. Such resignation shall be
effective upon receipt unless specified to be effective at some other time; and
without in either case the necessity of its being accepted unless the
resignation shall so state. No director resigning and (except where a right to
receive compensation shall be expressly provided in a duly authorized written
agreement with the Corporation) no director removed shall have any right to
receive compensation as such director for any period following the director's
resignation or removal, or any right to damages on account of such removal,
whether the director's compensation be by the month or by the year or otherwise;
unless in the case of a resignation, the directors, or in the case of removal,
the body acting on the removal, shall in their or its discretion provide for
compensation. For purposes of this Section 4.16, "Cause" means:
(A) willful and continued material failure, refusal
or inability to perform one's duties to the Corporation or the willful engaging
in gross misconduct materially and demonstrably damaging to the Corporation; or
(B) conviction for any crime involving moral
turpitude or any other illegal act that materially and adversely reflects upon
the business, affairs or reputation of the Company or on one's ability to
perform one's duties to the Corporation.
(3) Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of such holders and may not be effected by any consent in
writing by such
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<PAGE> 23
holders. Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by law or by this Certificate of Incorporation, may
be called by the Chairman of the Board of Directors or the President and shall
be called by the President or Secretary at the request in writing of a majority
of the Board of Directors. Such request shall state the purpose or purposes of
the proposed meeting and business to be transacted at any special meeting of the
stockholders.
(4) No amendment to the Certificate of Incorporation of the
Corporation shall amend, alter, or repeal any of the provisions of this Article
FIFTH (a) unless the amendment effecting such amendment, alteration or repeal
shall receive the affirmative vote of or consent of the holders of seventy-five
percent (75%) of all shares of stock of the Corporation entitled to vote at a
meeting of stockholders held for the purpose of voting on such amendment,
considered for the purposes of this Article FIFTH as one class; provided that
this paragraph FIFTH (a)(4) shall not apply to, and such seventy-five percent
(75%) vote shall not be required for, any such amendment recommended to the
stockholders pursuant to a resolution of the Board of Directors approved by
two-thirds of the Continuing Directors. For purposes of this paragraph FIFTH
(a)(4), a "Continuing Director" shall mean any Director of the Corporation who
is or becomes a Director on the date that this Article FIFTH is first adopted by
the Corporation's stockholders or any Director elected by a majority of the
Continuing Directors then in office to succeed any Director or to fill any
vacancy on the Board of Directors whether resulting from an increase in the
number of Directors or otherwise.
(b) Subject to any applicable requirements of law, the books of the
Corporation may be kept outside the State of Delaware at such locations as may
be designated by the Board of Directors or in the By-Laws of the Corporation.
(c) The Board of Directors may from time to time determine whether, to
what extent, at what times and places and under what conditions and regulations
the accounts, books and records of the Corporation, or any of them, shall be
open to the inspection of the stockholders, and no stockholder shall have any
right to inspect any account, book or document of the Corporation except as and
to the extent expressly provided by law or expressly authorized by resolution of
the Board of Directors.
(d) Except as provided to the contrary in the provisions establishing a
class of stock, the number of authorized shares of such class may be increased
or decreased (but not below the number of shares thereof then outstanding) by
the affirmative vote of a majority of the stock of the Corporation entitled to
vote, voting as a single class.
(e) In addition to the powers and authority herein or by law expressly
conferred upon them, the directors are hereby empowered to exercise all such
powers and do all such acts and things as may be exercised or done by the
Corporation, subject, nevertheless, to the provisions of the laws of the State
of Delaware, this Certificate of Incorporation and any By-Laws adopted by the
stockholders; provided, however, that no
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<PAGE> 24
By-Laws hereafter adopted by the stockholders shall invalidate any prior act of
the directors which would have been valid if such By-Laws had not been adopted.
SIXTH: The following provisions shall apply with respect to the indemnification
of, and advancement of expenses to, certain parties as set forth below:
A. INDEMNIFICATION.
1. Proceedings Other than by or in the Right of the Corporation. The
Corporation shall indemnify each person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation), by reason of the fact that
such person is or was, or has agreed to become, a director or officer of the
Corporation, or is or was serving or has agreed to serve, at the request of the
Corporation, as a director, officer or trustee of, or in a similar capacity
with, another corporation (including any partially or wholly owned subsidiary of
the Corporation), partnership, joint venture, trust or other enterprise
(including any employee benefit plan) (each of such persons being referred to as
an "Indemnitee"), or by reason of any action alleged to have been taken or
omitted in such capacity, against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by the Indemnitee or on the Indemnitee's behalf in connection with such action,
suit or proceeding and any appeal therefrom, if (A) the Indemnitee acted in good
faith and in a manner the Indemnitee reasonably believed to be in, or not
opposed to, the best interests of the Corporation and (B) with respect to any
criminal action or proceeding, the Indemnitee had no reasonable cause to believe
the Indemnitee's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the Indemnitee did not act in good faith, did not act in a manner that the
Indemnitee reasonably believed to be in, or not opposed to, the best interests
of the Corporation or, with respect to any criminal action or proceeding, did
not have reasonable cause to believe that the Indemnitee's conduct was unlawful.
Notwithstanding anything to the contrary in this Article SIXTH, except as set
forth in Section C.2. of this Article SIXTH, the Corporation shall not indemnify
an Indemnitee seeking indemnification in connection with a proceeding (or part
thereof) initiated by the Indemnitee unless the initiation thereof was approved
by the Board of Directors of the Corporation.
2. Proceedings by or in the Right of the Corporation. The Corporation
shall indemnify any Indemnitee who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in the Corporation's favor by
reason of the fact that the Indemnitee is or was, or has agreed to become, a
director or officer of the Corporation, or is or was serving as a director,
officer or trustee of, or in a similar capacity with, another corporation
(including any partially or wholly owned subsidiary of the Corporation),
partnership, joint venture, trust or other enterprise (including any employee
benefit plan), or by reason of any action alleged to have been taken or omitted
in such capacity, against
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<PAGE> 25
all expenses (including attorneys' fees) and amounts paid in settlement actually
and reasonably incurred by the Indemnitee or on the Indemnitee's behalf in
connection with such action, suit or proceeding and any appeal therefrom, if the
Indemnitee acted in good faith and in a manner the Indemnitee reasonably
believed to be in, or not opposed to, the best interests of the Corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which the Indemnitee shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery of Delaware
shall determine upon application that, despite the adjudication of such
liability but in view of all the circumstances of the case, the Indemnitee is
fairly and reasonably entitled to indemnity for such expenses (including
attorneys' fees) that the Court of Chancery of the State of Delaware shall deem
proper.
3. Expenses of Successful Indemnitee. Notwithstanding any other
provision of this Article SIXTH, to the extent that an Indemnitee has been
successful, on the merits or otherwise (including a disposition without
prejudice), in defense of any action, suit or proceeding referred to in Section
A.1. or 2. of this Article SIXTH, or in defense of any claim, issue or matter
therein, or on appeal from any such action, suit or proceeding, the Indemnitee
shall be indemnified against all expenses (including attorneys' fees) actually
and reasonably incurred by the Indemnitee or on the Indemnitee's behalf in
connection therewith. Without limiting the foregoing, if any action, suit or
proceeding is disposed of, on the merits or otherwise (including a disposition
without prejudice), without (A) the disposition being adverse to the Indemnitee,
(B) an adjudication that the Indemnitee was liable to the Corporation, (C) a
plea of guilty or nolo contendere by the Indemnitee, (D) an adjudication that
the Indemnitee did not act in good faith and in a manner the Indemnitee
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and (E) with respect to any criminal proceeding, an adjudication
that the Indemnitee had reasonable cause to believe the Indemnitee's conduct was
unlawful, the Indemnitee shall be considered for the purposes hereof to have
been wholly successful with respect thereto.
4. Partial Indemnification. If any Indemnitee is entitled under any
provision of this Section A. to indemnification by the Corporation for a
portion, but not all, of the expenses (including attorneys' fees), judgments,
fines or amounts paid in settlement actually and reasonably incurred by the
Indemnitee or on the Indemnitee's behalf in any appeal therefrom, the
Corporation shall indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
B. ADVANCEMENT OF EXPENSES.
Subject to Section C.2. of this Article SIXTH, in the event that the
Corporation does not assume a defense pursuant to Section C.1. of this Article
SIXTH of any action, suit, proceeding or investigation of which the Corporation
receives notice under this Article SIXTH, any expenses (including attorneys'
fees) incurred by an Indemnitee in defending a civil or criminal action, suit,
proceeding or investigation or any appeal therefrom shall be paid by the
Corporation in advance of the final disposition of such
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<PAGE> 26
matter; provided, however, that the payment of such expenses incurred by an
Indemnitee in advance of the final deposition of such matter shall be made only
upon receipt of an undertaking by or on behalf of the Indemnitee to repay all
amounts so advanced in the event that it shall ultimately be determined that the
Indemnitee is not entitled to be indemnified by the Corporation as authorized in
this Article SIXTH. Any such undertaking by an Indemnitee shall be accepted
without reference to the financial ability of the Indemnitee to make such
repayment.
C. PROCEDURES.
1. Notification and Defense of Claim. As a condition precedent to any
Indemnitee's right to be indemnified, the Indemnitee must promptly notify the
Corporation in writing of any action, suit, proceeding or investigation
involving the Indemnitee for which indemnity will or may be sought. With respect
to any action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee; provided that the Corporation
shall not be entitled, without the consent of the Indemnitee, to assume the
defense of any claim brought by or in the right of the Corporation or as to
which counsel for the Indemnitee shall have reasonably concluded that there may
be a conflict of interest or position on any significant issue between the
Corporation and the Indemnitee in the conduct of the defense of such claim.
After notice from the Corporation to the Indemnitee of its election so to assume
such defense, the Corporation shall not be liable to the Indemnitee for any
legal or other expenses subsequently incurred by the Indemnitee in connection
with such claim, other than as provided in this Section C.1. The Indemnitee
shall have the right to employ the Indemnitee's own counsel in connection with
such claim, but the fees and expenses of such counsel incurred after notice from
the Corporation of its assumption of the defense thereof shall be at the expense
of the Indemnitee unless (A) the employment of counsel by the Indemnitee has
been authorized by the Corporation, (B) counsel to the Indemnitee has reasonably
concluded that there may be a conflict of interest or position on any
significant issue between the Corporation and the Indemnitee in the conduct of
the defense of such action or (C) the Corporation has not in fact employed
counsel to assume the defense of such action, in each of which cases the fees
and expenses of counsel for the Indemnitee shall be at the expense of the
Corporation except as otherwise expressly provided by this Article SIXTH.
2. Requests and Payment. In order to obtain indemnification or
advancement of expenses pursuant to this Article SIXTH, an Indemnitee shall
submit to the Corporation a written request therefor, which request shall
include documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within sixty days after receipt by the Corporation of the written
request of the Indemnitee, unless with respect to requests under Section A.1.,
A.2. or B. of this Article SIXTH, the Corporation determines, by clear and
convincing
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evidence, within such sixty-day period, that any Indemnitee did not meet the
applicable standard of conduct set forth in Section A.1. or A.2. of this Article
SIXTH. Such determination shall be made in each instance by (A) a majority vote
of the directors of the Corporation consisting of persons who are not at that
time parties to the action, suit or proceeding in question ("disinterested
directors"), even though less than a quorum, (B) a majority vote of a quorum of
the outstanding shares of capital stock of all classes entitled to vote for
directors, which quorum shall consist of stockholders who are not at that time
parties to the action, suit, proceeding or investigation in question, (C)
independent legal counsel (who may be regular legal counsel to the Corporation),
or (D) a court of competent jurisdiction.
3. Remedies. The right of an Indemnitee to indemnification or
advancement of expenses pursuant to this Article SIXTH shall be enforceable by
the Indemnitee in any court of competent jurisdiction if the Corporation denies,
in whole or in part, a request of an Indemnitee in accordance with the preceding
Paragraph 2. or if no disposition thereof is made within the sixty-day period
referred to in the preceding Paragraph 2. Unless otherwise provided by law, the
burden of proving that an Indemnitee is not entitled to indemnification or
advancement of expenses pursuant to this Article SIXTH shall be on the
Corporation. Neither the failure of the Corporation to have made a determination
prior to the commencement of such action that indemnification is proper in the
circumstances because the Indemnitee has met any applicable standard of conduct,
nor an actual determination by the Corporation pursuant to the preceding Section
C.2. that the Indemnitee has not met such applicable standard of conduct, shall
be a defense to the action or create a presumption that the Indemnitee has not
met the applicable standard of conduct. The Indemnitee's expenses (including
attorneys' fees) incurred in connection with successfully establishing the
Indemnitee's right to indemnification, in whole or in part, in any such
proceeding shall also be indemnified by the Corporation.
D. RIGHTS NOT EXCLUSIVE.
The right of an Indemnitee to indemnification and advancement of
expenses pursuant to this Article SIXTH shall not be deemed exclusive of any
other rights to which the Indemnitee may be entitled under any law (common or
statutory), agreement, vote of stockholders or disinterested directors, or
otherwise, both as to action in the Indemnitee's official capacity and as to
action in any other capacity while holding office for the Corporation, and shall
continue as to an Indemnitee who has ceased to serve in the capacity with
respect to which the Indemnitee's right to indemnification or advancement of
expenses accrued, and shall inure to the benefit of the estate, heirs, executors
and administrators of the Indemnitee. Nothing contained in this Article SIXTH
shall be deemed to prohibit, and the Corporation is specifically authorized to
enter into, agreements with officers and directors providing indemnification
rights and procedures supplemental to those set forth in this Article SIXTH. The
Corporation may, to the extent authorized from time to time by its Board of
Directors, grant indemnification rights to other employees or agents of the
Corporation or other persons serving the Corporation and such rights may be
equivalent to, or greater or less than, those set forth in this Article SIXTH.
In addition, the Corporation may purchase and maintain
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<PAGE> 28
insurance, at its expense, to protect itself and any director, officer, employee
or agent of the Corporation or another corporation (including any partially or
wholly owned subsidiary of the Corporation), partnership, joint venture, trust
or other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by such a person in any such capacity, or arising out
of such person's status as such, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or loss under the
General Corporation Law of the State of Delaware.
E. SUBSEQUENT EVENTS.
1. Amendments of Article or Law. No amendment, termination or repeal of
this Article SIXTH or of any relevant provisions of the General Corporation Law
of the State of Delaware or any other applicable law shall affect or diminish in
any way the rights of any Indemnitee to indemnification under the provisions of
this Article SIXTH with respect to any action, suit, proceeding or investigation
arising out of or relating to any actions, transactions or facts occurring prior
to the effective date of such amendment, termination or repeal. If the General
Corporation Law of the State of Delaware is amended after adoption of this
Article SIXTH to expand further the indemnification permitted to any Indemnitee,
then the Corporation shall indemnify the Indemnitee to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended, without the need for any further action with respect to this Article
SIXTH.
2. Merger or Consolidation. If the Corporation is merged into or
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article SIXTH with respect to any action, suit,
proceeding or investigation arising out of or relating to any actions,
transactions or factors occurring prior to the date of such merger or
consolidation.
F. INVALIDATION.
If any or all of the provisions of this Article SIXTH shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by any applicable provision of this
Article SIXTH that shall not have been invalidated and to the fullest extent
permitted by the General Corporation Law of the State of Delaware or any other
applicable law.
G. DEFINITIONS.
Unless defined elsewhere in this Amended and Restated Certificate of
Incorporation, any term used in this Article SIXTH and defined in Section 145(h)
or (i) of the General Corporation Law of the State of Delaware shall have the
meaning ascribed to such term in such Section.
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<PAGE> 29
SEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
EIGHTH: No director of the Corporation shall be personally liable to the
Corporation or to any of its stockholders for monetary damages arising out of
such director's breach of fiduciary duty as a director of the Corporation,
except to the extent that the elimination or limitation of such liability is not
permitted by the General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended. No amendment to or repeal of this ARTICLE
EIGHTH shall apply to or have any effect on the liability or alleged liability
of any director of the Corporation for or with respect to any acts or omissions
of the director occurring prior to such amendment or repeal.
NINTH: The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation in the manner now or
hereafter prescribed by statute and this Certificate of Incorporation, and all
rights conferred upon stockholders herein are granted subject to this
reservation. Notwithstanding the foregoing, any other provision of law, this
Certificate of Incorporation or the By-Laws, and notwithstanding the fact that a
lesser percentage may be specified by law, the affirmative vote of the holders
of at least seventy-five percent (75%) of the shares of capital stock of the
corporation issued and outstanding and entitled to vote shall be required to
amend or repeal, or to adopt any provision inconsistent with, Article FIFTH or
Article NINTH of this Certificate of Incorporation.
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<PAGE> 30
IN WITNESS WHEREOF, the undersigned has executed, signed, and
acknowledged this Amended and Restated Certificate of Incorporation this 11th
day of November, 1999.
/s/ Kevin High
------------------------------------
Name: Kevin High
Title: President
ATTEST:
/s/ Krista Michael
- ----------------------------
Name: Krista Michael
Title: Secretary
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<PAGE> 1
Exhibit 3.2
BY-LAWS OF COLLEGELINK.COM INCORPORATED
Section 1. CERTIFICATE OF INCORPORATION AND BY-LAWS
1.1 These by-laws are subject to the certificate of incorporation
of the corporation. In these by-laws, references to the certificate of
incorporation and by-laws mean the provisions of the certificate of
incorporation and the by-laws as are from time to time in effect.
Section 2. OFFICES
2.1 REGISTERED OFFICE. The registered office shall be in the City
of Wilmington, County of New Castle, State of Delaware.
2.2 OTHER OFFICES. The corporation may also have offices at such
other places both within and without the State of Delaware as the board of
directors may from time to time determine or the business of the corporation may
require.
Section 3. STOCKHOLDERS
3.1 LOCATION OF MEETINGS. All meetings of the stockholders shall
be held at such place either within or without the State of Delaware as shall be
designated from time to time by the board of directors. Any adjourned session of
any meeting shall be held at the place designated in the vote of adjournment.
3.2 ANNUAL MEETING. The annual meeting of stockholders shall be
held at 10:00 a.m. on the second Thursday in November in each year (unless that
day be a legal holiday at the place where the meeting is to be held, in which
case the meeting shall be held at the same hour on the next succeeding day not a
legal holiday)(the "Specified Date") or at such other date and time as shall be
designated from time to time by the board of directors, at which they shall
elect a board of directors and transact such other business as may be required
by law or these by-laws or as may properly come before the meeting.
3.3 SPECIAL MEETING IN PLACE OF ANNUAL MEETING. If the election
for directors shall not be held on the day designated by these by-laws, the
directors shall cause the election to be held as soon thereafter as convenient,
and to that end, if the annual meeting is omitted on the day herein provided
therefor or if the election of directors shall not be held thereat, a special
meeting of the stockholders may be held in place of such omitted meeting or
election, and any business transacted or election held at such special meeting
shall have the same effect as if transacted or held at the annual meeting, and
in such case all references in these by-laws to the annual meeting of the
stockholders, or to the annual election of directors, shall be deemed to refer
to or include such special meeting. Any such special meeting shall be called and
the purposes thereof shall be specified in the call, as provided in Section 3.4.
3.4 NOTICE OF ANNUAL MEETING. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting. Such notice may specify the business
to be transacted and actions to be taken at such meeting. No action shall be
taken at such meeting unless such notice is given, or unless waiver of such
notice is given by the holders of outstanding stock having not less than the
minimum number of votes necessary to take such action at a meeting at which all
shares entitled to vote thereon were voted. Prompt notice of all action taken in
connection with such waiver of notice shall be given to all stockholders not
present or represented at such meeting.
3.5 OTHER SPECIAL MEETINGS. Special meetings of the stockholders,
for any purpose or purposes, unless otherwise prescribed by law or by the
certificate of incorporation, may be called by the chairman of the board
<PAGE> 2
or the president and shall be called by the president or the secretary at the
request in writing of a majority of the board of directors. Such request shall
state the purpose or purposes of the proposed meeting and business to be
transacted at any special meeting of the stockholders.
3.6 NOTICE OF SPECIAL MEETING. Written notice of a special meeting
stating the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be given not less than ten nor more than
sixty days before the date of the meeting, to each stockholder entitled to vote
at such meeting. No action shall be taken at such meeting unless such notice is
given, or unless waiver of such notice is given by the holders of outstanding
stock having not less than the minimum number of votes necessary to take such
action at a meeting at which all shares entitled to vote thereon were voted.
Prompt notice of all action taken in connection with such waiver of notice shall
be given to all stockholders not present or represented at such meeting.
3.7 NOTICE OF STOCKHOLDER BUSINESS AT A MEETING OF THE
STOCKHOLDERS.
Unless otherwise prescribed by law or by the certificate of
incorporation, the following provisions of this Section 3.7 shall apply to the
conduct of business at any meeting of the stockholders. (As used in this Section
3.7, the term annual meeting shall include a special meeting in lieu of an
annual meeting.)
(a) At any meeting of the stockholders, only such business
shall be conducted as shall have been brought before the meeting (i) pursuant to
the Corporation's notice of meeting, (ii) by or at the direction of the board of
directors or (iii) by any stockholder of the Corporation who is a stockholder of
record at the time of giving of the notice provided for in paragraph (b) of this
Section 3.7, who shall be entitled to vote at such meeting and who complies with
the notice procedures set forth in paragraph (b) of this Section 3.7.
(b) For business to be properly brought before any meeting of
the stockholders by a stockholder pursuant to clause (iii) of paragraph (a) of
this Section 3.7, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation (i) in the case of an annual meeting, not less than
sixty days nor more than ninety days prior to the Specified Date, regardless of
any postponements, deferrals or adjournments of that meeting to a later date;
provided, however, that if the annual meeting of stockholders or a special
meeting in lieu thereof is to be held on a date prior to the Specified Date, and
if less than seventy days' notice or prior public disclosure of the date of such
annual or special meeting is given or made, notice by the stockholder to be
timely must be so delivered or received not later than the close of business on
the tenth day following the earlier of the date on which notice of the date of
such annual or special meeting was mailed or the day on which public disclosure
was made of the date of such annual or special meeting; and (ii) in the case of
a special meeting (other than a special meeting in lieu of an annual meeting),
not later than the tenth (10th) day following the earlier of the day on which
notice of the date of the scheduled meeting was mailed or the day on which
public disclosure was made of the date of the scheduled meeting. A stockholder's
notice to the Secretary shall set forth as to each matter the stockholder
proposes to bring before the meeting (i) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting, (ii) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, the name and
address of the beneficial owner, if any, on whose behalf the proposal is made,
and the name and address of any other stockholders or beneficial owners known by
such stockholder to be supporting such proposal, (iii) the class and number of
shares of the Corporation which are owned beneficially and of record by such
stockholder of record, by the beneficial owner, if any, on whose behalf the
proposal is made and by any other stockholders or beneficial owners known by
such stockholder to be supporting such proposal, and (iv) any material interest
of such stockholder of record and/or of the beneficial owner, if any, on whose
behalf the proposal is made, in such proposed business and any material interest
of any other stockholders or beneficial owners known by such stockholder to be
supporting such proposal in such proposed business, to the extent known by such
stockholder.
(c) Notwithstanding anything in these by-laws to the contrary,
no business shall be conducted at a meeting except in accordance with the
procedures set forth in this Section 3.7. The person presiding at the meeting
shall, if the facts warrant, determine that business was not properly brought
before the meeting and in accordance with the procedures prescribed by these
by-laws, and if he should so determine, he shall so declare at the
<PAGE> 3
meeting and any such business not properly brought before the meeting shall not
be transacted. Notwithstanding the foregoing provisions of this Section 3.7, a
stockholder shall also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended (or any successor provision), and the rules and
regulations thereunder with respect to the matters set forth in this Section
3.7.
(d) This provision shall not prevent the consideration and
approval or disapproval at the meeting of reports of officers, directors and
committees of the board of directors, but, in connection with such reports, no
new business shall be acted upon at such meeting unless properly brought before
the meeting as herein provided.
3.8 STOCKHOLDER LIST. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
3.9 QUORUM OF STOCKHOLDERS. The holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise required by
law, or by the certificate of incorporation or by these by-laws. Except as
otherwise provided by law, no stockholder present at a meeting may withhold his
shares from the quorum count by declaring his shares absent from the meeting.
3.10 ADJOURNMENT. Any meeting of stockholders may be adjourned from
time to time to any other time and to any other place at which a meeting of
stockholders may be held under these by-laws, which time and place shall be
announced at the meeting, by a majority of votes cast upon the question, whether
or not a quorum is present. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the original meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
3.11 PROXY REPRESENTATION. Every stockholder may authorize another
person or persons to act for him by proxy in all matters in which a stockholder
is entitled to participate, whether by waiving notice of any meeting, objecting
to or voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by his
attorney-in-fact. No proxy shall by voted or acted upon after three years from
its date unless such proxy provides for a longer period. Except as provided by
law, a revocable proxy shall be deemed revoked if the stockholder is present at
the meeting for which the proxy was given. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and, if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power. A
proxy may be made irrevocable regardless of whether the interest with which it
is coupled is an interest in the stock itself or an interest in the corporation
generally. The authorization of a proxy may but need not be limited to specified
action, provided, however, that if a proxy limits its authorization to a meeting
or meetings of stockholders, unless otherwise specifically provided such proxy
shall entitle the holder thereof to vote at any adjourned session but shall not
be valid after the final adjournment thereof.
3.12 INSPECTORS. If required to do so by Section 231 of the
Delaware General Corporation Law or other applicable law or regulation, the
directors or the person presiding at the meeting shall appoint one or more
inspectors of election and any substitute inspectors to act at the meeting or
any adjournment thereof. If not so required, the directors or the person
presiding at the meeting may, but need not, appoint such inspectors and
substitute inspectors. In either event, the inspectors and substitute inspectors
shall have such duties and responsibilities as are required by applicable law or
regulation and such other duties and responsibilities not inconsistent therewith
as the directors or the person presiding at the meeting shall deem appropriate.
<PAGE> 4
3.13 ACTION BY VOTE. When a quorum is present at any meeting,
whether the same be an original or an adjourned session, a plurality of the
votes properly cast for election to any office shall elect to such office and a
majority of the votes properly cast upon any question other than an election to
an office shall decide the question, except when a larger vote is required by
law, by the certificate of incorporation or by these by-laws. No ballot shall be
required for any election unless requested by a stockholder present or
represented at the meeting and entitled to vote in the election.
3.14 NO ACTION BY CONSENT. Any action required or permitted to be
taken by the stockholders of the corporation must be effected at a duly
constituted annual or special meeting of such holders and may not be effected by
any consent in writing by such stockholders.
Section 4. DIRECTORS
4.1 NUMBER. The board shall consist of not less than three nor
more than twelve directors, the number of which shall be determined from time to
time by resolution adopted by affirmative vote of a majority of directors then
in office. Subject to the foregoing and to the provisions of the certificate of
incorporation, the number of directors may be increased or decreased at any time
or from time to time by vote of a majority of directors then in office, except
that such decrease by vote of directors shall only be made to eliminate
vacancies existing by reason of the death, resignation or removal of one or more
directors. The directors shall be elected at the annual meeting of stockholders
except as provided in Section 4.4 of these by-laws. directors need not be
stockholders.
4.2 TENURE. The directors shall be classified with respect to the
time for which they shall severally hold office by dividing them into three
classes, each consisting of one-third of the whole number of the board of
directors, and all directors shall hold office until their successors are chosen
and qualified, or until their earlier death, resignation, or removal. At the
first meeting held for election of the board of directors pursuant to such
classification, directors of the first class shall be elected for a term of one
year; directors of the second class shall be elected for a term of two years;
directors of the third class shall be elected for a term of three years; and at
each annual election thereafter, successors to the directors whose terms shall
expire that year shall be elected to hold office for a term of three years, so
that the term of office of one class of directors shall expire in each year.
4.3 POWERS. The business of the corporation shall be managed by or
under the direction of the board of directors which shall have and may exercise
all the powers of the corporation and do all such lawful acts and things as are
not by law, the certificate of incorporation or these by-laws directed or
required to be exercised or done by the stockholders.
4.4 VACANCIES. Except as otherwise provided by law or by the
certificate of incorporation, vacancies and any newly created directorships
resulting from any increase in the number of directors shall be filled only by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. When one or more directors shall resign from the board,
effective at a future date, a majority of the directors then in office,
including those who have resigned, shall have power to fill such vacancy or
vacancies, the vote or action by writing thereon to take effect when such
resignation or resignations shall become effective. The directors shall have and
may exercise all their powers notwithstanding the existence of one or more
vacancies in their number, subject to any requirements of law or of the
certificate of incorporation or of these by-laws as to the number of directors
required for a quorum or for any vote or other actions.
4.5 NOMINATION OF DIRECTORS.
The following provisions of this Section 4.5 shall apply to the
nomination of persons for election to the board of directors.
(a) Nominations of persons for election to the board of
directors of the corporation may be made (i) by or at the direction of the board
of directors or (ii) by any stockholder of the corporation who is a stockholder
of record at the time of giving of notice provided for in paragraph (b) of this
Section 4.5, who shall be
<PAGE> 5
entitled to vote for the election of directors at the meeting and who complies
with the notice procedures set forth in paragraph (b) of this Section 4.5.
(b) Nominations by stockholders shall be made pursuant to
timely notice in writing to the Secretary of the corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the corporation, not less than sixty days nor
more than ninety days prior to the Specified Date, regardless of any
postponements, deferrals or adjournments of that meeting to a later date;
provided, however, that if the annual meeting of stockholders or a special
meeting in lieu thereof is to be held on a date prior to the Specified Date, and
if less than seventy days' notice or prior public disclosure of the date of such
annual or special meeting is given or made, notice by the stockholder to be
timely must be so delivered or received not later than the close of business on
the tenth day following the earlier of the day on which notice of the date of
such annual or special meeting was mailed or the day on which public disclosure
was made of the date of such annual or special meeting. Such stockholder's
notice shall set forth (x) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended, or pursuant to any other
then existing statute, rule or regulation applicable thereto (including such
person's written consent to being named in the proxy statement as a nominee and
to serving as a director if elected); (y) as to the stockholder giving the
notice (1) the name and address, as they appear on the corporation's books, of
such stockholder and (2) the class and number of shares of the corporation which
are beneficially owned by such stockholder and also which are owned of record by
such stockholder; and (z) as to the beneficial owner, if any, on whose behalf
the nomination is made, (1) the name and address of such person and (2) the
class and number of shares of the corporation which are beneficially owned by
such person. The corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the corporation to determine
the eligibility of such proposed nominee as a director. At the request of the
board of directors, any person nominated by the board of directors for election
as a director shall furnish to the secretary of the corporation that information
required to be set forth in a stockholder's notice of nomination which pertains
to the nominee.
(c) No person shall be eligible to serve as a director of the
corporation unless nominated in accordance with the procedures set forth in this
Section 4.5. The person presiding at the meeting shall, if the facts warrant,
determine that a nomination was not made in accordance with the procedures
prescribed by these by-laws, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
Notwithstanding the foregoing provisions of this Section 4.5, a stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended (or any successor provision), and the rules and
regulations thereunder with respect to the matters set forth in this by-law.
4.6 COMMITTEES. The board of directors may, by vote of a majority
of the whole board, (a) designate, change the membership of or terminate the
existence of any committee or committees, each committee to consist of one or
more of the directors; (b) designate one or more directors as alternate members
of any such committee who may replace any absent or disqualified member at any
meeting of the committee; and (c) determine the extent to which each such
committee shall have and may exercise the powers and authority of the board of
directors in the management of the business and affairs of the corporation,
including the power to authorize the seal of the corporation to be affixed to
all papers which require it and the power and authority to declare dividends or
to authorize the issuance of stock; excepting, however, such powers which by
law, by the certificate of incorporation or by these by-laws they are prohibited
from so delegating. In the absence or disqualification of any member of such
committee and his alternate, if any, the member or members thereof present at
any meeting and not disqualified from voting, whether or not constituting a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in the place of any such absent or disqualified member. Except as
the board of directors may otherwise determine, any committee may make rules for
the conduct of its business, but unless otherwise provided by the board or such
rules, its business shall be conducted as nearly as may be in same manner as is
provided by these by-laws for the conduct of business by the board of directors.
Each committee shall keep regular minutes of its meetings and report the same to
the board of directors upon request.
<PAGE> 6
4.7 REGULAR MEETING. Regular meetings of the board of directors
may be held without call or notice at such place within or without the State of
Delaware and at such times as the board may from time to time determine,
provided that notice of the first regular meeting following any such
determination shall be given to absent directors. A regular meeting of the
directors may be held without call or notice immediately after and at the same
place as the annual meeting of the stockholders.
4.8 SPECIAL MEETINGS. Special meetings of the board of directors
may be held at any time and at any place within or without the State of Delaware
designated in the notice of the meeting, when called by the chairman of the
board or president, or by one-third or more in number of the directors,
reasonable notice thereof being given to each director by the secretary or by
the chairman of the board or president or by any one of the directors calling
the meeting.
4.9 NOTICE. It shall be reasonable and sufficient notice to a
director to send notice by mail at least forty-eight hours or by telegram or
telecopy at least twenty-four hours before the meeting, addressed to him at his
usual or last known business or residence address or to give notice to him in
person or by telephone at least twenty-four hours before the meeting. Notice of
a meeting need not be given to any director if a written waiver of notice,
executed by him before or after the meeting, is filed with the records of the
meeting, or to any director who attends the meeting without protesting prior
thereto or at its commencement the lack of notice to him. Neither notice of a
meeting nor a waiver of a notice need specify the purposes of the meeting.
4.10 QUORUM. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, at any meeting of the
directors a majority of the directors then in office shall constitute a quorum;
a quorum shall not in any case be less than one-third of the total number of
directors constituting the whole board. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
4.11 ACTION BY VOTE. Except as may be otherwise provided by law, by
the certificate of incorporation or by these by-laws, when a quorum is present
at any meeting the vote of a majority of the directors present shall be the act
of the board of directors.
4.12 ACTION WITHOUT A MEETING. Unless otherwise restricted by the
certificate of incorporation or these by-laws, any action required or permitted
to be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting if all the members of the board or of such
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the records of the meetings of the board or of such
committee. Such consent shall be treated for all purposes as the act of the
board or of such committee, as the case may be.
4.13 PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Unless
otherwise restricted by the certificate of incorporation or these by-laws,
members of the board of directors or of any committee thereof may participate in
a meeting of such board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Such participation shall constitute presence in
person at such meeting.
4.14 COMPENSATION. Unless otherwise restricted by the certificate
of incorporation or these by-laws, the board of directors shall have the
authority to fix from time to time the compensation of directors. The directors
may be paid their expenses, if any, of attendance at each meeting of the board
of directors and the performance of their responsibilities as directors and may
be paid a fixed sum for attendance at each meeting of the board of directors
and/or a stated salary as director. No such payment shall preclude any director
from serving the corporation or its parent or subsidiary corporations in any
other capacity and receiving compensation therefor. The board of directors may
also allow compensation for members of special or standing committees for
service on such committees.
<PAGE> 7
4.15 INTERESTED DIRECTORS AND OFFICERS.
(a) No contract or transaction between the corporation
and one or more of its directors or officers, or between the corporation and any
other corporation, partnership, association, or other organization in which one
or more of the corporation's directors or officers are directors or officers, or
have a financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the board or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for such purpose,
if:
(1) The material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
board of directors or the committee, and the board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a majority of
the disinterested directors, even though the disinterested directors be less
than a quorum; or
(2) The material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the
corporation as of the time it is authorized, approved or ratified, by the board
of directors, a committee thereof, or the stockholders.
(b) Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board of directors or
of a committee which authorizes the contract or transaction.
4.16 RESIGNATION OR REMOVAL OF DIRECTORS. Any director or the
entire board of directors may be removed for "Cause," as hereinafter defined, by
the holders of a majority of the stock issued and outstanding and entitled to
vote at an election of directors; provided, however, that the directors elected
by a particular class of stockholders may be removed only by the vote of the
holders of a majority of the shares of such class. No director may be removed
without "Cause" by vote of the stockholders. Any director may resign at any time
by delivering a resignation in writing to the principal executive officer or the
secretary or to a meeting of the board of directors. Such resignation shall be
effective upon receipt unless specified to be effective at some other time; and
without in either case the necessity of its being accepted unless the
resignation shall so state. No director resigning and (except where a right to
receive compensation shall be expressly provided in a duly authorized written
agreement with the corporation) no director removed shall have any right to
receive compensation as such director for any period following the director's
resignation or removal, or any right to damages on account of such removal,
whether the director's compensation be by the month or by the year or otherwise;
unless in the case of a resignation, the directors, or in the case of removal,
the body acting on the removal, shall in their or its discretion provide for
compensation. For purposes of this Section 4.16, "Cause" means:
(a) willful and continued material failure, refusal or
inability to perform one's duties to the corporation or the willful engaging in
gross misconduct materially and demonstrably damaging to the corporation; or
(b) conviction for any crime involving moral turpitude or
any other illegal act that materially and adversely reflects upon the business,
affairs or reputation of the Company or on one's ability to perform one's duties
to the corporation.
Section 5. NOTICES
5.1 FORM OF NOTICE. Whenever, under the provisions of law, or of
the certificate of incorporation or of these by-laws, notice is required to be
given to any director or stockholder, such notice may be given by mail,
addressed to such director or stockholder, at his address as it appears on the
records of the corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Unless written notice by mail is required by law, written notice
may also be given by telegram,
<PAGE> 8
cable, telecopy, commercial delivery service, telex or similar means, addressed
to such director or stockholder at his address as it appears on the records of
the corporation, in which case such notice shall be deemed to be given when
delivered into the control of the persons charged with effecting such
transmission, the transmission charge to be paid by the corporation or the
person sending such notice and not by the addressee. Oral notice or other
in-hand delivery (in person or by telephone) shall be deemed given at the time
it is actually given.
5.2 WAIVER OF NOTICE. Whenever notice is required to be given under the
provisions of law, the certificate of incorporation or these by-laws, a written
waiver thereof, signed by the person entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any meeting of the stockholders, directors or members of a
committee of the directors need be specified in any written waiver of notice.
Section 6. OFFICERS AND AGENTS
6.1 ENUMERATION; QUALIFICATION. The officers of the corporation shall
be a president, a chairman of the board, a treasurer, a secretary and such other
officers, if any, as the board of directors from time to time may in its
discretion elect or appoint including without limitation one or more vice
presidents. Any officer may be, but none need be, a director or stockholder. Any
two or more offices may be held by the same person.
6.2 POWERS. Subject to law, to the certificate of incorporation and to
the other provisions of these by-laws, each officer shall have, in addition to
the duties and powers herein set forth, such duties and powers as are commonly
incident to his office and such additional duties and powers as the board of
directors may from time to time designate.
6.3 ELECTION. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a president, a secretary and a
treasurer. Other officers may be appointed by the board of directors at such
meeting, at any other meeting or by written consent. At any time or from time to
time, the directors may delegate to any officer their power to elect or appoint
any other officer or any agents.
6.4 TENURE. Each officer shall hold office until the first meeting of
the board of directors following the next annual meeting of the stockholders and
until his successor is elected and qualified unless a shorter period shall have
been specified in terms of his election or appointment, or in each case until he
sooner dies, resigns, is removed or becomes disqualified. Each agent of the
corporation shall retain his authority at the pleasure of the directors, or the
officer by whom he was appointed or by the officer who then holds agent
appointive power.
6.5 CHAIRMAN, PRESIDENT AND VICE PRESIDENT. The chairman shall share
executive authority with the president. The president shall be the chief
executive officer and shall, with the chairman, have direct and active charge of
all business operations of the corporation and shall, with the chairman, have
general supervision of the entire business of the corporation, subject to the
control of the board of directors. The chairman shall preside at all meetings of
the stockholders and of the board of directors at which he is present, except as
otherwise voted by the board of directors.
The president or treasurer shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation.
Any vice presidents shall have such duties and powers as shall be
designated from time to time by the board of directors or by the president.
<PAGE> 9
6.6 TREASURER AND ASSISTANT TREASURERS. The treasurer shall be in
charge of the corporation's funds and valuable papers, and shall have such other
duties and powers as may be assigned to him from time to time by the board of
directors or by the president.
Any assistant treasurers shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
treasurer.
6.7 SECRETARY AND ASSISTANT SECRETARIES. The secretary shall record all
proceedings of the stockholders, of the board of directors and of committees of
the board of directors in a book or series of books to be kept therefor and
shall file therein all writings of, or related to, action by stockholder or
director consent. In the absence of the secretary from any meeting, an assistant
secretary, or if there is none or he is absent, a temporary secretary chosen at
the meeting, shall record the proceedings thereof. Unless a transfer agent has
been appointed, the secretary shall keep or cause to be kept the stock and
transfer records of the corporation, which shall contain the names and record
addresses of all stockholders and the number of shares registered in the name of
each stockholder. The secretary shall have such other duties and powers as may
from time to time be designated by the board of directors or the president.
Any assistant secretaries shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
secretary.
6.8 RESIGNATION AND REMOVAL. Any officer may resign at any time by
delivering his resignation in writing to the president or the secretary or to a
meeting of the board of directors. Such resignation shall be effective upon
receipt unless specified to be effective at some other time, and without in any
case the necessity of its being accepted unless the resignation shall so state.
The board of directors may at any time remove any officer either with or without
cause. The board of directors may at any time terminate or modify the authority
of any agent. No officer resigning and (except where a right to receive
compensation shall be expressly provided in a duly authorized written agreement
with the corporation) no officer removed shall have any right to any
compensation as such officer for any period following his resignation or
removal, or any right to damages on account of such removal, whether his
compensation be by the month or by the year or otherwise; unless in the case of
a resignation, the directors, or in the case of removal, the body acting on the
removal, shall in their or its discretion provide for compensation.
6.9 VACANCIES. If the office of the president or the treasurer or the
secretary becomes vacant, the directors may elect a successor by vote of a
majority of the directors then in office. If the office of any other officer
becomes vacant, any person or body empowered to elect or appoint that office may
choose a successor. Each such successor shall hold office for the unexpired term
of his predecessor, and in the case of the president, the treasurer and the
secretary until his successor is chosen and qualified, or in each case until he
sooner dies, resigns, is removed or becomes disqualified.
Section 7. CAPITAL STOCK
7.1 STOCK CERTIFICATES. Each stockholder shall be entitled to a
certificate stating the number and the class and the designation of the series,
if any, of the shares held by him, in such form as shall, in conformity to law,
the certificate of incorporation and the by-laws, be prescribed from time to
time by the board of directors. Such certificate shall be signed by the
president or a vice-president and (i) the treasurer or an assistant treasurer or
(ii) the secretary or an assistant secretary. Any of or all the signatures on
the certificate may be a facsimile. In case an officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed on such
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if he were such officer, transfer agent, or registrar at the time
of its issue.
7.2 LOST CERTIFICATES. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed
<PAGE> 10
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 8. TRANSFER OF SHARES OF STOCK
8.1 TRANSFER ON BOOKS. Subject to any restrictions with respect to
the transfer of shares of stock, shares of stock may be transferred on the books
of the corporation by the surrender to the corporation or its transfer agent of
the certificate therefor properly endorsed or accompanied by a written
assignment and power of attorney properly executed, with necessary transfer
stamps affixed, and with such proof of the authenticity of signature as the
board of directors or the transfer agent of the corporation may reasonably
require. Except as may be otherwise required by law, by the certificate of
incorporation or by these by-laws, the corporation shall be entitled to treat
the record holder of stock as shown on its books as the owner of such stock for
all purposes, including the payment of dividends and the right to receive notice
and to vote or to give any consent with respect thereto and to be held liable
for such calls and assessments, if any, as may lawfully be made thereon,
regardless of any transfer, pledge or other disposition of such stock until the
shares have been properly transferred on the books of the corporation.
It shall be the duty of each stockholder to notify the corporation of
his post office address.
Section 9. GENERAL PROVISIONS
9.1 RECORD DATE. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty days nor less than ten days before the date
of such meeting, nor more than sixty days prior to any other action to which
such record date relates. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting. If no record date is fixed,
(a) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held;
(b) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the day on which the
first written consent is expressed; and
(c) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating to such purpose.
9.2 DIVIDENDS. Dividends upon the capital stock of the corporation
may be declared by the board of directors at any regular or special meeting or
by written consent, pursuant to law. Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the certificate
of incorporation.
9.3 PAYMENT OF DIVIDENDS. Before payment of any dividend, there
may be set aside out of any funds of the corporation available for dividends
such sum or sums as the directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall think conducive to
the interest of the corporation, and the directors may modify or abolish any
such reserve in the manner in which it was created.
<PAGE> 11
9.4 CHECKS. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
9.5 FISCAL YEAR. The fiscal year of the corporation shall begin on
the first of January in each year and shall end on the last day of December next
following, unless otherwise determined by the board of directors.
9.6 SEAL. The board of directors may, by resolution, adopt a
corporate seal. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the word "Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise. The seal may be altered from time to time by the board
of directors.
Section 10. AMENDMENTS
10.1 BY THE BOARD OF DIRECTORS. These by-laws may be altered,
amended or repealed or new by-laws may be adopted by the affirmative vote of a
majority of the directors present at any regular or special meeting of the board
of directors at which a quorum is present.
10.2 BY THE STOCKHOLDERS. Except as otherwise provided in Section
10.3, these by-laws may be altered, amended or repealed or new by-laws may be
adopted by the affirmative vote of the holders of a majority of the shares of
the capital stock of the corporation issued and outstanding and entitled to vote
at any regular or special meeting of stockholders, provided notice of such
alteration, amendment, repeal or adoption of new by-laws shall have been stated
in the notice of such regular or special meeting.
10.3 CERTAIN PROVISIONS. Notwithstanding any other provision of
law, the certificate of incorporation or these by-laws, and notwithstanding the
fact that a lesser percentage may be specified by law, the affirmative vote of
the holders of at least two-thirds of the shares of capital stock of the
corporation issued and outstanding and entitled to vote shall be required to
amend or repeal, or to adopt any provision inconsistent with, Section 3.5,
Section 3.7, Section 3.14, Section 4 and Section 10 of these by-laws.
<PAGE> 1
Exhibit 10.9
CYTATION.COM INCORPORATED
1999 STOCK OPTION PLAN
1. NAME AND PURPOSE. This Plan shall be known as the Cytation.com
Incorporated 1999 Stock Option Plan (the "Plan"). The purpose of the
Plan is to advance the interests and increase the value of Cytation.com
Incorporated (the "Company") by providing material incentive for the continued
services of key and valuable employees. Awards under the Plan shall be granted
in the form of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended ("ISOs") or non-qualified stock
options.
2. DEFINITIONS. For purposes of this Plan, the following terms shall
have the meanings set forth below:
"ACCELERATION EVENT" means (i) a Change in Control, (ii) a change in
the composition of the Board during any period of two consecutive years such
that individuals who at the beginning of the period were members of the Board
cease for any reason to constitute at least a majority thereof, unless the
election or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period, or (iii) a complete liquidation of the
Company.
"ADMINISTRATOR" means the Board, or the Compensation Committee of the
Board or such other person(s) to whom the Board has delegated the responsibility
of administering the Plan.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means, (i) in the case of any Optionee whose employment with
the Company is governed by an employment agreement, the meaning given to such
term in such employment agreement, and (ii) for all other Optionees, as
determined in good faith by the Administrator, (1) gross negligence in the
performance of any of material duties and responsibilities; (2) willful
dishonesty, fraud or material misconduct with respect to the business or affairs
of the Company, (3) the conviction of a felony crime; (4) chronic absenteeism,
or (5) chronic alcohol abuse or illegal drug abuse.
"CHANGE IN CONTROL" means (i) a consolidation or merger of the Company
with or into any other corporation, or any other entity or person, other than a
wholly-owned subsidiary of the Company, excluding any transaction in which the
stockholders of the Company immediately prior to the transaction will maintain
voting control or own at least 50% (in each case, in substantially the same
proportion as before such event) of the resulting entity after the transaction;
(ii) any corporate reorganization, including an exchange offer, in which the
Company shall not be the continuing or surviving entity resulting from such
reorganization, excluding any transaction in which the stockholders of the
Company immediately prior to the transaction will maintain voting control or own
at least 50% (in each case, in substantially the
<PAGE> 2
same proportion as before such event) of the resulting entity after the
transaction; or (iii) the sale of a substantial portion of the Company's assets,
which shall be deemed to occur on the date that any one person, or more than one
person acting as a group, acquires (or has acquired during the 12 month period
ending on the date of the most recent acquisition by such person or persons)
assets from the Company that have a total fair market value equal to more than
75% of the total fair market value of all the assets of the Company.
"COMMON SHARES" means shares of the Company's common stock, $.001 par
value, reserved for issuance under the Plan.
"EFFECTIVE DATE" means May 7, 1999.
"FAIR MARKET VALUE" means, for any given day, the closing bid for the
Common Shares on such day.
"OPTIONEE" means an eligible employee or other person who performs
services for the Company that is granted an option pursuant to the Plan.
3. ADMINISTRATION. The Plan shall be administered by the Administrator.
The Administrator may establish, subject to the provisions of the Plan, such
rules and regulations as it deems necessary for the proper administration of the
Plan, and make such determinations and take such action in connection therewith
or in relation to the Plan as it deems necessary or advisable, consistent with
the Plan.
4. ELIGIBILITY. Officers and key employees of the Company and its
affiliates shall be eligible to participate in the Plan as determined by the
Administrator.
5. SHARES SUBJECT TO THE PLAN.
(a) The Common Shares to be issued and delivered by the Company upon
exercise of options granted under the Plan may be either authorized but unissued
shares or treasury shares.
(b) The aggregate number of Common Shares of the Company which may be
issued under the Plan shall not exceed 1,550,000 shares, all or any portion of
which may be ISOs; subject, however, to the adjustment provided in Section 9 in
the event of certain changes in the Company's capital structure. No option may
be granted under this Plan which could cause such maximum limit to be exceeded.
(c) Common Shares covered by an option which is no longer exercisable
with respect to such shares shall again be available for issuance under this
Plan.
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<PAGE> 3
6. GRANT OF OPTIONS. The Administrator may from time to time, in its
discretion and subject to the provisions of the Plan, grant options to eligible
employees or other persons who perform services for the Company, provided
however, that any grant of an ISO prior to the approval of the Plan by the
Company's stockholders shall be conditioned on and subject to stockholder
approval of the Plan. Each option shall be embodied in an option agreement
signed by the Optionee and the Company providing that the option shall be
subject to the provisions of this Plan and containing such other provisions as
the Administrator may prescribe not inconsistent with the Plan. The option
agreement shall specify whether the option is a non-qualified option or an ISO.
No ISO may be granted subsequent to August 31, 2009. Subject to adjustment as
provided in Section 9, in any fiscal year of the Company, the aggregate number
of Common Shares as to which options may be granted to any one participant shall
not exceed 750,000 shares.
7. TERMS AND CONDITIONS OF OPTION. All options granted under the Plan
shall contain such terms and conditions as the Administrator may from time to
time determine, subject to the foregoing and following limitations and
requirements:
(a) OPTION PRICE: The price of Common Shares covered by any option
granted under the Plan shall be determined by the Administrator provided,
however, that in the case of an ISO the option price shall not be less than 100%
of the Fair Market Value of the Common Shares on the date of grant.
(b) PERIOD WITHIN WHICH OPTION MAY BE EXERCISED: The period of each
option shall be fixed by the Administrator, but no option may be exercised after
the expiration of ten years from the date the option is granted. The
Administrator may, in its discretion, determine as a condition of any option,
that all or a stated percentage of the Common Shares covered by such option
shall become exercisable, in installments or otherwise, only after the
completion of a specified service requirement by the Optionee or the achievement
of certain performance criteria. In addition, the Administrator may impose such
other restrictions and conditions on the exercisability of options as the
Administrator, in its discretion, may approve. Notwithstanding the foregoing,
and except as otherwise provided in Section 9(iv) hereof, all options shall
become immediately exercisable in full upon an Acceleration Event.
(c) 10% STOCKHOLDER: Notwithstanding any other provision of this Plan,
the price per Common Share covered by an ISO granted to an Optionee who, at the
time such option is granted, owns shares possessing more than 10% of the total
combined voting power of all classes of shares of the Company or its
subsidiaries shall be at least 110% of the Fair Market Value of the Common
Shares subject to the option. In addition, any such option may not be exercised
after the expiration of five years from the date the ISO is granted.
(d) GRANT LIMITATION: The aggregate Fair Market Value of Common Shares
with respect to which ISOs are exercisable for the first time by any Optionee
during any calendar year (determined at the time the option is granted) shall
not exceed $100,000.
(e) TERMINATION OF OPTION BY REASON OF TERMINATION OF EMPLOYMENT:
Unless the Administrator in its discretion determines otherwise, if an
Optionee's employment (or
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<PAGE> 4
contractual relationship, which shall hereafter be referred to as employment)
with the Company terminates for any reason, including death or disability
(within the meaning of Section 22(e)(3) of the Internal Revenue Code), any
portion of options granted under this Plan to such Optionee which are not
exercisable by reason of Section 7(b) hereof shall terminate immediately. Any
remaining portion of such options shall terminate if not exercised within the
period provided for in the option agreement.
Notwithstanding the foregoing, if an Optionee's employment is
terminated for Cause, all outstanding options held by such Optionee, whether
vested or unvested, shall terminate immediately.
(f) NON-TRANSFERABILITY: Each option and all rights thereunder shall be
exercisable during the Optionee's lifetime only by him and shall be
non-assignable and non-transferable by the Optionee except, in the event of the
Optionee's death, by his will or by the laws of descent and distribution. In the
event the death of an Optionee occurs, the representative or representatives of
the estate, or the person or persons who acquired (by bequest or inheritance)
the rights to exercise the options may exercise such options in whole or in part
prior to the expiration of the applicable exercise period, as specified in
Section 7(e) above.
(g) COMPLIANCE WITH SECURITIES LAWS: Options granted and shares issued
by the Company upon exercise of options shall be granted and issued only in full
compliance with all applicable securities laws, including laws, rules and
regulations of the Securities and Exchange Commission and applicable state Blue
Sky Laws. With respect thereto, the Administrator may impose such conditions on
transfer, restrictions and limitations as it may deem necessary and appropriate
to assure compliance with such applicable securities laws.
(h) MODIFICATION OR CANCELLATION OF OPTION: The Administrator shall
have the authority to effect, at any time and from time to time, with the
consent of the affected Optionee or Optionees, the modification of the terms of
any option agreement (subject to the limitations hereof), including, but not
limited to, the acceleration of any vesting or exercisability requirements upon
the occurrence of a change in control or otherwise.
(i) DISPOSITION OF SHARES: No option granted under this Plan shall
qualify as an ISO within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended, if the Common Shares acquired pursuant to the exercise of
the option are transferred, other than by will or by the laws of descent and
distribution, within two years of the date such option was granted or within one
year after the transfer of Common Shares to the Optionee pursuant to such
exercise.
8. METHOD OF EXERCISE. An option granted under this Plan may be
exercised by written notice to the Administrator, signed by the Optionee, or by
such other person as is entitled to exercise such option. The notice of exercise
shall state the number of Common Shares in respect of which the option is being
exercised, and shall either be accompanied by the payment of the full option
price for such Common Shares, or shall fix a date (not more than ten business
days from the date of such notice) for the payment of the full option price of
the Common Shares being purchased. The purchase price may be paid (i) in cash,
(ii) subject to the approval of the
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<PAGE> 5
Administrator, the delivery to the Company of Common Shares already owned by the
Optionee (which shall be valued for this purpose at the Fair Market Value on the
day immediately preceding the date of transfer to the Company), or (iii) any
combination of the above. A certificate or certificates for the Common Shares of
the Company purchased through the exercise of an option shall be issued in
regular course after the exercise of the option and payment therefore. During
the option period no person entitled to exercise any option granted under this
Plan shall have any of the rights or privileges of a stockholder with respect to
any Common Shares issuable upon exercise of such option until certificates
representing such Common Shares shall have been issued and delivered.
9. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE.
(a) The existence of outstanding options shall not affect in any way
the right or ability of the Company or its stockholders to make or authorize any
or all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Shares or the rights hereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business or substantially all of the outstanding stock of
the Company, or any other corporate act or proceeding, whether of a similar
character or otherwise.
(b) If the Company shall effect a subdivision, consolidation or
reclassification of shares or other capital readjustment or recapitalization,
the payment of a stock dividend, or other increase or reduction in the number of
voting shares outstanding, without receiving compensation therefor in money,
services or property, then the number, class, and per share price of Common
Shares shall be appropriately adjusted in such a manner as to entitle an
Optionee to receive upon exercise of an option, for the same aggregate cash
consideration, the same total number and class of shares as he would have
received as a result of the event requiring the adjustment.
(c) Except as hereinbefore expressly provided, the issue by the Company
of shares of stock of any class, for cash or property, or for labor or services,
either upon direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number or price of Common
Shares then subject to outstanding options.
(d) In the event of a Change in Control, except as otherwise provided
below, all options outstanding under the Plan shall accelerate and become
immediately exercisable for a period of fifteen days, or such longer or shorter
period as the Board may prescribe, (the "notice period") immediately prior to
the scheduled consummation of such Change in Control, provided, however, that
any such acceleration and any exercise of options during the notice period shall
be (i) conditioned upon the consummation of the Change in Control and (ii)
effective only immediately before the consummation of such Change in Control.
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<PAGE> 6
Upon consummation of any such event, the Plan and all outstanding but
unexercised options shall terminate. Notwithstanding the foregoing, to the
extent provision is made in writing in connection with such Change in Control
for the continuation of the Plan and the assumption of options under the Plan
theretofore granted, or for the substitution for such options of new options
covering the stock of a successor company, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kinds of shares or units and
exercise prices, then the Plan and options theretofore granted shall continue in
the manner and under the terms so provided, and the acceleration and termination
provisions set forth in the first two sentences of this Section 9(d) shall be of
no effect. The Company shall send written notice of a Change in Control to all
individuals who hold options not later than the time at which the Company gives
notice thereof to its stockholders.
10. AMENDMENT OR TERMINATION. The Administrator may terminate this Plan
at any time, and may amend the Plan at any time or from time to time; provided,
however, that any amendment that would increase the aggregate number of shares
that may be issued under the Plan, materially increase the benefits accruing to
employees under the Plan, or materially modify the requirements as to
eligibility for participation in the Plan shall be subject to the approval of
the Company's stockholders to the extent required by Internal Revenue Code
Section 422, other applicable laws or any other governing rules or regulations
except that such increase or modification that may result from adjustments
authorized by Section 9 does not require such approval. If the Plan is
terminated, any unexercised option shall continue to be exercisable in
accordance with its terms, except as provided in Section 9 above.
11. COMPANY RESPONSIBILITY. All expenses of this Plan, including the
cost of maintaining records, shall be borne by the Company. The Company shall
have no responsibility or liability (other than under applicable Securities
Acts) for any act or thing done or left undone with respect to the price, time,
quantity, or other conditions and circumstances of the purchase of the Common
Shares under the terms of the Plan, so long as the Company acts in good faith.
12. TAX WITHHOLDING. Any grant of an option hereunder shall provide as
determined by the Administrator for appropriate arrangements for the
satisfaction by the Company and the Optionee of all federal, state, local or
other income excise or employment taxes or tax withholding requirements
applicable to the exercise of the option or the later disposition of the Common
Shares thereby acquired and all such additional taxes or amounts as determined
by the Administrator in its discretion, including, without limitation, the right
of the Company or any subsidiary thereof to receive transfers of Common Shares
or other property from the Optionee or to deduct or withhold in the form of
Common Shares from any transfer to an Optionee, in such amount or amounts deemed
required or appropriate by the Administrator in its sole and absolute
discretion.
13. IMPLIED CONSENT. Every Optionee, by the acceptance of an option
under this Plan shall be deemed to have consented to be bound, on his own behalf
and on behalf of his heirs, assigns, and legal representatives, by all of the
terms and conditions of this Plan.
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<PAGE> 7
14. NO EFFECT ON EMPLOYMENT STATUS. The fact that an employee or any
other person has been granted an option under this Plan shall not limit or
otherwise qualify the right of the Company to terminate his employment at any
time.
15. DELAWARE LAW TO GOVERN. This Plan shall be construed and
administered in accordance with and governed by the laws of the State of
Delaware.
IN WITNESS WHEREOF, the Company has caused this 1999 Stock Option Plan
to be executed by its duly authorized officer as of this 7th day of May, 1999.
CYTATION.COM INCORPORATED
By: /s/ Richard Fisher
------------------
Title: Chairman
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<PAGE> 1
Exhibit 10.15
LOCK UP LETTER
Cruttenden Roth Incorporated
As Representative of the several Underwriters
20 Corporate Plaza, Suite 200
Newport Beach, CA 92660
Ladies and Gentlemen:
This letter is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement") between CollegeLink.com
Incorporated, a New York corporation or any successor (the "Company"), and you
as representative of the several underwriters (the "Underwriters") named in
Schedule I thereto, relating to an underwritten public offering (the "Offering")
of shares of the Company's common stock, $.001 par value per share (the "Common
Stock") (including shares of Common Stock subject to an option granted to the
Underwriters solely to cover over-allotments, if any).
In order to induce you and the other Underwriters to enter into the
Underwriting Agreement with respect to the Offering, the undersigned, intending
to be legally bound, hereby agrees, for the benefit of the Company, you and the
other Underwriters, that for a period of 180 days following the effective date
of the Registration Statement relating to the Offering (the "Lock-up Period"),
the undersigned will not, without the prior written consent of the
Representative (as defined in the Underwriting Agreement), directly or
indirectly, offer, offer to sell, sell, contract to sell, grant any option for
the purchase of, assign, transfer, pledge, hypothecate or otherwise encumber or
dispose of any beneficial interest in or grant any other person the right to
acquire or otherwise dispose of (or enter into any transaction or arrangement
which is designed to, or could be expected to, result in the disposition at
anytime in the future of) ("Transfer") any shares of Common Stock or securities
convertible into or exchangeable for or evidencing any right to purchase or
subscribe for any shares of Common Stock (either pursuant to Rule 144 of the
regulations under the Securities Act of 1933, as amended, or otherwise) either
beneficially owned by the undersigned as of the effective date of the
Registration Statement or acquired by the undersigned during the Lock-up Period
as a result of the exercise of options or otherwise (the "Securities"). The
undersigned also will not, during the Lock-up Period, exercise any registration
rights relating to any shares of Common Stock, without the prior written consent
of the Representative.
In the event that the Representative consents to a Transfer, the
undersigned hereby agrees that, during the Lock-up Period, the execution of any
order relating to a Transfer of Securities
<PAGE> 2
shall be placed through the Representative.
To enable the Company and the Underwriters to enforce the aforesaid
covenants, the Undersigned hereby consents to the placing of legends on the
Securities and stop-transfer orders with the transfer agent of the Company's
securities with respect to any of the Securities registered in the name of or
beneficially owned by the undersigned.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York without giving effect to the
choice of law or conflict of laws principles.
If for any reason the Underwriting Agreement shall be terminated prior
to the Closing Date (as defined in the Underwriting Agreement), the agreement
set forth above shall be likewise terminated at such time.
Dated: _________________, 1999
-------------------------------
Signature
-------------------------------
Print Name
-------------------------------
Print Address
-------------------------------
Print Social Security Number or
Taxpayer I.D. Number
<PAGE> 1
Exhibit 10.17
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") is made and entered
into as of October 20, 1999 by and among (i) Cytation.com Incorporated, a New
York corporation ("Parent"), (ii) CollegeLink.com Incorporated, a Delaware
corporation and a direct, wholly-owned subsidiary of Parent ("Merger Sub"),
(iii) Student Success, Inc., a Wisconsin corporation (the "Company"), and (iv)
Bradford J. Baker ("Brad Baker"), Patrick S. O'Brien ("Pat O'Brien) and the
Patrick S. O'Brien Stock Trust (the "O'Brien Trust"; together with Brad Baker
and Pat O'Brien, the "Shareholders").
RECITALS
A. The Boards of Directors of each of the Company, Parent and Merger
Sub, believe it is in the best interests of each company and their respective
shareholders that the Company and Merger Sub combine into a single company
through the statutory merger of the Company with and into the Merger Sub (the
"Merger") and, in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, the outstanding shares
of Common Stock of the Company ("Company Common Stock") shall be converted into
the right to receive cash and shares of Common Stock of Parent ("Parent Common
Stock") at the rate determined herein.
C. The Company, Parent and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
D. Concurrent with the execution of this Agreement, as a material
inducement to Parent to enter into this Agreement, (i) Brad Baker and Pat
O'Brien each are entering into employment agreements with Parent ("Employment
Agreements") substantially in the form attached hereto as Exhibit A and (ii) the
Shareholders each are entering into support agreements with Parent ("Support
Agreements") substantially in the form attached hereto as Exhibit B.
E. The parties intend, by executing this Agreement, to adopt a plan of
merger within the meaning of Section 368 of the Internal Revenue Code of 1986,
as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
<PAGE> 2
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2), and
subject to and upon the terms and conditions of this Agreement, the applicable
provisions of the General Corporation Law of the State of Delaware ("Delaware
Law") and the applicable provisions of the Wisconsin Business Corporation Law
("Wisconsin Law"), the Company shall be merged with and into the Merger Sub, the
separate corporate existence of the Company shall cease and the Merger Sub shall
continue as the surviving corporation. The Merger Sub as the surviving
corporation after the Merger is hereinafter sometimes referred to as the
"Surviving Corporation." The name of the Surviving Corporation shall be
CollegeLink.com Incorporated.
1.2 Effective Time. As promptly as practicable after the satisfaction
or waiver of the conditions set forth in Article VI, the parties hereto shall
cause the Merger to be consummated by (i) filing a Certificate of Merger,
substantially in the form attached hereto as Exhibit C (the "Delaware Filing"),
with the Secretary of State of the State of Delaware, in accordance with the
relevant provisions of Delaware Law, and (ii) filing Articles of Merger,
substantially in the form attached hereto as Exhibit D (the "Wisconsin Filing"),
with the Department of Financial Institutions of the State of Wisconsin, in
accordance with the relevant provision of Wisconsin Law. The later to occur of
(i) the filing of the Delaware Filing and (ii) the Wisconsin Filing is
hereinafter sometimes referred to as (the "Effective Time"). The Closing of the
transaction contemplated hereby ("Closing") shall take place on or about the
Effective Time at the offices of Foley, Hoag & Eliot LLP, or at such other time,
date and location as the parties hereto agree ("Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
Delaware Law and Wisconsin Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) Unless otherwise determined by Parent prior to the
Effective Time, at the Effective Time the Certificate of Incorporation of the
Merger Sub, as in effect at the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Certificate of Incorporation.
(b) The Bylaws of the Merger Sub, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter amended.
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<PAGE> 3
1.5 Directors and Officers. The initial directors of the Surviving
Corporation shall be Richard A. Fisher and Kevin J. High, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation. The initial officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed and qualified,
shall be:
<TABLE>
<S> <C>
Thomas J. Burgess President
Timothy Jemison Vice President - Operations
Nancy Gleason Vice President - College Relations
Peter Barkman Vice President - High School Relations
Bradford J. Baker Vice President - Sales
Patrick S. O'Brien Vice President - Marketing
William Fink Vice President - Network Operations
Douglas Bush Vice President - Business Development
Richard A. Gariepy Vice President
Edward F. Hayes Treasurer
Richard A. Fisher Secretary
Krista A. Michael Assistant Secretary
</TABLE>
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the following securities:
(a) Merger Consideration. Each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time except as
provided in Sections 1.6(c) and 1.6(d) and any Dissenting Shares (as defined and
to the extent provided in Section 1.7(a)) will be canceled and extinguished and
be converted automatically into the right to receive:
(i) a cash payment ("Cash Payment"); and
(ii) that number of shares of Parent Common Stock
equal to the Exchange Ratio.
Such consideration is hereinafter sometimes collectively referred to as the
"Merger Consideration."
The Exchange Ratio shall equal (i) (A) $4,500,000 divided by (B) the
per share public offering price of the Parent Common Stock in the Secondary
Offering (as defined in Section 6.3(h)) before underwriters' discounts and
expenses (rounded up to the nearest whole share)("Offering Price"), divided by
(ii) the number of shares of Company Common Stock outstanding as of the
Effective Time.
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The Cash Payment shall equal (i) $3,500,000, less (A) all expenses
including, without limitation, all legal and accounting fees and expenses, of
the Company and of the Shareholders relating to the transactions contemplated
hereby (other than the payment of the reasonable expenses incurred by the
Company for audit of its financial statements to be included in the Parent's
pending registration statement (SEC File No. 333-85079) and up to $25,000 for
the Company's reasonable legal expenses) and (B) any payments made by the Parent
pursuant to Section 5.12 if the Closing occurs on or before January 15, 2000
divided by (ii) the number of shares of Company Common Stock outstanding as of
the Effective Time.
(b) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock or Company Common Stock), reorganization, recapitalization
or other like change with respect to Parent Common Stock or Company Common Stock
occurring after the date hereof and prior to the Effective Time.
(c) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued, but in lieu thereof each holder of shares of Company
Common Stock who would otherwise be entitled to a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent Common Stock to
be received by such holder) shall receive from Parent an amount of cash (rounded
to the nearest whole cent) equal to the product of (i) such fraction, multiplied
by (ii) the Offering Price.
(d) Treasury Stock. Each outstanding share of Company Common
Stock held by the Company as treasury stock immediately prior to the Effective
time shall be canceled without payment.
1.7 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of capital stock of the Company held by a holder who has
exercised dissenters' rights for such shares in accordance with Wisconsin Law
and who, as of the Effective Time, has not effectively withdrawn or lost such
dissenters rights ("Dissenting Shares"), shall not be converted into or
represent a right to receive the Merger Consideration pursuant to Section 1.6,
but the holder thereof shall only be entitled to such rights as are granted by
Wisconsin Law.
(b) Notwithstanding the provisions of subsection (a), if any
holder of Dissenting Shares shall effectively withdraw or lose (through failure
to perfect or otherwise) his or her dissenters' rights, then, as of the later of
the Effective Time or the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive the
Merger Consideration and payment for fractional shares as provided in Section
1.6, without interest thereon, upon surrender of the certificate representing
such shares.
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(c) The Company shall give Parent (i) prompt notice of any
written demand received by the Company to require the Company to purchase shares
of the Company's Common Stock pursuant to the applicable provisions of Wisconsin
Law and (ii) the opportunity to participate in all negotiations and proceedings
with respect to such demands. The Company shall not, except with the prior
written consent of Parent, voluntarily make any payment with respect to any such
demands or offer to settle or settle any such demands.
1.8 Surrender of Certificates.
(a) Exchange Agent. Foley, Hoag & Eliot LLP shall act as
exchange agent ("Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock. Promptly after the
Effective Time, Parent shall make available to the Exchange Agent for exchange
in accordance with this Article I, through such reasonable procedures as Parent
may adopt, the shares of the Merger Consideration issuable pursuant to Section
1.6 in exchange for outstanding shares of Company Common Stock.
(c) Exchange Procedures. At or before the Effective Time, each
holder of a certificate or certificates ("Certificates") which immediately prior
to the Effective Time represented outstanding shares of Company Common Stock
shall surrender to the Exchange Agent for cancellation the Certificates, duly
endorsed to Parent or accompanied by duly executed stock powers and assignments
separate from certificate transferring title to such shares to Parent. Promptly
after the Effective Time, and against receipt of such Certificates, the Exchange
Agent shall issue to each tendering holder of a Certificate a certificate for
the number of shares of Parent Common Stock to which such holder is entitled and
payment in lieu of fractional shares pursuant to Section 1.6 hereof and the
Certificate so surrendered shall forthwith be canceled. To the extent that any
holder of a Certificate does not so surrender such Certificate at or before the
Effective Time, then promptly after the Effective Time, the Surviving
Corporation shall cause to be mailed to each holder of record of Certificates,
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such form and
have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent after the Effective Time, or
to such other agent or agents as may be appointed by Parent, together with such
letter of transmittal, duly completed and validly executed in accordance with
the instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
shares of Parent Common Stock, the Cash Payment, and payment in lieu of
fractional shares which such holder has the right to receive pursuant to Section
1.6, and the Certificate so surrendered shall forthwith be canceled. Until so
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented shares of Company Common Stock will be deemed from and after the
Effective Time, for all corporate purposes,
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other than the payment of dividends, to evidence the right to receive the Cash
Payment and the ownership of the number of full shares of Parent Common Stock
into which such shares of Company Common Stock shall have been so converted and
the right to receive an amount in cash in lieu of the issuance of any fractional
shares in accordance with Section 1.6.
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date of this
Agreement with respect to Parent Common Stock with a record date after the
Effective Time will be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby until the
holder of record of such Certificate shall surrender such Certificate. Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, at the time
of such surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole shares
of Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which the
certificate surrendered in exchange therefore is registered, it will be a
condition of the issuance thereof that the certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Parent Common Stock in any name other than that of the registered
holder of the certificate surrendered, or established to the satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
(f) No Liability. Notwithstanding anything to the contrary in
this Section 1.8, none of the Exchange Agent, the Surviving Corporation or any
party hereto shall be liable to a holder of shares of Company Common Stock for
any amount properly paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
1.9 No Further Ownership Rights in Company Common Stock. The Cash
Payment and the shares of Parent Common Stock issued upon the surrender for
exchange of shares of Company Common Stock in accordance with the terms hereof
(including any cash paid in respect thereof) shall be deemed to have been issued
in full satisfaction of all rights pertaining to such shares of Company Common
Stock, and there shall be no further registration of transfers on the records of
the Surviving Corporation of shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article I.
1.10 Lost, Stolen or Destroyed Certificates. In the event any
certificates evidencing shares of Company Common Stock shall have been lost,
stolen or destroyed, the Exchange
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<PAGE> 7
Agent shall issue in exchange for such lost, stolen or destroyed certificates,
upon the making of an affidavit of that fact by the holder thereof, such shares
of Parent Common Stock and cash for fractional shares, if any, as may be
required pursuant to Section 1.6; provided, however, that Parent may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against Parent or the Exchange Agent with respect to the certificates alleged to
have been lost, stolen or destroyed.
1.11 Tax and Accounting Consequences. It is intended by the parties
hereto that the Merger shall constitute a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986. The parties shall not take a
position on any tax returns inconsistent with this Section 1.11.
1.12 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is consistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and the Shareholders represent and warrant to Parent and
Merger Sub, subject to the exceptions set forth in the Disclosure Schedule
attached hereto as Exhibit E ("Company Disclosure Schedule") as follows:
2.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Wisconsin. The Company has the corporate power to own its property and to carry
on its business as now being conducted and as proposed to be conducted by the
Company. Except as set forth in Section 2.1 of the Company Disclosure Schedule,
the Company is duly qualified to do business and in good standing as a foreign
corporation in each jurisdiction in which the failure to be so qualified would
have a material adverse effect on the business, assets (including intangible
assets), financial condition, results of operations or prospects ("Material
Adverse Effect") of the Company. The Company has delivered a true and correct
copy of its Certificate of Incorporation and Bylaws, each as amended to date, to
counsel for Parent.
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<PAGE> 8
2.2 Company Capital Structure. Immediately prior to the Effective Time,
the authorized capital stock of the Company consists of 9,000 shares of Common
Stock, without par value. There are 1,000 shares of the Company Common Stock
issued and outstanding held by the persons, and in the amounts, set forth on
Exhibit F. At the time of the Closing, such list shall have been appropriately
adjusted to reflect any option exercises and stock repurchases since the date
hereof. No shares of any holder were subject to repurchase upon termination of
employment as of the Effective Time. All outstanding shares of Company Common
Stock are duly authorized, validly issued, fully paid and non-assessable and not
subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of the Company or any agreement to which the Company is
a party or by which it is bound. There are no other options, warrants, calls,
rights, commitments or agreements of any character to which the Company is a
party or by which it is bound obligating the Company to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of the capital stock of the Company or obligating the
Company to grant, extend, accelerate the vesting of, change the price of, or
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement.
2.3 Subsidiaries. The Company does not have and has never had any
subsidiaries or affiliated companies and does not otherwise own and has never
otherwise owned any shares of stock or any interest in, or control, directly or
indirectly, any other corporation, partnership, association, joint venture or
business entity.
2.4 Authority.
(a) The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, subject only to
the approval of the Merger by the Company's shareholders as contemplated by
Section 6.1(a). This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company. Except
as set forth in Section 2.4 of the Company Disclosure Schedule, the execution
and delivery of this Agreement by the Company does not, and the consummation of
the transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under (i) any provision of the Certificate
of Incorporation, as amended, or Bylaws of the Company or (ii) any other
material mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or its properties or
assets. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity"), is
required by or with respect to the Company in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filing
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of the Delaware Filing with the Secretary of State of the State of Delaware,
(ii) the Wisconsin Filing with the Department of Financial Institutions of the
State of Wisconsin, (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and the laws of any foreign country, and (iv)
such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, would not have a Material Adverse Effect on the
Company.
(b) Each of the Shareholders has all requisite power and
authority to enter into this Agreement and any Related Agreements (as defined in
Section 6.1(e)) to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and any Related Agreements to which each Shareholder is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of such Shareholder, and no
further action is required on the part of such Shareholder to authorize the
Agreement, any Related Agreement to which it is a party and the transactions
contemplated hereby and thereby. This Agreement and any Related Agreements to
which such Shareholder is a party have been duly executed and delivered by such
Shareholder, and, assuming the due authorization, execution and delivery by the
other parties hereto and thereto, constitute the valid and binding obligation of
such Shareholder, enforceable in accordance with their respective terms, subject
to the laws of general application relating to bankruptcy insolvency and the
relief of debtors and to rules of law governing specific performance, injunctive
relief or other equitable remedies.
2.5 Company Financial Statements. Section 2.5 of the Company Disclosure
Schedule sets forth the Company's unaudited financial statement for the fiscal
years ending December 31, 1997 and 1998 and the Company's unaudited financial
statements for the 8 months ended August 31, 1999 (collectively, the "Financial
Statements"). The Financial Statements are complete and correct in all material
respects and have been prepared in accordance with the books and records of the
Company using accounting principles applied on a basis consistent throughout the
periods indicated and consistent with each other. The Financial Statements
present fairly the financial condition and operating results of the Company as
of the dates and during the periods indicated therein. The unaudited balance
sheet of the Company as of August 31, 1999 is hereinafter referred to as the
"Company Balance Sheet."
2.6 No Undisclosed Liabilities. The Company does not have any
liabilities, either accrued or contingent (whether or not required to be
reflected in financial statements), and whether due or to become due, which
individually or in the aggregate, (i) have not been reflected in the Company
Balance Sheet, (ii) have not been specifically described in this Agreement or in
Section 2.6 of the Company Disclosure Schedule, or (iii) are not normal or
recurring liabilities incurred since August 31, 1999 in the ordinary course of
business consistent with past practices.
2.7 No Changes. Since the date of the Company Balance Sheet there has
not been, occurred or arisen any:
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(a) material adverse change in the financial condition,
liabilities, assets, business, or prospects of the Company;
(b) amendments or changes in the Certificate of Incorporation
or Bylaws of the Company;
(c) capital expenditure by the Company, either individually or
in the aggregate, exceeding $50,000;
(d) destruction, damage to, or loss of any assets of the
Company (whether or not covered by insurance) that constitutes a Material
Adverse Effect on the Company;
(e) labor trouble or claim of wrongful discharge of which the
Company has received written notice or of which the Company is aware, or other
unlawful labor practice or action;
(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company;
(g) revaluation by the Company of any of its assets;
(h) declaration, setting aside, or payment of a dividend or
other distribution with respect to the shares of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of any of its
shares;
(i) increase in the salary or other compensation payable or to
become payable by the Company to any of its officers, directors or employees, or
the declaration, payment, or commitment or obligation of any kind for the
payment, by the Company, of a bonus or other additional salary or compensation
to any such person;
(j) acquisition, sale or transfer of any material asset of the
Company other than in the ordinary course of business;
(k) amendment or termination of any material contract,
agreement or license to which the Company is a party;
(l) loan by the Company to any person or entity, or guaranty
by the Company of any loan;
(m) waiver or release of any right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company;
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(n) the commencement or notice or threat of commencement of
any governmental proceeding against or investigation of the Company or its
affairs;
(o) other event or condition of any character that has or
might reasonably be expected to have a Material Adverse Effect on the Company;
(p) issuance or sale by the Company of any of its shares or of
any other of its securities except for issuances or sales as a result of
exercises of stock options granted under the Company Stock Option Plan or rights
previously granted to purchase shares of the Company's capital stock;
(q) change in pricing or royalties set or charged by the
Company; or
(r) negotiation or agreement by the Company to do any of the
things described in the preceding clauses (a) through (q), other than
negotiations with Parent and its representatives regarding the transactions
contemplated by this Agreement.
2.8 Tax and Other Returns and Reports.
(a) For the purposes of this Agreement, "Tax" or "Taxes"
refers to any and all federal, state, local and foreign taxes, assessments and
other governmental charges, duties, impositions and liabilities relating to
taxes, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, exercise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under agreement or arrangements with any
other person with respect to such amounts and including any liability for taxes
of a predecessor entity.
(b) The Company has timely filed (taking into account
applicable extensions) all federal, state, local and foreign returns, estimates,
information statements and reports ("Returns") relating to Taxes required to
have been filed by the Company and each of its subsidiaries with any Tax
authority, except such Returns which are not material to the Company, and have
paid all Taxes shown to be due on such Returns.
(c) The Company as of the Effective Time will have withheld
with respect to its employees all federal and state income taxes, Taxes pursuant
to the Federal Insurance Contribution Act ("FICA"), Taxes pursuant to the
Federal Unemployment Tax Act ("FUTA") and any other Taxes required to have been
withheld, in all cases to the extent such amounts are materially individually or
in the aggregate.
(d) The Company has not been delinquent in the payment of any
material Tax nor is there any material Tax deficiency outstanding, proposed or
assessed against the Company
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nor has the Company executed any unexpired waiver of any statute of limitations
on or extending the period for the assessment or collection of any Tax.
(e) To the Company's knowledge, no audit or other examination
of any Return of the Company by any Tax authority is presently in progress, nor
has the Company been notified of any request for such an audit or other
examination.
(f) No adjustment relating to any Returns filed by the Company
or any of its subsidiaries has been proposed in writing formally or informally
by any Tax authority to the Company or any representative thereof.
(g) The Company does not have any material liability for
unpaid Taxes which has not been accrued for or reserved on the Company Balance
Sheet, whether asserted or unasserted, contingent or otherwise, which is
material to the Company, other than any liability for unpaid Taxes that may have
accrued since the date of the Company Balance Sheet in connection with the
operation of the business of the Company in the ordinary course.
(h) There is no contract, agreement, plan or arrangement to
which the Company is a party to this Agreement, including, but not limited to,
the provisions of this Agreement, covering any employee or former employee of
the Company that, individually or collectively, could give rise to the payment
of any amount that would not be deductible pursuant to Sections 280G, 404 or
162(m) of the Internal Revenue Code of 1986, as amended ("Code").
(i) The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company.
(j) The Company is not a party to and has no obligation under
any tax-sharing, tax indemnity or tax allocation agreement or arrangement.
(k) Except as may be required as a result of the Merger, the
Company has not been and will not be required to include any material adjustment
in Taxable income for any Tax period (or portion thereof) pursuant to Section
481 or Section 263A of the Code or any comparable provision under state or
foreign Tax laws as a result of transactions, events or accounting methods
employed prior to the Closing.
(l) None of the Company's assets are tax exempt use property
within the meaning of Section 168(h) of the Code.
(m) The Company Disclosure Schedule lists (i) any foreign Tax
holidays, (ii) any intercompany transfer pricing agreements, or other
arrangements that have been established by the Company with any Tax authority,
and (iii) any expatriate programs or policies affecting the Company.
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(n) The Company has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(o) The Company has been a qualifying S corporation within the
meaning of Section 1361 of the Code (and any similar relevant state or local
statute) at all times since its inception.
(p) The Company has reviewed with the Company's own tax
advisors the federal, state and local tax consequences of the Merger and the
transactions contemplated by this Agreement. The Company is relying solely on
such advisors and not on any statements or representations of the Parent or any
of its agents, and understands that the Company (and not the Parent) shall be
responsible for the Company's own tax liability that may arise as a result of
the transactions contemplated by this Agreement.
2.9 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon the Company which
has or could reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of the Company, any acquisition of
property by the Company or the conduct of business by the Company as currently
conducted or as currently proposed to be conducted.
2.10 Title of Properties, Absence of Liens and Encumbrances; Condition
of Equipment.
(a) The Company owns no real property. Section 2.10(a) of the
Company Disclosure Schedule sets forth a true and complete list of all real
property leased by the Company, the name of the lessor, the date of the lease
and each amendment thereto and the aggregate annual rental or other fee payable
under any such lease. All such leases are in good standing, valid and effective
in accordance with their respective terms, and there is not, under any of such
leases, any existing material default or event of default (or event which with
notice or lapse of time, or both, would constitute a material default and in
respect of which the Company has not taken adequate steps to prevent such
default from occurring), except where the lack of such good standing, validity
and effectiveness or the existence of such default or event of default would not
have a Material Adverse Effect on the Company.
(b) The Company has good and valid title to, or, in the case
of leased properties and assets, valid leasehold interests in, all of its
material tangible properties and assets, real, personal and mixed, used in its
business, free and clear of any liens, charges, pledges, security interests or
other encumbrances, except as reflected in Section 2.10(b) of the Company
Disclosure Schedule and except for such imperfections of title and encumbrances,
if any, which are not substantial in character, amount or extent, and which do
not materially detract from the value, or interfere with the present use, of the
property subject thereto or affected thereby.
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(c) Section 2.10(c) of the Company Disclosure Schedule sets
forth all equipment ("Equipment") owned or leased by the Company except
equipment with an aggregate value of less than $10,000. The Equipment is, taken
as a whole, (i) adequate for the conduct of the business of the Company
consistent with its past practice, (ii) suitable for the uses to which it is
currently employed, (iii) in good operating condition, normal wear and tear
excepted, (iv) regularly and properly maintained, and (v) not obsolete,
dangerous or in need of renewal or replacement, except for renewal or
replacement in the ordinary course of business.
2.11 Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:
"Intellectual Property" shall mean any or all of the
following, in any form and embodied in any media: (i) works of authorship
including, without limitation, computer programs, source code and executable
code, whether embodied in software, firmware or otherwise, documentation,
designs, files, records, data and mask works, (ii) inventions (whether or not
patentable), improvements, and technology, (iii) proprietary and confidential
information, trade secrets and know how, (iv) databases, data compilations and
collections and technical data, (v) logos, trade names, trade dress, trademarks
and service marks, (vi) domain names, web addresses and sites, and (vii) tools,
methods and processes.
"Intellectual Property Rights" shall mean worldwide common law
and statutory rights associated with (i) patents and patent applications, (ii)
copyrights, copyright registrations and copyright applications and "moral"
rights, (iii) the protection of trade and industrial secrets and confidential
information, (iv) other proprietary rights relating to intangible intellectual
property, (y) trademarks, trade names and service marks, (vi) analogous rights
to those set forth above, and (vii) divisions, continuations, renewals,
reissuances and extensions of the foregoing (as applicable) now existing or
hereafter filed, issued or acquired.
"Company Intellectual Property" shall mean any Intellectual
Property and Intellectual Property Rights that are owned by or exclusively
licensed to the Company.
"Registered Intellectual Property Rights" shall mean
Intellectual Property Rights that have been registered, filed, certified or
otherwise perfected by recordation with any state, government or other public
legal authority.
(a) Section 2.11(a) of the Company Disclosure Schedule
lists-all Registered Intellectual property owned by, or filed in the name of,
the Company ("Company Registered Intellectual Property") and lists any
proceedings or actions before any court, tribunal (including the United States
Patent and Trademark Office ("PTO") or equivalent authority anywhere in the
world) related to any of the Company Registered Intellectual Property. Section
2.11(a) of the Company Disclosure Schedule also lists and identifies all
computer software that is owned by the Company (collectively, "Owned Software")
and all computer software (other than Owned
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<PAGE> 15
Software) that is used by the Company for any purpose whatsoever in its business
as presently conducted (collectively, the "Licensed Software"). The Owned
Software and the Licensed Software are collectively referred to as the
"Software".
(b) Each item of the Company Intellectual Property and all
Intellectual Property licensed to the Company, is free and clear of any liens,
pledges, charges, claims, restrictions on transfer, mortgages, security
interests or other encumbrances of any sort (collectively, "Liens") except, in
the case of licensed Intellectual Property, the restrictions set forth in
Section 2.11(b) of the Company Disclosure Schedule. The Company is the exclusive
owner of all Company Intellectual Property.
(c) To the extent that any Intellectual Property has been
developed or created independently or jointly by any person other than the
Company for which the Company has, directly or indirectly, paid, the Company has
a written agreement with such person with respect thereto, and the Company
thereby has obtained ownership of, and is the exclusive owner of, all such
Intellectual Property and associated Intellectual Property Rights by operation
of law or by valid assignment.
(d) The Company has not transferred ownership of or granted
any license of or right to use or authorized the retention of any rights to use
any Intellectual Property or Intellectual Property Rights that is or was Company
Intellectual Property, to any other person, except as provided in Section
2.11(f) below.
(e) The Company Intellectual Property and the Licensed
Software constitutes all the Intellectual Property and Intellectual Property
Rights used in and/or necessary to the conduct of the business of the Company as
it currently is conducted, or is reasonably contemplated by the Company on the
date hereof to be conducted by the Company in the foreseeable future, including,
without limitation, the design, development, manufacture, use, import and sale
of products, technology and services (including products, technology or services
currently under development). The Company has valid licenses to all software
owned by third parties that is used in and/or necessary to the operation of the
Company's products as they are currently used, and the Company is not in default
with respect to any such license.
(f) Other than "shrink-wrap" and similar widely available
third-party, commercial end-user licenses, the contracts, licensees and
agreements listed in Section 2.11(f) of the Company Disclosure Schedule include
all contracts, licenses and agreements to which the Company is a party with
respect to any Intellectual Property and Intellectual Property Rights. No person
who has licensed Intellectual Property or Intellectual Property Rights to the
Company has ownership rights or license rights to improvements made by the
Company in such Intellectual Property which has been licensed to the Company.
(g) Section 2.11(g) of the Company Disclosure Schedule lists
all contracts, licenses and agreements between the Company and any other person
wherein or whereby the
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<PAGE> 16
Company has agreed to, or assumed, any obligation or duty to warrant, indemnify,
reimburse, hold harmless, guaranty or otherwise assume or incur any obligation
or liability or provide a right of rescission with respect to the infringement
or misappropriation by the Company or such other person of the Intellectual
Property Rights of any person other than the Company.
(h) The operation of the business of the Company as it
currently is conducted or is reasonably contemplated to be conducted by the
Company in the foreseeable future, including, but not limited to, the design,
development, use, import, manufacture and sale of the products, technology or
services (including products, technology or services currently under
development) of the Company does not, to the knowledge of the Company and the
Shareholders, infringe or misappropriate the Intellectual Property Rights of any
person, violate the rights of any person (including rights to privacy or
publicity), or constitute unfair competition or trade practices under the laws
of any jurisdiction, and the Company has not received notice from any person
claiming that such operation or any act, product, technology or service
(including products, technology or services currently under development) of the
Company infringes or misappropriates the Intellectual Property Rights of any
person or constitutes unfair competition or trade practices under the laws of
any jurisdiction nor, to the knowledge of the Company and the Shareholders, is
there any reasonable basis therefor.
(i) The Company has no Registered Intellectual Property. In
each case in which the Company has acquired any Intellectual Property rights
from any person, the Company has obtained a valid and enforceable assignment
sufficient to irrevocably transfer all rights in such Intellectual Property and
the associated Intellectual Property Rights (including the right to seek past
and future damages with respect thereto) to the Company.
(j) There are no contracts, licenses or agreements between the
Company and any other person with respect to Company Intellectual Property under
which there is any dispute known to the Company or the Shareholders regarding
the scope of such agreement, or performance under such agreement including with
respect to any payments to be made or received by the Company thereunder.
(k) To the knowledge of the Company and the Shareholders, no
person is infringing or misappropriating any Company Intellectual Property.
(l) The Company has taken all commercially reasonable steps in
order to protect the Company's rights in confidential information and trade
secrets of the Company or provided by any other person to the Company. Except as
set forth in Section 2.11(l) of the Company Disclosure Schedule, all current and
former employees, consultants and contractors of the Company who have or have
had access to confidential, proprietary or trade secret information of the
Company ("Recipients") have entered proprietary information, confidentiality and
assignment of inventions agreements with the Company. Section 2.11(l) of the
Company Disclosure Schedule contains a list of all Recipients indicating those
who have signed the
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<PAGE> 17
agreements and those who have not entered into such agreements and the form of
each such agreement.
(m) No Company Intellectual Property, Intellectual Property
Rights or service of the Company is subject to any proceeding or outstanding
decree, order, judgment, agreement or stipulation that restricts in any manner
the use, transfer or licensing thereof by the Company or may affect the
validity, use or enforceability of such Company Intellectual Property.
(n) No (i) product, technology, service or publication of the
Company, (ii) material published or distributed by the Company or (iii) conduct
or statement of Company constitutes obscene material, a defamatory statement or
material, false advertising or, to the knowledge of the Company and the
Shareholders, otherwise violates any law or regulation.
(o) All of the Company's products and services (including
products and services currently under development) will record, store, process,
calculate and present calendar dates falling on and after (and, if applicable,
spans of time including) January 1, 2000, and will calculate any information
dependent on or relating to such dates in the same manner, and with the same
functionality, data integrity and performance, as the products record, store,
process, calculate and present calendar dates on or before December 31, 1999, or
calculate any information dependent on or relating to such dates (collectively,
"Year 2000 Compliant"). All of the Company's products and services (i) will lose
no functionality with respect to the introduction of records containing dates
falling on or after January 1, 2000 and (ii) will be interoperable with other
products and services used and distributed by the Company that may deliver
records to the Company's products or receive records from the Company's
products, or interact with the Company's products, including, but not limited
to, backup and archived data. The Company has described its Year 2000 testing
and compliance programs in Section 2.11(o) of the Company Disclosure Schedule.
All of the Company's internal computer and technology products and systems are
Year 2000 Compliant.
2.12 Agreements, Contracts and Commitments. Except as disclosed in
Section 2.12 of the Company Disclosure Schedule, the Company does not have and
is not a party to:
(a) any collective bargaining agreements,
(b) any agreements that contain any unpaid severance
liabilities or obligations,
(c) any bonus, deferred compensation, incentive compensation,
pension, profit-sharing or retirement plans, or any other employee benefit plans
or arrangements,
(d) any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson or
consulting or sales agreement, contract or commitment with a firm or other
organization, not terminable by the Company on thirty days
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<PAGE> 18
notice without liability, except to the extent general principles of wrongful
termination law may limit the Company's ability to terminate employees at will,
(e) agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement,
(f) any fidelity or surety bond or completion bond,
(g) any lease of personal property except for leases of
equipment with an aggregate value of less than $10,000,
(h) any agreement of indemnification or guaranty not entered
into in the ordinary course of business,
(i) any agreement, contract or commitment containing any
covenant limiting the freedom of the Company to engage in any line of business
or compete with any person,
(j) any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of $10,000,
(k) any agreement, contract or commitment relating to the
disposition or acquisition of assets not in the ordinary course of business or
any ownership interest in any corporation, partnership, joint venture or other
business enterprise,
(l) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money or extension of credit, including guaranties referred to in clause (h)
hereof,
(m) any purchase order or contract for the purchase of raw
materials or acquisition of assets involving $10,000 or more,
(n) any construction contracts,
(o) any distribution, joint marketing or development
agreement,
(p) any other agreement, contract or commitment which involves
$10,000 or more and is not cancelable without penalty within thirty (30) days,
or
(q) any agreement which is otherwise material to the Company's
business.
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<PAGE> 19
The Company has not breached, or received in writing any claim or threat
that it has breached, any of the terms or conditions of any agreement, contract
or commitment to which it is bound (including those set forth in any of the
lists separately certified by the Company) in such manner as would permit any
other party to cancel or terminate the same.
2.13 Interested Party Transactions. Except as disclosed in Section 2.13
of the Company Disclosure Schedule, no officer or director of the Company or
person who owns at least ten percent (10%) of the outstanding stock of the
Company (nor any parent, child or spouse of any of such persons, or any trust,
partnership or corporation in which any of such persons has or has had an
interest), has or has had, directly or indirectly, (i) an interest in any entity
which furnished or sold, or furnishes or sells, services or products which the
Company furnishes or sells, or proposes to furnish or sell, or (ii) any interest
in any entity which purchases from or sells or furnish to, the Company, any
goods or services, or (iii) a beneficial interest in any contract or agreement
described in Section 2.12; provided, that ownership of no more than one percent
(1%) of the outstanding voting stock of a publicly traded corporation shall not
be deemed an "interest in any entity" for purposes of this Section 2.13.
2.14 Governmental Authorization. Section 2.14 of the Company Disclosure
Schedule accurately lists each material federal, state, county, local or foreign
governmental consent, license, permit, grant, or other authorization issued to
the Company (i) pursuant to which the Company currently operates or holds any
interest in any of its properties or (ii) which is required for the operation of
its business or the holding of any such interest (herein collectively called
"Company Authorizations"), which Company Authorizations are in full force and
effect and constitute all Company Authorizations required to permit the Company
to operate or conduct its business or hold any interest in its properties.
2.15 Litigation. There is no action, suit, claim or proceeding of any
nature pending, or to the Company's knowledge, threatened against the Company,
its properties or any of its officers or directors, in their capacities as
agents of the Company. There is no investigation pending or, to the Company's
knowledge, threatened against the Company, its properties or any of its officers
or directors, in their capacities as agents of the Company by or before any
governmental entity. No governmental entity has at any time challenged or
questioned the legal right of the Company to manufacture, offer or sell any of
its products in the present manner or style thereof.
2.16 Minute Books. The minute books of the Company made available to
counsel for Parent contain complete and accurate minutes of all meetings of
directors and shareholders or actions by written consent since the time of
incorporation of the Company.
2.17 Brokers' and Finders' Fees. The Company has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby.
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<PAGE> 20
2.18 Insurance. Section 2.18 of the Company Disclosure Schedule lists
all insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, employees, officers and directors of the
Company. There is no claim by the Company pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid and the Company is otherwise in material
compliance with the terms of such policies and bonds. The Company has no
knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies.
2.19 Compliance With Laws. Except as to matters of which the Company is
not aware and which do not either individually or in the aggregate result in a
Material Adverse Effect with respect to the Company, the Company has complied
with, is not in violation of, and has not received any notices of violation with
respect to, any federal, state or local statute, law or regulation with respect
to the conduct of its business, or the ownership or operation of its business.
2.20 Complete Copies of Materials. The Company has delivered or made
available true and complete copies of each document (or summaries of same) which
has been requested by Parent or its counsel.
2.21 Binding Agreements; No Default. Except as set forth in Section
2.21 of the Company Disclosure Schedule, each of the contracts, agreements and
other instruments shown on the Exhibits or on any lists or statements set forth
in the Company Disclosure Schedule to which the Company is a party is a legal,
binding, and enforceable obligation by or against the Company (assuming such
contract, agreement or instrument has been duly authorized, executed and
delivered by the other party(ies) thereto), and no party with whom the Company
has an agreement or contract is, to the Company's knowledge, in material default
thereunder or has breached any material terms or provisions thereof (subject to
all applicable bankruptcy, insolvency, reorganization and other laws applicable
to creditors' rights and remedies and to the exercise of judicial discretion in
accordance with general principles of equity).
2.22 Representations Complete. None of the representations or
warranties made by the Company, nor any statement made in any list or other
statement separately certified by the Company, Exhibits or certificates
furnished by the Company pursuant to this Agreement, when all such documents are
read together in their entirety, contains or will contain any untrue statement
of a material fact at the Effective Time, or omits or will omit to state any
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which made, not misleading.
2.23 Third Party Consents. Except as set forth on Section 2.23 of the
Company Disclosure Schedule, no consent or approval is needed from any third
party in order to effect the Merger, this Agreement or any of the transactions
contemplated hereby.
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<PAGE> 21
2.24 Accounts Receivable Inventory.
(a) The Company has made available to Parent a list of all
accounts receivable of the Company as of August 31, 1999, along with a range of
days elapsed since invoice.
(b) All of the accounts receivable of the Company arose in the
ordinary course or business, are carried at values determined consistent with
the Company's past accounting practices and, to the best of the Shareholders'
knowledge, are collectible except to the extent of reserves therefor set forth
in the Company Balance Sheet. No person has any Lien on any of such accounts
receivable and no request or agreement for deduction or discount has been made
with respect to any of such accounts receivable.
(c) The Company has no inventory to be reflected on the
Company Balance Sheet or on the Company's books and records.
2.25 Environmental Matters.
(a) Hazardous Material. The Company has not: (i) operated any
underground storage tanks at any property that the Company has at any time
owned, operated, occupied or leased; or (ii) illegally released any material
amount of any substance that has been designated by any Governmental Entity or
by applicable federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including, without limitation,
PCBs, asbestos, petroleum, and urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and Recovery Act of
1976, as amended, and the regulations promulgated pursuant to said laws (a
"Hazardous Material"), but excluding office and janitorial supplies properly and
safely maintained. No Hazardous Materials are present as a result of the
deliberate actions of the Company or, to the Company's or the Shareholders'
knowledge, as a result of any actions of any other person or otherwise, in, on
or under any property, including the land and the improvements, ground water and
surface water thereof, that the Company has at any time owned, operated,
occupied or leased.
(b) Hazardous Materials Activities. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Closing, nor has it disposed of, transported, sold or manufactured
any product containing a Hazardous Material (any or all of the foregoing being
collectively referred to as "Hazardous Materials Activities") in violation of
any rule, regulation, treaty or statute promulgated by any Governmental Entity
in effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
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<PAGE> 22
(c) Permits. The Company currently holds all environmental
approvals, permit, licenses, clearances and consents (the "Environmental
Permits") necessary for the conduct of the Company's Hazardous Material
Activities and other businesses of the Company as such activities and businesses
are currently being conducted.
(d) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is pending
or threatened concerning any Environmental permit, Hazardous Material or any
Hazardous Materials Activity of the Company. To the knowledge of the Company and
the Shareholders, there is no fact or circumstance which is reasonably likely to
involve the Company in any environmental litigation or impose upon the Company
any environmental liability.
2.26 Employee Benefit Plans and Compensation.
(a) The following terms shall have the meanings set forth
below:
(i) "Affiliate" shall mean any other person or entity
under common control with the Company within the meaning of Section 414(b), (c),
(m) or (o) of the Code and the regulations issued thereunder;
(ii) "Employee Plan" shall mean any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, deferred compensation, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written, unwritten or otherwise,
funded or unfunded, including, without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by the Company or any
Affiliate for the benefit of any Employee, or with respect to which the Company
or any Affiliate has or may have any liability or obligation;
(iii) "COBRA" shall mean the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended;
(iv) "DOL" shall mean the Department of Labor;
(v) "Employee" shall mean any current or former
employee, consultant or director of the Company or any Affiliate;
(vi) "Employee Agreement" shall mean each management,
employment, severance, consulting, relocation or similar agreement contract or
understanding between the Company or any Affiliate and any Employee;
(vii) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended;
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<PAGE> 23
(viii) "FMLA" shall mean the Family Medical Leave Act
of 1993, as amended;
(ix) "IRS" shall mean the Internal Revenue Service;
(x) "PBGC" shall mean the Pension Benefit Guaranty
Corporation; and
(xi) "Pension Plan" shall mean each Employee Plan
which is an "employee pension benefit plan," within the meaning of Section 3(2)
of ERISA.
(b) Schedule. Schedule 2.26(b) contains an accurate and
complete list of each Employee Plan and each Employee Agreement. The Company has
no plan or commitment to establish any new Employee Plan or Employee Agreement,
to modify any Employee Plan or Employee Agreement (except to the extent required
by law Agreement), or to enter into any Employee Plan or Employee Agreement.
(c) Documents. The Company has provided to Parent: (i) correct
and complete copies of all documents embodying each Employee Plan and each
Employee Agreement, including (without limitation) all amendments thereto and
all related trust documents; (ii) the three (3) most recent annual reports (form
Series 5500 and all schedules and financial statements attached thereto), if
any, required under ERISA or the Code in connection with each Employee Plan;
(iii) if the Employee Plan is funded, the most recent annual and periodic
accounting of Employee Plan assets; (iv) the most recent summary plan
description together with the summary(ies) of material modifications thereto, if
any, required under ERISA with respect to each Employee Plan; (v) all material
written agreements and contracts relating to each Employee Plan, including, but
not limited to, administrative service agreements and group insurance contracts;
(vi) all communications material to any Employee or Employees relating to any
Employee Plan and any proposed Employee Plans, in each case, relating to any
amendments, terminations, establishments, increases or decreases in benefits,
acceleration of payments or vesting schedules or other events which would result
in any liability to the Company; (vii) all correspondence to or from any
governmental agency relating to any Employee Plan; (vii) all COBRA forms and
related notices; (ix) all policies pertaining to fiduciary liability insurance
covering the fiduciaries for each Employee Plan; and (x) all discrimination
tests for each Employee Plan for the most recent plan year.
(d) Employee Plan Compliance. (i) The Company has performed in
all material respects all obligations required to be performed by it under, is
not in default or violation of, and the Company and Shareholders have no
knowledge of any default or violation by any other party to each Employee Plan,
and each Employee Plan has been established and maintained in accordance with
its terms and in substantial compliance with all applicable laws, statutes,
orders, rules and regulations, including, but not limited to, ERISA and the
Code; (ii) no
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<PAGE> 24
"prohibited transaction," within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of
ERISA, has occurred with respect to any Employee Plan; (iii) there are no
actions, suits or claims pending or threatened nor is there any basis therefor
(other than routine claims for benefits) against any Employee Plan or against
the assets of any Employee Plan; (iv) each Employee Plan can be amended,
terminated or otherwise discontinued after the Closing in accordance with its
terms, without liability to Parent, the Company or any Affiliate (other than
ordinary administration expenses); (v) there are no audits, inquiries or
proceedings pending or threatened by the IRS or DOL with respect to any Employee
Plan; and (vi) neither the Company nor any Affiliate is subject to any penalty
or tax with respect to any Employee Plan under Section 502(i) of ERISA or
Sections 4975 through 4980 of the Code.
(e) No Pension Plans. Neither the Company nor any Affiliate
has ever maintained, established, sponsored, participated in, or contributed to,
any Pension Plan subject to Title IV of ERISA.
(f) No Post-Employment Obligations. No Employee Plan provides,
or reflects or represents any liability to provide, retiree life insurance,
retiree health or other retiree employee welfare benefits to any person for any
reason, except as may be required by COBRA or other applicable statute, and the
Company has never represented, promised or contracted (whether in oral or
written form) to any Employee (either individually or to Employees as a group)
or any other person that such Employee(s) or other person would be provided with
retiree life insurance, retiree health or other retiree employee welfare
benefit, except to the extent required by statute.
(g) COBRA. Neither the Company nor any Affiliate has, prior to
the Closing, violated any of the health care continuation requirements of COBRA,
the requirements of FMLA or any similar provisions of state law applicable to
its Employees.
(h) Effect of Transaction. The execution of this Agreement and
the consummation of the transactions contemplated hereby will not (either alone
or upon the occurrence of any additional or subsequent events) constitute an
event under any Employee Plan, Employee Agreement, trust or loan that will or
may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
(i) Employment Matters. The Company: (i) is in compliance in
all material respects with all applicable foreign, federal, state and local
laws, rules and regulations respecting employment, employment practices, terms
and conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld and reported all amounts required by law or by
agreement to be withheld and reported with respect to wages, salaries and other
payments to Employees; (iii) is not liable for any arrears of wages or any taxes
or any penalty for failure to comply with any of the foregoing; and (iv) is not
liable for any payment to any trust or
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<PAGE> 25
other fund governed by or maintained by or on behalf of any governmental
authority, with respect to unemployment compensation benefits, social security
or other benefits or obligations for Employees (other than routine payments to
be made in the normal course of business and consistent with past practice). To
the knowledge of the Company and the Shareholders, there are no pending,
threatened or reasonably anticipated claims or actions against the Company under
any worker's compensation policy or long-term disability policy, nor is there
any reasonable basis therefor.
(j) Labor. No work stoppage or labor strike against the
Company is pending or threatened, nor is there any reasonable basis therefor.
The Company does not know of any activities or proceedings of any labor union to
organize any Employees. There are no actions, suits, claims, labor disputes or
grievances pending or reasonably anticipated relating to any labor, safety or
discrimination matters involving any Employee, including, without limitation,
charges of unfair labor practices or discrimination complaints. Since inception,
the Company has not engaged in any unfair labor practices within the meaning of
the National Labor Relations Act. The Company is not presently, nor has it been
in the past, a party to, or bound by, any collective bargaining agreement or
union contract with respect to Employees and no collective bargaining agreement
is being negotiated by the Company.
(k) No Interference or Conflict. No shareholder, officer,
employee or consultant of the Company is obligated under any contract or
agreement or is subject to any judgment, decree or order of any court of
administrative agency that would interfere with such person's efforts to promote
the interests of the Company or that would interfere with the Company's
business. Neither the execution nor delivery of this Agreement, nor the carrying
on of the Company's business as presently conducted or presently proposed to be
conducted, nor any activity of such officers, directors, employees or
consultants in connection with the carrying on of the Company's business as
presently conducted or currently proposed to be conducted, will conflict with or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract or agreement under which any of such officers,
directors, employees or, to the knowledge of the Company and the Shareholders,
consultants is now bound.
2.27 Warranties, Indemnities. Except for the warranties and indemnities
contained in (i) those contracts and agreements set forth in Section 2.12 of the
Company Disclosure Schedule and (ii) the Company's standard product warranty
agreements substantially in the form set forth in Section 2.12 of the Company
Disclosure Schedule, the Company has not given any warranties or indemnities
relating to products or technology sold or licensed or services rendered by the
Company. Section 2.27 of the Company Disclosure Schedule contains a complete and
accurate summary of all warranty claims on the Company's products occurring
since the Company's inception.
2.28 Adequacy and Functionality of Company Products. The assets of the
Company, including, without limitation, the source code and products of the
Company, are now and following the Effective Time will be sufficient for the
conduct of the business of the Company in
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<PAGE> 26
the same manner as the business is now conducted. The Owned Software now
performs, and following the Closing will perform, substantially in accordance
with applicable user documentation provided by the Company to the customers
using such Owned Software, and does not contain and is not subject to any
operational defect or limitation which is reasonably likely to substantially
impair the capability or effectiveness of the Owned Software to achieve its
functions described in such user documentation. The Owned Software contains all
current revisions of such software in the Company's possession, and includes all
source code, object code, forms of such software and all computer programs,
materials processes, tapes, and know-how related to such Owned Software. The
Company has delivered to the Parent complete and correct copies of the current
version of all user documentation in the Company's possession related to the
Owned Software.
2.29 Investment Representations. Each Shareholder represents that it is
acquiring the shares of Parent Common Stock to be received by such Shareholder
in the Merger for its own account for investment and not for, with a view to or
in connection with any resale or distribution thereof. Each Shareholder further
represents that (a) such Shareholder has full power and authority to enter into
and to perform this Agreement in accordance with its terms and, with respect to
the O'Brien Trust only, that such Shareholder has not been organized,
reorganized or recapitalized specifically for the purpose of investing in the
Parent, (b) such Shareholder has reviewed the representations concerning the
Parent contained in this Agreement, and has made such inquiry concerning the
Parent, its business and its personnel, as such Shareholder deems appropriate in
connection with its investment in the Parent, (c) the officers of the Parent
have made available to such Shareholder any and all written information which it
has requested and has answered to such Shareholder's satisfaction all inquiries
made by such Shareholder, (d) such Shareholder has sufficient knowledge and
experience in investing in companies similar to the Company so as to be able to
evaluate the risks and merits of such Shareholder's investment in the Parent and
such Shareholder is able financially to bear the risks thereof, and (e) such
Shareholder is an "accredited investor" within the meaning of Regulation D under
the Securities Act.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company and the
Shareholders, subject to the exceptions previously certified in writing by
Parent or Merger Sub, as follows:
3.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of Parent and Merger
Sub has the corporate power to own its properties and to carry on its business
as now being conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified would have
a Material Adverse Effect on Parent and Merger Sub taken as a whole. Parent has
delivered a true and
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correct copy of the Certificate or Articles of Organization and Bylaws of each
of Parent and Merger Sub, as amended to date, to counsel for the Company.
3.2 Capital Structure.
(a) The authorized stock of Parent consists of 100,000,000
shares of Common Stock, $0.001 par value per share, of which 9,846,340 shares
were issued and outstanding as of September 30, 1999, and 10,000,000 shares of
Preferred Stock, $0.01 par value per share, of which 2,169,771 were issued and
outstanding as of September 30, 1999. The authorized capital stock of Merger Sub
consists of 1,000 shares of Common Stock, $0.01 par value, all of which, as of
the date hereof, are issued and outstanding and are held by Parent. All such
shares have been duly authorized, and all such issued and outstanding shares
have been validly issued, are fully paid and nonassessable and are free of any
liens or encumbrances other than any liens or encumbrances created by or imposed
upon the holders thereof.
(b) The shares of Parent Common Stock to be issued pursuant to
the Merger will be duly authorized, validly issued, fully paid, non-assessable.
3.3 Authority. Parent and Merger Sub have all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Merger Sub. The
shareholders of Parent are not required to approve the Merger, the Agreement or
the transactions contemplated hereby under applicable law or NASD rules or
regulations. This Agreement has been duly executed and delivered by Parent and
Merger Sub and constitutes the valid and binding obligations of Parent and
Merger Sub. The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both), or give rise to a right of termination, cancellation or acceleration
of any obligation or to loss of a benefit under (i) any provision of the
Certificates of Incorporation or Bylaws of Parent or the Articles of
Organization or Bylaws of Merger Sub or (ii) any mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or its properties or assets. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity, is required by or with respect to Parent and Merger Sub in connection
with the execution and delivery of this Agreement by Parent and Merger Sub or
the consummation by Parent and Merger Sub of the transactions contemplated
hereby, except for (i) the filing of the Delaware Filing with the Secretary of
State of the State of Delaware, (ii) the filing of the Wisconsin Filing with the
Department of Financial Institutions of the State of Wisconsin, (iii) the filing
of a Form 8-K with the Securities and Exchange Commission (the "SEC") within 15
days after the Closing Date, and any filings as may be required under applicable
state and federal securities laws and the laws of any foreign country,
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and (iv) such other consents, authorizations, filings, approvals and
registrations which if not obtained or made would not have a Material Adverse
Effect on Parent.
3.4 SEC Documents, Parent Financial Statements. Parent has furnished or
made available to the Company true and complete copies of the following
documents (collectively, the "SEC Documents"): (i) Annual Report on Form 10-KSB,
filed with the SEC on September 28, 1999 (the "10-K") and (ii) the October 15
draft of the Registration Statement on Form S-1, to be filed with the SEC on or
about the date of this Agreement (the "Draft S-1"). The 10-K complied in all
material respects with the requirements of the Exchange Act of 1934, as amended
or the Securities Act of 1933, as amended (the "Act") when filed. The Draft S-1
contains no untrue statement of a material fact and does not omit to state a
material fact necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading. The financial statements
of Parent, including the notes thereto, included in the 10-K (the "Parent
Financial Statements") are complete and correct in all material respects, comply
as to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto, and
have been prepared in accordance with U.S. generally accepted accounting
principles applied on a basis consistent throughout the periods indicated and
consistent with previous SEC filings of the Company (except as may be indicated
in the notes thereto or, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC). The Parent Financial Statements fairly present the
consolidated financial condition and operating results of Parent at the dates
and during the periods indicated therein (subject, in the case of unaudited
statements, to normal, year-end adjustments, which will not be material in the
aggregate). There has been no change in Parent accounting policies except as
described in the notes to the Parent Financial Statements.
3.5 No Material Adverse Change. Since October 15, 1999 there has not
occurred: (a) any amendments or changes in the Certificate of Incorporation or
Bylaws of Parent; (b) any sale of a material amount of property of Parent,
except in the ordinary course of business or (c) any other event or condition of
any character that has or might reasonably be expected to have a Material
Adverse Effect on the Parent that would require the Parent to file a report on
Form 8-K.
3.6 Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which Parent has received any
notice of assertion or as to which Parent has a reasonable basis to expect such
notice of assertion, against Parent which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
by this Agreement or which could reasonably be anticipated to have a Material
Adverse Effect on Parent.
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ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, the Company agrees (except to the extent that
Parent shall otherwise consent in writing), to carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay its debts and taxes when due subject (i) to good
faith disputes over such debts or taxes and (ii) in the case of taxes, to
Parent's consent to the filing of material Returns if applicable, to pay or
perform other obligations when due, and, to the extent consistent with such
business, use all reasonable efforts consistent with past practice and policies
to preserve intact the Company's present business organizations, keep available
the services of its present officers . and key employees and preserve their
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it, to the end that the Company's goodwill
and ongoing businesses shall be unimpaired at the Effective Time. The Company
shall promptly notify Parent of any event or occurrence not in the ordinary
course of business of the Company which could have a Material Adverse Effect on
the Company. Except as expressly contemplated by this Agreement, the Company
shall not, without the prior written consent of Parent:
(a) Enter into any commitment or transaction (i) which
requires performance over a period longer than six months in duration except
transactions in the ordinary course of business, or (ii) to purchase fixed
assets for a purchase price in excess of $5,000; except as mutually agreed in
writing by Parent and the Company;
(b) Grant any severance or termination pay (i) to any director
or officer or (ii) to any other employee except (x) payments made pursuant to
standard written agreements outstanding on the date hereof and as disclosed on
Schedule 2.12 or (y) in the case of employees who do not have standard written
agreements, payments of up to two months salary;
(c) Transfer to any person or entity any rights to the
Company's Intellectual Property-other than nonexclusive object code licenses
except as mutually agreed in writing by Parent and the Company;
(d) Enter into or amend any agreements pursuant to which any
other party is. granted marketing or other rights of any type or scope with
respect to any products or technology of the Company, except as mutually agreed
in writing by Parent and the Company;
(e) Violate, amend or otherwise modify the terms of any of the
contracts set forth in the Company Disclosure Schedule;
(f) Commence any litigation;
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(g) Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of the Company, or repurchase or
otherwise acquire, directly or indirectly, any shares of its capital stock
except from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service to the Company;
(h) Issue, deliver or sell or authorize or propose the
issuance, delivery or sale of, or purchase or propose the purchase of, any
shares of its capital stock or securities convertible into, or subscriptions,
rights, warrants or options to acquire, or other agreements or commitments of
any character obligating it to issue any such shares or other convertible
securities;
(i) Cause or permit any amendments to its Certificate of
Incorporation or Bylaws;
(j) Acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to the
business of the Company;
(k) Sell, lease, license or otherwise dispose of any of its
properties or assets which are material, individually or in the aggregate, to
the business of the Company, except in the ordinary course of business, except
as mutually agreed in writing by Parent and the Company;
(l) Incur any indebtedness for borrowed money in excess of
$175,000 or guarantee any such indebtedness or issue or sell any debt securities
of the Company or guarantee any debt securities of others;
(m) Adopt or amend any employee benefit plan, or enter into
any, employment contract except for offer letters in the Company's standard form
for newly hired employees, pay any special bonus or special remuneration to any
director or employee, or increase the salaries or wage rates of its employees;
(n) Revalue any of its assets, including, without limitation,
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business;
(o) Pay, discharge or satisfy in an amount in excess of $5,000
in any one case any claim, liability or obligation (absolute, accrued, asserted
or unasserted, contingent or
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otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in the Company
Financial Statements (or the notes thereto);
(p) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, file any material
Return or any amendment to a material Return, enter into any closing agreement,
settle any claim or assessment in respect of Taxes, or consent to any extension
or waiver of the limitation period applicable to any claim or assessment in
respect of Taxes; or
(q) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1 (a) through (q) above, or any action which
would make any of the representations or warranties of the Company contained in
this Agreement untrue or incorrect or prevent the Company from performing or
cause the Company not to perform its covenants hereunder.
4.2 No Solicitation. After the date of this Agreement and prior to the
Effective Time, the Company will not (nor will the Company permit any of the
Company's officers, directors, agents, representatives or affiliates to)
directly or indirectly, take any of the following actions with any party other
than Parent and its designees:
(a) solicit, encourage, initiate or participate in any
negotiations or discussions with respect to, any offer or proposal to acquire
all or substantially all of the Company's business and properties or to purchase
or acquire capital stock of the Company whether by merger, purchase of assets,
tender offer or otherwise (an "Acquisition"),
(b) disclose any information not customarily disclosed to any
person other than its attorneys or financial advisors concerning the Company's
business and properties or afford to any person or entity access to its
properties, books or records, or
(c) assist or cooperate with any person to make any proposal
to purchase all or any part of the Company's capital stock or assets, other than
licensing of software in the ordinary course of business (a "Purchase"),
provided, however, that the Company may participate in negotiations with, or
furnish information to, a party other than Parent or its designees who has made
a written Acquisition or Purchase offer or proposal if the Company's Board of
Directors, upon receipt of a written opinion from its outside counsel,
determines that failure to do so would constitute a breach of the Board's
fiduciary duty under applicable law.
In the event the Company shall receive any such written offer or
proposal, directly or indirectly, of the type referred to in clause (a) or (c)
above, or any request for disclosure or access pursuant to clause (b) above, the
Company party shall immediately inform Parent as to all material facts relating
to any such offer or proposal (including the identity of the party making
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such offer or proposal and the specific terms thereof) and will cooperate with
Parent by furnishing any information it may reasonably request.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Meeting of Company Shareholders. The Company shall promptly take
all action necessary in accordance with Wisconsin law, and the Company's
Certificate of Incorporation and Bylaws to prepare and solicit an Action By
Written Consent of the Company Shareholders. The Company shall use its best
efforts to obtain the approval of the shareholders of the Company for the Merger
and shall take all other action necessary or advisable to secure the vote or
consent of its shareholders required by Wisconsin Law to effect the Merger.
5.2 Access to Information. The Company shall afford Parent and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to (a) all of the
Company's properties, books, contracts, commitments and records, and (b) all
other information concerning the business, properties and personnel of the
Company as Parent may reasonably request. The Company agrees to provide to
Parent and its accountants, counsel and other representatives copies of internal
financial statements promptly upon request. Parent shall provide the Company
with copies of such publicly available information about Parent as the Company
may request and shall provide the Company with reasonable access to its
executive officers in this connection. No information or knowledge obtained in
any investigation pursuant to this Section 5.2 shall affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.3 Confidentiality. The parties acknowledge that Parent and the
Company have previously executed a Nondisclosure Agreement dated September 3,
1999, which agreement shall continue in effect in accordance with its terms.
5.4 Expenses. All expenses incurred in connection with the Merger and
this Agreement shall be the obligation of the party incurring such expenses (and
the Shareholders in the case of the Company's expenses; provided, that, the
Shareholders may cause the Company to pay legal fees and disbursements in
connection with the Merger and this Agreement not to exceed $25,000).
5.5 Public Disclosure. Unless otherwise required by law, prior to the
Effective Time no disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby
shall be made by any party hereto unless approved by Parent and the Company
prior to release, provided that such approval shall not be unreasonably
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withheld, subject, in the case of Parent, to Parent's obligation to comply with
applicable securities laws.
5.6 Consents. Each of Parent and the Company shall promptly apply for
or otherwise seek, and use its best efforts to obtain, all consents and
approvals required to be obtained by it for the consummation of the Merger, and
the Company shall use its best efforts to obtain all necessary consents, waivers
and approvals under any of the Company's material agreements, contracts,
licenses or leases in connection with the Merger. All such necessary consents
are set forth in Section 5.6 of the Company Disclosure Schedule.
5.7 Legal Requirements. Each of Parent, Merger Sub and the Company will
take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on them with respect to the consummation of
the transactions contemplated by this Agreement and will promptly cooperate with
and furnish information to any party hereto necessary in connection with any
such requirements imposed upon such other party in connection with the
consummation of the transactions contemplated by this Agreement and will take
all reasonable actions necessary to obtain (and will cooperate with the other
parties hereto in obtaining) any consent, approval, order or authorization of,
or any registration, declaration or filing with, any Governmental Entity or
other person, required to be obtained or made in connection with the taking of
any action contemplated by this Agreement.
5.8 Blue Sky Laws. Parent shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Parent Common Stock pursuant hereto. The
Company shall use its best efforts to assist Parent as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable in connection with the issuance of Parent Common Stock pursuant
hereto.
5.9 Best Efforts; Additional Documents and Further Assurances. Each of
the parties to this Agreement shall each use its best efforts to effectuate the
transactions contemplated hereby and to fulfill and cause to be fulfilled the
conditions to closing under this Agreement. Each party hereto, at the reasonable
request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby. Parent will use commercially reasonable best
efforts to have Secondary Offering completed as soon as possible.
5.10 Employment Agreements. Concurrently herewith, Brad Baker and Pat
O'Brien each are entering into Employment Agreements with Parent substantially
in the form attached hereto as Exhibit A, to become effective at the Effective
Time.
5.11 Support Agreement. Concurrently herewith, the Shareholders each
are entering in Support Agreements with Parent substantially in the form
attached hereto as Exhibit B, providing that they will vote for, and use their
best efforts to cause to occur, the Merger.
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5.12 Payments before Merger. Parent paid the Shareholders $100,000 on
or about October 1, 1999. If the Closing has not occurred on or before November
16, 1999 the Parent shall make a second payment of $100,000 to the Shareholders.
If the Closing has not occurred on or before December 16, 1999, the Company
shall make a third payment of $100,000 to the Shareholders. No such payment
shall be made after termination of this Agreement pursuant to Article IX or if
either Shareholder or the Company has materially breached his or its duties
under this Agreement and such breach has not been cured to the reasonable
satisfaction of the Parent. The foregoing payments shall be retained by the
Shareholders whether or not the Merger is consummated, but, if the Merger is
consummated, the payments shall be credited as provided in Section 1.6(a).
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Shareholder Approval. This Agreement and the Merger shall
have been approved and adopted by the requisite vote of the shareholders of the
Company.
(b) Board Approval. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of the Board of Directors of the
Company, Parent and Merger Sub.
(c) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger or limiting or restricting the
operation of the business of the Company following the Merger shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending; nor shall there be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the Merger, which makes the consummation of the Merger
illegal.
(d) Approval. Parent, Company and Merger Sub shall have timely
obtained all necessary approvals from Governmental Entities.
(e) Related Agreements. The related agreements referred to in
Sections 5.10 and 5.11 shall be in full force and effect. Such agreements are
collectively referred to herein as the "Related Agreements.")
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6.2 Additional Conditions to Obligations of Company. The obligations of
the Company to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, exclusively by the Company:
(a) Representations, Warranties and Covenants. The
representations and warranties of Parent and Merger Sub in this Agreement shall
be true and correct in all material respects on and as of the Effective Time as
though such representations and warranties were made on and as of such time and
each of Parent and Merger Sub shall have performed and complied in all material
respects with all covenants, obligations and conditions of this Agreement
required to be performed and complied. with by it as of the Effective Time.
(b) Certificate of Parent. The Company shall have been
provided with a certificate executed on behalf of Parent by its President and
its Chief Financial Officer or Treasurer to the effect that, as of the Effective
Time:
(i) all representations and warranties made by Parent
and Merger Sub under this Agreement are true and complete in all material
respects; and
(ii) all covenants, obligations and conditions of
this Agreement to be performed by Parent and Merger Sub on or before such date
have been so performed in all material respects.
(c) Legal Opinion. The Company shall have received a legal
opinion from Foley, Hoag & Eliot LLP, counsel to Parent, substantially in the
form of Exhibit G hereto.
(d) No Material Adverse Changes. There shall not have occurred
any event or change in the business, properties, results of operations or
financial condition of Parent since the date hereof that would constitute a
Material Adverse Effect.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate and effect this Agreement
and the transactions contemplated hereby shall be subject to the satisfaction at
or prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by Parent:
(a) Representations, Warranties and Covenants. The
representations and warranties of the Company in this Agreement shall be true
and correct in all material respects on and as of the Effective Time as though
such representations and warranties were made on and as of such time and the
Company shall have performed and complied in all material respects with all
covenants, obligations and conditions of this Agreement required to be performed
and complied with by it as of the Effective Time.
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(b) Certificate of the Company. Parent shall have been
provided with a certificate executed on behalf of the Company by its Chief
Executive Officer to the effect that, as of the Effective Time:
(i) all representations and warranties made by the
Company under this Agreement are true and complete in all material respects;
(ii) all covenants, obligations and conditions of
this Agreement to be performed by the Company on or before such date have been
so performed in all material respects; and
(iii) attached to such certificate are true and
correct copies of the Company's Certificate of Incorporation, as certified by
the Secretary of the State of the State of Wisconsin, Bylaws and resolutions of
the Company's Board of Directors and Shareholders approving the transactions
contemplated by this Agreement.
(c) Third Party Consents. Parent shall have been furnished
with evidence satisfactory to it of the consent or approval of those persons
whose consent or approval shall be required in order to assign the agreements
listed pursuant to Section 5.7.
(d) Legal Opinion. Parent shall have received a legal opinion
from Keating, Muething & Klekamp, P.L.L., legal counsel to the Company, in
substantially the form of Exhibit H.
(e) No Material Adverse Changes. There shall not have occurred
any event or change in the business, properties, results of operations or
financial condition of the Company that would constitute a Material Adverse
Effect.
(f) Dissenters. No holders of the outstanding Company Common
Stock shall have exercised, or shall continue to have the right to exercise,
dissenters' rights with respect to the transactions contemplated by this
Agreement.
(g) Resignation of Current Directors and Officers of the
Company. Parent shall have received letters of resignation of all of the
directors and officers of the Company effective as of the Effective Time.
(h) Parent Registration Statement. The pending registration
statement (SEC File No. 333-85079) of the Parent shall have been declared
effective by the SEC and the Parent and the underwriters named therein shall
have closed the purchase and sale of the stock of the Parent registered thereby.
(Such transaction is referred to herein as the "Secondary Offering.")
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ARTICLE VII
TAX MATTERS
7.1 Tax Periods Ending On Or Before the Closing Date. The Shareholders
shall prepare or cause to be prepared and file or cause to be filed all Returns
for the Company for all periods ending on or prior to the Closing Date that are
filed after the Closing Date. The Shareholders shall permit Parent to review and
comment on each such Return described in the preceding sentence prior to filing.
7.2 Cooperation on Tax Matters.
(a) Parent and the Company shall cooperate fully, as and to
the extent reasonably requested by the other party, in connection with the
filing of Returns pursuant to this Article VII and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information that are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. Parent agrees to cause the Company (i) to retain all books and
records with respect to Tax matters pertinent to the Company relating to any
taxable period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by the Shareholders, any
extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (ii)
prior to the expiration of the statue of limitations to give the Shareholders
reasonable written notice prior to transferring, destroying or discarding any
such books and records of the Shareholders so requested, to allow the
Shareholders to take possession of books and records.
(b) Parent and the Shareholders agree, upon request, to use
their best efforts to obtain any certificate or other document from any
governmental. authority or any other person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including without limitation
in respect of the transactions contemplated by this Agreement).
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
8.1 Survival of Representations, Warranties and Covenants. All
representations and warranties in this Agreement or in any other agreement or
instrument delivered pursuant to this Agreement shall survive until the date
Parent releases its annual independent audit of the consolidated financial
statements applicable to Parent for the period ending December 31, 2000, and
shall continue to survive as to damages (or a potential claim by an appropriate
party) asserted in good faith prior to such date.
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8.2 Indemnification.
(a) Subject to the terms and conditions of this Article VIII,
the Shareholders agree jointly and severally to indemnify and hold harmless
Parent and its officers, directors, agents, affiliates and representatives
(collectively, the "Indemnitees"), from and in respect of, and hold the
Indemnitees against, any and all damages, fines, penalties, losses, liabilities,
judgments, deficiencies, and expenses (including, without limitation, amounts
paid in settlement, interest, court costs, costs of investigators, reasonable
fees and expense of attorneys and accountants and other expenses of litigation),
offset or reduced by the amount of any insurance proceeds or tax benefits
actually received by Parent in respect of any of the foregoing, incurred or
suffered by any of the Indemnitees ("Damages") resulting from, relating to or in
connection with any misrepresentation, breach of representation or warranty or
failure to perform any covenant or agreement of the Company or the Shareholders
contained in this Agreement or any inaccuracy in any schedule or certificate
delivered by the Company or the Shareholders pursuant to this Agreement.
Notwithstanding the first sentence of this Section 8.2(a), each Shareholder
shall be severally and not jointly liable for claims based on such party's
representations and warranties contained in Section 2.4(b).
(b) Each Shareholder acknowledges that its indemnification
obligations hereunder are solely in his capacity as a former shareholder or
beneficial owner of shares of the Company, and, accordingly, the indemnification
obligations in this Article VIII shall not entitle any current or former
officer, director or employee of the Company to any indemnification from the
Company pursuant to the Certificate of Incorporation, or any agreement with the
Company (notwithstanding any insurance policy).
8.3 Indemnification Liability Limitations.
(a) The Shareholders shall not be liable under this Article
VIII unless Damages totaling in excess of $25,000 (the "Basket Amount") have
been determined in which case Parent shall be entitled to recover all Damages;
provided, however, Damages with respect to (i) claims based on fraud and (ii)
breaches of the representations and warranties contained in Sections 2.1, 2.2,
2.3, 2.4, 2.8, 2.11 and 2.28 shall be paid without regard to the Basket Amount.
(b) Nothing in this Article VIII shall limit, in any manner
(whether by time, amount, procedure or otherwise), any remedy at law or in
equity to which Parent may be entitled as a result of actual fraud or willful
misrepresentation or misconduct by the Company or Shareholders.
8.4 Shareholder Agent of the Shareholders. In the event that the Merger
is closed, Pat O'Brien shall be appointed as the Shareholder Agent for each
Shareholder.
8.5 Third-Party Claims. In the event Parent becomes aware of a
third-party claim which Parent believes may result in an indemnity claim
hereunder, Parent shall notify the
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Shareholder Agent of such claim, and the Shareholder Agent and the Shareholders
of the Company shall be entitled, at their expense, to participate in any
defense of such claim. Parent shall have the right in its sole discretion to
settle any such claim; provided, however, that except with the consent of the
Shareholder Agent, no settlement of any such claim with third-party claimants
shall be determinative of the amount or validity of any indemnity claim by
Parent hereunder. In the event that the Shareholder Agent has consented to any
such settlement, no Shareholder shall have power or authority to object under
any provision of this Article VIII to the amount of any indemnity claim by
Parent against the Shareholders with respect to such settlement.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) by mutual written consent of the Shareholders and Parent;
(b) by Parent if (i) it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of the Company or any of the Shareholders and such breach has not been
cured within five business days after written notice to the Company or to the
Shareholders, as the case may be, or (ii) there shall be any final action taken,
or any statute, rule, regulation or order enacted, promulgated or issued or
deemed applicable to the Merger by any Governmental Entity, which would prohibit
Parent's or the Company's ownership or operation of all or a material portion of
the business of the Company, or compel Parent or the Company to dispose of or
hold separate all or a material portion of the business or assets of the Company
or Parent as a result of the Merger.
(c) by the Company if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Parent or Merger Sub and such breach has not been cured within five
days after written notice to Parent;
(d) by any party hereto if: (i) the Effective Time has not
occurred by January 15, 2000; (ii) there shall be a final, non-appealable order
of a federal or state court in effect preventing consummation of the Merger;
(iii) there shall be any final action taken, or any statute, rule, regulation or
order enacted, promulgated or issued or deemed applicable to the Merger by any
Governmental Entity which would make consummation of the Merger illegal; or (iv)
if the Company's Shareholders do not approve the Merger.
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Where action is taken to terminate this Agreement pursuant to this
Section 9.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
9.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 9.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent, Merger Sub,
the Company or the Shareholders or their respective officers, directors or
shareholders, except to the extent that such termination results from the breach
by a party hereto of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
9.3 Amendment. This Agreement may be amended by the parties hereto at
any time by execution of an instrument in writing signed on behalf of each of
the parties hereto.
9.4 Extension; Waiver. At any time prior to the Effective Time any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
At the Parent's option, the date specified in Section 9.1(d)
may be extended to February 15, 2000 upon the Parent's payment of $50,000 to
each of the Shareholders on or before January 15, 2000 and if Parent shall elect
to make such payments, such payment shall not be applied to the Cash Payment.
ARTICLE X
GENERAL PROVISIONS
10.1 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via telecopy to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Cytation.com Incorporated
56 Hammarlund Way
Newport, RI 02842
Attn: Richard A. Fisher, Chairman of the Board of Directors
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<PAGE> 41
with a copy to:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, MA 02109
Attention: Robert L. Birnbaum, Esq.
(b) if to the Company, to:
Student Success, Inc.
607 Redna Terrace
Suite 600
Cincinnati, OH 45215-9906
Attn: Brad Baker
Attn: Pat O'Brien
with a copy to:
Keating, Muething & Klekamp, P.L.L.
1400 Provident Tower
One East Fourth Street
Cincinnati, OH 45202
Attention: Paul V. Muething, Esq.
(c) if to a Shareholder, to the address of such Shareholder
listed on Exhibit F,
(d) if to the Shareholder Agent to the address of such
Shareholder listed on Exhibit F.
10.2 Interpretation. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10.4 Miscellaneous. This Agreement and the documents and instruments
and other agreements among the parties hereto including all lists and statements
separately certified in writing by the Company or Parent (a) constitute the
entire agreement among the parties with
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<PAGE> 42
respect to the subject matter hereof and supersede all prior. agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, except for the Confidential Nondisclosure Agreement dated
September 3, 1999 which shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement; (b) are not
intended to confer upon any other person any rights or remedies hereunder; and
(c) shall not be assigned by operation of law or otherwise except as otherwise
specifically provided.
10.5 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware. All parties hereto agree to submit to the jurisdiction of the federal
and state courts of the State of Delaware, and further agree that service of
documents commencing any suit therein may be made as provided in Section 10.1.
10.6 Resolution of Disputes; Stipulation Regarding Confidentiality.
Except as otherwise provided in Article VIII, the parties hereto each agree to
work together in good faith to resolve any disputes which may arise under this
Agreement. Such attempts at resolution will be made at the level of a person to
person meeting between the presidents of Parent and the Company, the
Shareholders and the Shareholder Agent. Each party agrees that it will not
initiate any litigation against any other party hereto regarding the subject
matter of this Agreement for at least sixty (60) days following such person to
person meeting between the presidents of Parent and the Company, the
Shareholders and the Shareholder Agent except for (i) motions for a temporary
restraining order or other preliminary equitable relief and (ii) circumstances
in which a delay for such period would result in such action being barred as a
result of the relevant statute of limitations expiring. In the event any
litigation is initiated in compliance with this Section, the parties agree
jointly to stipulate to the court that all proceedings in such action be kept
confidential.
10.7 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or Rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
[The remainder of this page is intentionally left blank.]
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<PAGE> 43
IN WITNESS WHEREOF, Parent, Merger Sub, the Company and the Shareholders
(as to Articles II and VIII only) have caused this Agreement and Plan of Merger
to be signed by themselves or their duly authorized respective officers, all as
of the date first written above.
CYTATION.COM INCORPORATED
By: /s/ Richard A. Fisher
----------------------------------
Name: Richard A. Fisher
Title:
COLLEGELINK.COM INCORPORATED
By: /s/ Thomas Burgess
----------------------------------
Name: Thomas Burgess
Title: President
STUDENT SUCCESS, INC.
By: /s/ Patrick S. O'Brien
----------------------------------
Name: Patrick S. O'Brien
Title: President
SHAREHOLDERS:
/s/ Bradford J. Baker
---------------------------------------
Bradford J. Baker
/s/ Patrick S. O'Brien
---------------------------------------
Patrick S. O'Brien
PATRICK S. O'BRIEN STOCK TRUST
/s/ William J. Keating, Jr.
---------------------------------------
William J. Keating, Jr.
Trustee
<PAGE> 44
Exhibit A to
Agreement and Plan of Merger
COLLEGELINK.COM INCORPORATED
NONCOMPETITION AND EMPLOYMENT AGREEMENT
This Noncompetition and Employment Agreement (this "Agreement") is
entered into as of ________, 1999, among CollegeLink.com Incorporated, a
Delaware corporation (the "Company"), Cytation.com Incorporated, a New York
corporation and owner of all the issued and outstanding stock of the Company
("Cytation"), and _________________ ("Executive").
A. Executive is an officer, director and shareholder of Student Success
Inc., a Wisconsin corporation ("SSI"), and SSI, Cytation and the Company have
agreed to merge SSI with and into the Company (the "Merger") pursuant to an
Agreement and Plan of Merger dated as of October __, 1999 (the "Merger
Agreement").
B. It is a condition precedent to the closing of the Merger that
Executive continue as an employee of the Company after the date of the closing
of the Merger (the "Closing Date").
C. This Agreement will become effective, and the term of this Agreement
will commence, on the Closing Date.
The Company and Executive hereby agrees as follows:
1. EMPLOYMENT. The Company is employing Executive, and Executive
accepts employment upon the terms and conditions set forth in this Agreement.
(As used throughout this Agreement, "Company" shall mean and include any and all
of its present and future subsidiaries and any and all subsidiaries of a
subsidiary). Executive warrants that he is free to enter into and perform this
Agreement and is not subject to any employment, confidentiality, non-competition
or other agreement which would restrict his performance under this Agreement.
2. DUTIES. During the term of this Agreement, Executive's services
shall be exclusive to the Company, and he shall devote his entire business time,
attention and energies to the business of the Company and the duties to which
the President of the Company shall assign him from time to time, including the
transition of the operations and employees of SSI to the Company. Executive
agrees to perform his services faithfully and to the best of his ability and to
carry out the policies and directives of the Company. Notwithstanding the
foregoing, the Executive may participate in community boards and committees and
in activities generally considered to be in the public interest, so long as such
participation and activities do not materially interfere with his duties
hereunder.
<PAGE> 45
3. TITLE. During his employment hereunder, the Executive shall have the
position of _____________ or such other executive position as the President of
the Company may determine.
4. TERM. The term of this Agreement shall commence on the Closing Date
and shall extend until the first anniversary thereof, unless terminated sooner
in accordance with Section 6 of this Agreement.
5. COMPENSATION & BENEFITS.
(a) SALARY. For all Executive's services and covenants under
this Agreement, the Company shall pay Executive an initial annual salary of
$125,000 payable in accordance with the Company's payroll policy in effect from
time to time.
(b) STOCK OPTIONS. The Company's parent, Cytation, will grant
Executive incentive stock options to purchase a total of 200,000 shares of
Cytation's common stock at a price equal to the price to the public of the
shares of Cytation common stock in the public offering thereof pursuant to the
pending registration statement of Cytation on Form S-1 (SEC File No. 333-85079),
such options to be substantially in the form of Exhibit A attached hereto.
(c) BENEFITS. Executive shall be entitled to all medical
insurance, vacation, sick leave, holidays and other fringe benefits in
accordance with Company policies made available from time to time to other
executives of the Company.
(d) MOVING EXPENSES. In the event that the Company requires
Executive to relocate, the Company shall reimburse Executive for all reasonable
and customary expenses incurred by Executive in connection with any such
relocation.
6. TERMINATION OF EMPLOYMENT. Notwithstanding any other provision of
this Agreement, the Executive's employment may be terminated:
(a) FOR CAUSE. By the Company for cause (as hereinafter
defined). For purposes of this Agreement cause shall mean: (i) failure or
refusal by the Executive (other than by reason of any disability, illness or
other incapacity) to perform his assigned duties for the Company, which failure
or breach continues for more than 10 days after written notice thereof is given
to the Executive; (ii) commission by the Executive of an act of dishonesty or
moral turpitude; or (iii) commission by the Executive of an act of fraud upon
the Company or an act materially evidencing bad faith toward the Company. In the
event of termination for cause, the Company will pay to the Executive accrued
but unpaid annual salary through the date of termination.
(b) FOR DISABILITY. By the Company, upon 20 days' notice to
the Executive if he should be prevented by illness, accident or other disability
from discharging any of his
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<PAGE> 46
material duties hereunder for thirty (30) consecutive days or one or more
periods totaling thirty (30) days, provided that compliance with this paragraph
shall be subject to the "Americans with Disabilities Act" and the "Family and
Medical Leave Act", or such other laws as may be applicable to this Agreement.
In the event of such termination of Executive's employment, the Company's
obligation to pay further compensation hereunder shall cease forthwith, except
that the Executive shall be entitled to receive his accrued but unpaid annual
salary for the period up to the last day of the month in which such termination
of employment occurred.
(c) WITHOUT CAUSE. By the Company, without cause, provided,
however, that if the Executive's employment is terminated pursuant to this
Section, the Executive shall continue to receive his annual salary as provided
in Section 5(a) until the first anniversary of the date of termination and
continued coverage in all group health and medical plans.
(d) BY RESIGNATION. By the Executive upon providing thirty
(30) days written notice to the Company, provided, however, that, in the event
of termination by resignation, the Company will pay to Executive accrued but
unpaid annual salary through the date of termination.
(e) FOR GOOD REASON. By the Executive for "Good Reason", which
shall consist solely of the following: (i) failure of the Company to continue
the Executive during the term of this Agreement with executive duties and
responsibilities with respect to its business; or (ii) a material breach by the
Company of any provision of this Agreement which continues for more than 10 days
following written notice by the Executive to the Company specifying such breach.
In the event of termination under this Section, the Executive shall have no
further obligations to the Company except his obligations under Sections 7, 8, 9
and 10, and the Executive shall be entitled to the severance benefit set forth
in Section 6(c) above.
(f) BY DEATH. In the event of the Executive's death during the
term of his employment, the Company's obligation to pay further compensation
hereunder shall cease forthwith, except that the Executive's legal
representative shall be entitled to receive his annual salary for the period up
to the last day of the month in which such death shall have occurred.
(g) BY MUTUAL AGREEMENT. By the mutual, written agreement of
the Company and the Executive.
(h) RELEASE. The Company's obligation to make the severance
payments specified in Sections 6(c) or 6(e) are subject to the condition
precedent that the Executive execute and deliver to the Company a general
release, reasonably satisfactory in form to the Company's legal counsel, of all
claims that he may have against the Company or its officers, directory, agents,
employees, attorneys, accountants, or stockholders arising out of, or relating
to, this Agreement or his employment with the Company.
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<PAGE> 47
7. ALL BUSINESS TO BE PROPERTY OF THE COMPANY; ASSIGNMENT OF
INTELLECTUAL PROPERTY.
(a) COMPANY PROPERTY. Executive agrees that any and all
presently existing business of the Company and all business developed by him or
any other executive of the Company, including, without limitation, all
contracts, fees, commissions, compensation, records, customer or client lists,
agreements and any other incident of any business developed, earned or carried
on by Executive for the Company is and shall be the exclusive property of the
Company, and (where applicable) shall be payable directly to the Company.
(b) ASSIGNMENT OF RIGHTS. Executive hereby grants to the
Company (without any separate remuneration or compensation other than that
received by him from time to time in the course of his employment) his entire
right, title and interest throughout the world in and to, all research,
information, procedures, developments, inventions and improvements whether
patentable or non-patentable, patents and applications therefor, trademarks and
applications therefor, copyrights and applications therefor, programs, trade
secrets, plans, methods, and all other data and know-how (herein sometimes
"Intellectual Property") made, conceived, developed and/or acquired by him
solely or jointly with others during the period of his employment with SSI or
the Company, whether or not made, conceived, developed or acquired during
regular business hours or on the premises of, or using properties of, SSI or the
Company or in the regular scope of Executive's employment by SSI or the Company.
Set forth on Schedule A attached to this Agreement are descriptions of
inventions and copyrightable materials that the Executive has developed and
reduced to practice prior to commencement of his employment with SSI and that
are, accordingly, exempted from the provisions of this Section 7(b).
8. CONFIDENTIALITY. Except as necessary in performance of services for
the Company, Executive shall not, either during the period of his employment
with the Company or thereafter, use for his own benefit or disclose to or use
for the benefit of any person outside the Company, any information concerning
any Intellectual Property, or other confidential or proprietary information of
the Company, including, without limitation, any of the materials listed in
Section 7(a) or 7(b), whether Executive has such information in his memory or
embodied in writing or other tangible form. All originals and copies of any of
the foregoing, however and whenever produced, shall be the sole property of the
Company, not to be removed from the premises or custody of the Company without
first obtaining authorization of the Company, which authorization may be revoked
by the Company at any time. Upon the termination of Executive's employment in
any manner or for any reason, Executive shall promptly surrender to the Company
all copies of any of the foregoing, together with any documents, materials,
data, information and equipment belonging to or relating to the Company's
business and in his possession, custody or control, and Executive shall not
thereafter retain or deliver to any other person any of the foregoing or any
summary or memorandum thereof.
9. NON-COMPETITION COVENANT. The Executive recognizes that the Company
provides its services and products throughout the world and would be
substantially injured by
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<PAGE> 48
Executive competing with the Company as described below in any part of the world
and, therefore, Executive agrees and warrants that he will not, unless acting
with the Company's express prior written consent, directly or indirectly, while
an Executive of the Company and for a period of two (2) years following
termination of such employment, engage, anywhere in the world and in any
capacity, in any business or activity that competes with, or involves
preparation to compete with, that of the Company as it is at the time of
termination.
Executive and the Company are of the belief that the period of time and
the area herein specified are reasonable in view of the nature of the business
in which the Company is engaged and proposes to engage, the state of its
business development and Executive's knowledge of this business. However, if
such period or such area should be adjudged unreasonable in any judicial
proceeding, then the period of time shall be reduced by such number of months or
such area shall be reduced by elimination of such portion of such area, or both,
as are deemed unreasonable, so that this covenant may be enforced in such area
and during such period of time as is adjudged to be reasonable.
Executive acknowledges that his agreement to this non-competition
obligation is a material inducement to the Company to effect the Merger and that
Executive is to receive substantial value by reason of the Merger.
10. NON-SOLICITATION AGREEMENT. Executive agrees and covenants that he
will not, unless acting with the Company's express written consent, directly or
indirectly, during the term of this Agreement or for a period of two (2) years
thereafter (a) solicit, entice away or interfere with the Company's contractual
relationships with any customer, client, officer or Executive of the Company nor
(b) hire or assist another in the hiring of, or retain as a consultant or assist
another in such retention, any such employee or any person who has been such an
employee within the six (6) month period before such hiring or retention;
provided, however, it shall not be deemed to be a violation of this covenant or
the one contained in Section 9 hereof if, after termination of Executive's
employment with the Company, Executive shall solicit sponsors for, or seek to do
business with, existing customers or sponsors of the Company for or on behalf of
a business which is not in competition with the Company.
11. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given upon the earlier of actual
receive or three days after having been mailed by first class mail, postage
prepaid, or twenty-four hours after having been sent by Federal Express or
similar overnight delivery services, as follows: (a) if to Executive, at
___________, or to such other person(s) or address(es) as Executive shall have
furnished to the Company in writing; and (b) if to the Company, at 56 Hammarlund
Way, RI 02842, Attention: Richard A. Fisher, Chairman.
12. ASSIGNABILITY. In the event that the Company shall be merged with,
or consolidated into, any other corporation, or in the event that it shall sell
and transfer substantially all of its assets to another corporation or entity,
the terms of this Agreement shall inure to the
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<PAGE> 49
benefit of, and be assumed by, the corporation resulting from such merger or
consolidation, or to which the Company's assets shall be sold and transferred.
This Agreement shall not be assignable by Executive.
13. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the Company and Executive with respect to the subject matter hereof and
supersedes in all respects all prior agreements of any kind concerning the
subject matter hereof.
14. EQUITABLE RELIEF. Executive recognizes and agrees that the
Company's remedy at law for any breach of the provisions of Sections 7, 8, 9 or
10 hereof may be inadequate, and he agrees that for breach of such provisions,
the Company shall, in addition to such other remedies as may be available to it
at law or in equity or as provided in this Agreement, be entitled to injunctive
relief and to enforce its rights by an action for specific performance. Should
Executive engage in any activities prohibited by, and material to, this
Agreement, he agrees to pay over to the Company all compensation, remuneration
or monies or property of any sort received in connection with such activities;
such payment shall not impair the right of the Company to pursue any rights,
remedies, obligations or liabilities of Executive which such parties may have
under this Agreement or applicable law.
15. AMENDMENTS. This Agreement may not be amended, nor shall any
change, waiver, modification, consent or discharge be effected except by written
instrument executed by the Company and Executive.
16. SEVERABILITY. If any part of any term or provision of this
Agreement shall be held or deemed to be invalid, inoperative or unenforceable to
any extent by a court of competent jurisdiction, such circumstances shall in no
way affect any other term or provision of this Agreement, the application of
such term or provisions in any other circumstances, or the validity or
enforceability of this Agreement.
17. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of The Commonwealth of Massachusetts.
18. CONFIDENTIALITY OF THIS AGREEMENT. The Executive shall not, either
during the period of his employment with the Company or at any time thereafter,
disclose to any person within or outside of the Company either the existence of
this Agreement or any of the terms and conditions contained within this
Agreement without first obtaining authorization of the Company, which
authorization may be withheld by the Company at any time and for any reason.
19. PARENT GUARANTY. Cytation hereby guarantees the obligations of the
Company under this Agreement.
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<PAGE> 50
IN WITNESS WHEREOF, the parties hereto have executed or caused
to be executed this Noncompetition and Employment Agreement as an instrument
under seal as of the date first above written.
COLLEGELINK.COM INCORPORATED
By:
--------------------------------
Name:
Title:
CYTATION.COM INCORPORATED
By:
--------------------------------
Name:
Title:
-----------------------------------
[Executive]
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<PAGE> 51
Exhibit A to
Noncompetition and Employment Agreement
CYTATION.COM INCORPORATED
1999 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
This Agreement is by and between Cytation.com Incorporated (the
"Company"), CollegeLink.com Incorporated ("CollegeLink") and Patrick S. O'Brien
(the "Optionee").
W I T N E S S E T H:
1. DEFINITIONS. Whenever used herein, the following terms shall have
the meanings provided below:
"ADMINISTRATOR" means the administrator of the Plan appointed pursuant
to Section 3 of the Plan.
"AGREEMENT" means this Stock Option Agreement.
"BOARD" means the Board of Directors of the Company.
"CHANGE IN CONTROL" means (i) a consolidation or merger of the Company
with or into any other corporation, or any other entity or person, other than a
wholly-owned subsidiary of the Company, excluding any transaction in which the
stockholders of the Company immediately prior to the transaction will maintain
voting control or own at least 50% (in each case, in substantially the same
proportion as before such event) of the resulting entity after the transaction;
(ii) any corporate reorganization, including an exchange offer, in which the
Company shall not be the continuing or surviving entity resulting from such
reorganization, excluding any transaction in which the stockholders of the
Company immediately prior to the transaction will maintain voting control or own
at least 50% (in each case, in substantially the same proportion as before such
event) of the resulting entity after the transaction; or (iii) the sale of a
substantial portion of the Company's assets, which shall be deemed to occur on
the date that any one person, or more than one person acting as a group,
acquires (or has acquired during the 12 month period ending on the date of the
most recent acquisition by such person or persons) assets from the Company that
have a total fair market value equal to more than 75% of the total fair market
value of all the assets of the Company.
"CLOSING DATE" shall have the meaning given such term in the Employment
Agreement.
<PAGE> 52
"COMMON SHARES" means shares of the Company's common stock, $.001 par
value.
"EMPLOYMENT AGREEMENT" means that certain Non-Competition and
Employment Agreement between CollegeLink and the Optionee dated as of the
Closing Date.
"FAIR MARKET VALUE" has the meaning given such term in the Plan.
"GRANT DATE" means the Closing Date.
"PLAN" means the Cytation.com Incorporated 1999 Key Executive Stock
Option Plan.
2. GRANT OF OPTION. Effective as of the Grant Date, the Company hereby
awards to the Optionee, subject to the terms and conditions of the Plan, and the
terms and conditions contained herein, the right and option to purchase from the
Company all or any part of an aggregate of 200,000 Common Shares, at a purchase
price equal to $[INSERT PUBLIC OFFERING PRICE (IN ACCORDANCE WITH EMPLOYMENT
AGREEMENT)] per share, such option to be exercised as hereinafter provided. It
is intended that the option evidenced hereby constitute an incentive stock
option within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") to the maximum extent permitted by law. To the extent
that any portion of this option exceeds the limitations of Code Section 422, or
otherwise fails to qualify as an incentive stock option within the meaning of
Code Section 422, such portion shall be considered a non-qualified stock option.
3. TERMS AND CONDITIONS. In addition to the terms and conditions
contained in the Plan, it is understood and agreed that the option evidenced
hereby is subject to the following additional terms and conditions:
(a) Expiration Date. The option shall expire on the tenth
anniversary of the Grant Date, unless sooner terminated as provided herein.
(b) Period of Exercise. Subject to the other terms of this
Agreement regarding the exercisability of this option, one-third of this option
shall vest and become exercisable upon the first anniversary of the Grant Date,
and, provided that Optionee remains employed by CollegeLink, the remaining
portion of such option shall vest and become exercisable ratably on a monthly
basis over the two-year period commencing on the first anniversary of the Grant
Date and ending on the third anniversary of the Grant Date.
(c) Acceleration of Vesting upon Change in Control.
Notwithstanding the foregoing, this option shall become exercisable in full
immediately prior to a Change in Control, subject to the provisions of
subparagraph (e) hereof.
(d) Termination of Option or Acceleration of Vesting by Reason
of Termination of Employment.
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<PAGE> 53
(i) If Optionee's employment with CollegeLink is terminated by
CollegeLink during the term of the Employment Agreement or thereafter without
Cause (as defined in the Employment Agreement), this option shall become
immediately exercisable in full and shall terminate if not exercised within one
year of the date of termination, unless sooner terminated by reason of Paragraph
2(a) hereof.
(ii) If Optionee's employment with CollegeLink is terminated
by reason of death or Disability (as defined in the Employment Agreement) during
the term of the Employment Agreement or thereafter, any portion of this option
that is not vested and exercisable on the date of death or Disability by reason
of Paragraph 2(b) hereof shall immediately terminate, and any remaining portion
shall terminate if not exercised within one year of the date of death or
Disability, unless sooner terminated by reason of Paragraph 2(a) hereof.
(iii) If Optionee voluntarily terminates employment with
CollegeLink during the term of the Employment Agreement or thereafter without
Good Reason, any portion of this option that is not vested and exercisable on
the date of termination by reason of Paragraph 2(b) hereof shall immediately
terminate, and any remaining portion shall terminate if not exercised within
three months from the date of termination, unless sooner terminated by reason of
Paragraph 2(a) hereof.
(iv) In the event Optionee's employment is terminated by
CollegeLink for Cause during the term of the Employment Agreement or thereafter,
or subsequent to termination Optionee violates Sections 8, 9, or 10 of the
Employment Agreement as determined by a majority of the Board, any unexercised
portion of this option, whether exercisable pursuant to Paragraph 2(b) hereof or
not exercisable, shall become null and void upon action by the Administrator.
The Administrator's action shall be communicated in writing to the Optionee as
soon as practicable. In addition, the Administrator may, in its sole discretion,
by written notice demand that any or all stock certificates for Common Shares
acquired pursuant to the exercise of this option, or any profit realized from
the sale of such or transfer of such Common Shares, be returned to the Company
within five (5) days of receipt of such notice. Any exercise price paid by the
Optionee shall be returned to Optionee by the Company immediately thereafter,
without interest. The Company shall be entitled to reimbursement of reasonable
attorney fees and expenses incurred in seeking to enforce it rights under this
Paragraph 2(d)(iii).
(e) Change in Control. In the event of a Change in Control,
and except as otherwise provided herein, this option shall become immediately
exercisable for a period of fifteen days or such longer or shorter period as the
Board may prescribe (the "notice period") immediately prior to the scheduled
consummation of such Change in Control, provided, however, that the
exercisability of and any exercise of this option during the notice period shall
be (i) conditioned upon the consummation of the Change in Control, and (ii)
effective only immediately before the consummation of such Change in Control.
-3-
<PAGE> 54
Upon consummation of any such Change in Control, the Plan and any
unexercised portion of this option shall terminate. Notwithstanding the
foregoing, to the extent provision is made in writing in connection with such
Change in Control for the continuation of the Plan and the assumption of this
option, or for the substitution for this option of new options covering the
stock of a successor company, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kinds of shares or units and
exercise prices, then the Plan and this option shall continue in the manner and
under the terms contained herein, and the acceleration and termination
provisions set forth in the first two sentences of this subparagraph (e) shall
be of no effect. The Company shall send written notice of a Change in Control to
Optionee not later than the time at which the Company gives notice thereof to
its stockholders.
(f) Exercise of Option. This option shall be exercised by
submitting a written notice to the Administrator signed by the Optionee and
specifying the number of Common Shares as to which the option is being
exercised. Such notice shall be accompanied by the payment of the full option
price for the shares being purchased. Payment shall be made in (i) cash or by
check in a form satisfactory to the Company, (ii) subject to the approval of the
Administrator, already-owned Common Shares (to the extent permitted by law),
which shall be valued for this purpose at the Fair Market Value of the Common
Shares on the day immediately preceding the date of transfer, or (iii) any
combination of the above. A certificate or certificates for the Common Shares
purchased shall be issued by the Company after the exercise of the option and
payment therefor, including provision for any federal and state withholding
taxes, and other applicable taxes.
(g) Non-transferability. This option and all rights hereunder
shall be exercisable during the Optionee's lifetime only by the Optionee and
shall be non-assignable and non-transferable by the Optionee except, in the
event of the Optionee's death, by will or by the laws of descent and
distribution. In the event the death of the Optionee occurs, the representative
or representatives of the Optionee's estate, or the person or persons who
acquire (by bequest or inheritance) the rights to exercise this option in whole
or in part, may exercise this option prior to the expiration of the option as
specified in Paragraphs 3(a) and (d) above.
(h) Modification or cancellation of option. The Administrator
shall have the authority to effect, at any time and from time to time, with the
consent of the Optionee, the modification of the terms of this option agreement
(subject to the limitations contained in the Plan).
(i) No Rights as Stockholder. The Optionee shall have no
rights as a stockholder with respect to any Common Shares subject to this option
prior to the date of issuance to Optionee of a certificate or certificates for
such shares.
(j) Compliance with Law and Regulations. This option and the
obligation of the Company to sell and deliver shares hereunder shall be subject
to all applicable federal and state laws, rules and regulations and to such
approvals by any government or regulatory agency as
-4-
<PAGE> 55
may be required. The Company shall not be required to issue or deliver any
certificates for Common Shares prior to (i) the listing of such Common Shares on
any stock exchange on which the Common Shares may then be listed, and (ii) the
completion of any registration or qualification of such Common Shares under any
federal or state law, or any rule or regulation of any government body which the
Company shall, in its sole discretion, determine to be necessary or advisable.
Moreover, this option may not be exercised if its exercise, or the receipt of
Common Shares pursuant thereto, would be contrary to applicable law.
(k) No Right to Continued Employment. This option shall not
confer upon the Optionee any right with respect to continuance of employment by
CollegeLink or the Company, nor shall it interfere in any way with the right of
CollegeLink or the Company to terminate the Optionee's employment at any time.
(l) Non-Competition. Optionee acknowledges and agrees that the
award of this option is conditioned upon and granted in consideration of
Optionee's agreement to abide by the provisions of Sections 8, 9, and 10 of the
Employment Agreement. In the event that Optionee's employment with CollegeLink
continues after the expiration of the Employment Agreement pursuant to an
"at-will" employment relationship, any portion of this option that is not
exercisable by reason of Paragraph 2(b) hereof shall terminate upon the
expiration of the Employment Agreement, and any remaining portion will terminate
if not exercised within three months of such expiration (unless sooner
terminated by reason of Paragraph 2(a) hereof), unless Optionee enters into and
agrees that his "at-will" employment shall be bound and governed by a
non-competition agreement containing terms substantially similar to those
contained in Sections 8, 9 and 10 of the Employment Agreement.
4. DISQUALIFYING DISPOSITION OF COMMON SHARES. This Option shall not
qualify as an incentive stock option within the meaning of Code Section 422 if
the Common Shares acquired pursuant to the exercise of the option are sold or
transferred, other than by will or by the laws of descent and distribution,
within two years of the Grant Date or within one year after the issuance of the
Common Shares to the Optionee pursuant to such exercise.
5. OPTIONEE BOUND BY PLAN. The Optionee hereby agrees to be bound by
all of the terms and provisions of the Plan. In the event of any inconsistency
between this Agreement and the terms of the Plan, the terms of the Plan shall
govern.
6. WITHHOLDING TAXES. Optionee acknowledges and agrees that the Company
has the right to deduct from payments of any kind otherwise due to Optionee any
federal, state or local taxes of any kind required by law to be withheld with
respect to the exercise of this option hereunder.
7. NOTICES. Any notice hereunder to the Company shall be addressed to
it at its principal business office, 56 Hammarlund Way, Newport, RI 02842 and
any notice hereunder to
-5-
<PAGE> 56
the Optionee shall be sent to the address reflected on the records of
CollegeLink, subject to the right of either party to designate at any time
hereafter in writing some other address.
8. DELAWARE LAW TO GOVERN. This Agreement shall be construed and
administered in accordance with and governed by the laws of the State of
Delaware.
IN WITNESS WHEREOF, the Company and CollegeLink have caused this Stock
Option Agreement to be executed by their duly authorized officers and the
Optionee has executed this Agreement this ______ day of _______________, 199_.
CYTATION.COM INCORPORATED
By:
--------------------------------
Name:
Title:
COLLEGELINK.COM INCORPORATED
By:
--------------------------------
Name:
Title:
-----------------------------------
Patrick S. O'Brien
-6-
<PAGE> 57
Exhibit B to
Agreement and Plan of Merger
CYTATION.COM INCORPORATED
SUPPORT AGREEMENT
This Support Agreement (this "Agreement") is entered into as of October
___, 1999, by and between Cytation.com Incorporated, a New York corporation
("Parent"), and _____________ ("Seller").
RECITALS
A. Concurrently with the execution and delivery of this Agreement,
Parent, CollegeLink.com Incorporated, a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Sub"), Student Success, Inc., a Wisconsin
corporation ("Company"), Bradford J. Baker, Patrick S. O'Brien and the Patrick
S. O'Brien Stock Trust are entering into an Agreement and Plan of Reorganization
of even date herewith ("Merger Agreement"), pursuant to which Parent agrees to
acquire all outstanding shares of common stock, without par value, of the
Company ("Shares"), pursuant to a statutory merger of Company with and into the
Merger Sub (the "Merger"). Capitalized terms used but not defined herein shall
have the meanings set forth in the Merger Agreement.
B. As of the date hereof, Seller beneficially owns directly ________
Shares ("Owned Shares").
Now, therefore, in consideration of the covenants, promises and
representations herein and in the Merger Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. AGREEMENT TO VOTE.
1.1 Voting. Seller hereby agrees that, during the time this
Agreement is in effect, at any meeting of the shareholders of the Company,
however called, or any action by written consent of the shareholders of the
Company, Seller shall (a) vote the Owned Shares in favor of the Merger; (b) vote
the owned Shares against any action or agreement that would result in a breach
of any covenant, representation, or warranty or any other obligation or
agreement of the Company under the Merger Agreement; and (c) vote the Owned
Shares against any action or agreement (other than the Merger Agreement or the
transactions contemplated thereby) that would impede, interfere with, delay,
postpone or attempt to discourage the Merger, including, but not limited to: (i)
any extraordinary corporation transaction, such as a merger, consolidation or
other business combination involving the Company or any of its subsidiaries;
(ii) a sale or transfer of a material amount of assets of the Company or any of
its subsidiaries or a
<PAGE> 58
reorganization, recapitalization or liquidation of the Company and its
subsidiaries; (iii) any change in the management or Board of Directors of the
Company, except as otherwise agreed to in writing by Parent; (iv) any material
change in the present capitalization or dividend policy of the Company; or (v)
any other material change in the Company's corporate structure or business.
1.2 Grant of Irrevocable Proxy; Appointment of Proxy.
(a) Seller hereby irrevocably grants to, and appoints
Richard A. Fisher and Kevin J. High, or either of them, in their respective
capacities as officers of the Parent, and any individual who shall hereafter
succeed to any such office of Parent, and each of them individually, Seller's
proxy and attorney-in-fact (with full power of substitution), for and in the
name, place and stead of Seller, to vote the Owned Shares in favor of the Merger
and otherwise as contemplated by Section 1.1
(b) Seller represents that any proxies heretofore
given in respect of the Owned Shares are not irrevocable, and that any such
proxies are hereby revoked.
(c) Seller understands and acknowledges that Parent
is entering into the Merger Agreement in reliance, among other things, upon
Seller's execution and delivery of this Agreement. Seller hereby affirms that
the irrevocable proxy set forth in this Section 1.2 is given in connections with
the execution of the Merger Agreement, and that such irrevocable proxy is given
to secure the performance of the duties of the Seller under this Agreement.
Seller hereby further affirms that the irrevocable proxy is coupled with an
interest and may under no circumstances be revoked. Seller hereby ratifies and
confirms all that such proxies and attorneys-in-fact may lawfully do or cause to
be done by virtue hereof. Such irrevocable proxy is executed and intended to be
irrevocable in accordance with the applicable provisions of the Wisconsin
Business Corporation Law.
1.3 No Inconsistent Arrangements. Seller hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
he shall not:
(a) transfer (which term shall include, without
limitation, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Owned Shares or any interest therein; provided,
however, that Seller may transfer (i) the Owned Shares by will or intestacy, and
(ii) up to ten percent (10%) of the Owned Shares as a bona fide gift or gifts,
provided that prior to any such permitted transfer, each transferee shall agree
in writing (in a form satisfactory to the Parent) that such transferee will
receive and hold such Owned Shares subject to the provisions of this Agreement;
(b) enter into any contract, option or other
agreement or understanding with respect to any transfer of any or all of the
Owned Shares or any interest therein;
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<PAGE> 59
(c) grant any proxy, power-of-attorney or other
authorization in or with respect to any or all of the Owned Shares;
(d) deposit the Owned Shares into a voting trust or
enter into a voting agreement or arrangement with respect to the Owned Shares;
or
(e) take any other action that would make any
representation or warranty of Seller hereunder untrue or incorrect.
1.4 Waiver of Appraisal Rights. Seller hereby waives any
rights of appraisal or rights to dissent from the Merger that he may have under
applicable law.
2. EXPIRATION. This Agreement and the proxy granted pursuant to Section
1 hereof shall terminate on the termination of the Merger Agreement in
accordance with its terms.
3. REPRESENTATIONS AND WARRANTIES. Seller hereby represents and
warrants to Parent as follows:
3.1 Title. Seller has good and valid title to the Owned
Shares, free and clear of any lien, pledge, charge, encumbrance or claim of
whatever nature and, upon consummation of the Merger, Seller will deliver good
and valid title to the Owned Shares, free and clear of any lien, charge,
encumbrance or claim of whatever nature.
3.2 Ownership of Shares. On the date hereof, the Owned Shares
are owned of record or beneficially by Seller and, on the date hereof, the Owned
Shares constitute all of the Shares owned of record or beneficially by Seller.
Seller has sole voting power and sole power of disposition with respect to all
of the Owned Shares, with no restrictions, subject to applicable federal
securities laws, on Seller's rights of disposition pertaining thereto.
3.3 Power; Binding Agreement. Seller has the legal capacity,
power and authority to enter into and perform all of his obligations under this
Agreement. The execution, delivery and performance of this Agreement by Seller
will not violate any other agreement to which Seller is a party including,
without limitation, any voting agreement, stockholders' agreement or voting
trust. This Agreement has been duly and validly executed and delivered by Seller
and constitutes a valid and binding agreement of Seller, enforceable against
Seller in accordance with its terms.
3.4 No Conflicts. No authorization, consent or approval of, or
filing with, any court or any public body or authority is necessary for the
consummation by Seller of the transactions contemplated by this Agreement. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not:
-3-
<PAGE> 60
(a) constitute a material breach, violation or
default (or any event which, with notice or lapse of time or both, would
constitute a default) under any material note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument to which Seller is a
party or by which his properties or assets are bound; or
(b) result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under any material note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument to which Seller is a party or by which his
properties or assets are bound; or
(c) result in the creation of any lien, encumbrance,
pledge, charge or claim upon any of the properties or assets of Seller under any
material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument to which Seller is a party or by which his
properties or assets are bound.
4. ADDITIONAL SHARES. Seller hereby agrees, while this Agreement is in
effect, to promptly notify Parent of the number of Shares acquired by the Seller
after the date hereof.
5. FURTHER ASSURANCES. From time to time, at Parent's request and
without further consideration, Seller shall execute and deliver such additional
documents and take all such further action as may be reasonably necessary or
desirable to consummate and make effective the transactions contemplated by
Section 1 of this Agreement.
6. MISCELLANEOUS.
6.1 Non-Survival. The representations and warranties made
herein shall terminate upon Seller's sale of the Owned Shares to Parent in the
Merger, other than Seller's representation and warranty in Section 3.1, which
shall survive the sale of the Owned Shares and the termination of this Agreement
following such sale.
6.2 Entire Agreement; Assignment. This Agreement (a)
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof
and (b) shall not be assigned by operation of law or otherwise, provided that
Parent may assign its rights and obligations hereunder to any direct or indirect
wholly-owned subsidiary of Parent, but no such assignment shall relieve Parent
of its obligations hereunder if such assignee does not perform such obligations.
6.3 Amendments. This Agreement may not be modified, amended,
altered or supplemented, except upon the execution and delivery of a written
agreement executed by the parties hereto.
-4-
<PAGE> 61
6.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand delivery
or telecopy or by other courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
if to Seller:
with a copy to:
if to Parent:
Cytation.com Incorporated
56 Hammarlund Way
Newport, RI 02842
Attn: Richard A. Fisher, Chairman of the Board
with a copy to:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, MA 02109
Attn: Robert L. Birnbaum, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
6.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
6.6 Specific Performance. Seller recognizes and acknowledges
that a breach by him of any covenants, promises or agreements contained in this
Agreement will cause the Parent to sustain damages for which it would not have
an adequate remedy at law for money damages, and therefore Seller agrees that in
the event of any such breach Parent shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or in
equity.
-5-
<PAGE> 62
6.7 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but both of which
shall constitute one and the same Agreement.
6.8 Descriptive Headings. The descriptive headings used herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
6.9 Severability. In the event that any part of this Agreement
is declared by any court or other judicial or administrative body to be null,
void or unenforceable, said provision shall survive to the extent it is not so
declared, and all of the other provisions of this Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Support
Agreement to be duly executed as an instrument under seal as of the date first
written above.
CYTATION.COM INCORPORATED
By:
--------------------------------
Name:
Title:
SELLER:
By:
--------------------------------
[name]
-6-
<PAGE> 63
Exhibit C to
Agreement and Plan of Merger
CERTIFICATE OF MERGER
Merging
STUDENT SUCCESS INC.,
a Wisconsin corporation
with and into
COLLEGELINK.COM INCORPORATED
a Delaware corporation
Pursuant to Section 252 of the General Corporation Law
of the State of Delaware
CollegeLink.com Incorporated, a corporation duly organized and existing
under the laws of the State of Delaware ("Merger Sub"), does hereby certify as
follows:
FIRST: An Agreement and Plan of Merger (the "Merger Agreement") dated
October __, 1999, among Cytation.com Incorporated, a New York corporation
("Parent"), Merger Sub, Student Success Inc., a Wisconsin corporation ("SSI"),
Bradford J. Baker, Patrick S. O'Brien and the Patrick S. O'Brien Stock Trust
setting forth the terms and conditions of the merger of SSI with and into Merger
Sub (the "Merger"), has been approved, adopted, certified, executed and
acknowledged by Merger Sub and SSI (collectively, the "Constituent
Corporations") in accordance with Section 252 of the Delaware General
Corporation Law.
SECOND: The name of the corporation surviving the Merger (the
"Surviving Corporation") shall be CollegeLink.com Incorporated.
THIRD: The Certificate of Incorporation of the Surviving Corporation
shall be its Certificate of Incorporation.
FOURTH: An executed copy of the Merger Agreement is on file at the
principal place of business of the Surviving Corporation at the following
address:
CollegeLink.com Incorporated
c/o Cytation.com Incorporated
809 Aquidneck Avenue
Middletown, RI 02842
<PAGE> 64
FIFTH: A copy of the Merger Agreement will be furnished by the
Surviving Corporation, on request and without cost, to any stockholder of either
Constituent Corporation.
SIXTH: The authorized capital stock of SSI, Inc. is 9,000 shares of
common stock, without par value per share.
SEVENTH: The Merger shall become effective upon the filing of this
Certificate of Merger with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, CollegeLink.com Incorporated has caused this
Certificate of Merger to be executed as of , 1999.
COLLEGELINK.COM INCORPORATED
By:
-------------------------------
Name:
Title:
-2-
<PAGE> 65
Exhibit D to Agreement
and Plan of Merger
ARTICLES OF MERGER
MERGING
STUDENT SUCCESS, INC.
a Wisconsin corporation
INTO
COLLEGELINK.COM INCORPORATED
a Delaware corporation
Pursuant to the provisions of the Wisconsin Business Corporation Law,
the undersigned corporations hereby certify the following:
1. STUDENT SUCCESS, INC., a Wisconsin corporation ("Student Success"),
shall merge with and into COLLEGELINK.COM INCORPORATED, a Delaware corporation
(CollegeLink"), and that CollegeLink shall be the surviving corporation (the
"Merger").
2. The Agreement and Plan of Merger (the "Merger Agreement") dated
October , 1999 among Student Success, Bradford Baker, Patrick S. O'Brien, the
Patrick S. O'Brien Stock Trust, Cytation.com Incorporated and CollegeLink is
attached hereto as Exhibit A.
3. The Merger Agreement was adopted and approved by Student Success and
CollegeLink in accordance with Section 180.1103 of the Wisconsin Business
Corporation Law.
4. The Merger shall become effective upon the effective date of the
filing of these Articles of Merger with the Secretary of the State of the State
Of Wisconsin.
IN WITNESS WHEREOF, the parties hereto have caused these Articles of
Merger to be executed as of the day of , 1999 by their duly authorized
officers.
STUDENT SUCCESS, INC.
a Wisconsin corporation
By:
-------------------------------
Name:
Title:
COLLEGELINK.COM, INCORPORATED
a Delaware corporation
By:
-------------------------------
Name:
Title:
<PAGE> 66
-2-
EXHIBIT A
<PAGE> 67
Exhibit E to
Agreement and Plan of Merger
DISCLOSURE SCHEDULES
TO THE
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CYTATION.COM INCORPORATED,
COLLEGELINK.COM INCORPORATED,
STUDENT SUCCESS, INC.
and
BRADFORD J. BAKER
PATRICK S. O'BRIEN
PATRICK S. O'BRIEN STOCK TRUST
Dated as of October , 1999
<PAGE> 68
DISCLOSURE SCHEDULES
<TABLE>
<CAPTION>
<S> <C>
Schedule 2.1 Organization of the Company
Schedule 2.4 Authority
Schedule 2.5 Company Financial Statements
Schedule 2.6 No Undisclosed Liabilities
Schedule 2.7 No Changes
Schedule 2.10(a) Real Property Leases
Schedule 2.10(b) Title to Properties
Schedule 2.10(c) Equipment
Schedule 2.11(a) Company Registered Intellectual Property
Schedule 2.11(b) Intellectual Property Liens
Schedule 2.11(f) Intellectual Property Agreement
Schedule 2.11(g) Intellectual Property - Indemnification Obligations
Schedule 2.11(l) Recipient Confidentiality Agreement
Schedule 2.11(o) Year 2000 Compliance Program
Schedule 2.12 Agreements, Contracts and Commitments
Schedule 2.13 Interested Party Transactions
Schedule 2.14 Governmental Authorization
Schedule 2.18 Insurance
Schedule 2.21 Binding Agreements; No Default
Schedule 2.23 Third Party Consents
Schedule 2.26(b) Employee Plan and Employee Agreement
Schedule 2.27 Warranty Claims
</TABLE>
<PAGE> 69
Schedule 2.1
ORGANIZATION OF THE COMPANY
The Company is in the process of qualifying to do business in the State of Ohio.
<PAGE> 70
Schedule 2.4
AUTHORITY
The Fifth Third Bank has a blanket lien on all of the assets of the
Company pursuant to a Security Agreement dated June 30, 1999 and Third Party
Collateral Agreement dated August 16, 1999.
<PAGE> 71
Schedule 2.5
COMPANY FINANCIAL STATEMENTS
Attached hereto are the Company's unaudited financial statements for the
fiscal years ending December 31, 1997 and 1998 and the Company's unaudited
financial statements for the eight months ended August 31, 1999.
<PAGE> 72
Schedule 2.6
NO UNDISCLOSED LIABILITIES
1. Unlimited Payment Guaranty dated August 16, 1999 between the Company
and The Fifth Third Bank.
2. The Company granted The Fifth Third Bank a security interest in all
of the Company's assets pursuant to a Security Agreement dated June 30, 1999.
3. Third Party Collateral Agreement between the Company and The Fifth
Third Bank dated August 16, 1999.
4. Revolving Promissory Notes from the Company to Pat O'Brien (up to a
maximum of $87,625) and Brad Baker (up to a maximum of $87,325), of which
approximately $75,000, in the aggregate, is outstanding as of October 15, 1999.
5. The Company has a bonus program based upon goals and objectives as
outlined in the employment letters disclosed in Schedule 2.12.
6. The Company did not meet its performance criteria in its Making
College Count Program with PriceWaterhouseCoopers ("PWC") under the Agreement
for the Participation of PriceWaterhouseCoopers LLP in the Making College Count
Program 1998-1999 Keynote Address Series dated November 13, 1998+. Pursuant to a
letter dated October 14, 1999 (attached hereto), PWC agreed to accept, in full
settlement thereof, 20 single sponsored one hour speaking events.
7. The Company did not meet its performance criteria under the
In-School Presentation Program Agreement with Bose Corporation dated December 7,
1998. Pursuant to an e-mail (attached hereto), Bose agreed to accept, in
settlement thereof, $10,000 worth of banner advertising on the Making College
Count website.
8. The Company agreed to purchase $75,000 worth of audio equipment from
Bose. The Company has only purchased approximately $25,000 worth of audio
equipment and may be obligated to purchase an additional approximately $50,000
worth of audio equipment.
9. As part of J.R. Cifani's employment arrangement, the Company agreed
to pay for up to one year, not to exceed $12,000, housing allowance and a
monthly car allowance of $350/month.
10. The Company owes SAIC, a computer software developer, approximately
$15,000 for services rendered.
11. In the ordinary course of the Company's business, the Company has
incurred miscellaneous/relocation expenses of approximately $15,000, $7,500 of
which is disclosed in the Company's financial statements.
<PAGE> 73
12. See Schedule 2.7.
13. See Schedule 2.12.
14. See Schedule 2.26(b)
<PAGE> 74
Schedule 2.7
NO CHANGES
1. See response to Schedule 2.6.
2. The Company owes a computer software developer approximately
$15,000 for serviced rendered.
3. The Company paid a consultant $5,000 per month for two months
(September and October) to provide recruiting and marketing services for the
Company.
4. The Company entered into the following contracts:
a. Making College Count Program Agreement dated
September 27, 1999 between the Company and Van Melle,
Inc.
b. Making High School Count Program Agreement dated
September 27, 1999 between the Company and Van Melle,
Inc.
c. The Company has verbal agreements with P&G for Making
High School Count test markets for the following
brands: Cover Girl, Head & Shoulders and Old Spice.
The Company will receive $27,000 per brand.
d. See Schedule 2.12.
5. The Company intends to make a tax distribution to its Shareholders
to cover the tax liability associated with the profits of the Company for the
fiscal period through the Effective Date.
6. The Company pays signing bonuses of between $500 and $1,000 to new
hires, all in the ordinary course of its business.
7. The Company agreed to pay for an apartment in Cincinnati, Ohio for
J.R. Cifani for up to one year (not to exceed $12,000).
8. The Company sold two pieces of Bose audio equipment for
approximately $1,000 each.
<PAGE> 75
Schedule 2.10(a)
REAL PROPERTY LEASES
Lease dated June 21, 1999 between Redna Place Properties and the
Company relating to the lease of office space at 607-600 Redna Terrace,
Cincinnati, Ohio 45215. The Lease has a three (3) year term with a one year
renewal period. Rent during the initial three year term is $25,800 per year. The
leased premises consists of 3,900 square feet (including finished and warehouse
space).
<PAGE> 76
Schedulc 2.10(b)
TITLE TO PROPERTIES
The Fifth Third Bank has a blanket lien on the assets of the Company
(see responses to Schedule 2.6).
<PAGE> 77
Schedule 2.10(c)
EQUIPMENT
See attached listing of equipment.
<PAGE> 78
Schedule 2.11(a)
COMPANY REGISTERED INTELLECTUAL PROPERTY
1. See attached letter from Tori Lynne Kluess dated June 30, 1999
summarizing the Company's intellectual property rights.
2. www.makingcollegecount.com
3. www makinghighschoolcount.com
<PAGE> 79
Schedule 2.11(b)
INTELLECTUAL PROPERTY LIENS
The Company receives royalty payments from Southwestern Publishing from
the sales of the book titled "Start Now, Succeed Later." Southwestern Publishing
owns the rights to this book.
<PAGE> 80
Schedule 2.11(f)
INTELLECTUAL PROPERTY AGREEMENTS
1. See response to Schedule 2.11(b).
2. Agreement between the Company and Lycos regarding the utilization of
the Company's content on Lycos' web site and revenue sharing arrangement related
thereto (see response to Schedule 2.12). The co-branded site is still under
development.
<PAGE> 81
Schedule 2.11(g)
INTELLECTUAL PROPERTY - INDEMNIFICATION OBLIGATIONS
None.
<PAGE> 82
Schedule 2.11(l)
RECIPIENT CONFIDENTIALITY AGREEMENT
The Company does not maintain confidentiality agreements with its
employees, consultants and contractors except for independent contractor
agreements signed by most persons engaged by the Company to provide lecturing
services (a listing of all such person is set forth in Schedule 2.12).
<PAGE> 83
Schedule 2.11(o)
YEAR 2000 COMPLIANCE PROGRAM
None.
<PAGE> 84
Schedule 2.12
AGREEMENTS, CONTRACTS AND COMMITMENTS
1. See Schedule 2.6.
2. See Schedule 2.7.
3. See Schedule 2.10(a).
4. See Schedule 2.11(a).
5. See Schedule 2.11(b).
6. See Schedule 2.11(f).
7. See Schedule 2.11(g).
8. See Schedule 2.18.
9. See Schedule 2.26.
10. Bill of Sale between Graphic Management Corporation and the Company
dated January 4, 1999 (evidencing transfer of all rights in Graphic
Management Corporation's assets relating to Making College Count and
Making High School Count to the Company.)
11. Assignment and Assumption Agreement dated January 4, 1999 between
Graphic Management Corp. and the Company (evidencing assignment of all
of Graphic Management's rights in the contracts relating to Making
College Count and Making High School Count).
12. Independent Contractor Agreement between Graphic Management (dba Making
College Count) and Annalisa Divito dated March 2, 1998.
13. In-School Presentation Program Agreement between Graphic Management and
Bose Corporation dated December 7, 1998.
14. Agreement for Services between Graphic Management and Apple Computer
dated September 1, 1998.
15. Making College Count Program Agreement between Graphic Management and
KeyBank USA dated September 30, 1998.
16. Making College Count Program Agreement between Graphic Management and
Student Advantage dated October 28, 1998.
17. Agreement for Participation between Graphic Management and
PriceWaterhouseCoopers
<PAGE> 85
LLP dated November 1998.
18. Postage Meter License Agreement.
19. Security Agreement dated June 30, 1999 between the Company and The
Fifth Third Bank.
20. Unlimited Payment Guaranty dated August 16, 1999 in favor of The Fifth
Third Bank.
21. Third Party Collateral Agreement dated August 16, 1999 between the
Company and The Fifth Third Bank.
22. Revolving Promissory Note from the Company to Brad Baker up to a
maximum of $87,325.
23. Revolving Promissory Note from the Company to Pat O'Brien up to a
maximum of $87,625.
24. Independent Contractor Agreement dated March 18, 1998 between Graphic
Management Corp. and Kathleen Hassan.
25. Independent Contractor Agreement dated March 4, 1998 between Graphic
Management Corp. and Samuel Hernandez.
26. Independent Contractor Agreement dated February 22, 1998 between
Graphic Management Corp. and Stephanie Maislen.
27. Independent Contractor Agreement dated March 3, 1998 between Graphic
Management Corp. and Craig Ellis.
28. Independent Contractor Agreement between Graphic Management Corp. and
Billy Bradford.
29. Independent Contractor Agreement dated March 8, 1998 between Graphic
Management Corp. and Carla Reese.
30. Independent Contractor Agreement between Graphic Management Corp. and
J.R. Cifani.
31. Independent Contractor Agreement dated March 7, 1998 between Graphic
Management Corp. and Joseph A. Schlidt.
32. Independent Contractor Agreement dated February 20, 1998 between
Graphic Management Corp. and Steven Green.
-2-
<PAGE> 86
33. Independent Contractor Agreement dated March 22, 1998 between
Graphic Management Corp. and Cathy Murata.
34. Independent Contractor Agreement dated February 23, 1998 between
Graphic Management Corp. and Robin Brun.
35. Independent Contractor Agreement dated February 24, 1998 between
Graphic Management Corp. and Tricia Rasmussen.
36. Independent Contractor Agreement dated January 16, 1999 between Graphic
Management Corp. and Rodney Franks.
37. Independent Contractor Agreement dated January 24, 1999 between Graphic
Management Corp. and Kevin Bracy.
38. Independent Contractor Agreement dated January 17, 1999 between Graphic
Management Corp. and Dan Morse.
39. Independent Contractor Agreement dated January 17, 1999 between Graphic
Management Corp. and Wendy Palmer.
40. Independent Contractor Agreement dated January 17, 1999 between
Graphic Management Corp. and Chelsea Latimer.
41. Independent Contractor Agreement dated January 17, 1999 between Graphic
Management Corp. and Wendell McCain.
42. Independent Contractor Agreement dated January 18, 1999 between Graphic
Management Corp. and Matthew G. Bailey.
43. Independent Contractor Agreement dated January 17, 1999 between Graphic
Management Corp. and Omar Habayeb.
44. Independent Contractor Agreement dated January 17, 1999 between Graphic
Management Corp. and Marla Kiley.
45. Independent Contractor Agreement dated January 6, 1999 between Graphic
Management Corp. and Rehema Stephens.
46. Independent Contractor Agreement dated January 5, 1999 between Graphic
Management Corp. and Michelle Zurawski.
47. Independent Contractor Agreement dated January 5, 1999 between Graphic
Management Corp. and Anne Obarski.
-3-
<PAGE> 87
48. Independent Contractor Agreement dated January 18, 1999 between Graphic
Management Corp. and Jake Welahemer.
49. The Company has engaged Craig Ellis as an independent contractor
commencing September 15, 1999. The Company paid Mr. Ellis a
commission/bonus of $1,730 for the period ending October 10, 1999. Mr.
Ellis's future engagements by the Company will be limited to speaking
only.
50. Agreement between the Company and Lycos, Inc. dated April 19, 1999.
51. Employment arrangement with J.R. Cifani.
52. Making College Count Program Agreement dated October 14, 1999 between
the Company and Student Advantage, Inc.
53. Employment letter for Charles Knippen.
54. Consignment Wholesale Agreement between Graphic Management Corp. and
Partners Book Distributing.
55. Agreement between Ingram Book Company and Graphic Management Corp.
56. Distribution Agreement between Graphic Management Corp. and Unique
Books Inc. dated January 8, 1998.
57. Agreement between Graphic Management Corp. and Patrick S. O'Brien
(assigned to Student Success, Inc.) dated October 13, 1998.
58. Sampling and Distribution Agreement dated January 27, 1999 between
Sampling Corporation of America and Making College Count.
59. Making High School Count Joint Marketing Agreement dated September 13,
1999 between the Company and Kaplan.
60. The Company is in the process of finalizing the following oral
agreements regarding Making High School Count:
a. Key Bank
b. Chevrolet
c. Old Spice
d. Head & Shoulders
e. Cover Girl
61. The Company in the process of finalizing the following oral agreement
regarding Making College Count:
-4-
<PAGE> 88
a. Key Bank
b. PriceWaterhouseCoopers
c. Folgers
d. Vicks
e. Head & Shoulders
62. The Company has employment arrangements with the following individuals
(as evidenced by the attached employment letters):
a. Tracy Dodd
b. Kevin Bracy
c. Melissa Crohns
d. Marie-Paule Totten
e. Thomas Kane
f. Judy Ross
g. Karen Bondi Bieber
h. Heath Smith
i. Julio Sanchez
j. Francis McFadden
k. Marcy Bok
1. Anne Eggers
m. Lisa Gray
n. Thomas Ethans
63. Making College Count Sign-Up Bonus.
64. See Schedule 2.13.
65. Making High School Count Program Agreement dated October 11, 1999
between the Company and Multitude, Inc.
66. South-Western College Publishing Agreement dated October 12, 1998
between Graphic Management Corp and South-Western Publishing.
67. Letter from Graphic Management Corp. to South-Western College
Publishing dated September 14, 1999 regarding the assignment of all
royalties to the Company.
-5-
<PAGE> 89
Schedule 2.13
INTERESTED PARTY TRANSACTIONS
1. Brad Baker is engaged by the Company as a consultant.
2. Revolving Promissory Note from the Company to Brad Baker up to a
maximum of $87,325.
3. Revolving Promissory Note from the Company to Pat O'Brien up to a
maximum of $87,675.
<PAGE> 90
Schedule 2.14
GOVERNMENTAL AUTHORIZATION
None.
<PAGE> 91
Schedule 2.18
INSURANCE
The following Company insurance policies are attached hereto:
1. Commercial Umbrella Liability Policy - The Cincinnati Insurance Company
2. Commercial Insurance Policy - The Cincinnati Insurance Company
3. Humana Employees Health Life and Dependent Life Benefits
<PAGE> 92
Schedule 2.21
BINDING AGREEMENTS: NO DEFAULT
1. The Company failed to meet its performance criteria pursuant to an
agreement with PriceWaterhouseCoopers. Pursuant to a letter dated October 14,
1999, PWC agreed to accept, in full settlement thereof, 20 single sponsored
one-hour speaking events.
2. The Company failed to meet its performance criteria pursuant to an
agreement with Bose. Pursuant to an e-mail, Bose agreed to accept in Settlement
thereof, $10,000 worth of banner advertising on the Company's website.
3. The Company agreed to purchase $75,000 worth of audio equipment from
Bose. As of the date hereof, the Company has purchased approximately $25,000
worth of audio equipment. The Company may be obligated to purchase an additional
approximately $50,000 worth of audio equipment.
<PAGE> 93
Schedule 2.23
THIRD PARTY CONSENTS
4. Security Agreement dated June 30, 1999 between the Company and The
Fifth Third Bank.
5. Third Party Collateral Agreement dated August 16, 1999 between the
Company and The Fifth Third Bank.
6. Unlimited Guaranty dated August 16, 1999 between the Company and The
Fifth Third Bank.
<PAGE> 94
Schedule 2.26(b)
EMPLOYEE PLAN AND EMPLOYEE AGREEMENT
1. The Company's employees are eligible to participate in the Company's
bonus program.
2. The Company has proposed to provide a 401(k) plan for its employees
by January 1, 2000.
3. Area Managers of the Company are eligible to receive bonuses if they
achieve certain Company determined goals.
4. Employees who sign schools to participate in the Company's program
are eligible to receive $25 per week if they achieve certain Company determined
goals.
<PAGE> 95
Schedule 2.27
WARRANTY CLAIMS
1. The Company offers a money back guarantee on the satisfaction of the
book "Start Now, Succeed Later." Only one person has made a claim under this
guaranty.
2. The Company offers a performance guaranty in each of its sponsor
agreements. As previously disclosed, the Company has settled the existing claims
with PriceWaterhouseCoopers and Bose (see Schedule 2.6).
<PAGE> 96
Exhibit F to
Agreement and Plan of Merger
List of Company Stockholders
<TABLE>
<CAPTION>
Name and Address of Shareholder Shares of Common Stock
- ------------------------------- ----------------------
<S> <C>
Bradford J. Baker 499
Patrick S. O'Brien 351
Patrick S. O'Brien Stock Trust 150
</TABLE>
<PAGE> 97
Exhibit G to
Agreement and Plan of Merger
FORM OF OPINION OF COUNSEL
FOR PARENT AND MERGER SUB
__________, 1999
Student Success, Inc.
607 Redna Terrace
Suite 600
Cincinnati, OH 45215-9906
Ladies and Gentlemen:
We have acted as counsel for Cytation.com Incorporated, a New York
corporation ("Parent"), and CollegeLink.com Incorporated, a Delaware corporation
and wholly-owned subsidiary of Parent ("Merger Sub"), in connection with the
negotiation, execution and delivery of the Agreement and Plan of Merger dated as
of October __, 1999 (the "Merger Agreement") among Parent, Merger Sub, Student
Success, Inc., a Wisconsin corporation, Bradford J. Baker, Patrick S. O'Brien
and the Patrick S. O'Brien Stock Trust. Capitalized terms used, but not
otherwise defined, herein shall have the meanings given to them in the Merger
Agreement.
In arriving at the opinions expressed below, we have examined and relied
on:
(a) executed copies of the Merger Agreement, the Employment
Agreements and the Support Agreements (collectively, the
"Transaction Documents");
(b) the Certificate of Incorporation and By-Laws of Parent, each
as amended as of the date hereof;
(c) the Certificate of Incorporation and By-Laws of Merger Sub,
each as amended as of the date hereof;
(d) the resolutions adopted by the board of directors of Parent by
unanimous written consent dated October _, 1999;
(e) the resolutions adopted by the board of directors of Merger
Sub by unanimous written consent dated October __, 1999 and
the resolutions adopted by the sole shareholder of Merger Sub
by unanimous written consent dated _______ __, 1999;
<PAGE> 98
_______ __, 1999
Page 2
(f) a certificate of the Secretary of State of the State of New
York, dated as of _______ __, 1999, as to the good standing of
Parent and other matters;
(g) a certificate of the Secretary of State of the State of
Delaware, dated as of _______ __, 1999, as to the good
standing of Merger Sub and other matters; and
(h) the other documents delivered at the Closing held pursuant to
the Merger Agreement on the date hereof.
[FH&E TO ADD USUAL AND CUSTOMARY QUALIFICATION LANGUAGE]
Based on the foregoing, it is our opinion that:
1. Parent is a corporation validly existing and in good standing under
the laws of the State of New York. Parent has the requisite corporate power to
own, operate and lease its properties and to conduct its business as now being
conducted.
2. The authorized capital stock of Parent consists of (a) 100,000,000
shares of Common Stock, $0.001 par value per share, of Parent ("Parent Common
Stock") and (b) 10,000,000 shares of Preferred Stock, $0.01 par value per share,
of Parent ("Parent Preferred Stock"). To our knowledge, (i) there were 9,846,340
shares of Parent Common Stock issued and outstanding on September 30, 1999 and
(ii) there were 2,169,771 shares of Parent Preferred Stock issued and
outstanding on September 30, 1999.
3. Parent has all requisite corporate power and authority to execute,
deliver and perform its obligations under the Transaction Documents to which it
is a party. The execution, delivery and performance of such Transaction
Documents have been duly and validly authorized by all requisite corporate
action on the part of Parent. Such Transaction Documents have been duly executed
and delivered by Parent, and constitute the legal, valid and binding obligations
of Parent, enforceable against it in accordance with their terms.
4. Merger Sub is a corporation validly existing and in good standing under
the laws of the State of Delaware. Merger Sub has all requisite corporate power
and authority to execute, deliver and perform its obligations under the
Transaction Documents to which it is a party. The execution, delivery and
performance of such Transaction Documents have been duly and validly authorized
by all requisite corporate action on the part of Merger Sub. Such Transaction
Documents have been duly executed and delivered by Merger Sub, and constitute
the legal, valid and binding obligations of Merger Sub, enforceable against it
in accordance with their terms.
<PAGE> 99
_______ __, 1999
Page 3
5. Assuming the due execution and delivery of the Delaware Filing and the
Wisconsin Filing, the execution, delivery and performance by Parent and Merger
Sub of the Transaction Documents to be signed by Parent or Merger Sub and the
consummation by Parent or Merger Sub of the transactions contemplated thereby do
not and will not (a) conflict with or result in a violation of the Certificate
of Incorporation or By-Laws of Parent or the Certificate of Incorporation or
By-Laws of Merger Sub, each as amended to date, or (b) to our knowledge, with or
without the giving of notice or the lapse of time, or both, conflict with, or
result in any violation or breach of, or constitute a default under, or result
in any right to accelerate or result in the creation of any encumbrance pursuant
to, or right of termination under, any provision of any note, mortgage,
indenture, lease, instrument or other agreement, permit, concession, grant,
franchise, license, judgment, order or decree to which Parent or Merger Sub is a
party or by which either of them or any of their respective assets or properties
is bound or which is applicable to either of them or any of their assets or
properties, or (c) require any authorization, consent or approval of, or filing
with or notice to, any Delaware or federal Governmental Entity prior to the
Closing except for the filing of the Delaware Filing with the Secretary of State
of the State of Delaware and the Wisconsin Filing with the Department of
Financial Institutions of the State of Wisconsin.
6. To our knowledge, there is no claim, action, suit, arbitration or
proceeding that is pending or threatened against Parent or Merger Sub before any
Governmental Entity (a) that seeks to restrain, enjoin, prevent the consummation
of or otherwise challenge any of the transactions contemplated by the Merger
Agreement or which questions the validity or legality of any of such
transactions or seeks to recover damages or to obtain other relief in connection
with any of such transactions or (b) which if adversely determined, will result
in any material adverse change in or effect on the financial condition,
business, operations, assets, properties or results of operations of Parent.
7. The shares of Parent Stock to be issued in connection with the Merger
have been duly authorized and, when issued in connection with the Merger as
contemplated by the Merger Agreement, will be validly issued, fully paid and
nonassessable.
8. Based upon the representations and warranties of the Shareholders in
the Merger Agreement, the issuance of Parent Stock in the Merger to the
Shareholders is exempt from the registration requirements of the Securities Act
of 1933, as amended.
9. Upon the filing of the Delaware Filing with the Secretary of State of
the State of Delaware and filing of the Wisconsin Filing with the Department of
Financial Institutions of the State of Wisconsin, the Merger will be duly
consummated in accordance with the laws of the State of Delaware.
<PAGE> 100
_______ __, 1999
Page 4
This opinion is given as of the date hereof and we assume no obligation to
update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention or any changes in laws which may hereafter
occur. This opinion is solely for your benefit and may not be disclosed to, or
quoted or relied upon by, any person or entity without our prior written
consent, except that this opinion may be disclosed to your outside legal counsel
and accountants.
Very truly yours,
FOLEY, HOAG & ELIOT LLP
By:______________________
A Partner
<PAGE> 101
Exhibit H to
Agreement and Plan of Merger
FORM OF OPINION OF COUNSEL FOR COMPANY AND THE SHAREHOLDERS
_______, 1999
Cytation.com Incorporated
CollegeLink.com Incorporated
56 Hammarlund Way
Newport, Rhode Island 02842
Ladies and Gentlemen:
We have acted as counsel for Student Success, Inc., a Wisconsin
corporation (the "Company"), and Bradford J. Baker ("Baker"), Patrick S. O'Brien
("O'Brien") and the Patrick S. O'Brien Stock Trust (collectively, the
"Shareholders") in connection with the negotiation, execution and delivery of
the Agreement and Plan of Merger dated as of October ___, 1999 (the "Merger
Agreement") among Cytation.com Incorporated, CollegeLink.com Incorporated, the
Company and the Shareholders. Capitalized terms used, but not otherwise defined,
herein shall have the meanings given to them in the Merger Agreement.
In arriving at the opinions expressed below, we have examined and
relied on:
A. executed copies of the Merger Agreement, the Employment
Agreements, the Support Agreements and other agreements
contemplated thereby (collectively, the "Transaction
Documents");
B. the Articles of Incorporation and Bylaws of the Company, as
amended as of the date hereof;
C. the resolutions adopted by the board of directors of the
Company by [unanimous written consent] dated October ___, 1999
and the resolutions duly adopted by the shareholders of the
Company at a meeting held on November ___, 1999;
D. a certificate of the Secretary of the State of Wisconsin,
dated as of ___________, 1999 as to the good standing of the
Company and other matters; and
E. the other documents delivered at the Closing held pursuant to
the Merger Agreement on the date hereof.
<PAGE> 102
______________, 1999
Page 2
In such examinations, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity to authentic original documents exhibit H to agreement and plan
of merger of all documents submitted to us as certified, conformed or
photostatic copies. Notwithstanding the foregoing, we have (with your
permission) limited our factual inquiries to conferences with representatives of
the Company and the Shareholders (at which conferences the business, affairs and
properties of the Company, the transactions contemplated by the Merger Agreement
and other related matters were discussed), a review of the resolutions of the
Board of Directors and Shareholders of the Company, the certificates of certain
public officials and of officers of the Parent and certain factual inquiries
that, in fact, were actually made by attorneys in this firm based on the matters
discussed in such resolutions and certificates or at such conferences. Any
opinion herein qualified by the modifier "to the best of our knowledge," or to
matters "known to us," or to any matter of which we "are aware" or coming "to
our attention" or any variation of any of the foregoing, shall mean the actual
knowledge of those attorneys of this firm who have rendered substantive
attention to the transaction to which the opinion relates of the existence or
absence of any facts which would contradict our opinions set forth below. We
have not undertaken, for purposes of this opinion, any independent investigation
to determine the existence or absence of facts and no inference as to our
knowledge of the existence or absence of such facts should be drawn from the
fact of our representation of the Company. Moreover, we have not, for purposes
of our opinions below, searched computerized or electronic databases or the
docket of any court, governmental agency or regulatory body or other filing
office in any jurisdiction.
We have also assumed that all parties to the Transaction Documents other
than the Company and the Shareholders have properly executed and delivered the
Transaction Documents, that such execution and delivery has been properly
authorized as to each of said parties and that such parties have the power fully
to perform their respective obligations under the Transaction Documents.
We express no opinion with respect to the laws of any jurisdiction other
than the laws of the States of Delaware, Ohio and Wisconsin and, the federal
laws of the United States of America. With respect to the Employment Agreements,
we have assumed, with your permission, that the law of the Commonwealth of
Massachusetts which governs such agreements is identical in all respects to the
law of the State of Ohio.
Based solely on the review described above and subject to the assumptions,
limitations and qualifications set forth herein, it is our opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Wisconsin and, except as described
in the Company Disclosure Schedule, is duly qualified and in good standing as a
foreign corporation in each other
<PAGE> 103
______________, 1999
Page 3
jurisdiction in which it owns or leases properties, conducts operations or
maintains a stock of goods, where failure to so qualify would have a material
adverse effect on the Company or its business or property.
2. To the best of our knowledge, the Company does not own, directly or
indirectly, any of the capital stock of any corporation, association, trust or
similar entity.
3. The authorized capital stock of the Company consists of 9,000 shares
of Company Common Stock, of which 1,000 shares are issued and outstanding.
Immediately prior to the delivery of this letter, (a) the outstanding shares of
Company Common Stock were held of record by the persons and in the respective
numbers set forth in Exhibit F to the Merger Agreement and (b) all of the
outstanding shares of Company Common Stock had been validly issued, were fully
paid and nonassessable, and, to the best of our knowledge, were free and clear
of all liens or encumbrances.
4. To the best of our knowledge, (i) there are no other rights,
agreements, or commitments obligating the Company, now or in the future, to
issue or sell any shares of its capital stock or any options, warrants or
convertible securities, (ii) no person holds any phantom stock or other
contractual rights the value of which is determined, in whole or in part, by
reference to the value of the capital stock of the Company or the financial
performance of the Company, (iii) there are no stock appreciation rights granted
by the Company, (iv) there are no shares of preferred stock or bonds,
debentures, notes or other indebtedness of the Company which have the right to
vote on any matters on which the stockholders of the Company have the right to
vote, and (v) there are no outstanding contractual obligations of the Company to
purchase, redeem or otherwise acquire any shares of its capital stock or any
other securities.
5. The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Merger Agreement and each
of the other Transaction Documents to which the Company is a party and to
consummate the transactions contemplated thereby. The execution, delivery and
performance of the Merger Agreement and each of the other Transaction Documents
to which the Company is a party have been duly and validly authorized by all
requisite corporate action on the part of the Company. The Merger Agreement, and
the other Transaction Documents to be signed by the Company at or before the
Effective Time have been duly executed and delivered by the Company, and
constitute the legal, valid and binding obligations of the Company, enforceable
in accordance with their respective terms.
6. Each Shareholder has all requisite power and authority to execute,
deliver and perform his obligations under the Merger Agreement and each of the
Transaction Documents
<PAGE> 104
______________, 1999
Page 4
to which such Shareholder is a party and to consummate the transactions
contemplated thereby. Each of the Merger Agreement and the Transaction Documents
have been duly executed and delivered by each Shareholder who is a party
thereto, and constitutes the legal, valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms.
7. Except as described in the Company Disclosure Schedule, the
execution and delivery by the Company of the Merger Agreement and the other
Transaction Documents to which the Company is a party, and the performance of
the transactions contemplated thereby do not and will not (a) conflict with or
result in a violation of the Articles of Incorporation or Bylaws of the Company,
each as amended to date, (b) to the best of our knowledge, with or without the
giving of notice or the lapse of time, or both, conflict with, or result in any
violation or breach of, or constitute a default under, or result in any right to
accelerate or result in the creation of any lien or encumbrance pursuant to, or
right of termination under, any provision of any judgment, law or regulation, or
any agreement, instrument or understanding to which the Company is a party or by
which it is bound, or (c) require any authorization, consent or approval of, or
filing with or notice to, any Wisconsin, Ohio or other Governmental Entity prior
to the Closing, except for the filing of the Articles of Merger with the
Department of Financial Institutions of the State of Wisconsin and the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware.
8. The execution and delivery by each Shareholder of the Merger
Agreement and each Transaction Document to which such Shareholder is a party,
and the performance of the transactions contemplated thereby do not and will
not, to the best of our knowledge, with or without the giving of notice or the
lapse of time, or both, conflict with, or result in any violation or breach of,
or constitute a default under, or result in any right to accelerate or result in
the creation of any Encumbrance pursuant to, or right of termination under any
provision of any judgment, law or regulation, or any agreement, instrument or
understanding to which such Shareholder is a party or by which it is bound.
9. To the best of our knowledge, there is no claim, action, suit,
arbitration or proceeding that is pending or threatened against the Company
before any Governmental Entity.
10. The Company is not in default or violation of any provision of its
Articles of Incorporation or its Bylaws, each as amended to date. To the best of
our knowledge, the business of the Company is not being conducted in violation
of any applicable law, statute, ordinance, regulation, rule, judgment, decree,
order, permit, concession, grant or other authorization of any Wisconsin, Ohio
or other Governmental Entity. To the best of our knowledge, with or without the
giving of notice or the lapse of time, or both, the Company is not in violation,
breach or default of any provision of any provision of any judgment, law or
<PAGE> 105
______________, 1999
Page 5
regulation, or any agreement, instrument or understanding to which such
Shareholder is a party or by which it is bound.
11. Upon the filing of the Articles of Merger with the Department of
Financial Institutions of the State of Wisconsin and filing of the Certificate
of Merger with the Secretary of State of the State of Delaware, the Merger will
be duly consummated in accordance with the laws of the State of Wisconsin with
the effect provided therein and in the Articles of Merger, and the shares of
Company Common Stock will be converted as provided in Section 1.6 of the Merger
Agreement.
Each of the foregoing opinions is subject to the following
qualifications:
a. The legality, validity and enforceability of any rights and
remedies provided in the Transaction Documents and other documents are subject
to exceptions provided by bankruptcy, insolvency, reorganization, receivership,
moratorium, assignment for the benefit of creditors' laws or similar laws now or
hereafter in effect affecting the validity, legality and binding effect and
enforceability of creditors' rights generally, including, without limitation,
the effect of statutory or other laws regarding fraudulent conveyances or
preferential transfers.
b. Specific performance, injunctive relief or other traditional
equitable remedies may not be available as being subject to the discretion of
the court before which any proceeding therefor may be brought.
c. Rights to indemnity may be limited by federal or state securities
laws.
d. We express no opinion as to the enforceability of any provisions
in the Transaction Documents providing for the recovery of attorneys' fees or
other costs of collection.
e. We express no opinion with respect to any provisions for
submission to jurisdiction and the related waivers of defenses to such
jurisdiction.
f. No opinion is expressed as to the enforceability of (1)
provisions which purport to permit the alteration or termination of the rights
of third parties; (2) provisions which purport to establish evidentiary
standards; (3) provisions which purport to require the payment of attorneys'
fees and other costs of collection; or (4) provisions related to waiver of
remedies (or the delay or omission of enforcement thereof), disclaimers,
liability limitations with respect to third parties, releases or legal or
equitable rights, discharge of defenses, liquidated damages, or the creation of
rights or remedies not available under applicable law.
<PAGE> 106
______________, 1999
Page 6
This opinion is given as of the date hereof and we assume no obligation to
update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention or any changes in laws which may hereafter
occur. This opinion is solely for your benefit and may not be disclosed to, or
quoted or relied upon by, any person or entity without my prior written consent,
except that this opinion may be disclosed to your outside legal counsel and
accountants.
Yours truly,
KEATING, MUETHING & KLEKEMP, P.L.L.
By: ___________________________________
<PAGE> 1
Exhibit 10.18
CYTATION.COM INCORPORATED
SUPPORT AGREEMENT
This Support Agreement (this "Agreement") is entered into as of October
20, 1999, by and between Cytation.com Incorporated, a New York corporation
("Parent"), and Bradford J. Baker ("Seller").
RECITALS
A. Concurrently with the execution and delivery of this Agreement,
Parent, CollegeLink.com Incorporated, a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Sub"), Student Success, Inc., a Wisconsin
corporation ("Company"), Bradford J. Baker, Patrick S. O'Brien and the Patrick
S. O'Brien Stock Trust are entering into an Agreement and Plan of Merger of even
date herewith ("Merger Agreement"), pursuant to which Parent agrees to acquire
all outstanding shares of common stock, without par value, of the Company
("Shares"), pursuant to a statutory merger of Company with and into the Merger
Sub (the "Merger"). Capitalized terms used but not defined herein shall have the
meanings set forth in the Merger Agreement.
B. As of the date hereof, Seller beneficially owns directly 499 Shares
("Owned Shares").
Now, therefore, in consideration of the covenants, promises and
representations herein and in the Merger Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Agreement to Vote.
1.1 Voting. Seller hereby agrees that, during the time this
Agreement is in effect, at any meeting of the shareholders of the Company,
however called, or any action by written consent of the shareholders of the
Company, Seller shall (a) vote the Owned Shares in favor of the Merger; (b) vote
the owned Shares against any action or agreement that would result in a breach
of any covenant, representation, or warranty or any other obligation or
agreement of the Company under the Merger Agreement; and (c) vote the Owned
Shares against any action or agreement (other than the Merger Agreement or the
transactions contemplated thereby) that would impede, interfere with, delay,
postpone or attempt to discourage the Merger, including, but not limited to: (i)
any extraordinary corporation transaction, such as a merger, consolidation or
other business combination involving the Company or any of its subsidiaries;
(ii) a sale or transfer of a material amount of assets of the Company or any of
its subsidiaries or a reorganization, recapitalization or liquidation of the
Company and its subsidiaries; (iii) any
<PAGE> 2
change in the management or Board of Directors of the Company, except as
otherwise agreed to in writing by Parent; (iv) any material change in the
present capitalization or dividend policy of the Company; or (v) any other
material change in the Company's corporate structure or business.
1.2 Grant of Irrevocable Proxy; Appointment of Proxy.
(a) Seller hereby irrevocably grants to, and appoints
Richard A. Fisher and Kevin J. High, or either of them, in their respective
capacities as officers of the Parent, and any individual who shall hereafter
succeed to any such office of Parent, and each of them individually, Seller's
proxy and attorney-in-fact (with full power of substitution), for and in the
name, place and stead of Seller, to vote the Owned Shares in favor of the Merger
and otherwise as contemplated by Section 1.1
(b) Seller represents that any proxies heretofore given in
respect of the Owned Shares are not irrevocable, and that any such proxies are
hereby revoked.
(c) Seller understands and acknowledges that Parent is
entering into the Merger Agreement in reliance, among other things, upon
Seller's execution and delivery of this Agreement. Seller hereby affirms that
the irrevocable proxy set forth in this Section 1.2 is given in connections with
the execution of the Merger Agreement, and that such irrevocable proxy is given
to secure the performance of the duties of the Seller under this Agreement.
Seller hereby further affirms that the irrevocable proxy is coupled with an
interest and may under no circumstances be revoked. Seller hereby ratifies and
confirms all that such proxies and attorneys-in-fact may lawfully do or cause to
be done by virtue hereof. Such irrevocable proxy is executed and intended to be
irrevocable in accordance with the applicable provisions of the Wisconsin
Business Corporation Law.
1.3 No Inconsistent Arrangements. Seller hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
he shall not:
(a) transfer (which term shall include, without
limitation, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Owned Shares or any interest therein; provided,
however, that Seller may transfer (i) the Owned Shares by will or intestacy, and
(ii) up to ten percent (10%) of the Owned Shares as a bona fide gift or gifts,
provided that prior to any such permitted transfer, each transferee shall agree
in writing (in a form satisfactory to the Parent) that such transferee will
receive and hold such Owned Shares subject to the provisions of this Agreement;
(b) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of the Owned Shares or
any interest therein;
(c) grant any proxy, power-of-attorney or other
authorization in or with respect to any or all of the Owned Shares;
-2-
<PAGE> 3
(d) deposit the Owned Shares into a voting trust or enter
into a voting agreement or arrangement with respect to the Owned Shares; or
(e) take any other action that would make any
representation or warranty of Seller hereunder untrue or incorrect.
1.4 Waiver of Appraisal Rights. Seller hereby waives any
rights of appraisal or rights to dissent from the Merger that he may have under
applicable law.
2. Expiration. This Agreement and the proxy granted pursuant to
Section 1 hereof shall terminate on the termination of the Merger Agreement in
accordance with its terms.
3. Representations and Warranties. Seller hereby represents and
warrants to Parent as follows:
3.1 Title. Seller has good and valid title to the Owned
Shares, free and clear of any lien, pledge, charge, encumbrance or claim of
whatever nature and, upon consummation of the Merger, Seller will deliver good
and valid title to the Owned Shares, free and clear of any lien, charge,
encumbrance or claim of whatever nature.
3.2 Ownership of Shares. On the date hereof, the Owned Shares
are owned of record or beneficially by Seller and, on the date hereof, the Owned
Shares constitute all of the Shares owned of record or beneficially by Seller.
Seller has sole voting power and sole power of disposition with respect to all
of the Owned Shares, with no restrictions, subject to applicable federal
securities laws, on Seller's rights of disposition pertaining thereto.
3.3 Power; Binding Agreement. Seller has the legal capacity,
power and authority to enter into and perform all of his obligations under this
Agreement. The execution, delivery and performance of this Agreement by Seller
will not violate any other agreement to which Seller is a party including,
without limitation, any voting agreement, stockholders' agreement or voting
trust. This Agreement has been duly and validly executed and delivered by Seller
and constitutes a valid and binding agreement of Seller, enforceable against
Seller in accordance with its terms.
3.4 No Conflicts. No authorization, consent or approval of, or
filing with, any court or any public body or authority is necessary for the
consummation by Seller of the transactions contemplated by this Agreement. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not:
(a) constitute a material breach, violation or default (or
any event which, with notice or lapse of time or both, would constitute a
default) under any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument to which Seller is a party or by
which his properties or assets are bound; or
-3-
<PAGE> 4
(b) result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under any material note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument to which Seller is a party or by which his
properties or assets are bound; or
(c) result in the creation of any lien, encumbrance,
pledge, charge or claim upon any of the properties or assets of Seller under any
material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument to which Seller is a party or by which his
properties or assets are bound.
4. Additional Shares. Seller hereby agrees, while this Agreement
is in effect, to promptly notify Parent of the number of Shares acquired by the
Seller after the date hereof.
5. Further Assurances. From time to time, at Parent's request and
without further consideration, Seller shall execute and deliver such additional
documents and take all such further action as may be reasonably necessary or
desirable to consummate and make effective the transactions contemplated by
Section 1 of this Agreement.
6. Miscellaneous.
6.1 Non-Survival. The representations and warranties made
herein shall terminate upon Seller's sale of the Owned Shares to Parent in the
Merger, other than Seller's representation and warranty in Section 3.1, which
shall survive the sale of the Owned Shares and the termination of this Agreement
following such sale.
6.2 Entire Agreement; Assignment. This Agreement (a)
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof
and (b) shall not be assigned by operation of law or otherwise, provided that
Parent may assign its rights and obligations hereunder to any direct or indirect
wholly-owned subsidiary of Parent, but no such assignment shall relieve Parent
of its obligations hereunder if such assignee does not perform such obligations.
6.3 Amendments. This Agreement may not be modified, amended,
altered or supplemented, except upon the execution and delivery of a written
agreement executed by the parties hereto.
6.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand delivery
or telecopy or by other courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
-4-
<PAGE> 5
if to Seller:
Bradford J. Baker
c/o Student Success, Inc.
607 Redna Terrace
Suite 600
Cincinnati, OH 45215-9906
with a copy to:
Keating, Muething & Klekamp, P.L.L.
1400 Provident Tower
One East Fourth Street
Cincinnati, OH 45202
Attn: Paul V. Muething, Esq.
if to Parent:
Cytation.com Incorporated
56 Hammarlund Way
Newport, RI 02842
Attn: Richard A. Fisher, Chairman of the Board of Directors
with a copy to:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, MA 02109
Attn: Robert L. Birnbaum, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
6.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
-5-
<PAGE> 6
6.6 Specific Performance. Seller recognizes and acknowledges that a
breach by him of any covenants, promises or agreements contained in this
Agreement will cause the Parent to sustain damages for which it would not have
an adequate remedy at law for money damages, and therefore Seller agrees that in
the event of any such breach Parent shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or in
equity.
6.7 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but both of which shall
constitute one and the same Agreement.
6.8 Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
6.9 Severability. In the event that any part of this Agreement is
declared by any court or other judicial or administrative body to be null, void
or unenforceable, said provision shall survive to the extent it is not so
declared, and all of the other provisions of this Agreement shall remain in full
force and effect.
[The remainder of this page is intentionally left blank.]
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Support
Agreement to be duly executed as an instrument under seal as of the date first
written above.
CYTATION.COM INCORPORATED
By:/s/ Richard A. Fisher
--------------------------------
Name:
Title:
----------------------------------
Bradford J. Baker
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Support
Agreement to be duly executed as an instrument under seal as of the date first
written above.
CYTATION.COM INCORPORATED
By:
-------------------------
Name:
Title:
/s/ Bradford J. Baker
-----------------------------
Bradford J. Baker
<PAGE> 1
Exhibit 10.19
CYTATION.COM INCORPORATED
SUPPORT AGREEMENT
This Support Agreement (this "Agreement") is entered into as of October
20, 1999, by and between Cytation.com Incorporated, a New York corporation
("Parent"), and Patrick S. O'Brien ("Seller").
RECITALS
A. Concurrently with the execution and delivery of this Agreement,
Parent, CollegeLink.com Incorporated, a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Sub"), Student Success, Inc., a Wisconsin
corporation ("Company"), Bradford J. Baker, Patrick S. O'Brien and the Patrick
S. O'Brien Stock Trust are entering into an Agreement and Plan of Merger of even
date herewith ("Merger Agreement"), pursuant to which Parent agrees to acquire
all outstanding shares of common stock, without par value, of the Company
("Shares"), pursuant to a statutory merger of Company with and into the Merger
Sub (the "Merger"). Capitalized terms used but not defined herein shall have the
meanings set forth in the Merger Agreement.
B. As of the date hereof, Seller beneficially owns directly 351 Shares
("Owned Shares").
Now, therefore, in consideration of the covenants, promises and
representations herein and in the Merger Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. AGREEMENT TO VOTE.
1.1 Voting. Seller hereby agrees that, during the time this
Agreement is in effect, at any meeting of the shareholders of the Company,
however called, or any action by written consent of the shareholders of the
Company, Seller shall (a) vote the Owned Shares in favor of the Merger; (b) vote
the owned Shares against any action or agreement that would result in a breach
of any covenant, representation, or warranty or any other obligation or
agreement of the Company under the Merger Agreement; and (c) vote the Owned
Shares against any action or agreement (other than the Merger Agreement or the
transactions contemplated thereby) that would impede, interfere with, delay,
postpone or attempt to discourage the Merger, including, but not limited to: (i)
any extraordinary corporation transaction, such as a merger, consolidation or
other business combination involving the Company or any of its subsidiaries;
(ii) a sale or transfer of a material amount of assets of the Company or any of
its subsidiaries or a reorganization, recapitalization or liquidation of the
Company and its subsidiaries; (iii) any
<PAGE> 2
change in the management or Board of Directors of the Company, except as
otherwise agreed to in writing by Parent; (iv) any material change in the
present capitalization or dividend policy of the Company; or (v) any other
material change in the Company's corporate structure or business.
1.2 Grant of Irrevocable Proxy; Appointment of Proxy.
(a) Seller hereby irrevocably grants to, and appoints Richard A.
Fisher and Kevin J. High, or either of them, in their respective capacities as
officers of the Parent, and any individual who shall hereafter succeed to any
such office of Parent, and each of them individually, Seller's proxy and
attorney-in-fact (with full power of substitution), for and in the name, place
and stead of Seller, to vote the Owned Shares in favor of the Merger and
otherwise as contemplated by Section 1.1
(b) Seller represents that any proxies heretofore given in respect
of the Owned Shares are not irrevocable, and that any such proxies are hereby
revoked.
(c) Seller understands and acknowledges that Parent is entering into
the Merger Agreement in reliance, among other things, upon Seller's execution
and delivery of this Agreement. Seller hereby affirms that the irrevocable proxy
set forth in this Section 1.2 is given in connections with the execution of the
Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of the Seller under this Agreement. Seller hereby
further affirms that the irrevocable proxy is coupled with an interest and may
under no circumstances be revoked. Seller hereby ratifies and confirms all that
such proxies and attorneys-in-fact may lawfully do or cause to be done by virtue
hereof. Such irrevocable proxy is executed and intended to be irrevocable in
accordance with the applicable provisions of the Wisconsin Business Corporation
Law.
1.3 No Inconsistent Arrangements. Seller hereby covenants and agrees
that, except as contemplated by this Agreement and the Merger Agreement, he
shall not:
(a) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of the Owned Shares or any interest therein; provided, however, that Seller
may transfer (i) the Owned Shares by will or intestacy, and (ii) up to ten
percent (10%) of the Owned Shares as a bona fide gift or gifts, provided that
prior to any such permitted transfer, each transferee shall agree in writing (in
a form satisfactory to the Parent) that such transferee will receive and hold
such Owned Shares subject to the provisions of this Agreement;
(b) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of the Owned Shares or
any interest therein;
(c) grant any proxy, power-of-attorney or other authorization in or
with respect to any or all of the Owned Shares;
-2-
<PAGE> 3
(d) deposit the Owned Shares into a voting trust or enter into a
voting agreement or arrangement with respect to the Owned Shares; or
(e) take any other action that would make any representation or
warranty of Seller hereunder untrue or incorrect.
1.4 Waiver of Appraisal Rights. Seller hereby waives any rights of
appraisal or rights to dissent from the Merger that he may have under applicable
law.
2. Expiration. This Agreement and the proxy granted pursuant to Section 1
hereof shall terminate on the termination of the Merger Agreement in accordance
with its terms.
3. Representations and Warranties. Seller hereby represents and warrants to
Parent as follows:
3.1 Title. Seller has good and valid title to the Owned Shares, free
and clear of any lien, pledge, charge, encumbrance or claim of whatever nature
and, upon consummation of the Merger, Seller will deliver good and valid title
to the Owned Shares, free and clear of any lien, charge, encumbrance or claim of
whatever nature.
3.2 Ownership of Shares. On the date hereof, the Owned Shares are owned
of record or beneficially by Seller and, on the date hereof, the Owned Shares
constitute all of the Shares owned of record or beneficially by Seller. Seller
has sole voting power and sole power of disposition with respect to all of the
Owned Shares, with no restrictions, subject to applicable federal securities
laws, on Seller's rights of disposition pertaining thereto.
3.3 Power; Binding Agreement. Seller has the legal capacity, power and
authority to enter into and perform all of his obligations under this Agreement.
The execution, delivery and performance of this Agreement by Seller will not
violate any other agreement to which Seller is a party including, without
limitation, any voting agreement, stockholders' agreement or voting trust. This
Agreement has been duly and validly executed and delivered by Seller and
constitutes a valid and binding agreement of Seller, enforceable against Seller
in accordance with its terms.
3.4 No Conflicts. No authorization, consent or approval of, or filing
with, any court or any public body or authority is necessary for the
consummation by Seller of the transactions contemplated by this Agreement. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not:
(a) constitute a material breach, violation or default (or any event
which, with notice or lapse of time or both, would constitute a default) under
any material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument to which Seller is a party or by which his
properties or assets are bound; or
-3-
<PAGE> 4
(b) result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration under any
material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument to which Seller is a party or by which his
properties or assets are bound; or
(c) result in the creation of any lien, encumbrance, pledge, charge
or claim upon any of the properties or assets of Seller under any material note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument to which Seller is a party or by which his properties or assets are
bound.
4. Additional Shares. Seller hereby agrees, while this Agreement is in
effect, to promptly notify Parent of the number of Shares acquired by the Seller
after the date hereof.
5. Further Assurances. From time to time, at Parent's request and
without further consideration, Seller shall execute and deliver such additional
documents and take all such further action as may be reasonably necessary or
desirable to consummate and make effective the transactions contemplated by
Section 1 of this Agreement.
6. Miscellaneous.
6.1 Non-Survival. The representations and warranties made herein
shall terminate upon Seller's sale of the Owned Shares to Parent in the Merger,
other than Seller's representation and warranty in Section 3.1, which shall
survive the sale of the Owned Shares and the termination of this Agreement
following such sale.
6.2 Entire Agreement; Assignment. This Agreement (a) constitutes
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof
and (b) shall not be assigned by operation of law or otherwise, provided that
Parent may assign its rights and obligations hereunder to any direct or indirect
wholly-owned subsidiary of Parent, but no such assignment shall relieve Parent
of its obligations hereunder if such assignee does not perform such obligations.
6.3 Amendments. This Agreement may not be modified, amended,
altered or supplemented, except upon the execution and delivery of a written
agreement executed by the parties hereto.
6.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand delivery
or telecopy or by other courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
-4-
<PAGE> 5
if to Seller:
Patrick S. O'Brien
c/o Student Success, Inc.
607 Redna Terrace
Suite 600
Cincinnati, OH 45215-9906
with a copy to:
Keating, Muething & Klekamp, P.L.L.
1400 Provident Tower
One East Fourth Street
Cincinnati, OH 45202
Attn: Paul V. Muething, Esq.
if to Parent:
Cytation.com Incorporated
56 Hammarlund Way
Newport, RI 02842
Attn: Richard A. Fisher, Chairman of the Board of Directors
with a copy to:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, MA 02109
Attn: Robert L. Birnbaum, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
6.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
-5-
<PAGE> 6
6.6 Specific Performance. Seller recognizes and acknowledges that a
breach by him of any covenants, promises or agreements contained in this
Agreement will cause the Parent to sustain damages for which it would not have
an adequate remedy at law for money damages, and therefore Seller agrees that in
the event of any such breach Parent shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or in
equity.
6.7 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but both of which shall
constitute one and the same Agreement.
6.8 Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
6.9 Severability. In the event that any part of this Agreement is
declared by any court or other judicial or administrative body to be null, void
or unenforceable, said provision shall survive to the extent it is not so
declared, and all of the other provisions of this Agreement shall remain in full
force and effect.
[The remainder of this page is intentionally left blank.]
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Support
Agreement to be duly executed as an instrument under seal as of the date first
written above.
CYTATION.COM INCORPORATED
By:/s/ Richard A. Fisher
--------------------------------
Name:
Title:
-----------------------------------
Patrick S. O'Brien
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Support
Agreement to be duly executed as an instrument under seal as of the date first
written above.
CYTATION.COM INCORPORATED
By:
----------------------------
Name:
Title:
/s/ Patrick S. O'Brien
-------------------------------
Patrick S. O'Brien
<PAGE> 1
EXHIBIT 10.20
CYTATION.COM INCORPORATED
SUPPORT AGREEMENT
This Support Agreement (this "Agreement") is entered into as of October
20, 1999, by and between Cytation.com Incorporated, a New York corporation
("Parent"), and the Patrick S. O'Brien Stock Trust ("Seller").
RECITALS
A. Concurrently with the execution and delivery of this Agreement,
Parent, CollegeLink.com Incorporated, a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Sub"), Student Success, Inc., a Wisconsin
corporation ("Company"), Bradford J. Baker, Patrick S. O'Brien and the Patrick
S. O'Brien Stock Trust are entering into an Agreement and Plan of Merger of even
date herewith ("Merger Agreement"), pursuant to which Parent agrees to acquire
all outstanding shares of common stock, without par value, of the Company
("Shares"), pursuant to a statutory merger of Company with and into the Merger
Sub (the "Merger"). Capitalized terms used but not defined herein shall have the
meanings set forth in the Merger Agreement.
B. As of the date hereof, Seller beneficially owns directly 150 Shares
("Owned Shares").
Now, therefore, in consideration of the covenants, promises and
representations herein and in the Merger Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. AGREEMENT TO VOTE.
1.1 Voting. Seller hereby agrees that, during the time this
Agreement is in effect, at any meeting of the shareholders of the Company,
however called, or any action by written consent of the shareholders of the
Company, Seller shall (a) vote the Owned Shares in favor of the Merger; (b) vote
the owned Shares against any action or agreement that would result in a breach
of any covenant, representation, or warranty or any other obligation or
agreement of the Company under the Merger Agreement; and (c) vote the Owned
Shares against any action or agreement (other than the Merger Agreement or the
transactions contemplated thereby) that would impede, interfere with, delay,
postpone or attempt to discourage the Merger, including, but not limited to: (i)
any extraordinary corporation transaction, such as a merger, consolidation or
other business combination involving the Company or any of its subsidiaries;
(ii) a sale or transfer of a material amount of assets of the Company or any of
its subsidiaries or a reorganization, recapitalization or liquidation of the
Company and its subsidiaries; (iii) any
<PAGE> 2
change in the management or Board of Directors of the Company, except as
otherwise agreed to in writing by Parent; (iv) any material change in the
present capitalization or dividend policy of the Company; or (v) any other
material change in the Company's corporate structure or business.
1.2 Grant of Irrevocable Proxy; Appointment of Proxy.
(a) Seller hereby irrevocably grants to, and appoints
Richard A. Fisher and Kevin J. High, or either of them, in their respective
capacities as officers of the Parent, and any individual who shall hereafter
succeed to any such office of Parent, and each of them individually, Seller's
proxy and attorney-in-fact (with full power of substitution), for and in the
name, place and stead of Seller, to vote the Owned Shares in favor of the Merger
and otherwise as contemplated by Section 1.1
(b) Seller represents that any proxies heretofore
given in respect of the Owned Shares are not irrevocable, and that any such
proxies are hereby revoked.
(c) Seller understands and acknowledges that Parent
is entering into the Merger Agreement in reliance, among other things, upon
Seller's execution and delivery of this Agreement. Seller hereby affirms that
the irrevocable proxy set forth in this Section 1.2 is given in connections with
the execution of the Merger Agreement, and that such irrevocable proxy is given
to secure the performance of the duties of the Seller under this Agreement.
Seller hereby further affirms that the irrevocable proxy is coupled with an
interest and may under no circumstances be revoked. Seller hereby ratifies and
confirms all that such proxies and attorneys-in-fact may lawfully do or cause to
be done by virtue hereof. Such irrevocable proxy is executed and intended to be
irrevocable in accordance with the applicable provisions of the Wisconsin
Business Corporation Law.
1.3 No Inconsistent Arrangements. Seller hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
he shall not:
(a) transfer (which term shall include, without
limitation, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Owned Shares or any interest therein; provided,
however, that Seller may transfer (i) the Owned Shares by will or intestacy, and
(ii) up to ten percent (10%) of the Owned Shares as a bona fide gift or gifts,
provided that prior to any such permitted transfer, each transferee shall agree
in writing (in a form satisfactory to the Parent) that such transferee will
receive and hold such Owned Shares subject to the provisions of this Agreement;
(b) enter into any contract, option or other
agreement or understanding with respect to any transfer of any or all of the
Owned Shares or any interest therein;
(c) grant any proxy, power-of-attorney or other
authorization in or with respect to any or all of the Owned Shares;
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<PAGE> 3
(d) deposit the Owned Shares into a voting trust or
enter into a voting agreement or arrangement with respect to the Owned Shares;
or
(e) take any other action that would make any
representation or warranty of Seller hereunder untrue or incorrect.
1.4 Waiver of Appraisal Rights. Seller hereby waives any
rights of appraisal or rights to dissent from the Merger that he may have under
applicable law.
2. EXPIRATION. This Agreement and the proxy granted pursuant to Section
1 hereof shall terminate on the termination of the Merger Agreement in
accordance with its terms.
3. REPRESENTATIONS AND WARRANTIES. Seller hereby represents and
warrants to Parent as follows:
3.1 Title. Seller has good and valid title to the Owned
Shares, free and clear of any lien, pledge, charge, encumbrance or claim of
whatever nature and, upon consummation of the Merger, Seller will deliver good
and valid title to the Owned Shares, free and clear of any lien, charge,
encumbrance or claim of whatever nature.
3.2 Ownership of Shares. On the date hereof, the Owned Shares
are owned of record or beneficially by Seller and, on the date hereof, the Owned
Shares constitute all of the Shares owned of record or beneficially by Seller.
Seller has sole voting power and sole power of disposition with respect to all
of the Owned Shares, with no restrictions, subject to applicable federal
securities laws, on Seller's rights of disposition pertaining thereto.
3.3 Power; Binding Agreement. Seller has the legal capacity,
power and authority to enter into and perform all of his obligations under this
Agreement. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
trust action on the part of the Seller. The execution, delivery and performance
of this Agreement by Seller will not violate any other agreement to which Seller
is a party including, without limitation, any voting agreement, stockholders'
agreement or voting trust. This Agreement has been duly and validly executed and
delivered by Seller and constitutes a valid and binding agreement of Seller,
enforceable against Seller in accordance with its terms.
3.4 No Conflicts. No authorization, consent or approval of, or
filing with, any court or any public body or authority is necessary for the
consummation by Seller of the transactions contemplated by this Agreement. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not:
(a) constitute a material breach, violation or
default (or any event which, with notice or lapse of time or both, would
constitute a default) under any material note,
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<PAGE> 4
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument to which Seller is a party or by which his properties or assets are
bound; or
(b) result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under any material note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument to which Seller is a party or by which his
properties or assets are bound; or
(c) result in the creation of any lien, encumbrance,
pledge, charge or claim upon any of the properties or assets of Seller under any
material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument to which Seller is a party or by which his
properties or assets are bound.
4. ADDITIONAL SHARES. Seller hereby agrees, while this Agreement is in
effect, to promptly notify Parent of the number of Shares acquired by the Seller
after the date hereof.
5. FURTHER ASSURANCES. From time to time, at Parent's request and
without further consideration, Seller shall execute and deliver such additional
documents and take all such further action as may be reasonably necessary or
desirable to consummate and make effective the transactions contemplated by
Section 1 of this Agreement.
6. MISCELLANEOUS.
6.1 Non-Survival. The representations and warranties made
herein shall terminate upon Seller's sale of the Owned Shares to Parent in the
Merger, other than Seller's representation and warranty in Section 3.1, which
shall survive the sale of the Owned Shares and the termination of this Agreement
following such sale.
6.2 Entire Agreement; Assignment. This Agreement (a)
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof
and (b) shall not be assigned by operation of law or otherwise, provided that
Parent may assign its rights and obligations hereunder to any direct or indirect
wholly-owned subsidiary of Parent, but no such assignment shall relieve Parent
of its obligations hereunder if such assignee does not perform such obligations.
6.3 Amendments. This Agreement may not be modified, amended,
altered or supplemented, except upon the execution and delivery of a written
agreement executed by the parties hereto.
6.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand delivery
or telecopy or by other courier service, such as Federal Express, providing
proof of delivery. All
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<PAGE> 5
communications hereunder shall be delivered to the respective parties at the
following addresses:
if to Seller:
The Patrick S. O'Brien Trust
c/o Student Success, Inc.
607 Redna Terrace
Suite 600
Cincinnati, OH 45215-9906
with a copy to:
Keating, Muething & Klekamp, P.L.L.
1400 Provident Tower
One East Fourth Street
Cincinnati, OH 45202
Attn: Paul V. Muething, Esq.
if to Parent:
Cytation.com Incorporated
56 Hammarlund Way
Newport, RI 02842
Attn: Richard A. Fisher, Chairman of the Board of Directors
with a copy to:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, MA 02109
Attn: Robert L. Birnbaum, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
6.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
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6.6 Specific Performance. Seller recognizes and acknowledges
that a breach by him of any covenants, promises or agreements contained in this
Agreement will cause the Parent to sustain damages for which it would not have
an adequate remedy at law for money damages, and therefore Seller agrees that in
the event of any such breach Parent shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or in
equity.
6.7 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but both of which
shall constitute one and the same Agreement.
6.8 Descriptive Headings. The descriptive headings used herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
6.9 Severability. In the event that any part of this Agreement
is declared by any court or other judicial or administrative body to be null,
void or unenforceable, said provision shall survive to the extent it is not so
declared, and all of the other provisions of this Agreement shall remain in full
force and effect.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Support
Agreement to be duly executed as an instrument under seal as of the date first
written above.
CYTATION.COM INCORPORATED
By: /s/ Richard A. Fisher
---------------------------------
Name:
Title:
PATRICK S. O'BRIEN STOCK TRUST
/s/ William J. Keating, Jr.
-------------------------------------
William J. Keating, Jr.
Trustee
<PAGE> 1
Exhibit 10.21
COLLEGELINK.COM INCORPORATED
NONCOMPETITION AND EMPLOYMENT AGREEMENT
This Noncompetition and Employment Agreement (this "Agreement") is
entered into as of October 20, 1999, among CollegeLink.com Incorporated, a
Delaware corporation (the "Company"), Cytation.com Incorporated, a New York
corporation and owner of all the issued and outstanding stock of the Company
("Cytation"), and Bradford J. Baker ("Executive").
A. Executive is an officer, director and shareholder of Student
Success, Inc., a Wisconsin corporation ("SSI"), and SSI, Cytation and the
Company have agreed to merge SSI with and into the Company (the "Merger")
pursuant to an Agreement and Plan of Merger dated as of October 20, 1999 (the
"Merger Agreement").
B. It is a condition precedent to the closing of the Merger that
Executive continue as an employee of the Company after the date of the closing
of the Merger (the "Closing Date").
C. This Agreement will become effective, and the term of this Agreement
will commence, on the Closing Date.
The Company and Executive hereby agrees as follows:
1. EMPLOYMENT. The Company is employing Executive, and Executive
accepts employment upon the terms and conditions set forth in this Agreement.
(As used throughout this Agreement, "Company" shall mean and include any and all
of its present and future subsidiaries and any and all subsidiaries of a
subsidiary). Executive warrants that he is free to enter into and perform this
Agreement and is not subject to any employment, confidentiality, non-competition
or other agreement which would restrict his performance under this Agreement.
2. DUTIES. During the term of this Agreement, Executive's services
shall be exclusive to the Company, and he shall devote his entire business time,
attention and energies to the business of the Company and the duties to which
the President of the Company shall assign him from time to time, including the
transition of the operations and employees of SSI to the Company. Executive
agrees to perform his services faithfully and to the best of his ability and to
carry out the policies and directives of the Company. Notwithstanding the
foregoing, the Executive may participate in community boards and committees and
in activities generally considered to be in the public interest, so long as such
participation and activities do not materially interfere with his duties
hereunder.
<PAGE> 2
3. TITLE. During his employment hereunder, the Executive shall have the
position of Vice President - Sales, or such other executive position as the
President of the Company may determine.
4. TERM. The term of this Agreement shall commence on the Closing Date
and shall extend until the first anniversary thereof, unless terminated sooner
in accordance with Section 6 of this Agreement.
5. COMPENSATION & BENEFITS.
(a) SALARY. For all Executive's services and covenants under
this Agreement, the Company shall pay Executive an initial annual salary of
$125,000 payable in accordance with the Company's payroll policy in effect from
time to time.
(b) STOCK OPTIONS. The Company's parent, Cytation, will grant
Executive incentive stock options to purchase a total of 200,000 shares of
Cytation's common stock at a price equal to the price to the public of the
shares of Cytation common stock in the public offering thereof pursuant to the
pending registration statement of Cytation on Form S-1 (SEC File No. 333-85079),
such options to be substantially in the form of Exhibit A attached hereto.
(c) BENEFITS. Executive shall be entitled to all medical
insurance, vacation, sick leave, holidays and other fringe benefits in
accordance with Company policies made available from time to time to other
executives of the Company.
(d) MOVING EXPENSES. In the event that the Company requires
Executive to relocate, the Company shall reimburse Executive for all reasonable
and customary expenses incurred by Executive in connection with any such
relocation.
6. TERMINATION OF EMPLOYMENT. Notwithstanding any other provision of
this Agreement, the Executive's employment may be terminated:
(a) FOR CAUSE. By the Company for cause (as hereinafter
defined). For purposes of this Agreement cause shall mean: (i) failure or
refusal by the Executive (other than by reason of any disability, illness or
other incapacity) to perform his assigned duties for the Company, which failure
or breach continues for more than 10 days after written notice thereof is given
to the Executive; (ii) commission by the Executive of an act of dishonesty or
moral turpitude; or (iii) commission by the Executive of an act of fraud upon
the Company or an act materially evidencing bad faith toward the Company. In the
event of termination for cause, the Company will pay to the Executive accrued
but unpaid annual salary through the date of termination.
(b) FOR DISABILITY. By the Company, upon 20 days' notice to
the Executive if he should be prevented by illness, accident or other disability
from discharging any of his
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material duties hereunder for thirty (30) consecutive days or one or more
periods totaling thirty (30) days, provided that compliance with this paragraph
shall be subject to the "Americans with Disabilities Act" and the "Family and
Medical Leave Act", or such other laws as may be applicable to this Agreement.
In the event of such termination of Executive's employment, the Company's
obligation to pay further compensation hereunder shall cease forthwith, except
that the Executive shall be entitled to receive his accrued but unpaid annual
salary for the period up to the last day of the month in which such termination
of employment occurred.
(c) WITHOUT CAUSE. By the Company, without cause, provided,
however, that if the Executive's employment is terminated pursuant to this
Section, the Executive shall continue to receive his annual salary as provided
in Section 5(a) until the first anniversary of the date of termination and
continued coverage in all group health and medical plans.
(d) BY RESIGNATION. By the Executive upon providing thirty
(30) days written notice to the Company, provided, however, that, in the event
of termination by resignation, the Company will pay to Executive accrued but
unpaid annual salary through the date of termination.
(e) FOR GOOD REASON. By the Executive for "Good Reason", which
shall consist solely of the following: (i) failure of the Company to continue
the Executive during the term of this Agreement with executive duties and
responsibilities with respect to its business; or (ii) a material breach by the
Company of any provision of this Agreement which continues for more than 10 days
following written notice by the Executive to the Company specifying such breach.
In the event of termination under this Section, the Executive shall have no
further obligations to the Company except his obligations under Sections 7, 8, 9
and 10, and the Executive shall be entitled to the severance benefit set forth
in Section 6(c) above.
(f) BY DEATH. In the event of the Executive's death during the
term of his employment, the Company's obligation to pay further compensation
hereunder shall cease forthwith, except that the Executive's legal
representative shall be entitled to receive his annual salary for the period up
to the last day of the month in which such death shall have occurred.
(g) BY MUTUAL AGREEMENT. By the mutual, written agreement of
the Company and the Executive.
(h) RELEASE. The Company's obligation to make the severance
payments specified in Sections 6(c) or 6(e) are subject to the condition
precedent that the Executive execute and deliver to the Company a general
release, reasonably satisfactory in form to the Company's legal counsel, of all
claims that he may have against the Company or its officers, directory, agents,
employees, attorneys, accountants, or stockholders arising out of, or relating
to, this Agreement or his employment with the Company.
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<PAGE> 4
7. ALL BUSINESS TO BE PROPERTY OF THE COMPANY; ASSIGNMENT OF
INTELLECTUAL PROPERTY.
(a) COMPANY PROPERTY. Executive agrees that any and all
presently existing business of the Company and all business developed by him or
any other executive of the Company, including, without limitation, all
contracts, fees, commissions, compensation, records, customer or client lists,
agreements and any other incident of any business developed, earned or carried
on by Executive for the Company is and shall be the exclusive property of the
Company, and (where applicable) shall be payable directly to the Company.
(b) ASSIGNMENT OF RIGHTS. Executive hereby grants to the
Company (without any separate remuneration or compensation other than that
received by him from time to time in the course of his employment) his entire
right, title and interest throughout the world in and to, all research,
information, procedures, developments, inventions and improvements whether
patentable or non-patentable, patents and applications therefor, trademarks and
applications therefor, copyrights and applications therefor, programs, trade
secrets, plans, methods, and all other data and know-how (herein sometimes
"Intellectual Property") made, conceived, developed and/or acquired by him
solely or jointly with others during the period of his employment with SSI or
the Company, whether or not made, conceived, developed or acquired during
regular business hours or on the premises of, or using properties of, SSI or the
Company or in the regular scope of Executive's employment by SSI or the Company.
Set forth on Schedule A attached to this Agreement are descriptions of
inventions and copyrightable materials that the Executive has developed and
reduced to practice prior to commencement of his employment with SSI and that
are, accordingly, exempted from the provisions of this Section 7(b).
8. CONFIDENTIALITY. Except as necessary in performance of services for
the Company, Executive shall not, either during the period of his employment
with the Company or thereafter, use for his own benefit or disclose to or use
for the benefit of any person outside the Company, any information concerning
any Intellectual Property, or other confidential or proprietary information of
the Company, including, without limitation, any of the materials listed in
Section 7(a) or 7(b), whether Executive has such information in his memory or
embodied in writing or other tangible form. All originals and copies of any of
the foregoing, however and whenever produced, shall be the sole property of the
Company, not to be removed from the premises or custody of the Company without
first obtaining authorization of the Company, which authorization may be revoked
by the Company at any time. Upon the termination of Executive's employment in
any manner or for any reason, Executive shall promptly surrender to the Company
all copies of any of the foregoing, together with any documents, materials,
data, information and equipment belonging to or relating to the Company's
business and in his possession, custody or control, and Executive shall not
thereafter retain or deliver to any other person any of the foregoing or any
summary or memorandum thereof.
9. NON-COMPETITION COVENANT. The Executive recognizes that the Company
provides its services and products throughout the world and would be
substantially injured by
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<PAGE> 5
Executive competing with the Company as described below in any part of the world
and, therefore, Executive agrees and warrants that he will not, unless acting
with the Company's express prior written consent, directly or indirectly, while
an Executive of the Company and for a period of two (2) years following
termination of such employment, engage, anywhere in the world and in any
capacity, in any business or activity that competes with, or involves
preparation to compete with, that of the Company as it is at the time of
termination.
Executive and the Company are of the belief that the period of time and
the area herein specified are reasonable in view of the nature of the business
in which the Company is engaged and proposes to engage, the state of its
business development and Executive's knowledge of this business. However, if
such period or such area should be adjudged unreasonable in any judicial
proceeding, then the period of time shall be reduced by such number of months or
such area shall be reduced by elimination of such portion of such area, or both,
as are deemed unreasonable, so that this covenant may be enforced in such area
and during such period of time as is adjudged to be reasonable.
Executive acknowledges that his agreement to this non-competition
obligation is a material inducement to the Company to effect the Merger and that
Executive is to receive substantial value by reason of the Merger.
10. NON-SOLICITATION AGREEMENT. Executive agrees and covenants that he
will not, unless acting with the Company's express written consent, directly or
indirectly, during the term of this Agreement or for a period of two (2) years
thereafter (a) solicit, entice away or interfere with the Company's contractual
relationships with any customer, client, officer or Executive of the Company nor
(b) hire or assist another in the hiring of, or retain as a consultant or assist
another in such retention, any such employee or any person who has been such an
employee within the six (6) month period before such hiring or retention;
provided, however, it shall not be deemed to be a violation of this covenant or
the one contained in Section 9 hereof if, after termination of Executive's
employment with the Company, Executive shall solicit sponsors for, or seek to do
business with, existing customers or sponsors of the Company for or on behalf of
a business which is not in competition with the Company.
11. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given upon the earlier of actual
receive or three days after having been mailed by first class mail, postage
prepaid, or twenty-four hours after having been sent by Federal Express or
similar overnight delivery services, as follows: (a) if to Executive, at Student
Success, Inc., 607 Redna Terrace, Suite 600, Cincinnati, OH 45215-9906, or to
such other person(s) or address(es) as Executive shall have furnished to the
Company in writing; and (b) if to the Company, at 56 Hammarlund Way, Newport, RI
02842, Attention: Richard A. Fisher, Chairman.
12. ASSIGNABILITY. In the event that the Company shall be merged with,
or consolidated into, any other corporation, or in the event that it shall sell
and transfer substantially
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all of its assets to another corporation or entity, the terms of this Agreement
shall inure to the benefit of, and be assumed by, the corporation resulting from
such merger or consolidation, or to which the Company's assets shall be sold and
transferred. This Agreement shall not be assignable by Executive.
13. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the Company and Executive with respect to the subject matter hereof and
supersedes in all respects all prior agreements of any kind concerning the
subject matter hereof.
14. EQUITABLE RELIEF. Executive recognizes and agrees that the
Company's remedy at law for any breach of the provisions of Sections 7, 8, 9 or
10 hereof may be inadequate, and he agrees that for breach of such provisions,
the Company shall, in addition to such other remedies as may be available to it
at law or in equity or as provided in this Agreement, be entitled to injunctive
relief and to enforce its rights by an action for specific performance. Should
Executive engage in any activities prohibited by, and material to, this
Agreement, he agrees to pay over to the Company all compensation, remuneration
or monies or property of any sort received in connection with such activities;
such payment shall not impair the right of the Company to pursue any rights,
remedies, obligations or liabilities of Executive which such parties may have
under this Agreement or applicable law.
15. AMENDMENTS. This Agreement may not be amended, nor shall any
change, waiver, modification, consent or discharge be effected except by written
instrument executed by the Company and Executive.
16. SEVERABILITY. If any part of any term or provision of this
Agreement shall be held or deemed to be invalid, inoperative or unenforceable to
any extent by a court of competent jurisdiction, such circumstances shall in no
way affect any other term or provision of this Agreement, the application of
such term or provisions in any other circumstances, or the validity or
enforceability of this Agreement.
17. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of The Commonwealth of Massachusetts.
18. CONFIDENTIALITY OF THIS AGREEMENT. The Executive shall not, either
during the period of his employment with the Company or at any time thereafter,
disclose to any person within or outside of the Company either the existence of
this Agreement or any of the terms and conditions contained within this
Agreement without first obtaining authorization of the Company, which
authorization may be withheld by the Company at any time and for any reason.
19. PARENT GUARANTY. Cytation hereby guarantees the obligations of the
Company under this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Noncompetition and Employment Agreement as an instrument under
seal as of the date first above written.
COLLEGELINK.COM INCORPORATED
By: /s/ Thomas Burgess
--------------------------------
Name: Thomas Burgess
Title: President
CYTATION.COM INCORPORATED
By: /s/ Richard A. Fisher
--------------------------------
Name:
Title:
/s/ Bradford J. Baker
-----------------------------------
Bradford J. Baker
<PAGE> 8
Exhibit A to
Noncompetition and Employment Agreement
CYTATION.COM INCORPORATED
1999 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
This Agreement is by and between Cytation.com Incorporated (the "Company"),
CollegeLink.com Incorporated ("CollegeLink") and Bradford J. Baker (the
"Optionee").
W I T N E S S E T H:
1. DEFINITIONS. Whenever used herein, the following terms shall have the
meanings provided below:
"ADMINISTRATOR" means the administrator of the Plan appointed pursuant to
Section 3 of the Plan.
"AGREEMENT" means this Stock Option Agreement.
"BOARD" means the Board of Directors of the Company.
"CHANGE IN CONTROL" means (i) a consolidation or merger of the Company with
or into any other corporation, or any other entity or person, other than a
wholly-owned subsidiary of the Company, excluding any transaction in which the
stockholders of the Company immediately prior to the transaction will maintain
voting control or own at least 50% (in each case, in substantially the same
proportion as before such event) of the resulting entity after the transaction;
(ii) any corporate reorganization, excluding an exchange offer, in which the
Company shall not be the continuing or surviving entity resulting from such
reorganization, excluding any transaction in which the stockholders of the
Company immediately prior to the transaction will maintain voting control or own
at least 50% (in each case, in substantially the same proportion as before such
event) of the resulting entity after the transaction; or (iii) the sale of a
substantial portion of the Company's assets, which shall be deemed to occur on
the date that any one person, or more than one person acting as a group,
acquires (or has acquired during the 12 month period ending on the date of the
most recent acquisition by such person or persons) assets from the Company that
have a total fair market value equal to more than 75% of the total fair market
value of all the assets of the Company.
"CLOSING DATE" shall have the meaning given such term in the Employment
Agreement.
"COMMON SHARES" means shares of the Company's common stock, $.001 par
value.
<PAGE> 9
"EMPLOYMENT AGREEMENT" means that certain Non-Competition and
Employment Agreement between CollegeLink and the Optionee dated as of the
Closing date.
"FAIR MARKET VALUE" has the meaning given such term in the Plan.
"GRANT DATE" means the Closing Date.
"PLAN" means the Cytation.com Incorporated 1999 Key Executive Stock
Option Plan.
2. GRANT OF OPTION. Effective as of the Grant Date, the Company
hereby awards to the Optionee, subject to the terms and conditions of the Plan,
and the terms and conditions contained herein, the right and option to purchase
from the company all or any part of an aggregate of 200,000 Common Shares, at a
purchase price equal to $[INSERT PUBLIC OFFERING PRICE (IN ACCORDANCE WITH
EMPLOYMENT AGREEMENT)] per share, such option to be exercised as hereinafter
provided. It is intended that the option evidenced hereby constitute an
incentive stock option within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") to the maximum extent permitted by law. To
the extent that any portion of this option exceeds the limitation of Code
Section 422, or otherwise fails to qualify as an incentive stock option within
the meaning of Code Section 422, such portion shall be considered a
non-qualified stock option.
3. TERMS AND CONDITIONS. In addition to the terms and conditions
contained in the Plan, it is understood and agreed that the option evidenced
hereby is subject to the following additional terms and conditions:
(a) EXPIRATION DATE. The option shall expire on the tenth
anniversary of the Grant Date, unless sooner terminated as provided herein.
(b) PERIOD OF EXERCISE. Subject to the other terms of this
Agreement regarding the exercisability of this option, one-third of this option
shall vest and become exercisable upon the first anniversary of the Grant Date,
and, provided that Optionee remains employed by CollegeLink, the remaining
portion of such option shall vest and become exercisable ratably on a monthly
basis over the two-year period commencing on the first anniversary of the Grant
Date and ending on the third anniversary of the Grant Date.
(c) ACCELERATION OF VESTING UPON CHANGE IN CONTROL.
Notwithstanding the foregoing, this option shall become exercisable in full
immediately prior to a Change in Control, subject to the provisions of
subparagraph (e) hereof.
(d) TERMINATION OF OPTION OR ACCELERATION BY REASON OF
TERMINATION OF EMPLOYMENT.
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<PAGE> 10
(i) If Optionee's employment with CollegeLink is terminated by
CollegeLink during the term of the Employment Agreement or thereafter without
Cause (as defined in the Employment Agreement), this option shall become
immediately exercisable in full and shall terminate if not exercised within one
year of the date of termination, unless sooner terminated by reason of Paragraph
2(a) hereof.
(ii) If Optionee's employment with CollegeLink is terminated by reason
of death or Disability (as defined in the Employment Agreement) during the term
of the Employment Agreement or thereafter, any portion of this option that is
not vested and exercisable on the date of death or Disability by reason of
Paragraph 2(b) hereof shall immediately terminate, and any remaining portion
shall terminate if not exercised within one year of the date of death or
Disability, unless sooner terminated by reason of Paragraph 2(a) hereof.
(iii) If Optionee voluntarily terminates employment with CollegeLink
during the term of the Employment Agreement or thereafter without Good Reason,
any portion of this option that is not vested and exercisable on the date of
termination by reason of Paragraph 2(b) hereof shall immediately terminate, and
any remaining portion shall terminate if not exercised within three months from
the date of termination, unless sooner terminated by reason of Paragraph 2(a)
hereof.
(iv) In the event Optionee's employment is terminated by CollegeLink
for Cause during the term of the Employment Agreement or thereafter, or
subsequent to termination Optionee violates Sections 8, 9, or 10 of the
Employment Agreement as determined by a majority of the Board, any unexercised
portion of this option, whether exercisable pursuant to Paragraph 2(b) hereof or
not exercisable, shall become null and void upon action by the Administrator.
The Administrator's action shall be communicated in writing to the Optionee as
soon as practicable. In addition, the Administrator may, in its sole discretion,
by written notice demand that any or all stock certificates for Common Shares
acquired pursuant to the exercise of this option, or any profit realized from
the sale of such or transfer of such Common Shares, be returned to the Company
within five (5) days of receipt of such notice. Any exercise price paid by the
Optionee shall be returned to Optionee by the Company immediately thereafter,
without interest. The Company shall be entitled to reimbursement of reasonable
attorney fees and expenses incurred in seeking to enforce it rights under this
Paragraph 2(d)(iv).
(c) Change in Control. In the event of a Change in Control, and except
as otherwise provided herein, this option shall become immediately exercisable
for a period of fifteen days or such longer or shorter period as the Board may
prescribe (the "notice period") immediately prior to the scheduled consummation
of such Change in Control, provided however, that the exercisability of an any
exercise of this option during the notice period shall be (i) conditioned upon
the consummation of the Change in Control, and (ii) effective only immediately
before the consummation of such Change in Control.
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<PAGE> 11
Upon consummation of any such Change in Control, the Plan and any
unexercised portion of this option shall terminate. Notwithstanding the
foregoing, to the extent provision is made in writing in connection with such
Change in Control for the continuation of the Plan and the assumption of this
option, or for the substitution for this option of new options covering the
stock of a successor company, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kinds of shares or units and
exercise prices, then the Plan and this option shall continue in the manner and
under the terms contained herein, and the acceleration and termination
provisions set forth in the first two sentences of this subparagraph (e) shall
be of no effect. The Company shall send written notice of a Change of Control
to Optionee not later than the time at which the Company gives notice thereof
to its stockholders.
(f) Exercise of Option. This option shall be exercised by submitting a
written notice to the Administrator signed by the Optionee and specifying the
number of Common Shares as to which the option is being exercised. Such notice
shall be accompanied by the payment of the full option price for the shares
being purchased. Payment shall be made in (i) cash or by check in a form
satisfactory to the Company, (ii) subject to the approval of the Administrator,
already-owned Common Shares (to the extent permitted by law), which shall be
valued for this purpose at the Fair Market Value of the Common Shares on the
day immediately preceding the date of transfer, or (iii) any combination of the
above. A certificate or certificates for the Common Shares purchased shall be
issued by the Company after the exercise of the option and payment therefor,
including provision for any federal and state withholding taxes, and other
applicable taxes.
(g) Non-transferability. This option and all rights hereunder shall be
exercisable during the Optionee's lifetime only by the Optionee and shall be
non-assignable and non-transferable by the Optionee except, in the event of the
Optionee's death, by will or by the laws of descent and distribution. In the
event the death of the Optionee occurs, the representative or representatives
of the Optionee's estate, or the person or persons who acquire (by bequest or
inheritance) the rights to exercise this option in whole or in part, may
exercise this option prior to the expiration of the option as specified in
Paragraphs 3(a) and (d) above.
(h) Modification or cancellation of option. The Administrator shall have
the authority to effect, at any time and from time to time, with the consent of
the Optionee, the modification of the terms of this option agreement (subject
to the limitations contained in the Plan).
(i) No Rights as Stockholder. The Optionee shall have no rights as a
stockholder with respect to any Common Shares subject to this option prior to
the date of issuance to Optionee of a certificate or certificates for such
shares.
(j) Compliance with Law and Regulations. This option and the obligation
of the Company to sell and deliver shares hereunder shall be subject to all
applicable federal and state laws, rules and regulations and to such approvals
by any government or regulatory agency as
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<PAGE> 12
may be required. The Company shall not be required to issue or deliver any
certificates for Common Shares prior to (i) the listing of such Common Shares on
any stock exchange on which the Common Shares may then be listed, and (ii) the
completion of any registration or qualification of such Common Shares under any
federal or state law, or any rule or regulation of any government body which the
Company shall, in its sole discretion, determine to be necessary or advisable.
Moreover, this option may not be exercised if its exercise, or the receipt of
Common Shares pursuant thereto, would be contrary to applicable law.
(k) No Right to Continued Employment. This option shall no confer upon
the Optionee any right with respect to continuance of employment by CollegeLink
or the Company, nor shall it interfere in any way with the right of CollegeLink
or the Company to terminate the Optionee's employment at any time.
(l) Non-Competition. Optionee acknowledges and agrees that the award
of this option is conditioned upon and granted in consideration of Optionee's
agreement to abide by the provisions of Sections 8, 9, and 10 of the Employment
Agreement. In the event that Optionee's employment with CollegeLink continues
after the expiration of the Employment Agreement pursuant to an "at-will"
employment relationship, any portion of this option that is not exercisable by
reason of Paragraph 2(b) hereof shall terminate upon the expiration of the
Employment Agreement, and any remaining portion will terminate if not exercised
within three months of such expiration (unless sooner terminated by reason of
Paragraph 2(a) hereof), unless Optionee enters into and agrees that his
"at-will" employment shall be bound and governed by a non-competition agreement
containing terms substantially similar to those contained in Sections 8, 9 and
10 of the Employment Agreement.
4. DISQUALIFYING DISPOSITION OF COMMON SHARES. This Option shall not
qualify as an inventive stock option within the meaning of Code Section 422 if
the Common Shares acquired pursuant to the exercise of the option are sold or
transferred, other than by will or by the laws of descent and distribution,
within two years of the Grant Date or within one year after the issuance of the
Common Shares to the Optionee pursuant to such exercise.
5. OPTIONEE BOUND BY PLAN. The Optionee hereby agrees to be bound by all of
the terms and provisions of the Plan. In the event of any inconsistency between
this Agreement and the terms of the Plan, the terms of the Plan shall govern.
6. WITHHOLDING TAXES. Optionee acknowledges and agrees that the Company has
the right to deduct from payments of any kind otherwise due to Optionee any
federal, state or local taxes of any kind required to be withheld with respect
to the exercise of this option hereunder.
7. NOTICES. Any notice hereunder to the Company shall be addressed to it at
its principal business office, 56 Hammarlund Way, Newport, RI 02842 and any
notice hereunder to
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<PAGE> 13
the Optionee shall be sent to the address reflected on the records of
CollegeLink, subject to the right of either party to designate at any time
hereafter in writing some other address.
8. Delaware Law to Govern. This Agreement shall be construed and
administered in accordance with and governed by the laws of the State of
Delaware.
IN WITNESS WHEREOF, the Company and CollegeLink have caused this Stock
Option Agreement to be executed by their duly authorized officers and the
Optionee has executed this Agreement this day of , 199 .
CYTATION.COM INCORPORATED
By:______________________________________
Name:
Title:
COLLEGELINK.COM INCORPORATED
By:______________________________________
Name:
Title:
_________________________________________
Bradford J. Baker
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<PAGE> 1
Exhibit 10.22
COLLEGELINK.COM INCORPORATED
NONCOMPETITION AND EMPLOYMENT AGREEMENT
This Noncompetition and Employment Agreement (this "Agreement") is
entered into as of October 20, 1999, among CollegeLink.com Incorporated, a
Delaware corporation (the "Company"), Cytation.com Incorporated, a New York
corporation and owner of all the issued and outstanding stock of the Company
("Cytation"), and Patrick S. O'Brien ("Executive").
A. Executive is an officer, director and shareholder of Student
Success, Inc., a Wisconsin corporation ("SSI"), and SSI, Cytation and the
Company have agreed to merge SSI with and into the Company (the "Merger")
pursuant to an Agreement and Plan of Merger dated as of October 20, 1999 (the
"Merger Agreement").
B. It is a condition precedent to the closing of the Merger that
Executive continue as an employee of the Company after the date of the closing
of the Merger (the "Closing Date").
C. This Agreement will become effective, and the term of this Agreement
will commence, on the Closing Date.
The Company and Executive hereby agrees as follows:
1. EMPLOYMENT. The Company is employing Executive, and Executive
accepts employment upon the terms and conditions set forth in this Agreement.
(As used throughout this Agreement, "Company" shall mean and include any and all
of its present and future subsidiaries and any and all subsidiaries of a
subsidiary). Executive warrants that he is free to enter into and perform this
Agreement and is not subject to any employment, confidentiality, non-competition
or other agreement which would restrict his performance under this Agreement.
2. DUTIES. During the term of this Agreement, Executive's services
shall be exclusive to the Company, and he shall devote his entire business time,
attention and energies to the business of the Company and the duties to which
the President of the Company shall assign him from time to time, including the
transition of the operations and employees of SSI to the Company. Executive
agrees to perform his services faithfully and to the best of his ability and to
carry out the policies and directives of the Company. Notwithstanding the
foregoing, the Executive may participate in community boards and committees and
in activities generally considered to be in the public interest, so long as such
participation and activities do not materially interfere with his duties
hereunder.
<PAGE> 2
3. TITLE. During his employment hereunder, the Executive shall have the
position of Vice President - Marketing, or such other executive position as the
President of the Company may determine.
4. TERM. The term of this Agreement shall commence on the Closing Date
and shall extend until the first anniversary thereof, unless terminated sooner
in accordance with Section 6 of this Agreement.
5. COMPENSATION & BENEFITS.
(a) SALARY. For all Executive's services and covenants under
this Agreement, the Company shall pay Executive an initial annual salary of
$125,000 payable in accordance with the Company's payroll policy in effect from
time to time.
(b) STOCK OPTIONS. The Company's parent, Cytation, will grant
Executive incentive stock options to purchase a total of 200,000 shares of
Cytation's common stock at a price equal to the price to the public of the
shares of Cytation common stock in the public offering thereof pursuant to the
pending registration statement of Cytation on Form S-1 (SEC File No. 333-85079),
such options to be substantially in the form of Exhibit A attached hereto.
(c) BENEFITS. Executive shall be entitled to all medical
insurance, vacation, sick leave, holidays and other fringe benefits in
accordance with Company policies made available from time to time to other
executives of the Company.
(d) MOVING EXPENSES. In the event that the Company requires
Executive to relocate, the Company shall reimburse Executive for all reasonable
and customary expenses incurred by Executive in connection with any such
relocation.
6. TERMINATION OF EMPLOYMENT. Notwithstanding any other provision of
this Agreement, the Executive's employment may be terminated:
(a) FOR CAUSE. By the Company for cause (as hereinafter
defined). For purposes of this Agreement cause shall mean: (i) failure or
refusal by the Executive (other than by reason of any disability, illness or
other incapacity) to perform his assigned duties for the Company, which failure
or breach continues for more than 10 days after written notice thereof is given
to the Executive; (ii) commission by the Executive of an act of dishonesty or
moral turpitude; or (iii) commission by the Executive of an act of fraud upon
the Company or an act materially evidencing bad faith toward the Company. In the
event of termination for cause, the Company will pay to the Executive accrued
but unpaid annual salary through the date of termination.
(b) FOR DISABILITY. By the Company, upon 20 days' notice to
the Executive if he should be prevented by illness, accident or other disability
from discharging any of his
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<PAGE> 3
material duties hereunder for thirty (30) consecutive days or one or more
periods totaling thirty (30) days, provided that compliance with this paragraph
shall be subject to the "Americans with Disabilities Act" and the "Family and
Medical Leave Act", or such other laws as may be applicable to this Agreement.
In the event of such termination of Executive's employment, the Company's
obligation to pay further compensation hereunder shall cease forthwith, except
that the Executive shall be entitled to receive his accrued but unpaid annual
salary for the period up to the last day of the month in which such termination
of employment occurred.
(c) WITHOUT CAUSE. By the Company, without cause, provided,
however, that if the Executive's employment is terminated pursuant to this
Section, the Executive shall continue to receive his annual salary as provided
in Section 5(a) until the first anniversary of the date of termination and
continued coverage in all group health and medical plans.
(d) BY RESIGNATION. By the Executive upon providing thirty
(30) days written notice to the Company, provided, however, that, in the event
of termination by resignation, the Company will pay to Executive accrued but
unpaid annual salary through the date of termination.
(e) FOR GOOD REASON. By the Executive for "Good Reason", which
shall consist solely of the following: (i) failure of the Company to continue
the Executive during the term of this Agreement with executive duties and
responsibilities with respect to its business; or (ii) a material breach by the
Company of any provision of this Agreement which continues for more than 10 days
following written notice by the Executive to the Company specifying such breach.
In the event of termination under this Section, the Executive shall have no
further obligations to the Company except his obligations under Sections 7, 8, 9
and 10, and the Executive shall be entitled to the severance benefit set forth
in Section 6(c) above.
(f) BY DEATH. In the event of the Executive's death during the
term of his employment, the Company's obligation to pay further compensation
hereunder shall cease forthwith, except that the Executive's legal
representative shall be entitled to receive his annual salary for the period up
to the last day of the month in which such death shall have occurred.
(g) BY MUTUAL AGREEMENT. By the mutual, written agreement of
the Company and the Executive.
(h) RELEASE. The Company's obligation to make the severance
payments specified in Sections 6(c) or 6(e) are subject to the condition
precedent that the Executive execute and deliver to the Company a general
release, reasonably satisfactory in form to the Company's legal counsel, of all
claims that he may have against the Company or its officers, directory, agents,
employees, attorneys, accountants, or stockholders arising out of, or relating
to, this Agreement or his employment with the Company.
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<PAGE> 4
7. ALL BUSINESS TO BE PROPERTY OF THE COMPANY; ASSIGNMENT OF
INTELLECTUAL PROPERTY.
(a) COMPANY PROPERTY. Executive agrees that any and all
presently existing business of the Company and all business developed by him or
any other executive of the Company, including, without limitation, all
contracts, fees, commissions, compensation, records, customer or client lists,
agreements and any other incident of any business developed, earned or carried
on by Executive for the Company is and shall be the exclusive property of the
Company, and (where applicable) shall be payable directly to the Company.
(b) ASSIGNMENT OF RIGHTS. Executive hereby grants to the
Company (without any separate remuneration or compensation other than that
received by him from time to time in the course of his employment) his entire
right, title and interest throughout the world in and to, all research,
information, procedures, developments, inventions and improvements whether
patentable or non-patentable, patents and applications therefor, trademarks and
applications therefor, copyrights and applications therefor, programs, trade
secrets, plans, methods, and all other data and know-how (herein sometimes
"Intellectual Property") made, conceived, developed and/or acquired by him
solely or jointly with others during the period of his employment with SSI or
the Company, whether or not made, conceived, developed or acquired during
regular business hours or on the premises of, or using properties of, SSI or the
Company or in the regular scope of Executive's employment by SSI or the Company.
Set forth on Schedule A attached to this Agreement are descriptions of
inventions and copyrightable materials that the Executive has developed and
reduced to practice prior to commencement of his employment with SSI and that
are, accordingly, exempted from the provisions of this Section 7(b).
8. CONFIDENTIALITY. Except as necessary in performance of services for
the Company, Executive shall not, either during the period of his employment
with the Company or thereafter, use for his own benefit or disclose to or use
for the benefit of any person outside the Company, any information concerning
any Intellectual Property, or other confidential or proprietary information of
the Company, including, without limitation, any of the materials listed in
Section 7(a) or 7(b), whether Executive has such information in his memory or
embodied in writing or other tangible form. All originals and copies of any of
the foregoing, however and whenever produced, shall be the sole property of the
Company, not to be removed from the premises or custody of the Company without
first obtaining authorization of the Company, which authorization may be revoked
by the Company at any time. Upon the termination of Executive's employment in
any manner or for any reason, Executive shall promptly surrender to the Company
all copies of any of the foregoing, together with any documents, materials,
data, information and equipment belonging to or relating to the Company's
business and in his possession, custody or control, and Executive shall not
thereafter retain or deliver to any other person any of the foregoing or any
summary or memorandum thereof.
9. NON-COMPETITION COVENANT. The Executive recognizes that the Company
provides its services and products throughout the world and would be
substantially injured by
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<PAGE> 5
Executive competing with the Company as described below in any part of the world
and, therefore, Executive agrees and warrants that he will not, unless acting
with the Company's express prior written consent, directly or indirectly, while
an Executive of the Company and for a period of two (2) years following
termination of such employment, engage, anywhere in the world and in any
capacity, in any business or activity that competes with, or involves
preparation to compete with, that of the Company as it is at the time of
termination.
Executive and the Company are of the belief that the period of time and
the area herein specified are reasonable in view of the nature of the business
in which the Company is engaged and proposes to engage, the state of its
business development and Executive's knowledge of this business. However, if
such period or such area should be adjudged unreasonable in any judicial
proceeding, then the period of time shall be reduced by such number of months or
such area shall be reduced by elimination of such portion of such area, or both,
as are deemed unreasonable, so that this covenant may be enforced in such area
and during such period of time as is adjudged to be reasonable.
Executive acknowledges that his agreement to this non-competition
obligation is a material inducement to the Company to effect the Merger and that
Executive is to receive substantial value by reason of the Merger.
10. NON-SOLICITATION AGREEMENT. Executive agrees and covenants that he
will not, unless acting with the Company's express written consent, directly or
indirectly, during the term of this Agreement or for a period of two (2) years
thereafter (a) solicit, entice away or interfere with the Company's contractual
relationships with any customer, client, officer or Executive of the Company nor
(b) hire or assist another in the hiring of, or retain as a consultant or assist
another in such retention, any such employee or any person who has been such an
employee within the six (6) month period before such hiring or retention;
provided, however, it shall not be deemed to be a violation of this covenant or
the one contained in Section 9 hereof if, after termination of Executive's
employment with the Company, Executive shall solicit sponsors for, or seek to do
business with, existing customers or sponsors of the Company for or on behalf of
a business which is not in competition with the Company.
11. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given upon the earlier of actual
receive or three days after having been mailed by first class mail, postage
prepaid, or twenty-four hours after having been sent by Federal Express or
similar overnight delivery services, as follows: (a) if to Executive, at Student
Success, Inc., 607 Redna Terrace, Suite 600, Cincinnati, OH 45215-9906, or to
such other person(s) or address(es) as Executive shall have furnished to the
Company in writing; and (b) if to the Company, at 56 Hammarlund Way, Newport, RI
02842, Attention: Richard A. Fisher, Chairman.
12. ASSIGNABILITY. In the event that the Company shall be merged with,
or consolidated into, any other corporation, or in the event that it shall sell
and transfer substantially
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<PAGE> 6
all of its assets to another corporation or entity, the terms of this Agreement
shall inure to the benefit of, and be assumed by, the corporation resulting from
such merger or consolidation, or to which the Company's assets shall be sold and
transferred. This Agreement shall not be assignable by Executive.
13. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the Company and Executive with respect to the subject matter hereof and
supersedes in all respects all prior agreements of any kind concerning the
subject matter hereof.
14. EQUITABLE RELIEF. Executive recognizes and agrees that the
Company's remedy at law for any breach of the provisions of Sections 7, 8, 9 or
10 hereof may be inadequate, and he agrees that for breach of such provisions,
the Company shall, in addition to such other remedies as may be available to it
at law or in equity or as provided in this Agreement, be entitled to injunctive
relief and to enforce its rights by an action for specific performance. Should
Executive engage in any activities prohibited by, and material to, this
Agreement, he agrees to pay over to the Company all compensation, remuneration
or monies or property of any sort received in connection with such activities;
such payment shall not impair the right of the Company to pursue any rights,
remedies, obligations or liabilities of Executive which such parties may have
under this Agreement or applicable law.
15. AMENDMENTS. This Agreement may not be amended, nor shall any
change, waiver, modification, consent or discharge be effected except by written
instrument executed by the Company and Executive.
16. SEVERABILITY. If any part of any term or provision of this
Agreement shall be held or deemed to be invalid, inoperative or unenforceable to
any extent by a court of competent jurisdiction, such circumstances shall in no
way affect any other term or provision of this Agreement, the application of
such term or provisions in any other circumstances, or the validity or
enforceability of this Agreement.
17. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of The Commonwealth of Massachusetts.
18. CONFIDENTIALITY OF THIS AGREEMENT. The Executive shall not, either
during the period of his employment with the Company or at any time thereafter,
disclose to any person within or outside of the Company either the existence of
this Agreement or any of the terms and conditions contained within this
Agreement without first obtaining authorization of the Company, which
authorization may be withheld by the Company at any time and for any reason.
19. PARENT GUARANTY. Cytation hereby guarantees the obligations of the
Company under this Agreement.
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<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Noncompetition and Employment Agreement as an instrument under
seal as of the date first above written.
COLLEGELINK.COM INCORPORATED
By: /s/ Thomas Burgess
-------------------------------
Name: Thomas Burgess
Title: President
CYTATION.COM INCORPORATED
By: /s/ Richard A. Fisher
--------------------------------
Name:
Title:
/s/ Patrick S. O'Brien
------------------------------------
Patrick S. O'Brien
<PAGE> 8
Exhibit A to
Noncompetition and Employment Agreement
CYTATION.COM INCORPORATED
1999 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
This Agreement is by and between Cytation.com Incorporated (the
"Company"), CollegeLink.com Incorporated ("CollegeLink") and Patrick S. O'Brien
(the "Optionee").
W I T N E S S E T H:
1. DEFINITIONS. Whenever used herein, the following terms shall have
the meanings provided below:
"ADMINISTRATOR" means the administrator of the Plan appointed pursuant
to Section 3 of the Plan.
"AGREEMENT" means this Stock Option Agreement.
"BOARD" means the Board of Directors of the Company.
"CHANGE IN CONTROL" means (i) a consolidation or merger of the Company
with or into any other corporation, or any other entity or person, other than a
wholly-owned subsidiary of the Company, excluding any transaction in which the
stockholders of the Company immediately prior to the transaction will maintain
voting control or own at least 50% (in each case, in substantially the same
proportion as before such event) of the resulting entity after the transaction;
(ii) any corporate reorganization, including an exchange offer, in which the
Company shall not be the continuing or surviving entity resulting from such
reorganization, excluding any transaction in which the stockholders of the
Company immediately prior to the transaction will maintain voting control or own
at least 50% (in each case, in substantially the same proportion as before such
event) of the resulting entity after the transaction; or (iii) the sale of a
substantial portion of the Company's assets, which shall be deemed to occur on
the date that any one person, or more than one person acting as a group,
acquires (or has acquired during the 12 month period ending on the date of the
most recent acquisition by such person or persons) assets from the Company that
have a total fair market value equal to more than 75% of the total fair market
value of all the assets of the Company.
"CLOSING DATE" shall have the meaning given such term in the Employment
Agreement.
<PAGE> 9
"COMMON SHARES" means shares of the Company's common stock, $.001 par
value.
"EMPLOYMENT AGREEMENT" means that certain Non-Competition and
Employment Agreement between CollegeLink and the Optionee dated as of the
Closing Date.
"FAIR MARKET VALUE" has the meaning given such term in the Plan.
"GRANT DATE" means the Closing Date.
"PLAN" means the Cytation.com Incorporated 1999 Key Executive Stock
Option Plan.
2. GRANT OF OPTION. Effective as of the Grant Date, the Company hereby
awards to the Optionee, subject to the terms and conditions of the Plan, and the
terms and conditions contained herein, the right and option to purchase from the
Company all or any part of an aggregate of 200,000 Common Shares, at a purchase
price equal to $[INSERT PUBLIC OFFERING PRICE (IN ACCORDANCE WITH EMPLOYMENT
AGREEMENT)] per share, such option to be exercised as hereinafter provided. It
is intended that the option evidenced hereby constitute an incentive stock
option within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") to the maximum extent permitted by law. To the extent
that any portion of this option exceeds the limitations of Code Section 422, or
otherwise fails to qualify as an incentive stock option within the meaning of
Code Section 422, such portion shall be considered a non-qualified stock option.
3. TERMS AND CONDITIONS. In addition to the terms and conditions
contained in the Plan, it is understood and agreed that the option evidenced
hereby is subject to the following additional terms and conditions:
(a) Expiration Date. The option shall expire on the tenth
anniversary of the Grant Date, unless sooner terminated as provided herein.
(b) Period of Exercise. Subject to the other terms of this
Agreement regarding the exercisability of this option, one-third of this option
shall vest and become exercisable upon the first anniversary of the Grant Date,
and, provided that Optionee remains employed by CollegeLink, the remaining
portion of such option shall vest and become exercisable ratably on a monthly
basis over the two-year period commencing on the first anniversary of the Grant
Date and ending on the third anniversary of the Grant Date.
(c) Acceleration of Vesting upon Change in Control.
Notwithstanding the foregoing, this option shall become exercisable in full
immediately prior to a Change in Control, subject to the provisions of
subparagraph (e) hereof.
(d) Termination of Option or Acceleration of Vesting by Reason
of Termination of Employment.
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<PAGE> 10
(i) If Optionee's employment with CollegeLink is terminated by
CollegeLink during the term of the Employment Agreement or thereafter without
Cause (as defined in the Employment Agreement), this option shall become
immediately exercisable in full and shall terminate if not exercised within one
year of the date of termination, unless sooner terminated by reason of Paragraph
2(a) hereof.
(ii) If Optionee's employment with CollegeLink is terminated
by reason of death or Disability (as defined in the Employment Agreement) during
the term of the Employment Agreement or thereafter, any portion of this option
that is not vested and exercisable on the date of death or Disability by reason
of Paragraph 2(b) hereof shall immediately terminate, and any remaining portion
shall terminate if not exercised within one year of the date of death or
Disability, unless sooner terminated by reason of Paragraph 2(a) hereof.
(iii) If Optionee voluntarily terminates employment with
CollegeLink during the term of the Employment Agreement or thereafter without
Good Reason, any portion of this option that is not vested and exercisable on
the date of termination by reason of Paragraph 2(b) hereof shall immediately
terminate, and any remaining portion shall terminate if not exercised within
three months from the date of termination, unless sooner terminated by reason of
Paragraph 2(a) hereof.
(iv) In the event Optionee's employment is terminated by
CollegeLink for Cause during the term of the Employment Agreement or thereafter,
or subsequent to termination Optionee violates Sections 8, 9, or 10 of the
Employment Agreement as determined by a majority of the Board, any unexercised
portion of this option, whether exercisable pursuant to Paragraph 2(b) hereof or
not exercisable, shall become null and void upon action by the Administrator.
The Administrator's action shall be communicated in writing to the Optionee as
soon as practicable. In addition, the Administrator may, in its sole discretion,
by written notice demand that any or all stock certificates for Common Shares
acquired pursuant to the exercise of this option, or any profit realized from
the sale of such or transfer of such Common Shares, be returned to the Company
within five (5) days of receipt of such notice. Any exercise price paid by the
Optionee shall be returned to Optionee by the Company immediately thereafter,
without interest. The Company shall be entitled to reimbursement of reasonable
attorney fees and expenses incurred in seeking to enforce it rights under this
Paragraph 2(d)(iii).
(e) Change in Control. In the event of a Change in Control,
and except as otherwise provided herein, this option shall become immediately
exercisable for a period of fifteen days or such longer or shorter period as the
Board may prescribe (the "notice period") immediately prior to the scheduled
consummation of such Change in Control, provided, however, that the
exercisability of and any exercise of this option during the notice period shall
be (i) conditioned upon the consummation of the Change in Control, and (ii)
effective only immediately before the consummation of such Change in Control.
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Upon consummation of any such Change in Control, the Plan and any
unexercised portion of this option shall terminate. Notwithstanding the
foregoing, to the extent provision is made in writing in connection with such
Change in Control for the continuation of the Plan and the assumption of this
option, or for the substitution for this option of new options covering the
stock of a successor company, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kinds of shares or units and
exercise prices, then the Plan and this option shall continue in the manner and
under the terms contained herein, and the acceleration and termination
provisions set forth in the first two sentences of this subparagraph (e) shall
be of no effect. The Company shall send written notice of a Change in Control to
Optionee not later than the time at which the Company gives notice thereof to
its stockholders.
(f) Exercise of Option. This option shall be exercised by
submitting a written notice to the Administrator signed by the Optionee and
specifying the number of Common Shares as to which the option is being
exercised. Such notice shall be accompanied by the payment of the full option
price for the shares being purchased. Payment shall be made in (i) cash or by
check in a form satisfactory to the Company, (ii) subject to the approval of the
Administrator, already-owned Common Shares (to the extent permitted by law),
which shall be valued for this purpose at the Fair Market Value of the Common
Shares on the day immediately preceding the date of transfer, or (iii) any
combination of the above. A certificate or certificates for the Common Shares
purchased shall be issued by the Company after the exercise of the option and
payment therefor, including provision for any federal and state withholding
taxes, and other applicable taxes.
(g) Non-transferability. This option and all rights hereunder
shall be exercisable during the Optionee's lifetime only by the Optionee and
shall be non-assignable and non-transferable by the Optionee except, in the
event of the Optionee's death, by will or by the laws of descent and
distribution. In the event the death of the Optionee occurs, the representative
or representatives of the Optionee's estate, or the person or persons who
acquire (by bequest or inheritance) the rights to exercise this option in whole
or in part, may exercise this option prior to the expiration of the option as
specified in Paragraphs 3(a) and (d) above.
(h) Modification or cancellation of option. The Administrator
shall have the authority to effect, at any time and from time to time, with the
consent of the Optionee, the modification of the terms of this option agreement
(subject to the limitations contained in the Plan).
(i) No Rights as Stockholder. The Optionee shall have no
rights as a stockholder with respect to any Common Shares subject to this option
prior to the date of issuance to Optionee of a certificate or certificates for
such shares.
(j) Compliance with Law and Regulations. This option and the
obligation of the Company to sell and deliver shares hereunder shall be subject
to all applicable federal and state laws, rules and regulations and to such
approvals by any government or regulatory agency as
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may be required. The Company shall not be required to issue or deliver any
certificates for Common Shares prior to (i) the listing of such Common Shares on
any stock exchange on which the Common Shares may then be listed, and (ii) the
completion of any registration or qualification of such Common Shares under any
federal or state law, or any rule or regulation of any government body which the
Company shall, in its sole discretion, determine to be necessary or advisable.
Moreover, this option may not be exercised if its exercise, or the receipt of
Common Shares pursuant thereto, would be contrary to applicable law.
(k) No Right to Continued Employment. This option shall not
confer upon the Optionee any right with respect to continuance of employment by
CollegeLink or the Company, nor shall it interfere in any way with the right of
CollegeLink or the Company to terminate the Optionee's employment at any time.
(l) Non-Competition. Optionee acknowledges and agrees that the
award of this option is conditioned upon and granted in consideration of
Optionee's agreement to abide by the provisions of Sections 8, 9, and 10 of the
Employment Agreement. In the event that Optionee's employment with CollegeLink
continues after the expiration of the Employment Agreement pursuant to an
"at-will" employment relationship, any portion of this option that is not
exercisable by reason of Paragraph 2(b) hereof shall terminate upon the
expiration of the Employment Agreement, and any remaining portion will terminate
if not exercised within three months of such expiration (unless sooner
terminated by reason of Paragraph 2(a) hereof), unless Optionee enters into and
agrees that his "at-will" employment shall be bound and governed by a
non-competition agreement containing terms substantially similar to those
contained in Sections 8, 9 and 10 of the Employment Agreement.
4. DISQUALIFYING DISPOSITION OF COMMON SHARES. This Option shall not
qualify as an incentive stock option within the meaning of Code Section 422 if
the Common Shares acquired pursuant to the exercise of the option are sold or
transferred, other than by will or by the laws of descent and distribution,
within two years of the Grant Date or within one year after the issuance of the
Common Shares to the Optionee pursuant to such exercise.
5. OPTIONEE BOUND BY PLAN. The Optionee hereby agrees to be bound by
all of the terms and provisions of the Plan. In the event of any inconsistency
between this Agreement and the terms of the Plan, the terms of the Plan shall
govern.
6. WITHHOLDING TAXES. Optionee acknowledges and agrees that the Company
has the right to deduct from payments of any kind otherwise due to Optionee any
federal, state or local taxes of any kind required by law to be withheld with
respect to the exercise of this option hereunder.
7. NOTICES. Any notice hereunder to the Company shall be addressed to
it at its principal business office, 56 Hammarlund Way, Newport, RI 02842 and
any notice hereunder to
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the Optionee shall be sent to the address reflected on the records of
CollegeLink, subject to the right of either party to designate at any time
hereafter in writing some other address.
8. DELAWARE LAW TO GOVERN. This Agreement shall be construed and
administered in accordance with and governed by the laws of the State of
Delaware.
IN WITNESS WHEREOF, the Company and CollegeLink have caused this Stock
Option Agreement to be executed by their duly authorized officers and the
Optionee has executed this Agreement this ______ day of _______________, 199_.
CYTATION.COM INCORPORATED
By: _________________________________
Name:
Title:
COLLEGELINK.COM INCORPORATED
By: _________________________________
Name:
Title:
_____________________________________
Patrick S. O'Brien
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Exhibit 10.23
CYTATION.COM INCORPORATED
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT is made as
of this 26th day of October, 1999, by and between CYTATION.COM INCORPORATED, a
New York corporation (the "Company"), and the person listed on Exhibit 1 which
is a signatory to this Agreement (the "Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE.
1.1 SALE AND ISSUANCE OF SERIES A CONVERTIBLE PREFERRED STOCK.
Subject to the terms and conditions of this Agreement, Investor hereby
agrees to purchase, and the Company hereby agrees to sell and issue to Investor
against cash payment, the number of shares of Series A Convertible Preferred
Stock (the "Series A Preferred Shares") of the Company set forth opposite its
name in Exhibit 1 to this Agreement at a purchase price of $4.00 per share. The
Series A Preferred Shares shall pay a six percent (6%) dividend payable as set
forth in the Designation of Rights and Preferences of Series A Convertible
Preferred Stock.
1.2 CLOSING.
The initial purchase and sale of the Series A Preferred Shares being
purchased by the Investor shall take place the date hereof. The Company has
delivered to Investor a certificate representing the number of Series A
Preferred Shares which Investor is purchasing against delivery to the Company by
Investor of cash or a certified bank cashier's or other check reasonably
acceptable to the Company, or by wire transfer to the Company's account, in the
amount set forth in Exhibit 1. Except as provided in this subparagraph 1.2, the
Company may not issue additional Series A Preferred Shares or warrants, options
or other rights to acquire Series A Preferred Shares without the prior written
approval of holders of at least two-thirds of the outstanding Series A Preferred
Shares purchased under this Agreement.
1.3 USE OF PROCEEDS.
The Company agrees to use the proceeds from the sale of the Series A
Preferred Shares for working capital purposes, for the repayment of outstanding
obligations and for the reduction of trade debt.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to Investor that:
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2.1 INCORPORATION.
The Company is a corporation duly organized and validly existing, is in
good standing under the laws of the state or other place of its incorporation,
has all requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted.
2.2 CAPITALIZATION.
The authorized capital of the Company consists of one hundred million
(100,000,000) shares of common stock, par value $.001 per share ("Common
Stock"), of which not more than nine million eight hundred forty-six thousand
three hundred forty (9,846,340) shares are issued and outstanding and ten
million (10,000,000) shares of preferred stock (the "Preferred Shares"), as
follows: two million five hundred thousand (2,500,000) shares have been
designated Series A Preferred Shares, one million one hundred forty thousand
(1,140,000) of which are issued and outstanding, including the Series A
Preferred Shares purchased by Investor hereby; three hundred thousand (300,000)
shares have been designated Series B Preferred Shares, two hundred seventy-nine
thousand seven hundred seventy-one (279,771) of are issued and outstanding; and
one million (1,000,000) shares have been designated Series C Non-Voting
Preferred Shares, one million (1,000,000) of which are issued and outstanding.
Two million five hundred thousand (2,500,000) shares of Common Stock have been
reserved for issuance upon conversion of the Series A Preferred Shares. Three
hundred thousand (300,000) shares of Common Stock have been reserved for
issuance upon conversion of the Series B Preferred Shares. One million
(1,000,000) shares Common Stock have been reserved for issuance upon conversion
of the Series B Preferred Shares
2.3 SUBSIDIARIES.
The Company presently controls, directly or indirectly, CollegeLink.com
Incorporated, which is being independently operated.
2.4 AUTHORIZATION.
All corporate action on the part of the Company, its officers and
directors necessary for the authorization, execution, delivery and performance
of all obligations of the Company under this Agreement and for the
authorization, issuance and delivery of the Series A Preferred Shares being sold
hereunder has been taken, and this Agreement, when executed and delivered, shall
constitute a valid and legally binding obligation of the Company. Issuance of
the Series A Preferred Shares is not, and issuance of the Common Stock issuable
upon conversion of the Series A Preferred Shares will not be, subject to
preemptive rights or other preferential rights of any present or future
stockholders in the Company.
2.5 VALIDITY OF SECURITIES.
The Series A Preferred Shares purchased and sold pursuant to this
Agreement are duly and validly issued. The Common Stock issuable upon conversion
of the Series A Preferred
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Shares has been duly and validly reserved and upon issuance will be duly and
validly, issued, fully paid and nonassessable.
2.6 GOVERNMENTAL CONSENTS.
All consents, approvals, orders, authorizations or registration,
qualification, designation and declaration or filing with and federal or state
governmental authority on the part of the Company required in connection with
the consummation of the transactions contemplated herein has been obtained.
2.7 COMPLIANCE WITH OTHER INSTRUMENTS.
The Company is not in violation of any provisions of its respective
Articles of Incorporation, its Bylaws, any material mortgage, indenture, lease,
agreement or other instrument to which it is a party, or of any provision of any
federal or state judgment, writ, decree, order, statute, rule or governmental
regulation applicable to the Company. The execution, delivery and performance of
this Agreement will not result in any such violation or be in conflict with or
constitute a default under any such provision.
2.8 LITIGATION.
There are no actions, proceedings or investigations pending, or to the
knowledge of the Company threatened, which question the validity of this
Agreement or which might result, either individually or in the aggregate, in any
material adverse change in the assets, conditions, affairs or prospects of the
Company, nor, to the knowledge of the Company, has there occurred any event or
does there exist any condition which might properly be the basis therefor.
2.9 PATENTS.
The Company owns or has a valid right to use the patents, patent
rights, licenses, trade secrets, trademarks, trademark rights, trade names or
trade name rights or franchises, copyrights, inventions, and intellectual
property rights being used to conduct their businesses as now operated and as
now proposed to be operated; and the conduct of business as now operated and as
now proposed to be operated does not and will not conflict with valid patents,
patent rights, licenses, trade secrets, trademarks, trademark rights, trade
names or trade name rights or franchises, copyrights, inventions, and
intellectual property rights of others. The Company has no obligation to
compensate any person or entity for the use of any such patents or rights and
have granted to no person or entity any license or other rights to use in any
manner any of the patents or rights of the Company, whether requiring the
payment of royalties or not.
2.10 FINANCIAL STATEMENTS.
The Company has separately furnished to Investor a copy of Amendment
No. 1 to Form S-1 Registration Statement filed by Cytation with the Securities
and Exchange Commission on October 21, 1999 ("Amendment No. 1"). Amendment No. 1
contains true and complete copies
Bost & Co.
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statements of financial condition as of June 30, 1999, June 30, 1998 and June
30, 1997, and the related statements of operations and statements of changes in
financial position for the years then ended, certified by Radin, Glass & Co.
LLP, independent accountants. All such financial statements have been prepared
in conformity with generally accepted accounting principles applied on a basis
consistent with prior periods, fairly present the financial condition of the
Company as of dates thereof, and the results of operations of the Company for
the periods indicated. Specifically, without limitation, such financial
statements reflect, as of their respective dates, all material accrued
liabilities and adequate reserves for all material unaccrued liabilities and for
all reasonably anticipated material losses of the Company. The books of account
of the Company fully and fairly reflect all of the transactions of the Company
and are complete and accurate. The Company is not subject to any undisclosed
material liability not (i) reflected in its June 30, 1999 financial statements
referred to above or in the notes to the June 30, 1999 financial statements or
(ii) incurred in the ordinary course of business since June 30, 1999. For
purposes of this Agreement, all financial statements of the Company shall be
deemed to include any notes to such financial statements.
2.11 ABSENCE OF CERTAIN CHANGES.
Since October 21, 1999, whether or not in the ordinary course of
business, there has not occurred or arisen (a) any material adverse change in
the financial condition, operations, business or prospects of the Company, or
(b) any event, condition or state of facts of any character which materially or
adversely affects, or may materially or adversely affect, the financial
condition, operations, business or prospects of the Company.
2.12 TAX RETURNS AND REPORTS.
All federal income tax and state franchise tax returns and tax reports
required to be filed by the Company have been filed with the appropriate
governmental agencies in all jurisdictions in which such returns or reports are
required to be filed. All such returns and reports constitute complete and
accurate representations, in all material respects, of the tax liabilities of
the Company. All federal income tax and state franchise and other taxes
(including interest and penalties) due from the Company have been fully paid or
adequately provided for on the books and financial statements of the Company.
None of the federal income tax returns of the Company has been audited by the
Internal Revenue Service. The Company knows of no additional assessments or
adjustments pending or threatened for any period, nor of any basis for any such
assessment or adjustment. The Company and its affiliates have not entered into
any agreements with federal and state taxing authorities extending the statute
of limitations with respect to the assessment of federal and state taxes for any
period.
2.13 PROPERTIES.
The Company has good and marketable title to its real and personal
properties and assets and valid leasehold interests in its leased properties as
and to the extent carried on its books, including those reflected on the
statements of financial condition as of June 30, 1999 referred to in paragraph
2.10 above, except properties and assets disposed of in the ordinary course of
Bost & Co.
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business, since June 30, 1999, and none of such properties or assets is subject
to any mortgage, pledge, charge, lien, security interest, encumbrance of joint
ownership interest, except liens for taxes, assessments, or governmental charges
or levies if the same shall not at the time be delinquent or thereafter can be
paid without penalty, or are being contested in good faith and by appropriate
proceedings.
The Company enjos peaceful and undisturbed possession under all leases
under which it is operating, and all said lease are valid and subsisting and in
full force and effect.
2.14 AGREEMENTS.
The Company has not breached and has not received oral or written
notice of any claim or threatened claim that the Company has breached any of the
terms or conditions of any agreement, contract, lease, commitment or
understanding, whether oral or written, the breach or breaches of which singly
or in the aggregate could materially or adversely affect the financial
condition, operations, business or prospects of the Company.
2.15 PENSION BENEFIT PLAN.
The Company does make contributions to a pension, defined benefit or
defined contribution plan which is subject to the Federal Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). The Company provides a 401K
plan.
2.16 REGISTRATION RIGHTS.
Amendment No. 1 sets forth the obligations of the Company to register
its securities with the Securities and Exchange Commission.
2.17 DISCLOSURE.
To the best of the Company's knowledge and belief, neither this
Agreement, the financial statements referred in paragraph 2.10, nor any other
agreement, document, certificate or written statement furnished to Investor by
or on behalf of the Company in connection with the transactions contemplated
hereby contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. To the best knowledge of the Company's executive
officers, but without having made any independent investigation, there is no
fact within the knowledge of any of the executive officers of the Company which
has not been disclosed herein or in writing by them to Investor and which
materially adversely affects, or in the future in their opinion may, insofar as
they can now foresee, materially adversely affect the business, properties,
assets or condition, financial or other, of the Company. Without limiting the
foregoing, the Company has no knowledge or belief that there exists, or there is
pending or planned, any patent, invention, device, application or principle or
any statute, rule, law, regulation, standard or code which would materially
adversely affect the condition, financial or other, or the operations of the
Company.
Bost & Co.
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2.18 YEAR 2000 COMPLIANCE
All of the Company's computer systems, and all of the computer software
developed in connection with the Company's products and services offered to
third parties, are year 2000 compliant.
3. REPRESENTATIONS AND WARRANTIES OF INVESTOR.
The Investor represents and warrants to the Company as follows:
3.1 AUTHORIZATION.
When executed and delivered by Investor, this Agreement will constitute
the valid and legally binding obligation of Investor.
3.2 ACCREDITED INVESTOR.
Each person for whom or for which Investor acts as nominee is an
"accredited investor" as that term is defined in Rule 501 promulgated under the
Act.
4. SECURITIES ACT OF 1933.
4.1 INVESTMENT REPRESENTATION.
(a) This Agreement is made with the Investor in reliance upon its
representations to the Company, which by its acceptance hereof Investor hereby
confirms, that the Series A Preferred Shares to be received will be acquired for
investment for an indefinite period for its own account and not with a view to
the sale or distribution of any part thereof, and that it has no present
intention of selling or otherwise distributing the same, but subject,
nevertheless, to any requirement of law that the disposition of its property
shall at all times be within its control. By executing this Agreement, Investor
further represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell or transfer to such person any of the Series
A Preferred Shares or any Common Stock acquired on conversion of the Series A
Preferred Shares (all of such securities are hereinafter collectively referred
to as the "Securities").
(b) Investor understands that the Securities are not registered under the
Act on the ground that the sale provided for in this Agreement and the issuance
of securities is exempt pursuant to Section 4(2) of the Act and Rule 506 of
Regulation D thereunder, and that the Company's reliance on such exemption is
predicated on its representations set forth herein.
(c) Investor agrees that in no event will it make a disposition of any of
the Securities, unless the Securities shall have been registered under the Act,
unless and until (i) it shall have notified the Company with a statement of the
circumstances surrounding the proposed disposition and (ii) it shall have
furnished the Company with an opinion of counsel reasonably, satisfactory to the
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Company to the effect that (A) such disposition will not require registration
of such securities under the Act, and (B) that appropriate action necessary for
compliance with the Act has been taken. Notwithstanding the foregoing, each
Investor may distribute any of the Securities to the owners of its equity or an
asset trust wherein the Investor is a beneficiary.
(d) Investor represents that it is able to fend for itself in the
transactions contemplated by this Agreement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investment, has the ability to bear the economic risks of its
investment and has been furnished with and has had access to such information as
would be made available in the form of a registration statement together with
such additional information as is necessary to verify the accuracy of the
information supplied and to have all questions which have been asked by Investor
answered by the Company.
(e) Investor Understands that if a registration statement covering the
Securities under the Act is not in effect when it desires to sell any of the
Securities, it may be required to hold such Securities for an indeterminate
period. Investor also acknowledges that it understands that any sale of the
Securities which might be made by it in reliance upon Rule 144 under the Act may
be made only in limited amounts in accordance with the terms and conditions of
that Rule.
4.2 LEGENDS.
All certificates for the Securities shall bear substantially the
following legend:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED BY THE ISSUEE FOR
INVESTMENT PURPOSES. SAID SHARES MAY NOT BE SOLD OR TRANSFERRED UNLESS (A) THEY
HAVE BEEN REGISTERED UNDER SAID ACT, OR (B) THE TRANSFER AGENT (OR THE COMPANY
IF THEN ACTING AS ITS TRANSFER AGENT) IS PRESENTED WITH EITHER A WRITTEN OPINION
SATISFACTORY TO COUNSEL FOR THE COMPANY OR A "NO-ACTION" OR INTERPRETIVE LETTER
FROM THE SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER THE CIRCUMSTANCES OF SUCH SALE OR TRANSFER."
4.3 RULE 144.
The Company covenants and agrees that: (i) at all times while it is
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934 it will use its best efforts to comply with the current
public information requirements of Rule 144(c)(1) under the Act; and (ii) it
will furnish Investor upon request with all information about the Company
required for the preparation and filing of Form 144.
5. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING. [DELETED]
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. [DELETED]
Bost & Co.
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7. REGISTRATION RIGHTS.
7.1 SHARES INCLUDED IN REGISTRATION STATEMENT.
The Company covenants and agrees with Investor to include all of
Investor's shares of Common Stock ("Registrable Shares") receivable upon
conversion by Investor of the Series A Preferred Shares in its first
registration statement under the Act filed 180 days after the effective date of
the registration statement referred to in paragraph 2.10 hereof ("Effective
Date").
7.2 OBLIGATIONS OF THE COMPANY.
In connection with the Registration Statement, the Company shall:
(a) Use its best efforts to cause the Registration Statement to be filed on
Form S-3 or equivalent within 215 days of the Effective Date and to become and
remain effective.
(b) Prepare and file with the SEC such amendments and supplements to the
Registration Statement and the prospectus used in connection therewith as may be
necessary to permit the disposition of all of the Registrable Shares.
(c) Furnish to Investor such number of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Act, and such
other documents as they may reasonably request in order to facilitate the
disposition of the Registrable Shares owned by them.
(d) Use its best efforts to register and qualify the Registrable Shares
under such other securities or Blue Sky laws of such jurisdictions (not
exceeding ten unless otherwise agreed upon by the Company) as shall be
reasonably appropriate for the distribution of the securities covered by the
Registration Statement, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions, and further provided that (anything herein to the contrary
notwithstanding with respect to the bearing of expenses) if any jurisdiction in
which the securities shall be qualified shall require that expenses incurred in
connection with the qualification therein of the securities be borne by selling
shareholders, then such expenses shall be payable by selling shareholders pro
rata, to the extent required by such jurisdiction.
7.3 FURNISH INFORMATION.
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this paragraph 7 that Investor shall furnish to the
Company such information regarding them, the Registrable Shares held by it, and
the intended method of disposition thereof as the Company shall reasonably
request and as shall be required in connection with the action to be taken by
the Company.
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7.4 EXPENSES.
All expenses incurred in connection with the Registration Statement,
including without limitation all registration and qualification fees, printing
and accounting fees, fees and disbursements of counsel for the Company, but
excluding underwriting discounts and commissions shall be borne by the Company.
Each selling shareholder shall bear the fees and costs of its own counsel (if
different from counsel for the Company).
7.5 INDEMNIFICATION.
In the event any of the Registrable Shares are included in the
Registration Statement under this paragraph 7:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor against any losses, claims, damages or liabilities, joint
or several, to which they may become subject under the Act or otherwise, insofar
as such losses, claims, damages or liabilities or actions in respect thereof
arise out of or are based upon any untrue or alleged untrue statement of any
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, or arise out of or are based upon the omission or
alleged omission to state therein, or allegedly necessary to make the statements
therein not misleading; and will reimburse each such Investor, such underwriter
or controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this subparagraph 7.5(a) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Company nor shall the Company be liable in
any such case for any such loss, claim, damage, liability, or action to the
extent that it arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in connection with such
registration Statement preliminary prospectus, final prospectus, or amendments
or supplements thereto, in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Investor, such underwriter or controlling person.
(b) To the extent permitted by law, each such Investor will indemnify and
hold harmless the Company, each of its directors, each of its officers who have
signed such registration statement, each person, if any, who controls the
Company within the meaning of the Act, and any underwriter for the Company
(within the meaning of the Act) against any losses, claims, damages, or
liabilities to which the Company or any such director, officer, controlling
person, or underwriter may become subject, under the Act or otherwise, insofar
as such losses, claims, damages, or liabilities (or actions in respect thereto)
arise out of or are based upon any untrue or alleged untrue statement of any
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, or arise out of or are based upon the omission or
alleged omission to state
Bost & Co.
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therein a material fact required to be stated therein or allegedly necessary to
make the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in such registration statement,
preliminary prospectus, or amendments or supplements thereto, in reliance upon
and in conformity with written information furnished by such Investor expressly
for use in connection with such registration; and each such Investor will
reimburse any legal or other expenses reasonably incurred by the Company or any
such director, officer, controlling person or underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there were material misstatements or omissions.
(c) Promptly after receipt by an indemnified party under this subparagraph
7.5 of notice of the commencement of any action, such indemnified party will, if
a claim in respect thereof is to be made against any indemnifying party under
this subparagraph 7.5, notify the indemnifying party in writing of the
commencement thereof and the indemnifying party shall have the right to
participate in and to assume the defense thereof with counsel mutually
satisfactory to the parties. The failure to notify an indemnifying party
promptly of the commencement of any such action, if prejudicial to the ability
to defend such action, shall relieve such indemnifying party under this
subparagraph 7.5, but the omission so to notify the indemnifying party will not
relieve such party of any liability which such party may have to any indemnified
party otherwise other than under this subparagraph 7.5.
(d) If recovery is not available under the foregoing indemnification
provisions of this paragraph, for any reason other than as specified therein,
the parties entitled to indemnification by the terms thereof shall be entitled
to contribution to liabilities and expenses, except to the extent that
contribution is not permitted under Section 11(f) of the Act. In determining the
amount of contribution to which the respective parties are entitled, there shall
be considered the relative benefits received by each party from the offering of
the securities (taking into account the portion of the proceeds of the offering
realized by each), the parties' relative knowledge and access to information
concerning the matter with respect to which the claim was asserted, the
opportunity to correct and prevent any statement of omission, and any other
equitable considerations appropriate under the circumstances; provided that in
no event will any Investor be required to contribute an amount in excess of the
original cost that Investor of its Shares included in that offering. The Company
and the Underwriters agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation.
7.6 REPORTS UNDER THE SECURITIES EXCHANGE ACT OF 1934.
With a view to making available to Investor the benefits of Rule 144
promulgated under the Act, the Company agrees to use its best efforts (i) to
file with the SEC in a timely manner all reports and other documents required to
be filed by an issuer of securities registered under the Act or the Securities
Exchange Act of 1934, as amended, (ii) to maintain in effect the registration of
its Common Stock under Section 12 of the Securities Exchange Act of 1934, as
amended, and (iii) so long as Investor owns any of the Shares, to furnish in
writing upon Investor's request the following information: (A) the Company's
name, address and telephone number, (B) the Company's Internal Revenue Service
identification number; (C) the Company's SEC file number,
Bost & Co.
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(D) the number of shares of Common Stock outstanding as shown by the most recent
report or statement published by the Company (E) the average weekly volume of
trading in such shares reported on all national securities exchanges during the
four calendar weeks preceding the date of receipt of request by the Investor,
and (F) whether the Company has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
twelve months. With respect to a rule or regulation of the SEC (other than Rule
144) which may at any time permit the Investor to sell Common Stock to the
public without registration, the Company agrees to take such action as is
reasonable to enable utilization of such rule.
7.7 DEFINITIONS.
(a) A person shall be deemed an "Investor" if such person then holds any
Series A Preferred Shares or Common Stock received upon conversion of Series A
Preferred Shares.
(b) "Registrable Shares" shall mean and include any shares of Common Stock
issuable or issued upon conversion of the Series A Preferred Shares issued
pursuant to this Agreement.
8. COVENANTS.
8.1 FINANCIAL STATEMENTS.
The Company promptly shall deliver to each holder of Series A Preferred
Shares annual and quarterly financial statements.
8.2 RESERVATION OF SHARES.
The Company shall reserve sufficient additional shares of Common Stock
for issuance upon conversion of all Series A Preferred Shares then outstanding.
8.3 CUMULATIVE DIVIDENDS.
The holders of the Series A Preferred Shares shall be entitled to
cumulative dividends which shall accrue (but not be compounded) daily (and
retroactively) at the rate of six percent (6%). Dividends shall be paid
quarterly in arrears and shall be cumulative if not paid when due. No dividends
on the Company's common stock shall be paid until all outstanding dividends on
the Series A Preferred Shares are paid. At the Company's election, the dividends
may be paid in registered shares of the Company's Common Stock valued at the
lesser of (a) the closing price of the Common Stock on the day prior to the due
date of the dividend and (b) $4.00 per share.
8.4 ADOPTION OF CERTIFICATE OF DETERMINATION OF PREFERENCES.
The Company shall adopt and file a Designation of Rights and
Preferences attached hereto as Exhibit 3 with respect to the Series A Preferred
Shares, and Investor hereby authorizes, approves and consents to all actions
taken or to be taken by the Company in connection with the adoption and filing
of such Designation of Rights and Preferences.
Bost & Co.
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8.5 OPTIONAL CONVERSION.
The Investor shall have the right at any time from time to time at such
Investor's option to convert all or any portion of the Series A Preferred Shares
into such number of fully paid and nonassessable shares of Common Stock as
provided in paragraph 8.6.
The Investor may exercise the conversion right provided in this
paragraph 8.5 by giving written notice (the "Conversion Notice") to the Company
of the exercise of such right and stating the name or names in which the stock
certificate or stock certificates for the Common Stock are to be issued and the
address to which such certificates shall be delivered. The Conversion Notice
shall be accompanied by the Series A Preferred Shares.
Conversion shall be deemed to have been effected on the date the
Conversion Notice is given by the Investor to the Company. Within 10 business
days after receipt of the Conversion Notice by the Company, the Company shall
issue and deliver by hand against a signed receipt therefor or by United States
registered mail, return receipt requested, or by overnight delivery service, to
the address designated by the Investor in the Conversion Notice, a stock
certificate or stock certificates of the Company representing the number of
Common Stock to which such Investor is entitled and a check or cash in payment
of all accrued and unpaid dividends.
8.6 MANDATORY CONVERSION.
The Company may require mandatory conversion of all, but not less than
all, of the Series A Preferred Shares on or after the first anniversary of the
initial purchase and sale of the Series A Preferred Shares the ("Conversion
Date"), provided that:
(i) The average closing bid price of the Company on the
Over-the-Counter Bulletin Board ("OTCBB") or the NASDAQ Stock Exchange, as
applicable, for the twenty (20) consecutive trading days immediately preceding
the Conversion Date has exceeded $6.00 per share, or;
(ii) If there is a reorganization of the Company involving an
exchange of Company's Common Stock for shares of a United States domiciled
corporation the shares of which are trading on a national exchange or on the
NASDAQ National Market System.
Conversion shall be deemed to have been effected on the date the
Conversion Notice is given to Investor (the "Conversion Date"). Within 10
business days after receipt of the Conversion Notice, the Company shall issue
and deliver by hand against a signed receipt therefor or by United States
registered mail, return receipt requested, or by overnight delivery service, to
the address designated by the Investor in the Conversion Notice, a stock
certificate or stock certificates of the Company representing the number of
Common Stock to which such Investor is entitled and a check or cash in payment
of all accrued and unpaid dividends. Conversion of the Series A Preferred Shares
to Common Stock shall be deemed to have occurred on the Conversion
Bost & Co.
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Date whether or not an Investor returns to the Company its certificate or
certificates for the Series A Preferred Shares.
8.7 CONVERSION RATIO.
On the date hereof, the conversion ration ("Conversion Ratio") shall
equal one Series A Preferred Share for one (1) share of Common Stock, provided,
however, that the Conversion Ratio shall be subject to adjustment in accordance
with and at the times provided in this paragraph, as follows:
(a) In case issued and outstanding shares of Common Stock shall be
subdivided or split up into a greater number of shares of the Common Stock, the
Conversion Ratio in effect at the opening of business on the business day
immediately preceding the date fixed for the determination of the stockholders
whose shares of Common Stock shall be subdivided or split up (the "Split Record
Date") shall be proportionately increased, and in case issued and outstanding
shares of Common Stock shall be combined into a smaller number of shares of
Common Stock, the Conversion Ratio in effect at the opening of business on the
business day immediately preceding the date fixed for the determination of the
stockholders whose shares of Common Stock shall be combined (the "Combination
Record Date") shall be proportionately decreased, such increase or decrease, as
the case may be, becoming effective immediately after the opening of business on
the business day immediately after the Split Record Date or the Combination
Record Date, as the case may be.
(b) In case of any capital reorganization, any reclassification of the
stock of the Company (other than as a result of a stock dividend or subdivision,
split up or combination of shares), or the merger of the Company with or into
another person or entity (other than a merger in which the Company is the
continuing corporation and which does not result in any change in the Common
Stock) or of the sale, exchange, lease, transfer or other disposition of all or
substantially all of the properties and assets of the Company as an entirety or
the participation by the Company in a share exchange as the corporation the
stock of which is to be acquired, the Series A Preferred Shares shall (effective
on the opening of business on the date after the effective date of such
reorganization, reclassification, merger, sale or exchange, lease, transfer or
other disposition or share exchange) be convertible into the kind and number of
shares of stock or other securities or property of the Company or of the
corporation resulting from surviving such merger or to which such properties
and assets shall have been sold, exchanged, leased, transferred or otherwise
disposed or which was the corporation whose securities were exchanged for those
of the Company to which the holder of the number of shares of Common Stock
deliverable (at the close of business on the date immediately preceding the
effective date of such reorganization, reclassification, merger, sale, exchange,
lease, transfer or other disposition or share exchange) upon conversion of
Series A Preferred Shares would have been entitled upon such reorganization,
reclassification, merger, sale, exchange, lease, transfer or other disposition
or share exchange. The provisions of this paragraph 8.7(b) shall similarly apply
to successive reorganizations, reclassifications, mergers, sales, exchanges,
leases, transfers or other dispositions or other share exchanges.
Bost & Co.
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(c) Whenever the Conversion Ratio shall be adjusted as provided in
paragraph 8.6 hereof, the Company shall prepare and send to the holders of the
Series A Preferred Shares a statement, signed by the chief financial officer of
the Company, showing in detail the facts requiring such adjustment and the
Conversion Ratio that shall be in effect after such adjustment.
(d) No adjustment of the conversion rate shall be made in any of the
following cases:
(i) upon the grant or exercise of stock options hereafter
granted, or under any employee stock option plan now or hereafter authorized, to
the extent that the aggregate of the number of shares which may be purchased
under such options and the number of shares issued under such employee stock
purchase plan is less than or equal to ten percent (10%) of the number of shares
of Common Stock outstanding on January 1 of the year of the grant or exercise;
(ii) shares of Common Stock issued upon the conversion of
Preferred Stock;
(iii) shares issued in connection with the acquisition by the
Company or by any subsidiary of the Company of 80% or more of the assets of
another corporation, and shares issued in connection with the acquisition by the
Company or by any subsidiary of the Company of 80% or more of the voting shares
of another corporation (including shares issued in connection with such
acquisition of voting shares of such other corporation subsequent to the
acquisition of an aggregate of 80% of such voting shares), shares issued in a
merger of the Company or a subsidiary of the Company with another corporation in
which the Company or the Company's subsidiary is the surviving corporation, and
shares issued upon the conversion of other securities issued in connection with
any such acquisition or in any such merger;
(iv) shares issued by way of dividend or other distribution on
Common Stock excluded from the calculation of the adjustment under this
subparagraph 8.7(d) or on Common Stock resulting from any subdivision or
combination of Common Stock so excluded; or
(v) shares issued pursuant to all stock options and warrants
outstanding on the date of the filing of these Articles.
(e) In the event the Company shall propose to take any action of the types
described in paragraph 8.6 hereof, the Company shall give notice to the holder
of the Series A Preferred Shares, which notice shall specify the record date, if
any, with respect to any such action and the date on which such action is to
take place. Such notice shall be given on or prior to the earlier of 30 days
prior to the record date or the date which such action shall be taken. Such
notice shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Conversion Ratio and the
number, kind or class of shares or other securities or property which shall be
deliverable or purchasable upon the occurrence of such action or deliverable
upon conversion of the Series A Preferred Shares. Failure to give notice in
accordance with this paragraph 8.7(d) shall not render such action ultra vires,
illegal or invalid.
Bost & Co.
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8.8 BOARD OF DIRECTORS.
For as long as at least 50% of the Series A Preferred Shares are
outstanding, the holders of a majority of the shares of Series A Preferred
Shares shall have the right (as set forth in the Designation of Rights and
Preferences of the Series A Preferred Shares attached hereto as Exhibit 3) to
elect one (1) member to the Company's Board of Directors. The Board of Directors
shall consist of not fewer than five and not more than seven members. The
director elected by the majority of the holders of the Series A Preferred Shares
shall receive the same compensation as all other outside directors and shall be
reimbursed for all out of pocket expenses incurred in connection with attending
meetings of the Board of Directors. The Board of Directors shall meet in person
no less frequently than semi-annually and telephonically or personally no less
frequently than quarterly.
8.9 DELETED
8.10 RIGHT OF COMPANY.
The Company reserves the right in its sole discretion to refuse to
accept an investment of any prospective investor. The Company reserves the right
to place up to $10 million of Series A Preferred Shares.
9. MISCELLANEOUS.
9.1 AGREEMENT IS ENTIRE CONTRACT.
Except as specifically referenced herein, this Agreement constitutes
the entire contract between the parties hereto concerning the subject matter
hereof and no party shall be liable or bound to the other in any manner by any
warranties, representations or covenants except as specifically set forth
herein. Any previous agreement among the parties related to the transactions
described herein is superseded hereby. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties hereto. Nothing in this Agreement, express
or implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors and assigns, any rights, remedies, obligations,
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
9.2 GOVERNING LAW.
This Agreement shall be governed by and construed under the laws of the
State of New York.
9.3 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
Bost & Co.
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9.4 TITLE AND SUBTITLES.
The titles of the paragraphs and subparagraphs of this Agreement are
for convenience and are not to be considered in construing this Agreement.
9.5 NOTICES.
Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail, addressed to a
party at its address hereinafter shown below its signature or at such other
address as such party may designate by ten (10) days advance written notice to
the other party.
9.6 SURVIVAL OF WARRANTIES.
The warranties and representations of the Company contained in or made
pursuant to this Agreement shall survive the execution and delivery of this
Agreement.
9.7 AMENDMENT OF AGREEMENT.
Except as expressly provided herein, any provision of this Agreement
may be amended or waived on behalf of the Investor by a written instrument
signed by the Company and by Investors holding at least a majority of the
aggregate of the shares of Common Stock issuable and issued upon conversion of
the Series A Preferred Shares.
[SIGNATURES ON FOLLOWING PAGE]
Bost & Co.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first written above.
CYTATION.COM INCORPORATED
By: /s/ Richard A. Fisher
-------------------------
Authorized Signature
Chairman /s/ Krista Michael Secretary
- ----------------------------- ----------------------------, ---------
Title Attest
SEAL
BOST & CO., NOMINEE
By: Date: 10/27/99
-------------------------- ----------------------
Print Name
/s/ Hans H. Estin
--------------------------
Signature
Bost & Co.
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EXHIBIT 1
INVESTOR
NAME NUMBER OF SHARES
Bost & Co. 250,000
c/o North American Management Corp.
Ten Post Office Square
Suite 300
Boston, MA 02109
Bost & Co.
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EXHIBIT 3
DESIGNATION OF RIGHTS AND PREFERENCES OF SERIES A CONVERTIBLE PREFERRED STOCK
OF
CYTATION.COM INCORPORATED
1. DESIGNATION AND INITIAL NUMBER.
The class of shares of Preferred Stock hereby classified shall be
designated the "Series A Preferred Shares." The initial number of authorized
shares of the Preferred Stock shall be two million five hundred thousand
(2,500,000). The Stated Value of the Preferred Stock shall be $4.00 per share,
and the Par Value of the Preferred Stock shall be $.01 per share.
2. DISTRIBUTIONS.
The holders of the Preferred Stock shall be entitled to receive, out of
funds at the time legally available for payment of dividends in the State of New
York, a cumulative dividend at the rate of six percent (6%) per share per annum,
payable quarterly in equal installments on the first days of each successive
quarter each year, if, as and when determined by the Board of Directors, before
any dividend shall be set apart or paid on any other capital stock for such
year.
3. CONVERSION.
The Preferred Stock shall be convertible into Common Stock as
hereinafter provided and, when so converted, shall be canceled and retired and
shall not be reissued as such:
(A) Any holder of the Preferred Stock may at any time or from
time to time convert such stock into the Common Stock of the Company, on
presentation and surrender to the Company, of the certificates of the Preferred
Stock to be so converted together with the Notice of Conversion ("Conversion
Notice").
Conversion shall be deemed to have been effected on the date
the Conversion Notice is given by the Investor to the Company (the "Conversion
Date"). Within 10 business days after receipt of the Conversion Notice, the
Company shall issue and deliver by hand against a signed receipt therefor or by
United States registered mail, return receipt requested, or by overnight
delivery service, to the address designated by the Investor in the Conversion
Notice, a stock certificate or stock certificates of the Company representing
the number of Common Stock to which such Investor is entitled and a check or
cash in payment of all accrued and unpaid dividends.
(B) Each holder of Preferred Stock shall have the right to
convert such Preferred Stock on and subject to the following terms and
conditions:
(i) The Preferred Stock shall be converted into
Common Stock at the conversion rate, determined as hereinafter provided, in
effect at the time of conversion. Unless
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such conversion rate shall be adjusted as hereinafter provided, the conversion
rate shall be one (1) share of Common Stock for each share of Preferred Stock
("Conversion Ratio").
(ii) In order to convert Preferred Stock into Common
Stock, the holder thereof shall on any business day surrender to American
Securities Transfer, Inc., whose address is 938 Quail street, Suite 101,
Lakewood, Colorado 80215-5513, the certificate or certificates representing such
shares, duly endorsed to the Company or in blank, and give written notice to the
Company at said office of the number of said shares which such holder elects to
convert. Preferred Stock shall be deemed to have been effected on the date a
conversion notice is given by the Investor to the Company, and the person or
persons entitled to receive the Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder or holders of such Common Stock
at such time. As promptly as practicable on or after the date of any conversion,
the Company shall issue and deliver a certificate or certificates representing
the number of shares of Common Stock issuable upon such conversion, together
with cash in lieu of any fraction of a share, to the person or persons entitled
to receive same. In case of the conversion of only a part of the shares of any
holder of Preferred Stock, the Company shall also issue and deliver to such
holder a new certificate of Preferred Stock representing the number of shares of
such Preferred Stock not converted by such holder.
(C) The Company may require mandatory conversion of all, but
not less than all, of the Preferred Stock on or after the first anniversary of
the initial purchase and sale of the Preferred Stock ("the Mandatory Conversion
Date"), provided that:
(i) The average closing bid price of the Company on
the Over-the-Counter Bulletin Board or the NASDAQ Stock Exchange, as applicable,
for the twenty (20) consecutive trading days immediately preceding the Mandatory
Conversion Date has exceeded $6.00 per share, or;
(ii) If there is a reorganization of the Company
involving an exchange of Company's Common Stock for shares of a United States
domiciled corporation the shares of which are trading on a national exchange or
on the NASDAQ National Market System.
Conversion of the Series A Preferred Shares to Common Stock pursuant to
this paragraph 3(C) shall be deemed to have occurred on the Mandatory Conversion
Date whether or not an Investor delivers to the Company its certificate or
certificates for the Preferred Stock.
(D) The Conversion Ratio shall be subject to adjustment as
follows:
(i) In case issued and outstanding shares of Common
Stock shall be subdivided (e.g., stock dividend) or split up into a greater
number of shares of the Common Stock, the Conversion Ratio in effect at the
opening of business on the business day immediately preceding the date fixed for
the determination of the stockholders whose shares of Common Stock shall be
subdivided or split up (the "Split Record Date") shall be proportionately
increased, and in case issued and outstanding shares of Common Stock shall be
combined into a smaller number of shares of Common Stock, the Conversion Ratio
in effect at the opening of business on the business day immediately preceding
the date fixed for the determination of the
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stockholders whose shares of Common Stock shall be combined (the "Combination
Record Date") shall be proportionately decreased, such increase or decrease, as
the case may be, becoming effective immediately after the opening of business on
the business day immediately after the Split Record Date or the Combination
Record Date, as the case may be.
(ii) In case of any capital reorganization, any
reclassification of the stock of the Company (other than as a result of a stock
dividend or subdivision, split up or combination of shares), or the merger of
the Company with or into another person or entity (other than a merger in which
the Company is the continuing corporation and which does not result in any
change in the Common Stock) or of the sale, exchange, lease, transfer or other
disposition of all or substantially all of the properties and assets of the
Company as an entirety or the participation by the Company in a share exchange
as the corporation the stock of which is to be acquired, the Preferred Stock
shall (effective on the opening of business on the date after the effective date
of such reorganization, reclassification, merger, sale or exchange, lease,
transfer or other disposition or share exchange) be convertible into the kind
and number of shares of stock or other securities or property of the Company or
of the corporation resulting from surviving such merger or to which such
properties and assets shall have been sold, exchanged, leased, transferred or
otherwise disposed or which was the corporation whose securities were exchanged
for those of the Company to which the holder of the number of shares of Common
Stock deliverable (at the close of business on the date immediately preceding
the effective date of such reorganization, reclassification, merger, sale,
exchange, lease, transfer or other disposition or share exchange) upon
conversion of Preferred Stock would have been entitled upon such reorganization,
reclassification, merger, sale, exchange, lease, transfer or other disposition
or share exchange. The provisions of this subparagraph 3(B)(ii) shall similarly
apply to successive reorganizations, reclassifications, mergers, sales,
exchanges, leases, transfers or other dispositions or other share exchanges.
(iii) Whenever the Conversion Ratio shall be adjusted
as provided herein, the Company shall prepare and send to the holders of the
Preferred Stock a statement, signed by the chief financial officer of the
Company, showing in detail the facts requiring such adjustment and the
Conversion Ratio that shall be in effect after such adjustment.
(iv) In the event the Company shall propose to take
any action of the types described in paragraph 3 hereof, the Company shall give
notice to the holder of Preferred Stock, which notice shall specify the record
date, if any, with respect to any such action and the date on which such action
is to take place. Such notice shall be given on or prior to the earlier of 30
days prior to the record date or the date which such action shall be taken. Such
notice shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Conversion Ratio and the
number, kind or class of shares or other securities or property which shall be
deliverable or purchasable upon the occurrence of such action or deliverable
upon conversion of the Preferred Stock. Failure to give notice in accordance
with this paragraph 3(D(iv)) shall not render such action ultra vires, illegal
or invalid.
(E) No adjustment of the conversion rate shall be made in any
of the following cases:
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(i) upon the grant or exercise of stock options
hereafter granted, or under any employee stock option plan now or hereafter
authorized, to the extent that the aggregate of the number of shares which may
be purchased under such options and the number of shares issued under such
employee stock purchase plan is less than or equal to ten percent (10%) of the
number of shares of Common Stock outstanding on January 1 of the year of the
grant or exercise;
(ii) shares of Common Stock issued upon the
conversion of Preferred Stock;
(iii) shares issued in connection with the
acquisition by the Company or by any subsidiary of the Company of 80% or more of
the assets of another corporation, and shares issued in connection with the
acquisition by the Company or by any subsidiary of the Company of 80% or more of
the voting shares of another corporation (including shares issued in connection
with such acquisition of voting shares of such other corporation subsequent to
the acquisition of an aggregate of 80% of such voting shares), shares issued in
a merger of the Company or a subsidiary of the Company with another corporation
in which the Company or the Company's subsidiary is the surviving corporation,
and shares issued upon the conversion of other securities issued in connection
with any such acquisition or in any such merger; or
(iv) shares issued pursuant to all stock options and
warrants outstanding on the date of the filing of this Certificate of Amendment
to the Certificate of Incorporation of the Company ("Certificate").
(F) Whenever the conversion rate is adjusted as herein
provided, the Company shall prepare a certificate signed by the Treasurer of the
Company setting forth the adjusted conversion rate and showing in reasonable
detail the facts upon which such adjustment is based. As promptly as
practicable, the Company shall cause a copy of such certificate to be mailed to
each holder of record of issued and outstanding Preferred Stock at the address
of such holder appearing on the Company's books.
(G) The Company shall pay all taxes that may be payable in
respect of the issue or delivery of Common Stock on conversion of Preferred
Stock pursuant hereto, but shall not pay any tax which may be payable with
respect to income or gains of the holder of any Preferred Stock or Common Stock
or any tax which may be payable in respect of any transfer involved in the issue
and delivery of the Common Stock in a name other than that in which the
Preferred Stock so converted was registered, and no such issue or delivery
shall be made unless and until the person requesting such issue has paid to the
Company the amount of any such tax, or has established, to the satisfaction of
the Company, that such tax has been paid.
(H) Upon conversion of any shares of Preferred Stock, the
holders of the shares of Preferred Stock so converted shall not be entitled to
receive any dividends declared with respect to such shares of Preferred Stock
unless such dividends shall have been declared by the Board of Directors and the
record date for such dividends shall have been on or before the date such shares
shall have been converted. No payment or adjustment shall be made on account of
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dividends declared and payable to holders of Common Stock of record on a date
prior to the date of conversion.
(I) No fractional shares or scrip representing fractional
shares shall be issued upon the conversion of any shares of Preferred Stock. If
more than one share of Preferred Stock shall be surrendered for conversion at
one time by the same holder, the number of full shares issuable upon conversion
thereof shall be computed on the basis of the aggregate number of such shares so
surrendered. If the conversion of any share of Preferred Stock results in a
fraction, an amount equal to such fraction multiplied by the current market of
the Common Stock on the day of conversion shall be paid to such holder in cash
by the Company.
(J) The Company shall at all times reserve and keep available,
free from preemptive rights, out of its authorized Common Stock, for the purpose
of effecting the conversion of the issued and outstanding Preferred Stock, the
full number of shares of Common Stock then deliverable in the event and upon the
conversion of all of the Preferred Stock then issued and outstanding.
4. LIQUIDATION OR DISSOLUTION.
In the event of any voluntary or involuntary liquidation, dissolution,
or winding up of the affairs of the Company, the holders of the issued and
outstanding Preferred Stock shall be entitled to receive for each share of
Preferred Stock, before any distribution of the assets of the Company shall be
made to the holders of any other capital stock, a dollar amount equal to the
Stated Value thereof plus all accrued and unpaid distributions declared thereon,
without interest. After such payment shall have been made in full to the holders
of the issued and outstanding Preferred Stock, or funds necessary for such
payment shall have been set aside in trust for the account of the holders of the
issued and outstanding Preferred Stock so as to be and continue to be available
therefor, then, before any further distribution of the assets of the Company
shall be made, a dollar amount equal to that already distributed to the holders
of the Preferred Stock shall be distributed pro-rata to the holders of the other
issued and outstanding capital stock of the Company, subject to the rights of
any other class of capital stock set forth in the Certificate of Incorporation,
as amended, of the Company. After such payment shall have been made in full to
the holders of such other issued and outstanding capital stock, or funds
necessary for such payment shall have been set aside in trust for the account of
the holders of such other issued and outstanding capital stock so as to be and
continue to be available therefor, the holders of the issued and outstanding
Preferred Stock shall be entitled to participate with the holders of all other
classes of issued and outstanding capital stock in the final distribution of the
remaining assets of the Company, and, subject to any rights of any other class
of capital stock set forth in the Certificate of Incorporation, as amended, of
the Company, the remaining assets of the Company shall be divided and
distributed ratably among the holders of both the Preferred Stock and the other
capital stock then issued and outstanding according to the proportion by which
their respective record ownership of shares of the Preferred Stock and such
capital stock bears to the total number of shares of the Preferred Stock and
such capital stock then issued and outstanding. If, upon such liquidation,
dissolution, or winding up, the assets of the Company distributable, as
aforesaid, among the holders of the Preferred Stock shall be insufficient to
permit the payment to them of said amount, the entire assets shall be
distributed ratably among
Page 5
<PAGE> 24
the holders of the Preferred Stock. A consolidation or merger of the Company, a
share exchange, a sale, lease, exchange or transfer of all or substantially all
of its assets as an entirety, or any purchase or redemption of stock of the
Company of any class, shall not be regarded as a "liquidation, dissolution, or
winding up of the affairs of the Company" within the meaning of this paragraph
4.
5. VOTING RIGHTS.
Except as otherwise provided in this paragraph 6, each share of
Preferred Stock is entitled to one vote, voting together with the holders of
shares of Common Stock and not as a class, on each matter submitted to a vote at
a meeting of stockholders of the Company.
6. CHANGES IN TERMS OF PREFERRED STOCK.
The terms of the Preferred Stock may not be amended, altered or
repealed, and no class of capital stock or securities convertible into capital
stock shall be authorized which has superior rights to the Preferred Stock as to
distributions, liquidation or vote, without the consent of the holders of at
least two-thirds of the outstanding shares of Preferred Stock.
7. NO IMPLIED LIMITATIONS.
Except as otherwise provided by express provisions of this Certificate,
nothing herein shall limit, by inference or otherwise, the discretionary right
of the Board of Directors to classify and reclassify and issue any shares of
Preferred Stock and to fix or alter all terms thereof to the full extent
provided in the Certificate of Incorporation, as amended, of the Company.
8. GENERAL PROVISIONS.
In addition to the above provisions with respect to the Preferred
Stock, such Preferred Stock shall be subject to, and entitled to the benefits
of, the provisions set forth in the Company's Certificate of Incorporation, as
amended, of the Company with respect to Preferred Stock generally.
9. NOTICES.
All notices required or permitted to be given by the Company with
respect to the Preferred Stock shall be in writing, and if delivered by first
class United States mail, postage prepaid, or by overnight delivery service, to
the holders of the Preferred Stock at their last addresses as they shall appear
upon the books of the Company, shall be conclusively presumed to have been duly
given, whether or not the stockholder actually receives such notice; provided,
however, that failure to duly give such notice by mail, or any defect in such
notice, to the holders of any stock designated for redemption, shall not affect
the validity of the proceedings for the redemption of any other shares of
Preferred Stock.
Page 6
<PAGE> 25
WIRE TRANSFER INSTRUCTIONS FOR CYTATION.COM INCORPORATED
Chase Manhattan Bank
New York City
ABA 021000021
FBO Salomon Smith Barney
Account 066-198038
For Further Credit to Account 188-01059-19-122
<PAGE> 1
Exhibit 10.24
STUDENT ADVANTAGE, INC.--COLLEGELINK.COM PARTNER CONTRACT
PURPOSE
This proposal addresses the major components of a joint marketing/business
relationship between Student Advantage, Inc. and CollegeLink.com. The terms and
conditions below are not binding in any way upon the parties. However, the
parties agree to negotiate in good faith to reach an agreement based upon the
terms and conditions below.
BACKGROUND
CollegeLink.com is actively pursuing relationships with companies in industries
who target college bound students and their families. Currently proposals for
specific industries such as automotive, telephony and more are under
consideration with 2-3 more contemplated in other categories. The college hub
(Student Advantage) category has the potential of being much more comprehensive
because of the directly related business opportunities that are associated with
college bound students and their families as part of the admission, financial
aid and enrollment processes. It is within this category that we are proposing
the Student Advantage partnership.
THE MARKET
CollegeLink.com is the pioneer and leading provider of electronic college
admission applications. By leveraging this position and through a comprehensive
website, CollegeLink.com has become the most effective site for the online
application process for college-bound students and their parents. Via
partnerships and acquisitions, CollegeLink.com is augmenting our electronic
admissions solution by introducing services such as financial aid application
processing, student recruiting services and additional options related to
student lending.
The college-bound student market size is approximately 6 million with 2 million
applying to college annually. When factoring in the families, this market
quickly grows to nearly 15 million. Given that CollegeLink.com can maintain an
on-going relationship with the college-bound audience as they move into
college, our access expands both in number and in timeframe.
Colleges all agree that admission and financial aid applications will, in the
near future, go totally electronic. CollegeLink.com will continue to dominate
this market due to the following competitive advantages.
CollegeLink.com assets include:
- Endorsed relationships with over 1,000 colleges and universities
- CollegeLink.com's partnership with The College Board
- The CollegeLink.com method of only having to provide application
information once no matter the number of colleges to which the
student is applying
<PAGE> 2
- Delivery of the College's actual application. Not a 'common
application' that the admissions staff is not familiar with
- The CollegeLink.com mark and website which are being heavily
marketed to our audience
THE OPPORTUNITY
The initial partnering opportunity between CollegeLink.com and Student
Advantage would include the following:
- - Applying students have the ability to "opt in" to a Student Advantage
discount on the CollegeLink.com direct mail CD-ROMs--approximately
2 million mailings. The Student Advantage logo will appear on the
exterior of the CD-ROMs.
- - To the best of CollegeLink.com's ability, the applying student will
also be able to "opt in" for the Student Advantage discount on The
College Board Expan/CollegeLink.com software of which will be distributed
to approximately 3500 high school guidance counselors. The Student
Advantage logo will appear on the exterior of the CD-ROMs.
- - To the best of CollegeLink.com's ability, the applying student will also
be able to "opt in" for the Student Advantage discount on CollegeLink.com
web site and all syndicated web sites utilizing the CollegeLink.com college
admissions application.
- - CollegeLink.com shall collect all Student Advantage application fees
generated through the opt-in function on their college admissions
applications. These fees shall be accounted for and paid to Student
Advantage every 30 days.
- - Student Advantage will have exclusivity in the student discount membership
category for the duration of this agreement.
- - In the event that Student Advantage reduces the membership fee from its
current $20 price point, the bounty paid to College Link shall be reduced
by an equal percentage.
- - Student Advantage will pay, on advance, $25,000 to CollegeLink.com 30 days
subsequent to the signing of a definitive agreement. The advance will be
applied to the $8 bounty per sign-off for every Student Advantage sign up
from the CollegeLink.com applicant. If the bounty collected exceeds
$25,000, then Student Advantage will pay CollegeLink.com the $8 per sign up
every 90 days.
- - Student Advantage will include CollegeLink.com promotional literature in
the fall 1999 edition of the "Cool Stuff Mailer." The fair market value
for insertion into the cool stuff mailer is $24,000 ($48/m at 500,000).
Collegelink.com is solely responsible for all costs associated with
printing and delivering promotional to the identified mailing house.
TERM AND TERMINATION
This term of the marketing/business relationship will be in effect for a period
of one (1) year. The parties shall have the right, but not the obligation, to
renew this agreement for three (3) additional years. Both parties have the
right to terminate this agreement with thirty (30) days' notice.
<PAGE> 3
CollegeLink.com MUTUAL CONFIDENTIALITY AND NON-DISCLOSURE
- ---------------------------------------------------------
The parties plan to sign a mutually agreeable confidentiality and
non-disclosure agreement.
Dated: Sept. 8 , 1999 Dated: Sept. 3rd , 1999
------------ -------------
CollegeLink.com STUDENT ADVANTAGE
Accepted by: /s/ Thomas Burgess Accepted By: /s/ John Fees
------------------- ---------------
Title: President Title: Vice President
------------------------- ---------------------
/s/ Thomas Burgess /s/ John T. Fees
- ------------------------------- ---------------------------
Signature Signature
<PAGE> 1
Exhibit 10.26
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), entered into as of the 1st
day of July, 1999, is by and among Cytation.com Incorporated, a New York
corporation ("Cytation"), CollegeLink.com Incorporated, a Delaware corporation
and wholly-owned subsidiary of Cytation (the "Company"), and Thomas Burgess
("Burgess").
W I T N E S S E T H :
WHEREAS, the Company is engaged primarily in the business of providing
on-line college application and related services; and
WHEREAS, Cytation and the Company desire to employ Burgess as President
of the Company under the terms and conditions specified herein, and Burgess
desires to be so employed by the Company.
NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties do hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) Effective as of July 1, 1999 and through the period ending June 30,
2000, Cytation and the Company hereby agree to employ Burgess as President of
the Company. As such, Burgess shall have the responsibilities, duties and
authority reasonably accorded to and expected of such position. Burgess will
report directly to the Board of Directors of Cytation and carry out its
directives to him.
(b) Burgess hereby agrees to accept the employment, responsibilities
and duties described in subparagraph (a) above upon the terms and conditions
herein contained. Burgess agrees to devote all of his business and productive
time, skill, attention and efforts to promote and further the business of the
Company. In all aspects of his employment, Burgess shall faithfully adhere to,
execute and fulfill all directives, policies and standards established by the
Company. Burgess shall not, during the term of Burgess' employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Burgess' duties and
responsibilities hereunder.
2. COMPENSATION. For all services rendered by Burgess, the Company
shall compensate Burgess as follows:
(a) BASE SALARY. The Company shall pay to Burgess base salary at the
rate of $140,000 per year. Base salary shall be paid in accordance with the
Company's standard payroll procedures.
<PAGE> 2
(b) STOCK OPTIONS. Effective as of July 1, 1999, the Company and
Cytation agree to award Burgess an option to purchase 300,000 shares of the
common stock of Cytation, $.001 par value, at an exercise price equal to $6.125
per share. One third of such option shall vest and become exercisable on June
30, 2000, and the remaining portion of such option shall vest and become
exercisable ratably on a monthly basis over a two-year period commencing on July
31, 2000 and ending June 30, 2002; provided, however, that in the event Burgess'
employment is terminated at the expiration of this Agreement or thereafter for
reasons other than Cause, this option shall become immediately exercisable in
full as of the date of such termination. The option shall have a term of 10
years except as otherwise provided in Paragraph 4 hereof and the written option
agreement between the Company and Burgess, the terms of which shall be
conclusive and binding.
(c) STOCK. Effective as of January 1, 2000, the Company and Cytation
agree to award Burgess 5,000 shares of the common stock of Cytation, $.001 par
value. Such 5,000 shares shall be included in the first registration statement
filed by Cytation with the Securities and Exchange Commission on or after March
31, 2000 covering the offering of Cytation securities.
(d) WELFARE AND RETIREMENT BENEFITS. During the term of Burgess'
employment with the Company, Burgess may participate in such employee benefit
plans, including but not limited to 401(k), pension, health and dental insurance
plans, as the Company makes available generally to executives of the Company.
(e) BUSINESS EXPENSES. During the term of this Agreement, the Company
will reimburse Burgess in a manner consistent with Company practice for any
reasonable travel and out-of-pocket expenses actually incurred by Burgess in
connection with his employment hereunder. The Company's agreement under this
subparagraph (d) is subject to Burgess' substantiation and reporting of such
expenses in accordance with Company policy and federal and state income tax
laws.
3. NON-COMPETITION AGREEMENT.
(a) Burgess will not, during the period of Burgess' employment by or
with the Company, and for a period of one (1) year immediately following the
termination of Burgess' employment under this Agreement, for any reason
whatsoever, directly or indirectly, for Burgess or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) engage, as an officer, director, stockholder,
owner, partner, joint venturer, or in a managerial, consulting
or advisory capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales
representative, in any business which offers any services or
products in direct competition with the Company within the
United States of America ("USA");
- 2 -
<PAGE> 3
(ii) call upon any person who is, at that time,
within the USA, an employee of the Company in a managerial
capacity for the purpose or with the intent of enticing such
employee away from or out of the employ of Company;
(iii) call upon any person or entity which is, at
that time, or which has been, within one (1) year prior to
that time, a client of Company within the USA for the purpose
of soliciting or selling products or services in direct
competition with the Company within the USA;
(iv) call upon any prospective acquisition candidate,
on Burgess' own behalf or on behalf of any competitor, which
candidate was, to Burgess' actual knowledge after due inquiry,
either called upon by Company or for which Company made an
acquisition analysis, for the purpose of acquiring such
entity; or
(v) induce or attempt to induce any person known by
Burgess to be a customer, supplier, or business relation of
the Company to cease doing business with the Company or in any
way interfere with the relationship between the Company and
any person known by Burgess to be a customer, supplier,
licensee, or business relation of the Company.
Notwithstanding the above, the foregoing covenants shall not be deemed
to prohibit Burgess from acquiring as an investment not more than one percent
(1%) of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to Company
as a result of a breach of the foregoing covenants, and because of the immediate
and irreparable damage that could be caused to Company for which Company would
have no other adequate remedy, Burgess agrees that the foregoing covenants may
be enforced by Company in the event of breach by Burgess, by injunctions and
restraining orders.
(c) The covenants in this Paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and this
Agreement shall thereby be reformed.
(d) Burgess acknowledges that the covenants in this Paragraph 3 (i) are
agreed to by Burgess as an inducement for and in consideration of the Company's
entering into this Agreement, and (ii) contain limitations as to time,
geographic area and scope of activity to be restrained that are reasonable and
do not impose a greater restraint than is necessary to protect the goodwill or
other business interests of Company.
- 3 -
<PAGE> 4
(e) Burgess agrees that all of the covenants in this Paragraph 3 shall
be construed as an agreement independent of any other provision in this
Agreement, that Company shall be the beneficiary of and have the right to
enforce such covenants, and that the existence of any claim or cause of action
of Burgess against Company, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by Company of such covenants.
It is specifically agreed that the period of one (1) year following termination
of Burgess' employment stated at the beginning of this Paragraph 3, during which
the agreements and covenants of Burgess made in this Paragraph 3 shall be
effective, shall be computed by excluding from such computation any time during
which Burgess is in violation of any provision of this Paragraph 3.
4. TERM AND TERMINATION.
(a) TERM. Burgess' employment pursuant to this Agreement shall begin on
July 1, 1999 and shall terminate on June 30, 2000. This Agreement may be
extended only by a further written agreement between the parties. Future
employment of Burgess by the Company or Cytation without a written agreement
between the parties will be "at-will" employment. Notwithstanding the foregoing,
either party may terminate this Agreement as described below.
(b) EXECUTIVE RESIGNATION. Burgess may terminate the Agreement by
providing Cytation with at least thirty (30) business days advance written
notice. Upon termination of this Agreement by Burgess, Burgess shall be entitled
to receive base salary accrued through the date of termination. The stock option
described in Paragraph 2(b) hereof shall terminate immediately.
(c) COMPANY TERMINATION WITHOUT CAUSE. Cytation may terminate this
Agreement without Cause (as defined below) by providing Burgess at least thirty
(30) business days advance written notice. Upon termination of this Agreement by
Cytation without Cause, Burgess shall be entitled to receive base salary through
June 30, 2000 as provided in Paragraph 2(a) hereof. The stock option described
in Paragraph 2(b) hereof shall become immediately vested and exercisable in
full, and shall remain outstanding for a period of one year following such
termination.
(d) TERMINATION FOR CAUSE. Cytation may terminate this Agreement
without notice for Cause (as defined below). In the event Cytation terminates
Burgess' employment during the term of this Agreement for Cause, Burgess shall
be entitled to base salary accrued through the date of termination, but shall be
entitled to no further rights or benefits hereunder. The stock option described
in Paragraph 2(b) hereof shall terminate immediately. For purposes of this
Agreement, "Cause" means, as determined in good faith by two-thirds of the Board
of Directors of Cytation, (1) Burgess' material and irreparable breach of this
Agreement, (2) Burgess' gross negligence in the performance of any of his
material duties and responsibilities hereunder; (3) Burgess' willful dishonesty
or fraud with respect to the business or affairs of the Company; (4) Burgess'
conviction of a felony crime; or (5) chronic alcohol abuse or illegal drug abuse
by Burgess.
(e) DEATH. Upon the death of Burgess during the term of this Agreement,
the Company shall pay to Burgess' designated beneficiary(ies) compensation
accrued through the last day of the month in which the date of death occurs.
- 4 -
<PAGE> 5
5. RETURN OF COMPANY PROPERTY. All records, files, business plans,
financial statements, manuals, memoranda, lists, designs, patents, and other
property delivered to or compiled by Burgess by or on behalf of Company or any
of its representatives, vendors or clients which pertain to the business of
Company shall be and remain the property of Company and be subject at all times
to its discretion and control. Likewise, all correspondence, reports, records,
charts, advertising materials and other similar data pertaining to the business,
activities or future plans of Company which is collected by Burgess shall be
delivered promptly to the Company without request by it upon termination of
Burgess' employment.
6. INVENTIONS AND WORKS. Burgess shall disclose promptly to the Company
any and all significant conceptions and ideas for inventions, improvements and
valuable discoveries, whether patentable or not, and any and all works of
authorship (including computer software), whether copyrightable or not, which
are conceived or made by Burgess, solely or jointly with another, during the
period of employment or within six (6) months thereafter and which are directly
related to the business or activities of Company and which Burgess conceives as
a result of Burgess' employment by the Company. Burgess hereby assigns and
agrees to assign all Burgess' interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Burgess shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain copyright registration or Letters Patent of
the United States or any foreign country or to otherwise protect the Company's
interest therein.
7. TRADE SECRET, PROPRIETARY AND CONFIDENTIAL INFORMATION. Burgess
acknowledges and agrees that during the course of Burgess' employment with the
Company, Burgess may learn about, develop or be entrusted with Trade Secret,
Proprietary and Confidential Information. The Company has in the past and will
in the future use reasonable efforts to keep secret the Trade Secret,
Proprietary and Confidential Information. Burgess expressly acknowledges and
agrees that unless the Trade Secret, Proprietary and Confidential Information
becomes publicly known through legitimate means not involving an act or omission
by Burgess: (i) the Trade Secret, Proprietary and Confidential Information is,
and at all times shall remain, the sole and exclusive property of the Company,
(ii) Burgess shall use the utmost diligence to guard and protect the Trade
Secret, Proprietary and Confidential Information from disclosure to any other
person or entity except in the scope of the discharge of his duties to the
Company; (iii) Burgess shall not use for his own benefit, or for the benefit of
any other person or entity other than the Company, and shall not disclose,
directly or indirectly, to any other person or entity, any of the Trade Secret,
Proprietary and Confidential Information except in the scope of the discharge of
his duties to the Company; and (iv) except in the scope of the discharge of his
duties to the Company, Burgess shall not seek or accept any of the Trade Secret,
Proprietary and Confidential Information from any former, present, or future
employee of the Company.
For purposes of this Agreement, "Trade Secret, Proprietary or
Confidential Information" means any and all confidential, trade secret and/or
proprietary information of the Company or its clients, including without
limitation financial information, projected budgets, marketing strategies, past
performances, client lists, pricing policies, operational methods, marketing
plans
- 5 -
<PAGE> 6
or strategies, product development techniques or plans, flowcharts, software
programs, data, systems, techniques, business acquisition plans, inventions and
research projects and other business affairs or any other documents or
materials, whether or not reduced to tangible form, pertaining to the business
of Company.
8. COMPLETE AGREEMENT. This Agreement is not a promise of future
employment. This written Agreement is the final, complete and exclusive
statement and expression of the agreement between the Company and Burgess and of
all the terms of this Agreement, and it cannot be varied, contradicted or
supplemented by evidence of any prior or contemporaneous oral or written
agreements. This written Agreement may not be later modified or extended except
by a further writing signed by a duly authorized officer of the Company and
Burgess, and no term of this Agreement may be waived except by writing signed by
the party waiving the benefit of such term.
9. NOTICE. Whenever notice is required hereunder, it shall be given in
writing and addressed to Cytation and the Company at the main business office of
Cytation, and to Burgess at the address reflected in the payroll records of the
Company, with a copy to Michael F. Sweeney, Esq., Duffy & Sweeney, LLP, 76
Westminster Street, Providence, Rhode Island 02903.
10. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Delaware.
11. ARBITRATION. Any dispute, controversy or claim arising out of or
relating to this Agreement or the breach or performance hereof will be settled
by arbitration in accordance with the laws of the State of Delaware by an
arbitrator mutually agreed upon by the Company and Burgess. If an arbitrator
cannot be agreed upon, the Company and Burgess shall each choose an arbitrator,
and these two together shall select a third arbitrator. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator will be appointed by the American Arbitration Association in
Providence, Rhode Island. Such arbitration will be conducted in the City of
Providence in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, except with respect to the selection of arbitrators
which shall be as provided in this Paragraph 11. Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CYTATION.COM INCORPORATED
By: /s/ Richard A. Fisher
------------------------------------
Title: Chairman
---------------------------------
- 6 -
<PAGE> 7
COLLEGELINK.COM INCORPORATED
By: /s/ Edward Hayes
------------------------------------
Title: Treasurer
---------------------------------
THOMAS BURGESS:
/s/ Thomas Burgess
----------------------------------------
Thomas Burgess
- 7 -
<PAGE> 1
Exhibit 21.1
COLLEGELINK.COM INCORPORATED
List of Subsidiaries
NAME STATE OF INCORPORATION
CollegeLink Corporation* Delaware
- -------
*Prior to November 1, 1999, CollegeLink Corporation was named CollegeLink.com
Incorporated.
<PAGE> 1
Exhibit 23.2
CONSENTS OF INDEPENDENT AUDITOR
We hereby consent to the use in this Registration Statement for Cytation.com
Incorporated of our independent auditor's report, dated September 3, 1999,
relating to the financial statements of Cytation.com Incorporated as of June 30,
1999 and 1998, and for each of the years ended June 30, 1999, 1998 and 1997,
which appear in such Registration Statement. We also consent to the reference to
us under the heading "Experts" in such Registration Statement, with respects
only pertaining to Cytation.com Incorporated.
We hereby consent to the use in this Registration Statement for Cytation.com
Incorporated of our independent auditor's report, dated October 1, 1999,
relating to the financial statements of Online Network, L.L.C., T/A Online
Scouting Network as of September 30, 1998 and 1997, and for each of the years
ended September 30, 1998 and, 1997, which appear in such Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Registration Statement, with respects only pertaining to Online Network, L.L.C.,
T/A Online Scouting Network.
/s/ Radin, Glass & Co., LLP
Radin, Glass & Co., LLP
New York, New York
November 24, 1999
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement for Cytation.com
Incorporated of our independent auditors' report, dated August 10, 1999,
relating to the financial statements of ECI, Inc. as of and for the years ended
December 31, 1998, 1997 and 1996, which appear in such Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Registration Statement, with respect only to matters pertaining to ECI, Inc.
/s/ Paolilli & Jarek, LLC
Paolilli & Jarek, LLC
Chelmsford, Massachusetts
November 24, 1999
<PAGE> 1
Exhibit 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in a Registration Statement our report
dated October 11, 1999 relating to the financial statements and financial
statement schedule of Student Success (a division of Graphic Management
Corporation), which appear in such Registration Statement. We also consent to
the reference to us under the heading "Experts" in such Registration Statement,
with respect only to matters pertaining to Student Success (a division of
Graphic Management Corporation).
SCHENCK & ASSOCIATES SC
/s/ SCHENCK & ASSOCIATES SC
Green Bay, Wisconsin
November 24, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS AND STATEMENTS OF OPERATIONS INCLUDED IN THE COMPANY'S FORM 10-Q FOR THE
QUARTER ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,303,222
<SECURITIES> 0
<RECEIVABLES> 218,101
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,639,037
<PP&E> 291,296
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,181,622
<CURRENT-LIABILITIES> 969,320
<BONDS> 0
0
11,709,980
<COMMON> 9,846
<OTHER-SE> 6,035,664
<TOTAL-LIABILITY-AND-EQUITY> 13,181,622
<SALES> 266,085
<TOTAL-REVENUES> 266,085
<CGS> 0
<TOTAL-COSTS> 1,627,226
<OTHER-EXPENSES> 735,472
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,361,141)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,361,141)
<EPS-BASIC> (.14)
<EPS-DILUTED> (.14)
</TABLE>
